01:00 AM EDT on Tuesday, May 17, 2005

More people have applied for Rhode Island's statewide property-tax relief program than there is money to go around.

As a result, the state once again this year will have to reduce the amount some applicants receive. Although the numbers are preliminary, nearly 13,000 low-income applicants -- and probably more -- will get only a fraction of what they would otherwise be eligible to receive.

In general, the property-tax relief program is intended to distribute to each eligible household a "rebate" of up to $250, as a way to help reduce the local property-tax burden faced by lower-income Rhode Islanders.

Rhode Island has the fourth-highest state and local tax burden nationwide, according to a report issued last month by the Tax Foundation, a nonprofit group in Washington, D.C., that monitors government finance. (Maine has the highest state and local tax burden among all states, followed by New York and Hawaii, the report said.)

To try to obtain some help under Rhode Island's property-tax relief program, applicants file the required paperwork -- a Rhode Island Form 1040H -- by the April 15 deadline. If their applications are approved -- their household income must be $30,000 or less, and they must clear some other hurdles -- they receive checks in the mail, said Michael F. Canole, chief revenue agent for the state Division of Taxation's personal income-tax section.

But because of the way the program works, some applicants don't know until summer how much they will receive. Here's why:

The state provides $6 million for the program each year. Of that, $50,000 is set aside for emergency hardship cases (essentially those who could not file their applications by the April 15 deadline due to illness or other reasons).

So that leaves $5.95 million. By state law, the Rhode Island Division of Taxation, which administers the program, must split applicants into two groups:

The first is for people 65 and older or people who are disabled and receiving Social Security disability benefits. They receive the full amount to which they are entitled.

So far this year, the state tax agency has processed applications from 24,187 people in this group, who claimed a total of about $5.55 million. (Remember that the entire program has only $5.95 million to distribute.)

The second group is for people under 65 who are not receiving Social Security benefits. They get whatever is left after the first group has been paid in full.

So far this year, the state has processed applications from 12,871 in this group, who claimed a total of about $3.015 million, Canole said.

The numbers mean trouble for people in the second group, which is generally made up of younger people with lower incomes. After requests from the first group are taken care of, there is only about $397,648 remaining.

As a result, they'll each receive less than 13 percent of their claims. In other words, for every dollar they should receive under the program, they'll get 13 cents. For example, if someone in the second group was eligible to receive the full $250, they'll wind up getting only about $33.

And the final figure will probably be even lower. The numbers listed here reflect only the applications the state tax agency processed through Wednesday, the latest period for which figures are available, Canole said in an interview at state tax agency headquarters in Providence last week.

There are many more applications still in the pipeline, he said. (The state receives thousands of applications at and around the April 15 filing deadline, and it takes time to sort them out.)

When those are processed, there will probably be even less money available for people in the second group. By the time all the numbers were processed last year, for instance, people in the second group wound up receiving only about 7.13 percent of the amount they had claimed. So someone in the second group who'd otherwise be eligible to receive $250 wound up with about $17.83.

When the state tax agency mails checks this time around, probably in July, it will mark the sixth consecutive year in which the program has paid out less than the full amount to applicants in the second group.

TODAY'S TIP: The George A. Wiley Center in Pawtucket, a statewide community action program that manages a campaign to eliminate childhood poverty in Rhode Island, has asked legislators to boost, by $4 million, the amount the state sets aside for the property-tax relief program each year.

That way, all applicants would receive the full amount for which they're eligible, said Henry Shelton, coordinator at the center.

Governor Carcieri has also proposed a $4-million increase in the amount the program receives. But his proposal would take additional steps.

For example, it would double the maximum per-household payment, to $500 from $250. It also would make such payments available only to those 65 and older or who receive Social Security disability payments; younger people who are not disabled would be excluded from the program.

The governor's proposal is similar to one he made last year. Asked at the time why his plan would boost aid to older people but eliminate it for younger people, spokesman Jeff Neal said, "The governor felt it important to help senior citizens deal with the burden of increased property taxes. . . . The governor felt it was important to target this program to this particular group, but would also be open to expanding property-tax relief to more Rhode Islanders as the state's fiscal situation becomes more promising."

Neil Downing is a Journal staff writer and author of The New IRAs and How to Make Them Work for You. Questions about your money matters? Call us at (401) 277-7484 and leave a message, or e-mail:

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