Investigation finds cheating on Texas homestead exemption is widespread

HOUSTON - An independent investigation of Texas property owners claiming "homestead exemptions" indicates cheating is common, widespread and potentially costing local governments hundreds of millions of dollars in revenue.

Texas homestead exemption fraud investigation

What they're saying:

Acting on reports of unscrupulous activity and lax local oversight of the generous exemption, journalist and longtime FOX 26 contributor Charles Blain employed artificial intelligence to analyze a sample of 20,000 mostly Harris County exemption holders.

The analysis turned up more than 600 likely cheaters, including "double dippers" claiming the exemption on multiple homes and corporations illegally claiming the tax break on scores of properties.

"What you will find is that there are hundreds, if not thousands, of different ineligible properties getting exemptions, whether they are owned by LLC's, which is outright not allowed in state law, or there are people who have two homestead exemptions in the same county or one in one county and one in another. I think they kind of see it as the wild, wild west, and they can run it as long as they can and eventually, if they get caught, they just lose the exemption," said Blain.

The backstory:

State lawmakers, led by Houston State Senator Paul Bettencourt and Lt. Governor Dan Patrick, have sought to give substantial property tax relief via the Homestead exemption, which currently renders the first $140,000 of a primary residence's value exempt from school property taxes. Seniors get an even larger break at $200,000.

Why you should care:

 Blain says those claiming the exemption improperly are cheating both local schools and fellow taxpayers.

"It matters for us. Our property tax goes up to pay for what's missing. And it matters to the entities that go without that money. You look at one of the ones we found here in Harris County. There was a multi-million-dollar condo owned by an LLC that's getting a homestead exemption. For what reason? I don't know," said Blain.

What's next:

Blain says the Harris County Appraisal District is fully cooperating with his investigation and has actually stripped the exemptions from a real estate holding company that was clearly gaming the system.

"I really think there should be some criminal penalties for it because, at the end of the day, if you don't pay your property taxes, we have all these penalties that come with it. If someone is gaming the system and forcing everyone to pay more property taxes or forcing these jurisdictions to go without, then someone needs to be held accountable for that too," said Blain.

The other side:

 State Senator Bettencourt tells Fox 26 property owners who knowingly "double dip" the exemption are committing "fraud."