Florida Homestead Exemption: A family (unit) affair

Florida Homestead Exemption: A family (unit) affair

I. A Contextual Background

In 1968, the Florida constitution was amended. At that time, the words “family unit,” were added in a Section addressing Homestead exemption. In 1968 this phrase may have been viewed as a straightforward and simple concept. However, it was not defined at that time in the Constitution. If the terms “family unit” were thought straightforward in 1968, plainly the expression is no longer, as family dynamics continue to expand. It would appear the exact legal boundaries of the expression “family unit” is still incompletely established. This appears to be the case primarily because of the lack of a statutory definition. There are however statutory and jurisprudential guideposts discussed in this article which shed light, but first the Constitutional context of the terms should be considered. Article VII, section 6 of the Florida Constitution states:

(a) Every person who has the legal or equitable title to real estate and maintains thereon the permanent residence of the owner, or another legally or naturally dependent upon the owner, shall be exempt from taxation thereon, except assessments for special benefits, up to the assessed valuation of twenty-five thousand dollars and, for all levies other than school district levies, on the assessed valuation greater than fifty thousand dollars and up to seventy-five thousand dollars, upon establishment of right thereto in the manner prescribed by law . . . .

(b) Not more than one exemption shall be allowed any individual or family unit or with respect to any residential unit. No exemption shall exceed the value of the real estate assessable to the owner or, in case of ownership through stock or membership in a corporation, the value of the proportion which the interest in the corporation bears to the assessed value of the property

It is important to note that the Florida Constitution does not grant an absolute right to a Homestead exception. As the Florida Supreme Court ruled in Horne v. Markham:

“Article VII, Section 6, of the Constitution of the State of Florida… does not establish an absolute right to a homestead exemption. Rather, it clearly provides that taxpayers who otherwise qualify shall be granted an exemption only ‘upon establishment of right thereto….”

II. Criteria for Exemption

The key to establishment of the exemption, under Article VII, section 6, is demonstration of specific criteria. Those persons who meet these constitutional requirements are able to qualify for a tax exemption for their homestead property in Florida. Such person must (1) have legal or equitable title to the real estate for which the exemption is filed; and (2) maintain his or her own permanent residence; or 3) the permanent residence of another who is legally or naturally dependent upon the applicant, on the property.

So, two key factors are title and maintenance of permanent residence Thus, the exemption distinguishes between real estate used as a Florida permanent residence, on the one hand, and (by implicit exclusion) any other real estate such as secondary or vacation residences or rentals. . Renish v Clark. 765 So. 2d 197, 205 (Fla. 1st DCA 2000 . Also, the underlying classification in the exemption provisions is based primarily on the use of the property rather than on the user. In fact, a natural person does not have to be a U.S. citizen to be eligible for the homestead exemption. Id.

It is also clear that any “person” who meets either the criteria of legal or equitable title and who satisfies the permanent residence requirement qualify. Neither an LLC Corporation or Subchapter S corporation are entitled to claim homestead exemption on behalf of their owners. This is a somewhat odd circumstance , because certain corporate entities specifically identified in the 1968 Florida Constitution may claim on such a basis. Section 196.041, Florida Statutes, identifies those corporate entities holding equitable title entitled to claim a homestead exemption. In addition to said corporate forms of ownership, qualifying for exemption, a beneficial interest in a trust, such as a Florida Land Trust ( See: AGO 2008-44 ( 2008) ) or a qualified personal residence trust (“QPRT) also qualify. See: Robbins v. Welbaum, 664 So. 2d 1 (Fla. 3^rd DCA 1995)

III. Understanding the “Family Unit” provision

Apart from the designation of “person”, the constitutional provisions stated in Article VII, section 6, also address the concept offamily unit. The term “family unit” was not defined in the Constitution and, curiously, has not been defined by the legislature.^[1] Nevertheless, this term has been addressed by the appellate courts of Florida, by at least two opinions of Attorneys General ( AGO- 2005-60 & AGO 75-146 ) and by an Administrative Rule of the Department of Revenue. Each of these opinions illuminate the phrase as it has been understood since its enactment.

The Department of Revenue has given specific meaning for the terms “family unit” in the context of an Administrative Rule addressing a “husband and wife” relationship. While this rule by its terms does not purport to address all present cirumstances of a modern “family unit”, it does add to the discussion and understanding of the Constitutional provision. The rule states in part:

(7) A married woman and her husband may establish separate permanent residences without showing “impelling reasons” or “just ground” for doing so. If it is determined by the property appraiser that separate permanent residences and separate “family units” have been established by the husband and wife, and they are otherwise qualified, each may be granted homestead exemption from ad valorem taxation under Article VII, Section 6, 1968 State Constitution. The fact that both residences may be owned by both husband and wife as tenants by the entireties will not defeat the grant of homestead ad valorem tax exemption to the permanent residence of each. See: Fla. Admin. Code . 12D-7.007

Thus, it would appear under the rule that both a “husband and wife” could, depending upon the circumstances, be considered two “family units”. The choice of the language “married woman and her husband” would appear to be somewhat limiting and out of date given the scope of protection under our present understanding of Constitutional law.(“ laws excluding same-sex couples from the marriage right impose stigma and injury of the kind prohibited by our basic charter”) See Obergefell v. Hodges, 135 S. Ct. 2584, 2601–02, 192 L. Ed. 2d 609 (2015) In addition, the context in which the terms are used would strongly suggest that “family unit” referenced in the rule is not limited to a husband and wife living in one household as a traditional family unit. Such a wider reading is also not inconsistent with a decision of the Second DCA.

In 2010 the 2^nd DCA, in Wells v. Haldeos, 48 So. 3d 85, 87 (Fla. Dist. Ct. App. 2010)( quoting Law v. Law, 738 So.2d 522, 524 (Fla. 4th DCA 1999 ) rejected the Property Appraiser argument that a husband's home could not be homestead because the home he owned with his wife was, as a matter of law, his homestead, and a person cannot have two homesteads. The Second stated:

We see nothing inconsistent with our public policy if we extend a homestead exemption to each of two people who are married, but legitimately live apart in separate residences, if they otherwise meet the requirements of the exemption. When we say “legitimately” we mean that there is no “fraudulent or otherwise egregious act” by the beneficiary of the homestead exemption

Likewise, a decision from the 1^st DCA in the 80’s focused on the term “family unit” in preservation of Homestead against a judgment creditor when a “family unit” was temporarily removed from the property. Dean v. Heimbach, 409 So. 2d 157, 158 (Fla. 1^st DCA 1982)

Another interesting decision, although not directly addressing “family unit”, is the Florida Supreme court decision ruling that a wife could be married and maintain a separate homestead from her husband who was domiciled in another state. See Judd v. Schooley, 158 So.2d 514, 517 (Fla.1963) (holding that the wife could claim a permanent home in Florida and receive a homestead exemption even though her husband was legally domiciled in another state). It is noting that this case predated the amendment of the Constituion but is nevertheless consistent with AGO opinions and the 2^nd DCA in Wells, supra.

However, in 2014 the 4^th DCA seemed to focus on the state of the marriage in refusing to support a married couple’s claim of two homestead exemptions based upon the concept of “family unit”. In Brklacic v. Parrish, 149 So. 3d 85, 89 (Fla. 4^th DCA 2014, ) the 4^th DCA supported the Property Appraiser in rejecting two homestead claims by a married couple. It did so on the basis that “….the undisputed facts are sufficient to establish that Appellant and his wife maintained an intact marriage during the operative years, they are a single “family unit” entitled to one homestead tax exemption……. [a]s such, Appellant was not entitled to a second homestead tax exemption….” This language would seem to establish a view of “family unit” as husband and wife in an “ intact marriage”. Such an interpretation would seem restricted to those facts because an “intact marriage” would not appear to comport with the Wells decision nor the Florida Supreme Court in Judd v. Schooley, supra. However, as observed in AGO 2005-60:

“The burden is on the applicants to demonstrate that they have established separate family units. This office and the Florida courts have recognized that in order for there to be entitlement to a homestead tax exemption, there must be ownership of the home, residence therein, and the making of such residence as the permanent home in good faith."

AGO 2005-60 also discusses a 1975 AGO addressed to the Sarasota Property Appraiser, John Mikos. The AGO 75-146 also addressed the “family unit” provision in the Consitution and stated:

“Initially, it is my opinion that, as in considering whether the wife has established a residence separate from her husband's, it is not essential that the husband and wife be "legally separated" in determining whether they have also established separate family units, for the marriage relationship continues to exist even though the husband and wife may be legally separated, AGO 071-228. However, if one spouse should continue to maintain the home of the other, such as by making the payments on the mortgage, and for insurance and taxes, it would appear that the spouses under such circumstances have not established separate family units."

Thus the 1975 Mikos opinion would suggest that a married couple could, depending upon the facts, be entitled to separate homestead exemptions under the “family unit” provision. “ [W]hether a person is maintaining his or her permanent residence on certain property is, within the above statutory guideline, a question of fact to be determined in the first instance by the property appraiser…. The property appraiser is thus limited to a determination of whether separate residences have in law or in fact been established, not whether there are impelling reasons…..” Id.

The Homestead exemption is driven and should be driven by good public policy. This policy would be to protect Florida Homestead protections, including a tax exemption. Such good policy is best described by 4^th DCA in Law v. Law, 738 So. 2d 522, 525 (Fla. 4^th 1999) ( quoting: Public Health Trust of Dade County v. Lopez, 531 So.2d 946, 948 (Fla.1988):

As a matter of public policy, the purpose of the homestead exemption is to promote the stability and welfare of the state by securing to the householder a home, so that the homeowner and his or her heirs may live beyond the reach of financial misfortune and the demands of creditors who have given credit under such law.

Take Aways:

1. The Florida Constitution homestead exemption provision clearly refers to a “person” and is not therefore limited to a husband and wife or a “married couple”.
2. A person does not need to be a U.S. citizen to claim Florida homestead exemption.
3. Title to the Homestead property may be held by the entireties, jointly or in common with others in which case the exemption is apportioned. See: 196.031 F.S.
4. Neither a Limited Liability Corporation (LLC) or a Sub S Corporation holding real property are entitled to claim a Homestead Exemption in Florida. Florida OAG Op. 2007-18 (2007); See also: s.196.041 F.S.
5. A beneficiary of a trust may qualify for exemption as an equitable owner. Robbins v. Welbaum, 664 So. 2d 1 (Fla. 3^rd DCA 1995)
6. A “married couple” may be entitled to more than one homestead exemption because a “married couple” may be establish separate family units. Determination of eligibility is fact specific. Jurisprudence identified herein as well as Fla. Admin. Code . 12D-7.007 should be consulted.
7. The fact that a “married couple” owns two separate residences as tenants by the entireties will not itself prohibit two separate homestead exemptions. Fla. Admin. Code . 12D-7.007
8. The Florida Administrative Code rules provides that property appraisers may consider married couples as separate “family units” in certain circumstances not including facts which demonstrate that one spouse continued to maintain the home of the other, such as by making the payments on the mortgage, and for insurance and taxes. Id.

About the Firm: Formed in 1991, the Law Offices of Moffa, Sutton, & Donnini, P.A. is a law firm with a primary practice area of Florida tax controversy and a heavy emphasis on Florida sales and use tax. With offices in Fort Lauderdale, Tampa, and Tallahassee, the firm defends business owners against the Florida Department of Revenue from the initial audit notice through administrative protest and litigation as well as collections, revocations, and criminal investigations.

About the Author: James (Jim) F. McAuley is an experienced attorney, joining the firm in 2015 after an exemplary career with the state of Florida. Holding the Florida Bar board certification as a specialist in State and Federal Administrative Law, Mr. McAuley represented the State of Florida for more than 20 years in the area of state and local taxation and administrative law with an emphasis on litigation. Mr. McAuley is Board Certified by the Florida Bar in the area of State and Federal Government Administrative Practice. Mr. McAuley holds the highest rating given to lawyers by Martindale Hubbell (Av) and has maintained that rating for more than 15 years. He is also a published legal author in both State taxation and Administrative law. He is an alumni & author of the Nova Law Review (Fall 2007). You can read more about Mr. McAuley in his firm bio.