|
Agenda Item
ASR
Control 17-001194 |
||
|
MEETING DATE: |
12/05/17 |
|
|
legal entity taking action: |
Board of Supervisors |
|
|
board of supervisors
district(s): |
All Districts |
|
|
SUBMITTING
Agency/Department: |
Assessor Department
(Approved) |
|
|
Department contact
person(s): |
Claude Parrish (714)834-2734 |
|
|
|
Neil Shah (714)834-2733 |
|
Subject: Resolution to Exclude Filing
of Tax Liens Under $200
|
ceo CONCUR |
|
Clerk of the Board |
||||||||
|
No Administrative Objection |
Approved Resolution to Form |
Discussion |
||||||||
|
|
|
3 Votes Board Majority |
||||||||
|
|
|
|
||||||||
|
Budgeted: N/A |
Current Year Cost:
N/A |
Annual Cost:
N/A |
||||||||
|
|
|
|
||||||||
|
Staffing Impact: |
No |
# of Positions:
|
Sole Source:
N/A |
|||||||
|
Current Fiscal Year Revenue: N/A
|
||||||||||
|
Prior Board Action: N/A
|
||||||||||
RECOMMENDED ACTION(S):
Adopt a resolution providing that effective January 1, 2018, a tax on real or personal property is not a lien against the property assessed or the assessee if the amount of the tax is less than $200, excluding any interest, penalties or other fees and therefore, shall not be recorded by the Tax Collector.
SUMMARY:
It is recommended that the Board of Supervisors adopt a resolution to provide that a tax on real or personal property is not a lien against the property assessed or the assessee if the amount of the tax assessed against that property or assessee is less than $200, excluding any interest, penalties, or other fees.
BACKGROUND INFORMATION:
Existing law provides that every tax, penalty, or interest on real property is a lien against the property assessed. Also, a tax on personal property is a lien against any real property on the Secured Roll belonging to the owner of the personal property. Existing law authorizes the County Tax Collector to record a lien with respect to certain types of taxes on real and personal property with the County Recorder.
The genesis of Senate Bill 624 is that thousands of taxpaying individuals did not receive their tax bill or the subsequent two follow-up letters. The taxpayers either no longer live at that location or, in the case of an Unsecured lien, the business could have been closed or relocated. The taxpayers are unaware of their outstanding lien.
Additionally, these low-value liens affect our Unsecured Roll (business properties) because new businesses will be stifled and the liens will impede their obtaining the Uniform Commercial Code filing applications, to obtain business equipment when they find these minimum-dollar amount recorded liens. In essence, this resolution will help to increase our revenue base of new homes and new business start-ups.
The economic growth of our real estate values in Orange County is being impacted by the fact that it is difficult for first-time homebuyers to purchase homes, when escrow companies find these liens. Many first-time homebuyers must then be required to pay for monthly mortgage insurance which protects the lender. This additional monthly cost adds to the burden of the then required impound account. Thus, first-time homebuyers will probably be disqualified for their lack of ability to pay the required payments and thus be unable to purchase a first-time home. At this point, the damage is done, because even if the lien is paid off immediately, the title company demands to see the lien release. When the taxpayer pays the lien, they do not receive a copy of the lien release at this point.
Senate Bill 624, which was unanimously passed by the California State Legislature and signed by the Governor on July 31, 2017, adds Section 2191.10 to the Revenue and Taxation Code. Revenue and Taxation Code 2191.10 authorizes the Board of Supervisors to adopt an ordinance or resolution providing that a tax on real or personal property is not a lien against the property assessed or the assessee if the amount of the tax assessed against that property or assessee is less than an amount set by that ordinance or resolution, up to $200, excluding any interest, penalties, or other fees. This section does not authorize a county to exempt any property from taxation, and does not relieve the taxpayer from the obligation to pay any tax.
The Secured Roll is the listing of properties that has sufficient value to guarantee payment of taxes levied on real property. Thus, secured taxes are those which, if unpaid, can be satisfied by the sale of realty against which they are levied. The Unsecured Roll is the listing of properties that a lien on real property is not sufficient to guarantee payment of taxes levied against them. As such, unsecured taxes are charges levied from assessment against property, where such charges cannot be satisfied by tax default of the property but only by some action against the person responsible for payment. Property tax bills for the Unsecured Roll are due January 1 and are considered delinquent August 31. Delinquent property taxes on the Unsecured Roll may be involuntarily collected by seizure and sale of the property, filing suit for taxes owed, seeking summary judgment against the assessee, or filing a certificate of lien. The certificate of lien may be recorded in any county without fee and constitutes a lien upon all personal and real property in the county owned by the assessee named in the certificate. The recorded lien, which appears on title and credit reports, continues for 10 years from the time the certificate is recorded and may be extended for two subsequent 10-year periods, or until the bill is paid in full or otherwise settled.
Data analyzed by the Orange County Assessor's office shows that 45,331 liens were filed between January 1, 2015, and December 31, 2015, with a random sample of 3,600 liens revealing that liens under $200 represented 65.86% of the total number of sampled liens, but only accounted for 14.31% (close to $603,000) of the total dollar values, of sampled liens.
The recommended Tax Lien Resolution will provide the following key benefits:
· It will assist many Orange County taxpayers by eliminating the potential of a negative credit report of a lien, which could impact the purchase of a home or other big ticket items.
· This resolution is good public policy as it assists taxpayers from having a potential tax liability, of which they are often unaware.
· This change in law focuses on the recording and filing of tax liens on amounts that may exceed the administrative costs of implementation.
· The new law does not exempt property from tax, but instead provides that a lien may no longer be filed where personal property tax is less than $200. Taxpayers would still be liable for property taxes due.
The new law goes into effect on January 1, 2018.
Points in
Support of This Resolution:
|
1. |
Potentially helping over an estimated 50% of taxpayers
receiving these small county tax-collector liens to help keep their credit
undamaged, thus allowing purchases of homes and other big-ticket items. Without this help, first-time home buyers
would most likely have to put large down payments on a home or obtain private
mortgage insurance (PMI) which will increase the monthly mortgage payments,
thus possibly exceeding their lender-approved previous monthly payment
capacity in order to qualify for the loan. |
|
2. |
Prospective law, going into effect starting January 1,
2018. This only affects future
recordings. |
|
3. |
Adoption of law is elective by the respective County’s
Board of Supervisors. |
|
4. |
According to the attached California State Board of
Equalization Compliance Policy, as noted in Chapter 7, 757.060, in most
instances, “a lien is not filed for liabilities under $2,000,” and this is
because of the cost to administer amounts under $2,000 is impractical. |
|
5. |
This proposal
does not eliminate any of the tax-dollars initially billed, it only addresses
the filing of liens $200 and under. No tax loss! |
Points In Regard To A Tax Liability of Which Taxpayers Are Not Properly Notified:
- Only the 58 California County Treasurer-Tax Collectors liens are addressed by SB624.
- There are three ways a citizen can get a Treasurer-Tax Collector lien, which SB624 addresses by eliminating small liens under $200.
Example 1:
Every time there is a recorded document effecting a change in ownership, it needs to have a Preliminary Change of Ownership Report (PCOR) when the deed is recorded. On occasion, this document is not included or is incomplete. It is considered incomplete if it is signed by the escrow officer instead of the owner. The new owner believes that everything is taken care of. Also, on occasion the wrong address is on the PCOR. The owner never receives the two requests, and a penalty is created. If the address is wrong, they never received the bill and the Treasurer Tax-Collector files a lien. The taxpayer does not find out until they try to refinance their property.
The taxpayer has the obligation to pay the bill within 60 days of issue, after which there is a 10% penalty. Then, the Treasurer-Tax Collector writes three notices that are sent out (to the previous address – the taxpayer, again, never receives the notices), after which in 15 days, the Treasurer-Tax Collector files the lien for the amount of the tax bill, plus a penalty (and an additional $75 lien fee, in the case of Orange County).
Multiple real estate transactions (three-party) can leave residual tax obligations which would be mailed to the property address that is no longer owned by that individual. Also, 1031 exchanges can cause problems. These things pop up years later, creating severe problems for the individual.
Example 2:
A small business, such as a Certified Public Accountant, insurance agent, doctor, dentist, etc., move and unfortunately don’t think to notify the Assessor. As a result, the Unsecured (business or personal property tax) bill goes out (mailed at a different time than the real property tax bills), it’s not paid (it’s discarded or perhaps forwarded unsuccessfully), and the same procedure as described above happens again; 15 days later there is a lien, and the taxpayer is not aware of it for years to come.
Many times real estate and business brokers find their clients' escrow accounts either frozen or canceled completely due to this kind of a lien. This is bad for Orange County property values. Of course, this resolution does not forgive any of the taxes. It only eliminates the Treasurer-Tax Collector from keeping track of thousands of low-value liens (at least in our county). As you may know, the lien is renewable up to 30 years.
Example 3:
Multiple sales of real estate during a one-year period may result in escape assessments, as well as back-to-back escrows, third-party escrows, and 1031 exchanges may also result in a lien. Hopefully the distress, anguish, aggravation and damage to small business startups and the purchase of first-time homebuyers can be alleviated. All of our locally-elected state assembly members and senators voted for SB 624.
FINANCIAL IMPACT:
It is anticipated that the amount of revenues collected from liens under $200 is not significant since the total amount of such liens is only 14.31% of the total dollar value for liens filed in 2015. The Assessor Department would expect that only a small portion of these liens would be paid. The small amount of revenue lost by the County is more than offset by the significant amount of financial relief provided to thousands of small business owners in Orange County who will be able to obtain credit for Uniform Commercial Code business filing, enhancing Orange County’s real estate market by increasing the number of viable first time home buyers.
STAFFING IMPACT:
N/A
ATTACHMENT(S):
Attachment A – SB-624 Bill Text
Attachment B – Summary 2015 Liens
Attachment C – Board of Supervisors Resolution Assessor-Lien
Attachment D – California State Board of Equalization Policy, Sect. 757.060
Attachment E - Support Letter, California Association of Mortgage Professionals
Attachment F - Support Letter, Hon. Jeffrey Prang, Los Angeles County Assessor
Attachment G - Support Letter, Hon. Ernest Dronenburg, San Diego County
Assessor