BILL ANALYSIS Ó
AB 2257
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Date of Hearing: April 9, 2014
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
AB 2257 (Cooley) - As Introduced: February 21, 2014
SUBJECT : Property tax: tax-defaulted property: excess proceeds
from sale.
SUMMARY : Makes changes to the distribution of excess proceeds
from the sale of tax defaulted property, including the transfer
of specified excess proceeds to the county general fund instead
of the taxing agencies. Specifically, this bill :
1)Authorizes the transfer of specified excess proceeds from the
sale of tax defaulted property to the county general fund
instead of the taxing agencies.
2)Prohibits excess proceeds from being distributed to parties of
interest sooner than one year following the date the board of
supervisors determines the tax sale should not be rescinded,
and only if the person who petitioned the board has not
commenced a proceeding in the court.
3)Prohibits any excess proceeds from being distributed to
parties of interest, if a proceeding has been commenced in a
court, until a final court order is issued.
4)Allows treasurer-tax collectors, when they provide notice of
the right to claim proceeds to the last known parties of
interest in a tax sale but cannot obtain the address of the
last known party, to forego the requirement to publish the
notice in a newspaper of general circulation if the costs of
publication eliminates any excess proceeds available for
distribution.
5)Provides that if the Commission on State Mandates determines
that this bill contains costs mandated by the state,
reimbursement to local agencies and school districts for those
costs shall be made pursuant to current law governing state
mandated local costs.
EXISTING LAW :
1)Requires a property owner to pay property taxes to the
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treasurer-tax collector of the county within which the
property is located.
2)Authorizes the treasurer-tax collector to sell property that
has been tax defaulted for five years or more, or three years
or more in the case of nonresidential commercial property.
3)Requires the distribution for all or any portion of each
separately valued parcel of real property subject to sale and
sold to the State of California general fund, the county
general fund for the cost of conducting the sale, for its
costs incurred in giving notice pursuant to existing law, and
the cost of advertising sales of tax defaulted property, and
to the taxing agencies based on the proportion of tax rate for
property taxes and assessments for the defaulted taxes.
4)Requires any excess in the proceeds, remaining after the
distribution in 3) to be deposited in the delinquent tax sale
trust fund and may be claimed by parties of interest in the
property.
5)Requires any excess proceeds not claimed by parties of
interest to be distributed to the county for administering and
processing claims for excess proceeds and then to the taxing
agencies.
6)Authorizes any party of interest, including lienholders or
former owners, to file with the county a claim for the excess
proceeds, in proportion to his or her interest in the
property, as specified.
7)Requires the excess proceeds, if the excess proceeds have been
claimed by any interested parties, to be distributed on order
of the board of supervisors pursuant to specified order of
priority.
8)Specifies that a proceeding based on alleged invalidity or
irregularity of any proceedings instituted in a sale of
tax-defaulted property can only be commenced within one year
after the date of execution of the tax collector's deed.
9)Requires treasurer-tax collectors to provide notice to the
right to claim proceeds to the last known parties of interest
in a tax sale that exceeds $150, and specifies that if the
treasurer-tax collector cannot obtain the address, he/she must
publish notice in a newspaper of general circulation in the
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county. Allows treasurer-tax collectors to skip the
requirement to publish the notice in a newspaper of general
circulation if the costs of publication are equal to or
greater than the amount of the tax sale's proceeds.
FISCAL EFFECT : This bill is keyed fiscal.
COMMENTS :
1)Background and purpose of this bill . When a taxpayer is
delinquent on property taxes, the treasurer-tax collector
first publishes the property and delinquent tax information.
If the taxpayer does not pay the tax, interest, and penalties,
the treasurer-tax collector may then sell his or her
residential property five years after the delinquency date, or
non-residential commercial property after three years, in a
tax sale if approved by the Board of Supervisors.
Current law specifies the distribution of these proceeds if
the tax defaulted property is sold in order to repay the state
and local governments for costs incurred and for defaulted
taxes. Lienholders and the former owner may claim proceeds in
excess of the taxes and cost of the sale. Following this
process, this bill would allow for the excess proceeds that
remain to be transferred to the county general fund instead of
going back to the taxing agencies for another round of
distribution.
Current law establishes several requirements for any person
challenging the validity of a tax sale within one year of the
date of the execution of the tax collector's deed, including
the requirement that they first petition the board of
supervisors. This bill prohibits any excess proceeds from
being distributed to parties of interest within one year of
the date the board of supervisors determines the tax sale
should not be rescinded, and if a person has not commenced
court proceedings. Additionally, this bill prohibits excess
proceeds from being distributed if a person has commenced
court proceeding to challenge the validity of a sale until a
final court order is issued.
Existing law requires treasurer-tax collectors to provide
notice to the right to claim proceeds to the last known
parties of interest in a tax defaulted property sale that
exceeds $150, and specifies that if the treasurer-tax
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collector cannot obtain the address, they must publish notice
in a newspaper of general circulation in the county. The
publication is not required if the cost of the notice in a
newspaper of general circulation is equal to or greater than
the amount of the tax sale's proceeds. This bill extends this
exemption in current law if the publication cost eliminates
any excess proceeds available for distribution. This bill is
sponsored by the California Association of County Treasurers
and Tax Collectors.
2)Author's statement . According to the author, "When real
property is sold due to a tax default, the distribution of
those proceeds is governed by [current law]. Occasionally,
there are small amounts of proceeds left over after all the
claims have been paid to parties in interest and monies
distributed to local taxing authorities. This bill clarifies
that when this happens, these nominal excess proceeds shall be
deposited into the County General Fund after the time in which
any claimants may make additional claims has elapsed. This
simple change will result in costs-savings for the counties
through reduced staff time used on distributing these small
dollar amounts."
3)Previous legislation . AB 261 (Dickinson), Chapter 288,
Statues of 2011, requires persons challenging the validity of
a tax sale to first petition the Board of Supervisors for a
rescission within one year of the sales. If the Board rejects
the petition, the person must commence the proceeding
challenging the validity of the tax sale within one year of
the rejection.
4)Questions for the Committee . While counties pay a large share
of property tax administrative costs (often more than
two-thirds), yet receive a small share of property tax
revenues (often less than one-third), there may be a weaker
incentive in some counties to fund property tax
administration. For offices like the county assessors (and
the tax collectors) whose funding relies on the annual budget
determined by the county board of supervisors, even an
infrequent and small amount of excess proceeds may be
beneficial. The Committee may wish to consider, if instead of
going into the county general fund, the money should be
allocated to a specific fund or office within the county that
will lead to more property tax dollars thus benefiting all
taxing entities. According to the sponsor, current law
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requires several other types of excess funds to be distributed
directly into a county general fund.
The Committee may wish to ask the author why Section 3 of the
bill is necessary. Current law already creates an exemption
to publication in a newspaper if the cost to publish is equal
to or greater than the amount of the excess proceeds.
Therefore, if the amount of excess proceeds available for
distribution is eliminated by the cost of publishing, they
would already be equal to or greater than the cost of
publishing.
5)Arguments in support . Supporters argue that making this
common sense change will reduce staff time needed to allocate
small sums of money to taxing entities that have already been
made whole through the distribution proceeds from the sale and
clarifies that the funds may be deposited into the general
fund.
6)Arguments in opposition . None on file.
7)Double-referral . This bill is double-referred to the Revenue
and Taxation Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of County Treasurers and Tax Collectors
[SPONSOR]
Opposition
None on file
Analysis Prepared by : Misa Yokoi-Shelton / L. GOV. / (916)
319-3958