BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 2257 HEARING: 6/25/14
AUTHOR: Cooley FISCAL: Yes
VERSION: 5/5/14 TAX LEVY: No
CONSULTANT: Grinnell
TAX SALES
Diverts excess proceeds from tax sales from taxing entities
to the county.
Background and Existing Law
Property owners pay property taxes in two annual
installments: the first on November 1st, and the second on
February 1st. Taxpayers who have not paid their first
property tax installment by December 10, or their second
installment by April 10, become delinquent and receive a
10% delinquency penalty on each amount, plus redemption
penalties of 1.5% a month until paid. Counties can issue
tax liens against property when an owner is late on paying
property taxes. Once unpaid real property taxes are
delinquent, or "tax defaulted," the county tax collector
publishes the information on the defaulted roll. If the
owner fails to redeem the property by full payment of the
defaulted taxes, interest and penalties, the property may
be sold to the highest bidder at a public sale.
Tax collectors can sell residential property in default for
five years and commercial property in default for three
years, to pay the back taxes, penalties, and costs. Prior
to sale, the tax collector must issue a notice, and record
it with the county recorder. The tax collector sends the
notice to the board of supervisors, who must approve the
sale, to each taxing agency, and each party of interest
with a lien against the property or with title or record to
all or any portion of the property. The tax collector must
then publish notice of the intended sale once a week for
three successive weeks in a newspaper of general
circulation published in the county seat, and in a
newspaper of general circulation published in the judicial
district in which the property is situated. If the
property is the primary residence of the taxpayer, the tax
AB 2257 - 5/5/14 -- Page 2
collector must inform the taxpayer that the property will
be sold, and of the taxpayer's right of redemption. Boards
of supervisors can also rescind tax sales in specified
circumstances.
After the sale, proceeds first pay for the costs of
newspaper publishing, and recording fees. Funds are then
distributed to taxing agencies with valid claims, and to
the tax collector to pay for notices and contacting
taxpayers. After that, proceeds satisfy liens held by
parties in interest. Any amounts left over, known as
"excess proceeds," are then divided up between each taxing
entity according to their appropriate share of the property
tax, after the county deducts specified costs.
Proposed Law
Assembly Bill 2257 directs excess proceeds from a tax sale
to the county general fund. The measure also provides that
a year must pass before any excess proceeds can be
distributed in the case where a county board of supervisors
has rejected a petition to rescind the sale, and the person
hasn't subsequently challenged the rejection in court.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . 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."
AB 2257 - 5/5/14 -- Page 3
2. Yours and mine . Tax collectors sell property to
satisfy delinquent property taxes, penalties, and interest,
then pay lienholders with remaining funds. If sales
proceeds are still left over, AB 2231 changes who gets what
by diverting excess proceeds from the taxing entities that
had a previous share of the property tax to the county.
While sales proceeds aren't taxes, these taxing entities
will see less revenue because of the bill; however,
allowing the county to retain all funds is sensible, as
costs of tax sales can sometimes exceed the amount of tax
sale proceeds, and some taxing entities don't pay the costs
of property tax administration.
AB 2257 - 5/5/14 -- Page 4
Assembly Actions
Assembly Floor 73-0
Assembly Appropriations 17-0
Assembly Revenue and Taxation 9-0
Assembly Local Government 9-0
Support and Opposition (06/19/14)
Support : None received
Opposition : None received.