BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2291


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          ASSEMBLY THIRD READING


          AB  
          2291 (Achadjian)


          As Amended  April 7, 2016


          Majority vote


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          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Revenue &       |9-0  |Ridley-Thomas,        |                    |
          |Taxation        |     |Brough, Dababneh,     |                    |
          |                |     |Gipson, Mullin,       |                    |
          |                |     |O'Donnell, Patterson, |                    |
          |                |     |Quirk, Wagner         |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
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          SUMMARY:  Allows a county tax collector to charge a fee to  
          recover the reasonable costs of instituting and maintaining an  
          arrangement to accept partial payments of delinquent taxes on  
          tax-defaulted property.  Specifically, this bill:  


          1)Allows, upon authorization by ordinance of the county board of  
            supervisors, a county tax collector to charge a fee to recover  
            the reasonable costs of instituting and maintaining a partial  
            payment arrangement for delinquent taxes on tax-defaulted  








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            property.


          2)Specifies that the fee is a charge imposed pursuant to  
            Proposition 26 (2010) and subject to the requirements  
            governing the process by which a county board of supervisors  
            may increase or decrease a fee or charge.


          3)Specifies that the ordinance authorizing the fee must include  
            a limitation on the total amount of fees imposed.


          EXISTING LAW:  


          1)Requires an annual payment of property tax, and provides that  
            unpaid taxes become delinquent and subject to penalties and  
            costs.  


          2)Requires tax-defaulted property to be sold to the highest  
            bidder at public sale if the taxpayer fails to redeem the  
            property by repaying in full the defaulted taxes, interest,  
            and penalties within three to five years, as specified.


          3)Allows the tax collector to collect fees to reimburse the  
            county for costs incurred preparing tax-defaulted property for  
            sale.


          4)Allows a county tax collector, with the approval of the board  
            of supervisors, to accept partial payments from taxpayers in  
            the case of a deficiency in the payment of taxes due.  


          5)Specifies that partial payments shall be applied first to all  
            penalties and interest due, and the balance, if any, shall  








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            then be applied to the taxes due.


          6)Specifies that partial payments shall not be deemed a  
            redemption, partial redemption, or installment payment and  
            shall not alter either the date upon which the property became  
            tax defaulted or the date the property becomes subject to a  
            power of sale.


          7)Allows a taxpayer to choose to pay delinquent taxes in  
            installments, subject to a fee for processing the taxpayer's  
            request, during which time the property subject to the  
            installment plan shall not become subject to sale unless  
            payments are not made by the dates prescribed.


          8)Provides that a charge imposed for a specific government  
            service or product provided directly to the payor that is not  
            provided to those not charged, and which does not exceed the  
            reasonable costs to the local government of providing the  
            service or product, is an exception to the definition of a  
            "tax" (Proposition 26).


          9)Allows a county board of supervisors to increase or decrease a  
            fee or charge, otherwise authorized to be levied by another  
            provision of law, in the amount reasonably necessary to  
            recover the cost of providing the product or service.  


          10)Requires the county board of supervisors to hold at least one  
            public meeting to discuss the proposed fee or charge, and that  
            the action to levy the new fee or charge must be taken by  
            ordinance, amongst other requirements.  


          FISCAL EFFECT:  None









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          COMMENTS:  


          1)Author's Statement:  The author provided the following  
            statement in support of this bill:
          AB 2291 would simply allow counties to recover the cost of  
          providing an alternative for taxpayers with tax defaulted  
          property.  Accepting payments on a monthly basis would offer a  
          substantially lower barrier to entry than the existing, more  
          restrictive Permanent Installment Plan.  As a result, AB 2291  
          would allow more taxpayers to begin paying off their  
          delinquent taxes with lower monthly payments in the same  
          manner they typically pay other debt.  This will have direct  
          benefits to taxpayers who are making earnest efforts to pay  
          taxes owed.


          AB 2291 is both taxpayer friendly and maintains local control  
          for counties that choose to provide this service.


          2)Arguments in Support:  The sponsor of this bill, the  
            California Association of County Treasurers and Tax Collectors  
            (CACTTC), states: 


               The prospect of establishing a payment plan for an  
               individual taxpayer requires in most counties a separate,  
               local tracking process for payments.  This can take a  
               substantial amount of time to research, establish and  
               maintain the plan going forward for any individual  
               taxpayer.  AB 2291 will authorize Tax Collectors to  
               recover the costs to establish this plan for individuals,  
               which will provide a direct benefit to affected taxpayers  
               that choose to make an earnest effort to become current  
               on their property taxes.










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          3)Arguments in Opposition:  There is no opposition on file.


          4)Delinquent Property Taxes:  Generally, property taxes on the  
            secured roll are due in two installments on November 1 and  
            February 1.  Property taxes that are due but unpaid after  
            December 10 or April 10 become delinquent and incur a 10%  
            penalty per installment.  After April 10, the taxpayer is also  
            charged a $10 fee for preparation of their delinquent tax  
            records.  If there are any unpaid taxes after June 30, then  
            the property taxes are declared to be in default and incur  
            additional penalties at the rate of 1.5% per month of the  
            unpaid taxes (18% per year), as well as a $15 redemption fee.   
            If property taxes remain unpaid for five years, the taxpayer  
            is given notice that the property has become subject to the  
            power of sale and will be sold at a public auction; if the tax  
            delinquent property is requested for affordable housing  
            development, the property can be sold after three years.  The  
            taxpayer can redeem his/her property by paying the total  
            amount of the unpaid taxes for all delinquent years, as well  
            as all penalties and fees.  Depending on when the property is  
            redeemed in relation to its time of sale, the taxpayer may be  
            subject to additional fees. 


          5)Permanent Installment Plans:  Counties are required to offer  
            taxpayers a Permanent Installment Plan (PIP), through which  
            they can make annual payments to redeem their tax defaulted  
            property.  The PIP may be opened any time prior to the  
            property becoming subject to the power of sale, during which  
            time the property will not be subject to sale unless payments  
            are not made by the dates prescribed.  The PIP requires the  
            taxpayer to make an initial payment of at least 20% of the  
            redemption amount and make subsequent yearly payments of at  
            least 20%, in addition to paying current year taxes and any  
            applicable penalties.  Under existing law, any taxpayer  
            choosing to pay delinquent taxes in installments may be  
            subject to a fee, set by the board of supervisors, for  
            processing the request and setting up the PIP.  The fee varies  








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            from county to county as each county faces unique costs in  
            administering the PIP given differences in existing staff,  
            technological resources, and program need.  For example,  
            Fresno County charges a $95 set-up fee; San Francisco County  
            charges a $50 set-up fee; and Riverside County charges a  
            $19.22 set-up fee, plus a $36.36 annual maintenance fee.


          6)Partial Payment Arrangements:  In addition to a PIP, a county  
            tax collector may choose to accept partial payments from  
            delinquent taxpayers, if authorized to do so by the board of  
            supervisors.  These partial payments could be accepted on an  
            ad hoc basis or on a more formal basis in the form of a  
            monthly payment plan.  Making partial payments may serve as an  
            alternative for taxpayers who want to catch up on delinquent  
            taxes, but cannot afford to begin a PIP given the 20% down  
            payment requirement.  Even if the overall fee for a partial  
            payment arrangement is higher than the fee for a PIP, since  
            administrative costs for providing a monthly plan are  
            naturally higher than those for a yearly plan, a partial  
            payment arrangement may be more cost-effective for a taxpayer  
            if increased flexibility helps the taxpayer budget for and pay  
            off debt more quickly.  Taxpayers would be able to decide  
            which payment plan suits their needs best.


            Existing law does not explicitly authorize a county to charge  
            a fee to recover the costs of accepting partial payments as it  
            does for administering a PIP.  As a result, many counties do  
            not allow partial payments as they do not have the budget,  
            personnel, or technical capacity to support the additional  
            expense of tracking partial payments and communicating an  
            updated payment balance to individual taxpayers.  According to  
            CACTTC, there are a few counties that currently accept partial  
            payments in any amount at any time as they have the capability  
            to absorb such relatively infrequent administrative costs.   
            However, for counties that wish to establish a more formalized  
            partial payment arrangement, the costs of informing taxpayers  
            about this new payment option and establishing a more  








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            comprehensive tracking and notification system may be  
            prohibitive.  This bill allows counties to recover the cost of  
            accepting partial payments from delinquent taxpayers in the  
            hope that more counties can begin offering such services on a  
            regular basis.


            At What Cost?  Similar to the costs of administering a PIP,  
            the costs of administering a partial payment arrangement will  
            vary by county given differences in program need and existing  
            resources.  Unlike the PIP, however, the county has discretion  
            to decide for itself how it wants to accept partial payments,  
            if at all, on delinquent taxes.  Although this bill does not  
            specify what an appropriate fee amount may be, it requires the  
            ordinance by the county board of supervisors authorizing the  
            fee to include a limitation on the total amount of fees  
            imposed.  This bill also specifies that the fee would be  
            charged in accordance with the provisions of Proposition 26  
            and limited to the reasonable costs of providing the service.   





          Analysis Prepared by:                                             
                          Irene Ho / REV. & TAX. / (916) 319-2098  FN:  
          0002727