BILL ANALYSIS Ó
AB 2291
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CONCURRENCE IN SENATE AMENDMENTS
AB
2291 (Achadjian)
As Amended June 8, 2016
Majority vote
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|ASSEMBLY: |74-0 |(April 14, |SENATE: |35-1 |(August 1, 2016) |
| | |2016) | | | |
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Original Committee Reference: REV. & TAX.
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.
The Senate amendments:
1)Require the ordinance authorizing the fee to establish the
maximum fees that may be charged, as specified, instead of a
limitation on the total amount of fees that may be imposed.
2)Provide that the ordinance authorizing the fee must require
the fee to be paid prior to the application of any partial
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payments to penalties, interest, costs, and taxes due.
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
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
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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.
AS PASSED BY THE ASSEMBLY, this bill:
1)Allowed, 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 property.
2)Specified 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.
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3)Specified that the ordinance authorizing the fee must include
a limitation on the total amount of fees imposed.
FISCAL EFFECT: None
COMMENTS:
1)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.
2)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
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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
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.
3)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
the California Association of County Treasurers and Tax
Collectors (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
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establish a more formalized partial payment arrangement, the
costs of informing taxpayers about this new payment option and
establishing a more 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.
4)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. Counties may already accept
partial payments without charging taxpayers a fee, paying for
any costs out of general funding. 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 establish the maximum fees that the tax collector may
charge. 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:
0003567