BILL ANALYSIS �
AB 902
Page 1
Date of Hearing: April 11, 2011
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Henry T. Perea, Chair
AB 902 (Alejo) - Introduced: February 17, 2011
Majority vote.
SUBJECT : Property tax: sale of tax-defaulted property: fees.
SUMMARY : Removes the statutory cap imposed on certain types of
fees that a tax collector may charge in connection with a sale
of tax-defaulted property, and instead, requires the local board
of supervisors to establish those fees in the amounts that would
allow the county to recover its actual and reasonable costs, as
provided. Specifically, this bill :
1)Removes the $100 statutory limitation on the amount of the
costs that a tax collector may recover for attempting to
contact personally, and serve a written notice to, the
owner-occupant of the tax-defaulted property that is scheduled
to be offered for sale at a public auction.
2)Removes the $35 statutory limitation on the amount of the fee
that a tax collector may collect for obtaining the names and
last known mailing addresses of, and mailing specified notices
to, parties of interest, when the tax-defaulted property
subject to the notice is redeemed.
3)Clarifies that a tax collector, when the tax-defaulted
property is redeemed prior to the proposed sale to a public
agency or a qualified non-profit organization but after the
county has incurred notice or publication costs, may collect a
fee in an amount reasonably necessary to reimburse the tax
collector for the publication costs.
4)Specifies that the fee that may be imposed in the
above-mentioned cases shall be established by the county board
of supervisors based on the amount of actual and reasonable
costs incurred by the tax collector, in accordance with the
requirements of Government Code (GC) Chapter 12.5 (commencing
with Section 54985) of Part 1 of Division 2 of Title 5, and
shall be distributed to the county general fund (GF) or tax
collector, whichever is applicable, once the property is sold
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or redeemed.
5)Makes technical non-substantive changes to the corresponding
provisions of the Revenue and Taxation Code (R&TC).
EXISTING LAW :
1)Requires a property owner to pay property taxes to the
treasurer or tax collector of the county within which the
property is located.
1)Provides that if property taxes are not paid within five years
of the notice of impending default, the property becomes
subject to sale and will be sold at a public auction. The tax
collector has the power 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.
Tax-defaulted property may be sold under either of the
following procedures, each with distinct statutory
requirements:
a) Sale to private persons (including taxing authorities)
by auction (R&TC Section 3691 et seq.); or,
b) Sale to state and local taxing agencies by agreement
(R&TC Section 3791 et seq.).
1)Requires a tax collector, in the case of the proposed tax sale
of property that is the primary residence of the last known
assessee, to make a reasonable effort to contact the
owner-occupant. Provides that the costs incurred by the tax
collector in attempting to make personal contact with a
property owner before tax-defaulted property may be sold is a
"cost" included in computing the minimum price for which the
real property may be sold and must be added, not to exceed
$100, to the required amount for redemption of the property.
2)Requires a tax collector, when tax-defaulted property subject
to a recorded notice is redeemed, to collect certain fees,
including a fee of $35 to reimburse the county for its costs
of obtaining the names and last known mailing addresses of,
and for mailing specified notices to, parties of interest, in
addition to the amount required to redeem the tax-defaulted
property.
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3)Authorizes the tax collector, if the tax-defaulted property is
redeemed prior to the proposed sale, but after the county has
incurred costs to publish the notice of intended sale in a
newspaper, to collect a fee to reimburse the tax collector for
those costs.
4)Requires the price at which certain tax-defaulted property may
be offered for sale to be the total amount necessary to redeem
the property, plus costs, and prescribes the manner of
distribution of proceeds from the sale of property. Provides
for a distribution from those proceeds to the county GF to
reimburse the county for the cost of giving specified notice,
not to exceed $35, and a distribution to a tax collector to
reimburse the county for the costs of a personal contact, not
to exceed $100.
FISCAL EFFECT : Unknown, but the Committee staff estimates that
this bill will not impact state GF revenues.
COMMENTS :
1)Author's Statement . The author states that, "AB 902 gives
counties the ability to charge the actual and reasonable costs
of locating and serving a tax-defaulted property owner.
Currently, counties are restricted to a maximum reimbursement
of $100, regardless of the actual costs incurred."
2)Arguments in Support . The proponents of this bill argue that,
while tax collectors are required to provide a personal notice
to property owners who have a tax-defaulted residential
property at risk of being sold at public auction, they cannot
recover more than $100 for the staff time and transportation
costs incurred in complying with the requirement. The
proponents also state that this bill is important to counties
that are facing fiscal crisis since "the ability and authority
to bring fee levels closer to full cost recovery would be of
significant assistance."
3)Sale of Tax-Defaulted Property: Background . Property is
deemed in default if property taxes are not paid when due and
is subject to penalties and costs. Once the real property is
declared tax-defaulted, the county tax collector publishes the
information on the defaulted roll. If the owner fails to
redeem the property within five years (or three years if the
property is also subject to a nuisance abatement lien) by full
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payment of the defaulted taxes, interest and penalties, then
the property may be sold to the highest bidder at a public
sale. The county tax collector's power to sell arises by
operation of law in order to satisfy the defaulted taxes.
After the power to sell arises, the tax collector is required
to record a Notice of Power to Sell with the county recorder's
office. Once the property becomes subject to sale, the county
tax collector must attempt to sell the property in order to
collect the defaulted taxes. The property may be offered for
sale at public auction, a sealed bid sale, or a negotiated
sale to a public agency or qualified non-profit organization.
Public auctions are the most common way of selling
tax-defaulted property, and the property is sold to the
highest bidder. Generally, if no bid was received when the
property was last offered for sale at public auction, the tax
collector may re-offer property at a reduced price at the same
or next scheduled sale.
4)The $100 Statutory Cap . Once a county has decided to sell a
tax-defaulted property, it is under an obligation to make a
reasonable effort to contact the delinquent owner before
proceeding with a sale. Under existing law, a tax collector
is required to provide a personal notice to property owners
whose principal residence is at risk of being sold at a tax
sale. If the personal contact is not made after reasonable
efforts by a tax collector, the tax collector is required to
attempt to serve written notice, as specified. The law allows
the tax collector to add actual and reasonable costs of this
visit to the amount charged for redemption of the property.
However, even though the tax collector can recover the costs
of locating and serving a notice on the delinquent owner, the
amount of those costs is capped at $100.
According to the sponsor, in rare circumstances does this amount
cover the transportation costs and/or staff time. For
example, the County of Monterey estimates a loss of $200 in
each case of personal contact attempted by the tax collector,
whereas the County of Fresno approximates that it loses about
$50 per case. This bill would remove the $100 statutory cap
imposed on the amount of costs that may be recovered by a tax
collector and would, instead, allow the county to recover the
actual cost of locating and personally serving the owner of
the tax-defaulted principal residence. The amount of actual
and reasonable costs of making a personal contact would be
determined by the county board of supervisors, in accordance
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with the rules prescribed by GC Chapter 12.5 of Part 1 of
Division 2 of Title 5. This bill would also provide that, in
order to reimburse the county for the costs of a personal
contact, a sum equal to the total amount of the actual and
reasonable costs, not subject to the $100 cap, shall be
distributed to the tax collector from the sale price amount,
as specified.
5)The $35 Statutory Cap . Under existing law, tax-defaulted
property subject to a recorded notice may be redeemed by the
former owner by payment of all delinquencies and statutory
penalties prior to disposition of the property or until the
redemption right is terminated, as specified. When a
tax-defaulted property is redeemed, the tax collector is
required to collect specified fees, including a $35 fee for
the costs incurred by the county in obtaining the names and
last known mailing addresses of, and for mailing certain
notices to, parties of interest ( a so-called 'notice fee').
The minimum redemption price must also include the cost of
publishing and advertising the property sale, in addition to
other associated penalties and costs.
This bill would repeal the $35 notice fee and, instead, would
require the tax collector to collect a fee equal to an amount
of actual and reasonable costs incurred by the county in
notifying the parties of interest, as defined, for each
separately valued parcel of real property and would authorize
the full amount of the fee to be distributed to the county GF.
This bill would also clarify that the new notice fee amount
and a publication fee would apply in the case of a sale of
tax-defaulted property to a public agency or a qualified
non-profit organization. The amount of the notice fee will be
established by the county board of supervisors, in accordance
with the rules prescribed by GC Chapter 12.5 of Part 1 of
Division 2 of Title 5.
6)"Actual and Reasonable" Costs. Under existing law, the
majority of all fees and charges imposed by a treasurer-tax
collector in connection with the administration of property
taxes are established and approved by the board of supervisors
under GC Section 54985, which allows the treasurer-tax
collector to recover actual costs. Specifically, a county
board of supervisors has the authority to set the amount of a
fee or charge that is authorized to be levied by another
provision of law. GC Section 54986 prescribes the rules that
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the board of supervisors must follow before approving any new
fee or increasing an existing fee. Thus, the board must hold
at least one public meeting, and at least 14 days prior to the
meeting, a written notice is required to be mailed to
interested parties who have filed for written notifications.
Finally, at least 10 days prior to the meeting, the data
indicating the amount of the cost, or estimated cost, must be
made available to the public.
The amount of the fee or charge must be the amount reasonably
necessary to recover the cost of providing any product or
service or the cost of enforcing any regulation. The fee or
charge may be the average cost and can include direct and
indirect costs. The board of supervisors may request the
county auditor to conduct a study to determine whether the fee
or charge is reasonable. A study typically involves a review
of the methodology used in calculating the estimated costs.
Many counties ask the auditor to conduct a study prior to
presenting the amount of a new fee or an increase of an
existing fee to the board of supervisors for approval.
Although existing law allows a tax collector to collect the
amount of the actual and reasonable costs incurred in an
attempt to establish a person contact, it limits that amount
to $100 and, consequently, in many cases, does not allow the
tax collector to recover the actual costs incurred.
7)Proposition 26 . On November 2, 2010, the voters approved
Proposition 26, an initiative constitutional amendment, that
expanded the definition of a "tax" to include many state and
local government assessments previously classified as "fees."
Among other provisions, Proposition 26 amended Section 1 of
Article XIII C of the California Constitution to define the
term "tax" as any levy, charge, or exaction of any kind
imposed by a local government, except certain enumerated fees.
One type of those enumerated exactions is "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."
The personal contact fee and the notice fee are charged for the
costs of services provided by a local government. As such,
both fees must comply with the requirements of Proposition 26.
The actual and reasonable costs of providing the service may
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vary from county to county and may very well be more than $100
or $35. By authorizing a local board of supervisors to set
these fees, within the confines of both GC Section 54986 and
Proposition 26, this bill would allow local governments the
flexibility needed to recover the actual costs incurred by
them in complying with the requirements applicable to tax
sales.
8)Related Legislation .
AB 820 (Gordon), introduced in the current legislative
session, would allow a tax collector to recover the actual and
reasonable costs incurred in preparing a
certificate-of-payment showing taxes paid. AB 820 is set to
be heard in this Committee on April 25, 2011.
REGISTERED SUPPORT / OPPOSITION :
Support
The County of Santa Clara Board of Supervisors
The Monterey County Board of Supervisors
The California Association of County Treasurers and Tax
Collectors
The County of San Luis Obispo
The California State Association of Counties
The County of Benito
Opposition
None on file
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098