BILL ANALYSIS �
AB 902
Page 1
ASSEMBLY THIRD READING
AB 902 (Alejo)
As Introduced February 17, 2011
Majority vote
REVENUE & TAXATION 5-2
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|Ayes:|Perea, Beall, Charles | | |
| |Calderon, Fuentes, Gordon | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Donnelly, Harkey | | |
| | | | |
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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
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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 or redeemed.
5)Makes technical non-substantive changes to the corresponding
provisions of the Revenue and Taxation Code (R&TC).
FISCAL EFFECT : Unknown, but the Revenue and Taxation Committee
staff estimates that this bill will not impact state GF revenues.
COMMENTS :
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."
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."
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.
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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 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.
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.
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"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 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 personal contact, it limits that amount to $100 and,
consequently, in many cases, does not allow the tax collector to
recover the actual costs incurred.
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 Article XIII C, Section 1 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
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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 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.
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 was heard by the Revenue and Taxation Committee and
passed out on a five to one vote on April 25, 2011.
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916) 319-2098
FN: 0000319