97-043
Response
July 10, 1997
DATE: JULY 2, 1997
RE: REQUEST FOR ADVISORY OPINION
Delinquent tax payments
by centrally assessed property
owners with value under
appeal
_____________________________________________________________________________
During discussions with county
treasurers concerning this year’s legislation an issue arose that an advisory
opinion would help clarify. It concerns
how to treat a delinquent escrow account payment from a centrally assessed
taxpayer. This problem only involves
payment of delinquent taxes by centrally assessed companies which have appealed
the valuation. It does not involve
delinquent payments from companies whose value is not under appeal.
In the past, if a centrally assessed
taxpayer refused to pay its taxes on time, the taxing entities simply did not
receive its taxes until they were paid, and this was termed a delinquent
payment. The taxing entity was not made
whole on its taxes until the delinquent payment came in because no value was
deducted at the time certified tax rates were prepared.
With the new legislation, if a
centrally assessed taxpayer does not pay all of its taxes charged, then the
taxing entity is not necessarily harmed should the centrally assessed taxpayer
appeal and state that its value is zero.
Why? Because all the disputed value is subtracted prior to certified
rates being calculated, and nonpayment does not generate less revenue for a
taxing entity than expected from the certified rate.
As an example, assume a centrally
assessed taxpayer is assessed a value of $10,000,000. The taxpayer appeals $8,000,000 of value so that only $2,000,000
is used in the certified tax rate process.
Assume the taxes on the $2,000,000 are $25,000, and the taxes on the
disputed $8,000,000 are $100,000. Were
the taxpayer to pay the entire tax bill of $125,000, $25,000 would be distributed
to the taxpayer and $100,000 would go into an escrow account. Then, should the taxpayer’s appeal be
denied, the $100,000 would be distributed to the taxing entities and deducted
from their certified tax rates the following year.
However, should the taxpayer not pay
the $125,000 tax bill on time, the entire amount is delinquent. Then, when it is paid, this payment can
result in a windfall. The $25,000 would
not be a windfall because it was part of the certified tax rate. When it was not paid, the entities “lost”
this money. When it is paid, they are
made “whole.” The $100,000 should have
gone into the escrow account and, when paid out, deducted from the next year’s
certified tax rate so as not to be a windfall.
When the $100,000 is instead classified as a delinquent payment, the
statutes are silent as to its treatment, and current practice would give the
entities the money without a deduction to next year’s certified tax rate, thus
producing a windfall.
The escrow legislation provides this
new twist to delinquency distribution, but does not address whether this
delinquency should be treated like those of the past in relation to certified
rates or should now be deducted like escrow payments because the taxing entity
was already made whole in the year of assessment. The Property Tax Division believes that the $100,000 delinquent
payment should be deducted from the certified tax rate the year following the
distribution of the delinquency, and recommends that the counties by directed
to proceed in this manner. The Property
Tax Division requests an advisory opinion concerning this issue to assist in
clarifying our direction to the counties.
July
10, 1997
NAME
ADDRESS
CITY
STATE ZIP
Dear
NAME,
We have reviewed your
recommendations pertaining to the delinquent payment of property taxes
following decisions on a centrally assessed property tax appeals. We agree with your recommendations. Payments of delinquent tax to a county must
be considered in the calculation of that county’s certified tax rate in the tax
year following the payment.
Thank you for bringing attention to
this issue.
For
the Commission,
Joe
B. Pacheco,
Commissioner
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