Wednesday, April 22, 2015

Consumer advocates seek tax sale reforms


I recently came across a report from National Consumer Law Center that examined into property tax sales nationwide.  The NCLC described these sales over the past few years as a foreclosure crisis on par with the mortgage foreclosure crisis.  Their report is a bit dated now, but their findings are still relevant for review:
Overview All states have laws that permit local governments to sell property through a tax lien foreclosure process if the owner falls behind on property taxes or other municipal charges.

A tax lien sale may be started over nonpayment of a tax bill of only a few hundred dollars. A $200,000 home may be sold at a tax lien sale for $1,200 and then quickly resold for a huge profit.

Homeowners may lose not only a homestead but also hundreds of thousands of dollars in equity. This equity may represent their sole savings and security for retirement. As a result, foreclosures related to tax lien sales may destabilize entire communities.

Scope of Problem
  • $15 Billion and Counting: As homeowners navigate a difficult job market, declining home values, and high foreclosure rates, property tax delinquencies are increasing. Annual tax lien sales are now approximately $15 billion nationwide, according to the National Tax Lien Association.
  • Outdated Laws: Very few states have enacted procedures to protect owners' equity interests or to avoid windfalls to purchasers, and states rarely update tax lien laws to reflect current economic conditions or to ensure that proper safeguards exist to avoid unnecessary loss of homeownership. 
  • Elderly and Disabled Most at Risk: Homeowners most at risk are those who have fallen into default because they are incapable of managing their financial affairs, such as individuals suffering from Alzheimer's, dementia, or other cognitive disorders. One government study also found that in 2011 property tax foreclosures in New York City were highly concentrated among low-income communities with large African American and Latino populations, groups also targeted by subprime lenders. 
  • Wall Street Reaps Huge Profits: Individual tax sale purchasers and some of the same companies (Bank of America and JPMorgan Chase) are ramping up lucrative profit centers. Why? Buying tax liens can yield an incredible rate of return, up to 50%. Many state laws also permit tax lien purchasers to charge homeowners extremely high interest rates and fees to redeem their property and avoid foreclosure.
Key RecommendationsThe following recommendations reflect the goals of preserving homeownership and ensuring prompt payment of local taxes.

State Recommendations
  • Make redemption costs affordable by keeping investor profits reasonable. State laws should be reformed to limit the maximum interest or penalty rate on redemption amounts to reflect current economic conditions. The interest rate should seek to discourage speculation and promote redemption. 
  • Place reasonable limitations on additional fees and costs. States should not permit investors to pad their profits by charging homeowners unreasonable fees to redeem after the foreclosure process has been initiated. State law should establish a maximum fee schedule based on reasonable, market rates for title searches, attorneys' fees, and other fees. 
  • Establish a tax sale procedure, with court supervision. States should limit the initial tax sale to the sale of a tax lien certificate, rather than granting an entire interest in the property to a purchaser. If a homeowner fails to redeem the property, state law should require the purchaser to seek a court order authorizing final sale of the property. The court should confirm the final sale results and ensure that the sale price is fair and that any surplus funds are promptly paid to the homeowner. 
Recommendations for Cities and Towns
  • Implement redemption payment programs. Local tax offices should collect redemption payments to eliminate the possibility that an unscrupulous purchaser may thwart the owner's attempt to redeem. The local tax office should accept partial and installment payments. 
  • Adequate notice should be given at every stage of the tax sale process. Notifications should be used as a tool to avoid loss of homeownership Comprehensive notices should use plain language; include information about tax exemptions, abatements, and repayment plans; and note the consequences of each stage of the tax sale process. 
  • Provide detailed notice of redemption rights. The notice should give all of the essential details on how the redemption right can be exercised, including the name and address to which the homeowner can remit payment; itemized costs; and the deadline for the redemption payment.

Georgia law provides for a redemption amount of 120 percent paid by the property owner to the tax sale purchaser. My office will take a look at the proposals made here for cities. That being said, at least since 2008 if not much earlier up to the present, Decatur hasn’t had to auction off owner-occupied homes. Normally our tax sales involve vacant or unbuildable lots. We seldom get questions about redemption because usually the owner has decided to “walk away” from the property. The 120 percent redemption amount probably is a big hurdle for owners who weren’t able to pay their taxes in the first place.

Saturday, April 18, 2015

45 days until property taxes are due


First installment property taxes for Decatur are due by June 1, 2015.  We mailed out paper bills three weeks ago.  If you did not receive your paper bill, please go to our website at www.decaturgatax.com.  Payments can also be made on that website by e-check with no fees or by credit card with a convenience fee.  If your mailing address has changed, you must notify both the DeKalb County assessor's office at 404-371-0841 and the Decatur tax office through our website at www.decaturgatax.com.

Friday, April 17, 2015

10 business days until occupation taxes become delinquent


All 2014 business licenses in Decatur expired on January 30, 2015. If a business has not paid for its 2015 license and is still open in Decatur, that means that that business is operating without a business license. Please remit your occupational tax payment (and immigration-related documents if applicable) within the next 10 days to renew your 2015 license. A grace period during which no late fees accrued expires at the end of this month.  A 10 percent penalty and 1 percent interest per month will accrue on unpaid balances after Apr. 30, 2015.

If your business has closed or moved since 2014, please let us know to update our records and prevent collection activities. If you need any assistance, please call the business license office at 404-370-4100.

Monday, April 13, 2015

Last-minute income tax reminders in Decatur


• If you're itemizing deductions on your 2014 federal income tax return, you can generally itemize property taxes on property you own that you paid during 2014. If you escrow for taxes, the amount you paid in taxes should appear somewhere on your Form 1098--usually either in box 5 or in a blank box. If you don't escrow, remember to add both your county and city property taxes paid. To determine how much you paid in property taxes to the City of Decatur, Georgia, go to www.decaturgatax.com or call us at 404-370-4100.  (DeKalb County's tax office is at 404-298-4000.)  Please note that the IRS does not consider fees paid (such as garbage pick-up) to be deductible. Personal property taxes for business inventory and ad valorem taxes for motor vehicles are generally also deductible.

• The DeKalb library Decatur branch at 215 Sycamore Street has some blank federal forms left (1040, 1040A, and 1040EZ), but no instruction booklets or Georgia tax forms.  You're probably better off viewing any instructions or printing any other forms from the IRS or Georgia Department of Revenue's websites at this point if you file a paper return.

• Free income tax preparation services are available from AARP volunteer tax counselors at Decatur Recreation Center at 231 Sycamore Street this Monday and Wednesday from 10:00 a.m. until 2:00 p.m. They do a great job; however, you should expect very long lines at this late stage of the tax season. The Recreation Center and AARP do not have any blank tax forms or instruction books available.

• Sometimes the Decatur post office at 520 W. Ponce De Leon Avenue is open late to allow for last-minute mailing. Please check with them at 404-370-8300 for hours and details.

• City Hall does not have blank tax forms and does not accept income tax returns on behalf of the IRS.

• If you are a Decatur homeowner turning age 62 or age 80 this year (2015), or you are already over 62 and your income has dropped significantly on this year's return compared to your 2013 tax return, or you are taking care of a parent who meets those criteria, please call us at 404-370-4100. The homeowner may have become eligible for one of Decatur's income-based homestead exemptions for tax year 2016 for which they did not previously qualify.

• CBS Atlanta suggests a few bars where you can spend part of your refund on Tax Day here!  If you'd rather stay at home, try mixing an income tax cocktail for yourself.

Friday, April 10, 2015

Tax valuation and appeals bill passes state legislature


House Bill 202, which affects property value appeal procedures, passed the Georgia General Assembly on the final day of its session this year.  The House will transmit the bill to the governor's desk next week for his approval or veto before May 12.  HB 202 underwent significant amendments before final passage after a conference committee worked out differences between the House and Senate.  An earlier version of the bill had nine sections; the final version has 28 sections including motor vehicle, motor home, and income tax provisions that were not included in prior versions.  The portions relevant to property taxes are summarized below courtesy of the Georgia Municipal Association:
Section 5 -permits taxpayer to opt-in for electronic notice and billing of taxes at the discretion of the tax commissioner;

Section 6 -further specifies obstruction language regarding levying officers; 
Section 7 -requires levying (counties and cities) and recommending (e.g., school boards) authorities to post a on their website, if available, a report that has been required in the past; report must appear in newspaper of general circulation for one week (as opposed to two); 
Section 8 -permits taxpayers to opt-in for electronic notices and billing of ad valorem taxes; 
Section 9 -extends time for completing digest to September 1 (from August 1); -outlines requirements for penalties for incomplete or improper tax digests; -tax commissioners forfeit portions of commission depending on how long it take for proper submission; 
Section 10 -outlines joint boards of assessors between counties and the process of an intergovernmental agreement for such purposes; 
Section 11 -specifies the use of the Standard on Ratio Studies published by the International Association of Assessing Officers as tax digest in being prepared; 
Section 12 -establishes 10% penalty on assessment of unreturned personal property; -outlines a two year assessment freeze and exceptions; 
Section 13 -changes completion date for revision and assessment of returns from July 1 to July 15, except in counties where taxes collected in installments, where date remains June 1; 
Section 14 -clarifies that hearing officer method of appeal available for non-homestead property with value in excess of $750k (reduced from 1M) and for wireless property with aggregate FMV in excess of $750k (new provision for wireless property); -clarifies that methodology information may be obtained from board of assessors by way of a document request; adds enforcement mechanism for failure to comply with document requests, including assessment of attorneys’ fees;
Section 15 -defines appeal administrator for board of equalization as clerk of superior court, with distinct budget unit for such duties; -establishes 12 month document retention period; -sets standards for board of equalization members; -outlines process for appeals; -board of equalization must decide each case at end of hearing prior to proceeding to next appeal, written decision hand delivered to parties; 
Section 16 -outlines nonbinding arbitration process (replacing binding arbitration process) and process of appeals to superior court, including settlement conference; -establishes uniform superior court filing fee of $25.00; -lowers threshold for mandatory attorneys’ fees on commercial property from 80% to 85% (now the same for all real property) 
Section 17-RESERVED 
Section 18 -specifies that each digest shall be accompanied by all documents, statistics, and certifications relating to parcels under appeal; -removes penalty for deviation from assessment ratio appearing in subparagraph (b) for digests after 1/1/2016...

HB 202 does not directly affect Decatur's procedures for property tax billing, although affects certain assessment calculations and appeals options which can affect property owners county and city bills.

Thursday, April 9, 2015

Unpaid attorney taxes for 2014 are now considered delinquent


Each attorney practicing in the City of Decatur is responsible for a $425 annual occupational tax. The deadline for the 2014 lawyer tax was December 30, 2014, with a grace period for penalties and interest through March 31, 2015. Our Revenue Division has attempted to collect payment on all accounts through invoices and reminder notices, but several lawyers still owe the tax. The 2014 debt is now 90 days overdue. The Revenue Division has now added a 10 percent penalty to the amount owed for 2014. If this message pertains to you, please contact the Revenue staff at 404-370-4100 to confirm the current amount due and remit that amount no later than April 30, 2015, to prevent the accrual of additional monthly interest and escalated collection activity.

Wednesday, April 8, 2015

Equalized HOST and value freeze bills sent to Governor


Two bills supported by most state legislators representing DeKalb County were passed by both houses of the Georgia General Assembly and have been sent to Gov. Deal’s desk for his consideration.

House Bill 215 provides for an “equalized” homestead option sales tax (HOST) and an additional 1 percent sales tax in DeKalb County if approved by voters. The proceeds from the new tax would go toward infrastructure improvements in DeKalb County. The existing HOST credit would be modified to provide some more property tax relief. The equalized HOST could save Decatur residents about $20 a year compared to their last DeKalb County tax bill. HB 215 passed the state Senate unanimously, but received 32 nay votes in the House from fiscally conservative Republicans who regarded the measure as a tax increase.

HB 596 provides for an extension of the property assessment freeze in DeKalb County until 2021. The freeze is actually an exemption that offsets increases in property values for homeowners countywide. For Decatur residents, the freeze can help prevent increases in your DeKalb County tax bill but not your City of Decatur tax bill. HB 596 passed by a wider margin than HB 215. There were only four dissenting votes, which were cast by Democrats in the Senate including Sen. Gloria Butler of Stone Mountain and Sen. Steve Henson of Tucker.

Meanwhile, three bills to expand property tax relief for Decatur homeowners died in the state House before the session ended. HB 673 would have increased the existing GH1 basic homestead exemption by exempting $25,000 in assessed value rather than the current $20,000, which would have saved approximately $60 on resident homeowners’ tax bills when compared to current bills assuming no change in property value or in the millage rates. HB 670 would have added a new “GH3” exemption for homeowners over 62 with household income under $50,000 that would have saved them about $175 per year. Section 2A of HB 672 would have would have increased the existing GH2 (age 65) exemption amount of $1,000 to $10,000, which would be a savings of an additional $100 per eligible taxpayer.

Friday, April 3, 2015

Georgia Supreme Court upholds Fulton County's property tax breaks


Fulton County has a program providing property tax incentives to companies producing jobs or investing in the county.  The companies make payments in lieu of taxes (PILOT) pursuant a deal with the development authority.  PILOT agreements are periodically used throughout the state as an economic development method.  Fulton's PILOT program was challenged by an individual who objected to the formula used by the Fulton County Board of Tax Assessors for calculating the value of PILOT properties.

The SALT Shaker blog has the details:

Georgia Supreme Court rejects challenge to property tax incentives

BlogSALT Shaker
Sutherland Asbill & Brennan LLP Michele Borens, Jonathan A. Feldman, Jeffrey A. Friedman, Todd A. Lard, Carley A. Roberts and Leah Robinson

April 1 2015
On March 27, 2015, the Georgia Supreme Court rejected a challenge to the legal validity of property tax incentives in Georgia, largely on procedural grounds. SJN Properties, LLC v. Fulton County Bd. of Tax Assessors, No. S14A1493, 2015 WL 1393398 (Ga. Mar. 27, 2015).

Background
The case began in 2009 when a citizen, John Sherman (later substituted with SNJ Properties, LLC), filed a class action suit against the Fulton County Board of Tax Assessors seeking to invalidate property tax incentives provided to companies investing and creating jobs in the area. The Georgia Constitution’s uniformity provision generally prohibits county tax assessors from directly abating a company’s property taxes. Property taxes can potentially be reduced, however, through bond transactions involving local development authorities.

The transactions at issue were structured such that title to private property is transferred to a local development authority in connection with the issuance of revenue bonds. The authority leases the property back to the private party and uses the lease stream to pay down the bonds. The fee estate held by the tax-exempt authority is generally exempt from property tax, while the private party pays property tax on its leasehold interest. For purposes of determining the amount of property tax due on the leasehold interest, the parties agreed to use a “50% ramp-up method,” under which the property is valued at 50% of the fair market value of the fee estate in the first year, ramping up by 5% each year over 10 years until the property is valued at 100%. Sherman sought a determination that the 50% ramp-up method was unlawful on the basis that it did not reflect the property’s fair market value. Op. at 2-3.

The trial court initially dismissed Sherman’s claims, but in 2010, the Georgia Supreme Court reversed, holding that dismissal at that stage was improper because Sherman should have had an opportunity to present evidence regarding whether the valuation method was valid. 701 S.E. 2d 472 (Ga. 2010). On remand, the parties filed cross motions for summary judgment supported by expert affidavits of real estate appraisers. The trial court granted summary judgment on the merits to the Fulton County Board of Tax Assessors, and Sherman appealed.

The Georgia Supreme Court’s Opinion

On Friday, the Georgia Supreme Court upheld the trial court’s judgment on the merits in favor of the county. The Court held that:
  1. Sherman (and his substitute, SJN Properties) had standing as citizens and taxpayers of Fulton County to seek mandamus relief, which would allow the claimant to seek to force a public official to perform an official duty (here, valuing property), Op. at 12; 
  2. Sherman’s claims for injunctive relief were barred by sovereign immunity, Op. at 10-11; 
  3. Sherman’s claims for forward-looking declaratory relief were barred because he “faces no uncertainty or insecurity as to any of [his] own future conduct, but rather seeks an adjudication only of issues that will impact the future conduct of the FCBOA,” Op. at 17-19; and 
  4. On the merits, Sherman’s claims for mandamus relief failed, due in large part to a lack of proof. The Court reasoned that county tax assessors have broad discretion in valuing property, and the county’s two expert appraisers testified that the 50% ramp-up formula was analytically sound and reasonable. The Court also noted that Georgia courts had “previously endorsed” similar methods for valuing bond leasehold estates, citing DeKalb County Bd. of Tax Assessors v. W.C. Harris & Co., 282 S.E. 2d 880 (Ga. 1981). Sherman’s expert appraiser opined on the 50% ramp-up formula only in the abstract and did not actually appraise any particular property. Thus, the claims failed “for the simple reason that [Sherman] has adduced no evidence that any actual assessment of any particular property has been or is other than at fair market value.” Op. at 13-17.

Sutherland Observations: Citizen taxpayers often lack standing to challenge economic development incentives. See, e.g., DaimlerChrysler Corp. v. Cuno, 547 U.S. 332 (2006). Georgia, however, like some other states, grants citizen taxpayers standing to pursue mandamus relief, see O.C.G.A. § 9-6-24, and it was through the mandamus vehicle that Sherman was able to bring his challenge.

As this case and others like it illustrate, taxpayers negotiating credits and incentives must be mindful of the possibility that, at some future time, the legality of the incentives may be challenged. Care should be taken when negotiating and drafting the relevant agreements to anticipate and plan for these challenges and other potential risks (e.g., clawbacks, burdensome reporting obligations, etc.).

Thursday, April 2, 2015

Decatur bills for sanitation services for 2015


Decatur has sent out bills to businesses that receive commercial sanitation services from the City for 2015. The rates were adopted by the City Commission during a public meeting last month. The base rate for 95-gallon cart collection has changed from $710 last year to $720 this year. The base charge for 3-cubic yard containers has changed from $1,070 last year to $1,080 this year. Fees for containers of other sizes, which make up the majority of accounts, are unchanged in 2015 compared to 2014.  Payment is due by June 1, 2015.

The following stuffer was enclosed in commercial sanitation bills and provides more information for reference:



Businesses that are interested in signing-up or adjusting their sanitation or recycling service for 2015 should notify the Sanitation Office at 404-377-5571 prior to May 1.

For residential trash pick-up, the fee per household for 2015 is $240. Duplexes are charged double. The residential sanitation fee is included in Decatur's 1st installment 2015 tax bills which were mailed out late last week.

Friday, March 27, 2015

Proposal to extend property value freeze advances


The Georgia House of Representatives approved HB 596 yesterday which allows for a referendum to extend the property tax freeze in DeKalb County up through 2021. The bill now heads to the state Senate where Sen. Fran Millar says he’s already been promised support for the measure by fellow DeKalb legislators.

The freeze doesn’t actually prevent property values from increasing, but it offsets increases in property values by exempting the value by which the property has increased. The freeze applies to county property taxes. Homeowners can apply for the freeze when they apply for their DeKalb County homestead exemption. The DeKalb freeze can save taxpayers money even if they live within the city limits of Decatur by potentially reducing their county property tax bill.

Thursday, March 26, 2015

Equalized HOST bill passes Georgia Senate


State lawmakers have approved House Bill 215 which would allow for a referendum on increasing the sales tax by 1 percent in DeKalb County. If approved by voters, the existing homestead option sales tax (HOST), which mostly provides property tax relief but also generates revenue for infrastructure improvements in DeKalb and its cities, would be reconfigured solely to provide property tax relief to homeowners. The new, additional penny sales tax would be dedicated to infrastructure improvements in DeKalb.

Contrary to an earlier report in the news that indicated that taxes for a home in Decatur would decrease by $625 under the proposal, the equalized HOST would probably save homeowners in Decatur about $20 in 2016 on their county property tax bill compared to 2014.

HB 215 now returns to the Georgia House for final approval before heading to the governor’s desk for signature. The bill is almost certain to pass since an earlier version of the bill was already approved by the House earlier this month.

The bill passed the Senate unanimously including an aye vote from Sen. Elena Parent, who represents Decatur and large swaths of DeKalb County. However, Sen. Parent voted against an earlier motion to engross the bill, meaning that she supported the ability of senators to propose amendments from the floor before the final vote. It is not clear what amendments may have been proposed if amendments had been allowed.