Monday, August 30, 2010

Home scam warning

Alabama officials are warning home owners about an Atlanta-headquartered shingle company.  This is reminscent of roofing scams that Attorney General Thurbert Baker warned DeKalb seniors about during this year's Scam Jam at the Decatur Active Living Center.  Baker said that somebody claiming to be a roofer will drop by an older person's home, tell them they have loose shingles, get up on the roof for a while without doing actual work, then come back down and demand payment. 

From WAFF News on Aug. 19:
HUNTSVILLE, AL (WAFF) - During the past month, the Better Business Bureau of North Alabama has been issuing statements concerning calls to their office regarding American Shingle, a company that was headquartered in Atlanta, GA with a local office in Huntsville (American Shingle & Siding of Alabama) and more than 20 other cities.

The company's employees had been going door-to-door in several parts of North Alabama, offering to provide free roof inspections and working with the resident's insurance company to approve roofing jobs. In each call to the BBB, the homeowners who had roof damage reported that they had been asked to provide part or all of their insurance money to the company before the roof replacement job would be placed on the company's schedule.

After payment was made and the consumer waited 4-6 weeks for their new roof, as indicated by salespeople, they would receive a notice stating that the company needed to delay the roofing job by an additional 4-6 weeks, pushing some jobs into late August or even late September. Consumers began to question if the company intended to repair/replace their roof, or just keep the insurance money that had been provided.

The rest of the story is available here.  The company does not appear to have offered services to Atlanta-area residents.  However, Georgia is often ranked as one of the top 10 states for mortgage schemes and other property related fraud.

Tuesday, August 24, 2010

City and County taxes

Suppose you own a property—we’ll call it “Property A”—in Decatur worth $275,000 and you have no exemptions. Your City of Decatur taxes (plus fees) on Property A would be $4,831.56 for the year. Our millage rate is 32.935 mills (which includes taxes for Decatur schools) and we use a 50 percent assessment.

You would also owe DeKalb County $1,200.10 in taxes for Property A for the year. The County millage rate for Decatur residents is 10.91 mills. Georgia counties assess at 40 percent.

Now suppose you own a second $275,000 property, Property B, in unincorporated DeKalb—also without exemptions. You would owe $4,409.90 in DeKalb County property taxes for Property B. Your county taxes would not be $1,200.10 under this scenario. The millage rate for unincorporated DeKalb is 40.09 mills, not just the 10.91 mills that are imposed by the County on City residents:

The reason that an unincorporated property of equal value to a City of Decatur property would have a higher county tax liability than if it were inside the City is because the County is providing all the services (for example, school & fire services). Properties inside the City of Decatur pay a lower County tax because the City is providing the majority of services.

Monday, August 23, 2010

Surprise liens

Chad R. Pomeroy (h/t TaxProf Blog) has written a scholarly article on the concept of “surprise liens” where a property buyer is unaware of a pre-existing lien because the lien, such as a federal estate tax lien, was never recorded at the courthouse. Here’s his eye-popping introduction:
Imagine you want to buy a house. You find the perfect place, exactly where you want to live, exactly the style you want. Like almost everybody, you do not have enough money to buy the house outright, so you need a mortgage. Getting a mortgage makes you nervous – you are taking on a principal obligation that is more money than you will make in the next five to ten years combined. But, everyone assures you, this is a safe financial decision – so long as you do not buy for speculation at the peak of a bubble, your newly purchased asset will adequately secure your obligation and ensure that you are not left responsible for an enormous debt if you suddenly lose your job or get sick. You are still nervous, though, about such a complicated and significant transaction, so you take the relatively extraordinary step of talking to a real estate lawyer. He says the same thing as your friends: your loan will be secured by your new house, and no bank will make a home loan to you unless you buy title insurance, which literally ensures that you will have clear title and that the bank will have a first-place protected interest in your new home.

That does it. Feeling confident, you take out the loan and buy the house. You move in and start to settle down. Then you get a letter from the Internal Revenue Service (“IRS”). Your house is subject to an estate tax lien and will be seized unless you pay the full amount of estate tax that is currently owed by the estate of the fellow who sold the house to the woman from whom you bought it. Frantically, you call your lawyer. This cannot be right, can it? The IRS cannot have a superior lien based on the taxes owed by the estate of somebody you never met and who owned the home more than five years ago, can it? The lawyer reviews the IRS notice and does some research. Red-faced, he tells you the IRS can, indeed, seize your new home, even though you bought title insurance and the title insurer examined the public records. He had never heard of the estate tax lien until now, but it gives the IRS an interest that does not have to be filed anywhere and that still takes precedence over your rights. You have been victimized by a “surprise lien.”
Pomeroy goes on to describe other circumstances where liens can come to light after buying a property, and the reasons why current law allows for this.  He concludes that although surprise liens have a long history and even have some advantages, such practices should be ended.

When Decatur sets a lien for unpaid property taxes, we are required to file that record with the DeKalb County Clerk of Superior Court.  Those records are available to anybody doing title research.

Wednesday, August 18, 2010

Are all retirement homes tax exempt?

In Georgia, a “nonprofit home for the aged” is exempt from property tax if the institution has no stockholders, income, or profit distributed to a private person, and is classified as a 501(c)(3).

But the exemption does not apply to “property of a home for the aged held primarily for investment purposes or used for purposes unrelated to the providing of residential or health care to the aged” (O.C.G.A. § 48-5-41(a)(12)(B)).

Which is why Columbus says it's going after the Spring Harbor continuing care community for taxes owed. WRBL offers this interesting report, at least interesting to fellow tax geeks.  (Note:  for some reason it'll take about 10 seconds after clicking play before this video starts.)

Thursday, August 12, 2010

Assessment techniques under scrutiny

The AJC had an interesting article on Monday about the use of credit-bid sales to determine property values in 2010 for Fulton County.  Read the article here (hat tip to Georgia Zoning Blog).  The practice, which Fulton says it is discontinuing, may result in inflated values for tax purposes.

DeKalb assessor Eugene James is also quoted in the article.

Tuesday, August 10, 2010

Decatur's Financial Discipline Pays Off in Recession

On June 21st the Decatur City Commission adopted the City's budget for the fiscal year which started on July 1st. This was the most challenging budget year I've experienced in my twelve year with the City. The City's property tax digest decreased for the first time since 1995. While the drop was slight, just over 1%, it translated into $300,000 less in property tax revenue for this fiscal year. Considering that we were already estimating to spend $702,000 in fund balance for the fiscal year ending June 30, 2010 and the state of the economy was still looking grim, there was some serious concern about the ability to continue to provide a high level of City services.

Just to clarify, in simple terms, fund balance is the difference between revenues and expenditures and it is cumulative. For example, in some years the City brings in more revenue than it spends and that amount goes into the fund balance. In other years, the City may spend more than it collects and will use some of the fund balance to balance the budget.

The City is quite conservative in its approach to public finance. As it turns out, during a recession, you can finally appreciate the conservative financial approach that city staff have employed for the past two decades or more. The City's fund balance policy requires a fund balance between twenty and thirty percent of the operating budget. At June 30, 2008, the fund balance was about $7,200,000 or forty percent of the operating budget. If there was ever a time to have a healthy fund balance, June 2008 was that time. By June 30, 2009, the fund balance was down to $6,700,000 or thirty six percent of the operating budget. We thought we were going to spend $392,000 of fund balance to get through June 30, 2010 but it looks like that may not be necessary because of lower than anticipated expenditures and higher than budgeted revenues.

So, what does all of this mean to Decatur residents?

Thursday, August 5, 2010

Savannah to execute tax collector

Okay, they won't really kill one--it'll just be a performance.  Next week when Savannah commemorates the anniversary of its first public reading of the Declaration of Independence in 1776, they will reenact the hanging of a tax collector!  From the Savannah Morning News yesterday:
“Georgia’s First Fourth” will portray the arrival of the Declaration of Independence in Savannah on Aug. 10, 1776, said Jacob Grotheer, an interpretative ranger at Wormsloe [State Historice Site].

Archibald Bulloch, the president of the council on safety, read the declaration aloud in public that day, said Grotheer.

That proclamation will be restaged this weekend, along with a debate on the issue of loyalty, a portrayal of the raising of a militia force and the hanging of a tax collector.

The residents of Wormsloe, and the rest of Georgia, were split on the issues of the time, said Grotheer. Noble Wimberly Jones was so heavily involved in the patriot cause that he earned the nickname the “Morning Star of Liberty.” His father, Noble Jones, who settled Wormsloe in the mid-1730s, remained loyal to the crown.

The Habersham and Telfair families, along with many others in Savannah, were likewise rended by the revolution. The colony, after all, had been named for King George II, and its ties to the mother country proved difficult to break, said Grotheer.

The carefully researched and staged debate at Wormsloe will chart the colony’s path to the Declaration of Independence, and it will be followed by the public punishment of an ever-popular villain, a tax collector.

“They’ve been hated since biblical times,” Grotheer said.

Tuesday, August 3, 2010

Fallout from the housing bubble

We seem to be hearing more lately on the enforcement side of the housing market.

Although the defendants have denied any wrongdoing, Countrywide has agreed to settle lawsuits with its shareholders for $600 million for misrepresenting the risks associated with its loose lending standards, according to the Los Angeles Times last night.

This follows last week’s announcement that Citigroup will settle with investors for $75 million over similar allegations.

California recently announced that it has revoked a record number of real estate licenses over the past year, because “The down turn in the real estate market has uncovered abusive practices which has caused the number of disciplinary actions to rise.” Mortgage loan modification fraud is being outpaced by short sale abuses according to the California Real Estate Commission.

In June, the U.S. Department of Justice announced an anti-fraud initiative called Operation Stolen Dreams to investigate and prosecute mortgage fraud.

According to the DOJ, the U.S. Attorney for the Northern District of Georgia is among the leaders of mortgage fraud prosecution.  More on DOJ’s efforts in North Georgia, including brief summaries of recent mortgage fraud cases in Atlanta, Lithonia, and Dunwoody, can be found here.