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Collections Problems. Shea Denning School of Government. Problem #1.
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Collections Problems Shea Denning School of Government
Problem #1 • GS 161-31 permits certain county boards of commissioners to adopt an ordinance prohibiting the transfer of deeds unless the county tax collector “has certified that no delinquent ad valorem county taxes, ad valorem municipal taxes, or other taxes with which the collector is charged are a lien on the property.” • May a board of county commissioners require the county tax collector to certify payment of ad valorem taxes owed to cities located in the county for which the county does not collect taxes? • Must the board do so? • May the town adopt its own ordinance requiring this certification?
Answer to Problem #1 • This statute does not, in my view, require that the municipal taxes be charged to the county collector before he or she can be required by resolution to certify such amounts. • (Any taxes other than city and county taxes included in the resolution clearly would have to be charged to the county collector.) • If the county’s resolution requires certification of municipal taxes not collected by the county, the county will obviously have to contact the municipal collector to obtain information about municipal taxes before issuing the certification. • The decision about whether to require certification of municipal taxes is within the county board of commissioners’ discretion. • The municipality may not adopt a resolution requiring a certification before deeds may be recorded.
Problem #2 • The Bladen County Board of Commissioners adopted a resolution in 1992 stating that when a deed passes through the collector’s office, it is stamped, “Bladen County Tax Collector” and “taxes paid through [appropriate year]” is written beneath the stamp. • A deed recorded in 2007 was stamped “taxes paid through 2007.” Unfortunately, however, the 2007 taxes were unpaid. • Is this a tax certification under GS 105-361? • Does it carry the same weight as a tax certification under GS 105-361?
Answer to Problem #2 • Regardless of the source of authority for this resolution, given that a deed with this information stamped on its face was recorded as a public record, I believe it would have the force and effect of a GS 105-361 certification. • Thus, the 2007 taxes are no longer a lien on the property.
Problem #3 • Aaron’s Auto Parts, Inc. owes delinquent business personal property taxes and motor vehicle taxes. The business is located in a building on the side of Hwy 421 in Sanford. The building and lot are owned by Barrett Winslow. A chain-link fence surrounds the building. • May the tax collector levy on property inside the building by padlocking the fence around the business?
Answer to Problem #3 • Legally, the tax collector can shut down the business even if it is on rental property. However, this should be a last resort. If Aaron’s Auto Parts stops paying rent, and the tax collector plans to keep everything locked up until sale, then the tax collector may end up having to pay rent to the Barrett Winslow. • The better practice is to seize and remove equipment/property if possible versus shutting down an entire business. Of course, sometimes the latter is the only option.
Problem #4 • A home was graded as Grade A construction in the county’s 2006 revaluation. In January 2008, the homeowner asked that the assessor view the inside of the house and reconsider the assigned grade. The assessor changed the grade to Grade B effective for 2008. The change was made based on factors that existed in 2006. • The taxpayer has requested a refund for the taxes on the additional value based on the grad of construction for 2006 and 2007. • She submitted the request in writing to the board of commissioners. • Is the taxpayer entitled to a refund?
Answer to Problem #4 • The answer depends upon whether the error is considered a clerical error or an appraisal error. A clerical error is a data entry error, such as a transposition of numbers (entering 4200 sq feet instead of 2400 sq feet). A clerical error is not a judgment error. • See Ammons v. Wake County, 127 N.C. App. 426 (1997) (holding that taxes were not “imposed through clerical error” when the assessor incorrectly advised the taxpayer that he was not eligible for the present-use value program since the term “clerical error” applies only to transcription errors, that is, mistakes in writing or copying, that are ordinarily apparent on the face of the document). • So, if an assessor misjudged the appropriate grade, that is not, in my opinion, a clerical error that entitles the taxpayer to a refund. The correction certainly can be made for the current year.
Problem #5 • The Town of Troutman received a Bellsouth Utility tax payment in the United States mail on Friday, March 28th. The postmark on the envelope was March 26, 2008. Inside the envelope was another envelope, which had the check and bill remittance with it. That envelope was postmarked January 2, 2008. • It had been mailed to the town’s old post office box, which the town stopped using 5 years ago. The enclosed envelope bore a yellow sticky note from the USPS dated March 3, 2008 that said, “return to sender”. • Does interest apply to the tax bill?
§ 105‑360. Due date; interest for nonpayment of taxes; discounts for prepayment. * * * (d) For the purposes of computing discounts and interest, tax payments submitted by mail shall be deemed to be received as of the date shown on the postmark affixed by the United States Postal Service. If no date is shown on the postmark or if the postmark is not affixed by the United States Postal Service, the tax payment shall be deemed to be received when the payment is received in the office of the tax collector. In any dispute arising under this subsection, the burden of proof shall be on the taxpayer to show that the payment was timely made.
Answer to Problem #5 • Interest applies. The reliance on the postmark assumes that the correct address is on the envelope; otherwise, the taxpayer could avoid the posting of the check for quite some time without having to pay interest. • I read “submitted by mail” under GS 105-360(d) to include a requirement that the correct address appear on the envelope.
Problem #6 • Julie Marshall bought property at a mortgage foreclosure sale on February 28, 2008. The 2006 and 2007 taxes were paid from her foreclosure bid. • On March 12, 2008, the Ashe County tax assessor discovered a home that was constructed on the property and completed on January 1, 2007. • The previous owner did not list the new home in January 2007 and the assessor did not list the home based upon building permit information. • Additional taxes of $700 for the 2007 tax year are now included in the 2008 discovery. • What liability, if any, does the owner of record as of January 1, 2007 have for the discovered tax? • What liability, if any, does Julie Marshall have for the discovered tax?
Answer to Problem #6 • Given that the definition of taxpayer changed for purposes of taxes assessed for 2006 and subsequent years, the “taxpayer” personally liable for the tax is now the owner as of the date of delinquency. • The discovery bill is delinquent January 6, 2009. This means that personal property of the owner on that date, rather than the owner who actually failed to list the property, is subject to enforced collection remedies for non-payment. • In addition, the taxes are a lien on the property now owned by Julie Marshall.
Problem #7 • The Town of Surf City offers a 2% discount. Numerous people pay during the discount period but do not take the discount. Consequently, the town make a large number of refunds for more than $1 but less than $5. • The Town Council has requested that the tax collector send a letter informing the taxpayer that the town will apply the overpayment to a future tax bill unless the taxpayer requests otherwise. Is this permissible? • Could the tax collector print this information on the tax bills?
Answer to Problem #7 • The town could print the following notice on tax bills: • Any overpayment of $5 or less [or some other minimal amount that you specify] will be applied to your account to be effective for taxes levied in future years unless you request in writing a refund of the overpayment.
Problem #8 • Roger Smith overpaid taxes on parcel 321 in the amount of $100. Roger Smith died before a refund of the overpayment was issued. His son, Roy, has requested that Orange County issue the refund check in his name. Roy is the executor of his father’s estate. • May Orange County issue the refund check in Roy’s name?
Answer to Problem #8 • Orange County may not issue the check in Roy’s name.
Problem #9 • Holt Harding filed Chapter 7 bankruptcy on April 19, 2003. He was discharged from bankruptcy on July 28, 2003. • Mr. Harding owes delinquent 2005 and 2006 taxes on motor vehicles and 2003 taxes on a double-wide manufactured home. • May the county garnish his wages for the motor vehicle taxes? • May the county garnish his wages for the taxes on the double-wide manufactured home?
Answers to Problem #9 • The county may garnish Mr. Harding’s wages for the motor vehicle taxes. Those are post-petition taxes that are not affected by the Chapter 7 bankruptcy. • The controlling date for determining whether taxes are pre-petition or post-petition is the date of assessment. • If the manufactured home was personal property not secured by a lien on real property, then the taxpayer remains personally liable since this was an 8th priority claim (that is the taxes were last payable without interest within one year of the filing of the bankruptcy). • If the taxes were secured by a lien on real property (the manufactured home was sitting on land owned by the owner and the moving hitch, wheels and axles were removed, and it was on a foundation) or if the taxpayer owned other real property, then the taxpayer’s personal liability for these pre-petition secured taxes was discharged in bankruptcy. • If the taxes on the manufactured home were personal property taxes not secured by a lien on real property, then the county may garnish Mr. Harding’s wages.
Problem #10 • We Make It, Inc. (WMI) has listed business personal property since 1999. In February 2008, WMI submitted an "amended listing" and requested a refund for 2005 and 2006 because of a clerical error it made in listing property for those years. The company added its CIP incorrectly, resulting in an over-statement of its assets. WMI has provided a copy of the schedule, showing where the error was made. The tax assessor conducted an audit to conform the error. • The audit confirms the CIP error but also reveals M&E that was not listed. Below is a summary of the discovery. M&E CIP 07 200,000 0 06 200,000 (400,000) 05 200,000 (800,000) 04 200,000 0 03 200,000 0 1,000,000 (1,200,000) • WMI views this as a "net" overpayment, and insists there should be no discovery and that it is entitled to a refund. • How do you respond?
Answer to Problem #10 • If the CIP listing was a transcription or mathematical error, I am inclined to agree that it is a clerical error as that term is defined in GS 105-381. I think a taxpayer can make a clerical error. • The CIP refund, if granted, cannot, however, offset the discovery.
Problem #11 • The tax collector for Rockingham County is considering accepting credit card/debit card payments. The County has talked to a vendor who states that certain credit and debit card companies have agreed to allow a convenience fee to be charged for tax payments. The vendor proposes that the county will impose a 2.5 percent fee as part of the transaction to cover the charge by the credit card company and bank involved. • Is this lawful? • If so, may the county apply a constant percentage which estimates the typical credit card fee?
Answer to Problem #11 • GS 159-32.1 permits a city or county in accepting a credit card in payment of property taxes to pay the discount or transaction fee imposed by a bank or credit/debit card company and then to impose that surcharge on the amount paid by the person using the card. • My understanding has been that banks and credit/debit card companies have, in the past, prohibited such surcharges so the statute hasn’t actually been much help to local governments. If credit and debit card companies agree to the imposition of such surcharges, there is no legal impediment to adding these charges to the bill. • Given that the amount of the surcharge depends, in part, on the overall volume, it is reasonable to assess a fee on the customer based on the local government’s projected volume. The local government would need to adjust the fee periodically if the actual fee charged by the credit company varied significantly from the charge assessed to the customer.
Problem #12 • Deana Developer owns parcel 123, located in New Hanover County, on January 1, 2007. She subdivides the parcel in March 2007 into 5 lots. She sells one of the five lots to Jay Joyner in July 2007. At closing, Jay Joyner’s attorney estimates the amount of taxes attributable to his portion of the overall tract (by dividing the total tax bill by 5) and pays that amount. • Deana fails to pay the remaining taxes on parcel 123. The tax collector knows that Jay Joyner has a bank account at Wachovia Bank, but has been unable to locate an account for Deanna Developer. • What actions may the tax collector take to collect the 2007 taxes? May the tax collector attach Jay Joyner’s bank account?
Answer to Problem #12 • G.S. 105-273(17): For purposes of collecting delinquent ad valorem taxes assessed on real property under G.S. 105‑366 through G.S. 105‑375, "taxpayer" means the owner of record on the date the taxes become delinquent and any subsequent owner of record of the real property if conveyed after that date. • I do not think the tax collector can attach Jay Joyner’s bank account for additional sums beyond the portion of the value attributable to Jay Joyner.
