County Responsibilities Under “Tag & Tax Together”

1. County Responsibilities Under “Tag & Tax Together” Chris McLaughlin Assistant Professor, UNC SOG mclaughlin@sog.unc.edu 919.843.9167 September 2013

3. Two Thorny County Issues • Bankruptcy & Registration Blocks • Gap Billing

4. Bankruptcy & Registration Blocks

5. Registration Blocks and the Automatic Stay • Automatic stay arises immediately at filing

6. The Automatic Stay • Bans “process, proceeding or action” against debtor for claim that arose before filing • Creating a registration block (or refusing to remove a block) is definitely an “action” covered by automatic stay • Which means . . .

7. The Automatic Stay May not block registrations for unpaid RMV taxes that arose before the taxpayer filed for bankruptcy.

8. Post-Petition RMV Taxes • Automatic stay also bans any act to “obtain possession” or “exercise control” over debtor’s property for any claims (pre- or post-petition)

9. Post-Petition RMV Taxes Key question: is a registration block an act to exercise control over the debtor’s property? • No!! MV registrations (and drivers’ licenses) considered privileges and not property • Which means . . .

10. The Automatic Stay May block registrations for RMV taxes that arose after the taxpayer filed for bankruptcy.

11. The Automatic Stay • When does RMV tax arise for bankruptcy purposes? • Existing registration expires • New registration applied for

12. The Automatic Stay • The good news: • Under Tag & Tax Together, unpaid RMV taxes will usually be post-petition. • DMV may require payment of RMV taxes.

13. When are unpaid RMV taxes pre-petition? Two situations in which unpaid RMV taxes will be pre-petition and therefore not subject to registration block:

14. When are unpaid RMV taxes pre-petition? Bankruptcy filing after registration expires but before renewal

15. When are unpaid RMV taxes pre-petition? Bankruptcy filing after obtaining limited registration on new vehicle but before obtaining regular (full-year) registration

16. The Bottom Line on Blocks • Permitted for post-petition taxes: • Registration expires or taxpayer applies for new registration after bankruptcy filing • Not permitted for unpaid pre-petition taxes: • 2 limited situations

17. Example 1 • Billy files for bankruptcy on September 1, 2013. • Billy Blue Devil’s registration expires Oct. 31, 2013. • Billy renews his registration on Nov. 20, 2013. • DMV requires payment of 2013-14 property taxes on vehicle.

18. Did the DMV violate the automatic stay by requiring Billy to pay the 2013 taxes on his vehicle?

19. Example 2 • Tina Tar Heel’s registration expires Oct. 31, 2013. • Tina files for bankruptcy on Nov. 2, 2013. • Tina renews her registration on Nov. 10, 2013. • DMV requires payment of 2013-14 property taxes on vehicle.

20. Did the DMV violate the automatic stay by requiring Tina to pay the 2013 taxes on her vehicle?

21. Example 3 • Susie Seahawk buys a new car on Oct. 31, 2013. She obtains a limited registration. • Susie files for bankruptcy on Nov. 5, 2013. • Susie applies for a full registration on Dec. 10, 2013. • DMV requires payment of 2013-14 property taxes on vehicle.

22. Did the DMV violate the automatic stay by requiring Susie to pay the 2013 taxes on her vehicle?

23. Example 4 • Wanda Wolfpack files for bankruptcy on October 20, 2013. • Wanda’s registration expires on Oct 31, 2013. • Wanda renews her registration on Nov. 5, 2013. • DMV requires payment of 2013-14 property taxes on vehicle.

24. Did the DMV violate the automatic stay by requiring Wanda to pay the 2013 taxes on her vehicle?

25. The Process • How will DMV know not to place block on taxpayer? • Taxpayer must provide proof of bankruptcy filing to county • County must inform DMV to flag accounts and to remove those flags after bankruptcy

26. Bankruptcy and Registration Blocks

27. Gap Billing • DMV collecting taxes on registered motor vehicles • County obligation to bill and collect property taxes on unregistered motor vehicles

28. Gap Billing • Who is responsible for property tax collection when a vehicle moves back and forth between registered and unregistered status? • Late Renewals

29. Key Issue: Did Tax Year Change? • Tax year tied to registration year • When registration and tax years change, there will be a gap during which vehicle was unregistered

30. Key Issue: Did Tax Year Change?

31. Key Issue: Did Tax Year Change? • DMV will change registration year: • Vehicle not drivable • More than 12 months since expiration

32. Key Issue: Did Tax Year Change?

33. Gap Bills: GS 105-330.3(a1) • Prorated for # months unregistered • Unregistered 4 months, pay 1/3 of full year tax • Due & Delinquent 1st day of 2nd month after bill prepared • Bill prepared in November, due January 1 • Interest at 5% first month, then .75%/month

34. Gap Bills: GS 105-330.3(a1) • Collection remedies same as those for “regular” personal property bills: • Attachment/Garnishment • Levy • Foreclosure if taxpayer owns RP • No registration blocks

35. How Will You Know You Need to Create a Gap Bill? • VTS report shows RMVs with new registration (and tax) years

36. Draft of Ptax Bulletin #165 • Example 1: Billy Blue Devil • No change in tax year, car always registered • No need for gap bill

37. Draft of Ptax Bulletin #165 • Example 2: Wanda Wolfpack • Tax year changed due to car not drivable • Gap bill for 8 months

38. Draft of Ptax Bulletin #165 • Example 3: Tina Tarheel • Tax year changed; > 12 months since expiration • Gap bill for 24 months

39. Discovery Bills? • Current GS 105-303 calls for discovery bill if car unregistered for an entire fiscal year (July to June) • Too complicated! • 2 bills (discovery & gap) • Different values, tax rates due dates, interest • Will change statute to require only gap bill

40. Gap Billing