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HomeMy WebLinkAbout4.17 League Info on property Tax WaiverBackground and Initial Guidance on Waiver of Interest and Penalty for Late Property Tax Installments in AB 1038, the COVID-19 Legislative Response By League of Wisconsin Municipalities* April 15, 2020 Relevant Language from the original bill, AB 1038 (ACT 185) (25) INTEREST ON LATE PROPERTY TAX PAYMENTS. Notwithstanding ss. 74.11, 74.12, and 74.87, for property taxes payable in 2020, after making a general or case-by-case finding of hardship, a taxation district may provide that an installment payment that is due and payable after April 1, 2020, and is received after its due date shall not accrue interest or penalties if the total amount due and payable in 2020 is paid on or before October 1, 2020. Interest and penalties shall accrue from October 1, 2020, for any property taxes payable in 2020 that are delinquent after October 1, 2020. Language from Amendment 4 15. Page 86, line 12: after “2020." insert “A taxation district may not waive interest and penalties as provided in this subsection unless the county board of the county where the taxation district is located first adopts a resolution authorizing such waiver and establishing criteria for determining hardship, and the taxation district subsequently adopts a similar resolution. A county that has adopted a resolution authorizing the waiver of interest and penalties under this subsection shall settle any taxes, interest, and penalties collected on or before July 31, 2020, on August 20, 2020, as provided under s. 74.29 (1), and settle the remaining unpaid taxes, interest, and penalties on September 20, 2020. The August 20, 2020, settlement shall be distributed proportionally to the underlying taxing jurisdictions.". We interpret the above provisions, when read together, as follows: 1. A city or village can choose not to have interest and penalties accrue on late property tax installment payments due after April 1, 2020. Interest and penalties can be waived until October 1, 2020, when they would kick back in. 2. The decision to waive interest and penalties can be applied “generally” across the entire community or for individual taxpayers based on a “case-by-case finding of hardship”. 3. A taxation district can only choose to do this if the County Board first adopts a resolution that allows for such a waiver. The county resolution must identify criteria to determine general or case by case hardship justifying the waiver. A city or village that wants to waive interest and penalties on a late installment payment that is due and payable after April 1, 2020, must then adopt a similar resolution. 4. A county that has adopted a waiver resolution must settle taxes, interest, and penalties collected on or before July 31, 2020 on the typical settlement date – August 20, 2020. The August 20, 2020, settlement must be distributed proportionally to the underlying taxing jurisdictions. 5. The remaining taxes, interest, and penalties must be settled on September 20, 2020. If this waiver is applied generally to all taxpayers and large numbers of property owners within the community choose to pay after July 31, 2020, the September settlement amount could be a substantial amount of the levy in some communities. Important questions to consider: a. Does your municipality want to waive interest and penalties on delinquent property tax installment payments that are due after April 1? b. If yes, will you apply the waiver generally or on a case-by-case finding of hardship? c. If on a case-by-case basis, what standards will your community use to determine hardship? What strategies will you implement to protect against claims of bias or prejudice? d. We strongly recommend against waiving interest and penalties on a case by case basis. Doing so would likely invite litigation over the standards the community uses and the waiver decisions the community makes regarding different taxpayers. If your community decides to waive interest and penalties on delinquent property tax installment payments due after April 1, the best course from a litigation avoidance perspective is to adopt a general waiver citing overwhelming economic hardship the community is experiencing as a result of the COVID-19 pandemic and the safer at home order. e. Will your community lobby the County Board to pass a resolution to allow the waiver? f. If you don’t want to provide for this waiver, will your community lobby the County Board not to adopt a waiver resolution? g. If the County Board adopts a waiver resolution, will the one-month settlement delay for unpaid taxes cause a cash flow issue for your community? h. If you anticipate a cash flow issue, what plans will you put in place to address it? Finally, bear in mind that the County Board can make the decision to delay settlement of unpaid taxes until September 20 regardless of whether your city or village passes a resolution offering a waiver on interest and penalties for late installment payments. More Information. The League, the Counties Association, and the Towns Association are working with the Department of Revenue on providing a unified interpretation of this provision. We will provide more information and guidance as soon as we receive it. * The League thanks the Wisconsin Towns Association for allowing us to incorporate explanatory material they had prepared for their members into this document.