February 28, 2006
STATE AND LOCAL TAXES: NOTICE REQUIREMENTS AND COLLECTION
By: Kevin E. McCarthy, Principal Analyst
You asked (1) how many notices a municipality or the state must send out regarding taxes due, (2) how soon after a tax account becomes delinquent can a municipality or the state hand the account over to a collection agency, and (3) could a municipality or the state wait as long as a decade to do this.
MUNICIPAL PROPERTY TAXES
CGS § 12-130 requires tax collectors to mail or hand deliver to each person from whom taxes are due (1) a bill for their current taxes and (2) a statement of the year and amount of any back taxes due. But it also specifies that the failure to send out any such bill or statement does not invalidate the tax or the interest imposed on delinquent taxes. The law does not impose any additional notice requirements regarding the taxes themselves, although CGS § 12-171 to 12-195h establish notice and other requirements for recording, continuing, and foreclosing tax liens.
CGS § 36a-805 allows a municipality to contract with a private collection agency to collect and receive property taxes on the municipality's behalf. The collections agency must be insured and the municipality may also require the agency to post a bond. The law does not impose any restrictions on when a municipality can hand over a delinquent account to a collections agency, either in terms of the amount of time that must pass before the account can be handed over or how long an account can be delinquent before a municipality can no longer turn the account over. As a result, the law does not preclude a municipality waiting ten years after the tax becomes delinquent to hand the account over to the collection agency.
According to Kathleen Rubenbauer, legislative liaison for the Office of Policy and Management, actual practice regarding additional notices and the use of collection agencies varies by town.
As a general rule, the law does not require the Department of Revenue Services (DRS) to notify a taxpayer that he owes taxes. Instead, the law establishes taxpayer filing and payment requirements that vary by the tax. In practice, if DRS believes that a taxpayer has not made a required filing or payment, it will send several notices to the taxpayer, generally at intervals of about 30 days. The number of notices sent varies by the circumstances of the case.
The law is silent on the use of private agencies to collect delinquent state taxes. In practice, DRS commonly uses collection agencies with regard to taxes owed by out of state individuals and businesses. It also uses private agencies in the case of in-state taxpayers who owe relatively small sums or whose accounts have been difficult to collect, according to DRS staff. The point at which DRS will turn over an account to a collection agency depends on the facts in the case. For example, it may make more sense to turn over an out-of–state account over to an agency sooner than an in-state account, since some alternative enforcement mechanisms such as tax liens may be less applicable in the case of an out-of-state account.