Topic:
LEGISLATION; LEGISLATIVE INTENT; PROPERTY TAX; STATUTE OF LIMITATIONS;
Location:
TAXES - PROPERTY;

OLR Research Report


November 20, 2008

 

2008-R-0643

PROPERTY TAX COLLECTION STATUTE OF LIMITATIONS

By: Judith Lohman, Chief Analyst

You asked (1) for a legislative history of the 15-year statute of limitations for property tax collections and (2) whether any bills have been introduced to shorten the collection time period.

LEGISLATIVE HISTORY

By law, municipal tax collectors can enforce payment of property taxes for up to 15 years after the original tax due date (CGS 12-164). After 15 years, the tax is uncollectible. The annual interest rate on unpaid property taxes is 18% (CGS 12-146).

The 15-year limit on tax collections was enacted in 1941. The law became effective April 1, 1942 and specifically states that its provisions are retroactive. There are no transcripts of legislative debate or public hearings for sessions before 1945, so we cannot summarize the discussion surrounding the passage of the original statute. In the intervening 67 years, the 15-year time limit for collecting property taxes has not been changed.

Section 12-164 was amended in 1945 to exempt “improvement liens,” including municipal liens for repairs and services, from the 15-year time limit. The 1945 act also imposed a maximum annual interest rate of 6% on these improvement liens. The improvement lien interest rate was raised to 9% in 1969 and to the current 12% in 1975. Finally, in 1999, the law was amended to add a second exemption from the 15-year limit for liens for taxes deferred under a municipal option property tax relief program for elderly and disabled homeowners (CGS 12-129n).

PROPOSALS TO REDUCE THE 15-YEAR LIMIT

A computer search of legislation proposed since 1988 shows three bills to shorten the 15-year time limit for collecting motor vehicle property taxes. One bill was introduced in 2007 (SB 1267) and two in 2008 (SB 373 and SB 602). The language of the three bills is identical. It would (1) prohibit local tax officials and their agents from enforcing motor vehicle tax levies against people and corporations more than six years after the tax due date and (2) cap at three years the accrual of interest on motor vehicle tax delinquencies unless the official or agent, within that period, mailed or personally gave the taxpayer a statement specifying the year, amount of tax due, and accrued interest.

SB 1267 in the 2007 session was raised by the Judiciary Committee, which held a public hearing on the bill on March 14, 2007, but received no testimony on it. The committee reported the bill favorably to the Senate by a vote of 40 to 0. The Senate referred the bill (File 534) to the Planning and Development Committee on April 25, 2007. The motion for a joint favorable report in the Planning and Development Committee failed on a vote of 3 to 13.

In the 2008 session, the Judiciary and Planning and Development committees each raised bills on this issue (SB 602 and SB 373, respectively). The bills were identical to the 2007 bill and identical to each other. At the Planning and Development Committee hearing on March 3, 2008, the committee received oral and written testimony from eight witnesses. One witness, Senator Andrew McDonald, testified in favor of the bill, which he sponsored. Seven witnesses testified against it. Six of the seven represented the Connecticut Tax Collectors' Association and the Connecticut Conference of Municipalities (CCM) and the seventh witness was Representative Betsy Ritter, a former municipal tax collector. At the Judiciary Committee hearing on SB 602 on March 14, 2008, two witnesses testified, both against the bill. One was Bridgeport's tax collector representing the tax collectors' association and the other represented CCM.

In the two hearings, the bills' proponent argued that shortening the statute of limitations to six years and requiring notice within the first three years would be fairer to taxpayers who may not be aware that they owe taxes on their cars and who are confronted by large back tax bills after accumulating 15 years of interest at the 18% rate.

The witnesses testifying against the changes argued that (1) shortening the time during which municipalities can collect unpaid motor vehicle taxes would cost municipalities significant revenue, (2) the bill would be unfair to taxpayers who pay on time, (3) the 15-year limit is a good collection tool, and (4) taxpayers can avoid the danger of large back tax bills by changing their addresses in a timely fashion at the Department of Motor Vehicles when they move. (I attach copies of the written testimony presented at the two hearings and a copy of sSB 602 for your further information.)

The Planning and Development Committee took no action on SB 373. The Judiciary Committee reported a substitute version of SB 602 (File 429). The substitute made one minor change. The Senate referred sSB 602 to the Planning and Development Committee, which took no act on it.

JL:ts