PA 15-156—sHB 6571

Planning and Development Committee

Judiciary Committee

AN ACT CONCERNING THE MUNICIPAL TAX COLLECTION STATUTES

SUMMARY: This act makes several changes in the municipal tax collection statutes. Among other things, it:

1. allows municipalities and district health departments to withhold or revoke a business license or permit if a business owes water, sewer, or sanitation charges that are at least one year delinquent, as they may already do for delinquent taxes ( 3);

2. requires municipalities to follow a taxpayer's written instructions specifying the property or properties to which a specific tax payment should be applied ( 1);

3. eliminates the requirement that tax collectors apply payments for outstanding personal or real property taxes to recording fees related to the taxpayer's delinquency ( 1);

4. requires municipalities to retain any interest that accrues on excess tax sale proceeds;

5. specifies that state and municipal tax liens against a delinquent taxpayer have precedence or priority over any claim against the taxpayer by a party who redeems (i. e. , buys back) a property following a tax sale;

6. specifies that tax payments made through a municipal electronic payment service are timely, and thus not subject to interest charges, if they are made within the payment's statutory deadline, as is already the case with postmarked envelopes ( 2); and

7. makes minor and technical changes ( 4 & 7).

EFFECTIVE DATE: October 1, 2015

5 & 6 — TAX SALES

Notice to Taxpayer

The law requires a tax collector selling property through a tax sale to provide notice of the sale to the taxpayer. Under prior law, the notice had to include a statement indicating that additional taxes, interest, fees, and other charges accruing after the notice was sent had been added to the amount due in the notice. The act instead requires the statement to indicate that such taxes, interest, fees, and charges are owed in addition to the amount due in the notice.

Notice to Interested Parties

Following a tax sale, the law requires tax collectors to publish a newspaper notice and mail notice to the owner, mortgagee, lienholder, and other interested parties affected by the sale. Among other things, the notice must state that if the property is not redeemed (i. e. , bought by the owner or other interested parties), all parties notified will lose their respective titles, mortgages, liens, and other interests in it. The act expands this list of interests to include alienation restraints on the property (i. e. , deed restrictions that seek to prevent the property's sale or transfer).

Redemption

By law, the delinquent taxpayer or another interested party can redeem the property, generally within six months after the date of the tax sale, by paying certain taxes, interest, debts, and charges on the property. The act extends the redemption period to cover the period from the tax sale notice's publication through the sale date.

Redeemer's Claim Against the Delinquent Taxpayer

By law, a redeeming party who paid delinquent taxes on the property can pursue a claim against the delinquent taxpayer. That claim has the same priority over other encumbrances as the tax paid, but not over any tax that was not yet due and payable when the collector first published notice of the levy. Under the act, the redeemer's claim additionally does not take precedence or priority over any state or municipal tax liens. The act also provides that the claim includes the same interest rate as that imposed on unpaid taxes.

Tax Collector's Deed

The act requires a deed for a property sold at a tax sale (i. e. , tax collector's deed) to indicate that the property may be encumbered by municipal and state liens. (PA 15-5, June Special Session, 47, eliminates the requirement that the deed specify that the property may be subject to state liens. ) Existing law requires the deed to indicate that the property may be encumbered by municipal taxes that became due after notice of the sale was first published; easements, covenants, and restrictions in favor of other properties; interests exempt from sale under the U. S. Constitution and laws; and other interests described in the deed.

Interest Earned on Escrow Accounts

By law, if a tax sale produces more than the back taxes, penalties, interest, fees, and costs due on the property, the excess proceeds must be placed in an interest-bearing escrow account. The act requires municipalities to retain any interest that accrues on the excess proceeds. Under prior law, they retained the interest only if the property was redeemed after the tax sale.

Claims on Tax Sale Proceeds

If a property is not redeemed, the tax collector must (1) transfer the amount held in escrow to the Superior Court, after deducting an amount necessary to cover any delinquent taxes, interest, penalties, costs, and fees the former owner owes to the municipality and (2) notify all interested parties of their right to apply to the court for the money. The act provides that the property's purchaser may not be a party to an action to claim the funds without the purchaser's consent, as is the case with municipalities under existing law.

OLR Tracking: RP: KS: SD: bs