In the wake of the COVID-19 pandemic, certain California taxing
officials have acted swiftly to provide state taxpayers with some much
needed relief. On March 13, for example, the Franchise Tax Board (FTB)
extended the corporate and personal income filing and payment tax
deadlines to June 15, and then again on March 18, FTB further postponed
the deadlines to July 15. The California Department of Tax and Fee
Administration (CDTFA) and the California Office of Tax Appeals (OTA)
also has acted to implement measures aimed at supporting taxpayers amid
the COVID-19 outbreak. The Office of Tax Appeals granted an automatic
60-calendar-day extension of the deadline for appeals that have a
briefing or other deadline that falls between March 1, 2020 and May 18,
2020. In addition, CDTFA published a statement on its website indicating
that sales tax relief including return and payment extensions and
penalty and interest waivers may be available to taxpayers upon request.
But what about property tax? Pursuant to California Revenue and
Taxation Code (R&TC) section 2619, if the Tax Collectors office is
closed on the date of the property tax deadline, the next business day
that is open is when the deadline applies.[1] But yet, although many –
if not all 58 – of California’s county treasurer and tax collector
offices have closed to the public, county tax collectors have indicated
that the April 10 deadline for making the second installment of the
2019-20 property tax payments, still stands.
With the April 10 property tax deadline fast approaching, and absent
new relief offered for property taxpayers, this article lays out the
property tax relief measures that are available in lieu of an extended
payment deadline.
Late Payment Penalty Waivers
Under existing law, county tax collectors do not have the authority
to extend the property tax deadline. County tax collectors do, however,
have the authority to waive late-payment penalties under one of two
circumstances. First, as mentioned above, if the offices of any county
tax collector are closed and, as a result, taxpayers are unable to make
property tax payments to that county by April 10, pursuant to an order
of the board of supervisors, the law permits taxpayers to make payments
on the next business day that the county offices are open without
incurring a penalty.
Although this relief section seems promising, most tax
collectors–apparently to avoid being deemed “closed”–have quickly
updated their websites to provide a comprehensive explanation of the “no
contact payment methods” that their office accepts. Generally, payments
can still be made online, over the phone, or via the mail. Given that
payment method information for each county varies, however, we recommend
checking the website for your specific county prior to the April 10 due
date. The California Association of County Treasurers and Tax
Collectors (CACTTC) has published a comprehensive list of the county
websites. That list is available
here.
Second, tax collectors also have the authority to waive late payment
penalties pursuant to R&TC section 4985.2 upon a finding that
failure to timely pay is due to “reasonable cause and circumstances
beyond the taxpayer’s control, [] occur[ing] notwithstanding the
exercise of ordinary care in the absence of willful neglect[.]”
Taxpayers may begin to submit penalty cancellation requests starting on
April 11 (the day after property tax payment becomes delinquent).
In response to the COVID-19 pandemic, a number of counties have
released statements that they intend to provide penalty waivers to
affected taxpayers. In addition, some county tax collector offices (e.g. Contra
Costa and Los Angeles) have set up special teams to process requests
for those who demonstrate that they were affected by the outbreak.
Notably, though, penalty waivers provided pursuant to R&TC section
4985.2 are not automatic but are provided at the tax collector’s
discretion. And what is not clear, from a majority of the counties’
statements, is what standards apply to taxpayers seeking to demonstrate
that they were “affected by the outbreak.” In other words, most counties
have yet to provide guidance explaining how they will exercise their
discretion with regard to the penalty waiver.
For example, on March 31,
Alameda County issued
the following statement providing some additional information about the
types of taxpayers who may be granted penalty cancellation relief:
The Alameda County Treasurer-Tax Collector (TTC) plans to work with
taxpayers on an individual basis to address hardships caused by the
coronavirus and the shelter-in-place order. Beginning after the property
tax delinquent date, which remains as April 10, the TTC office will
make available a penalty cancellation request form specifically related
to COVID-19. The taxpayers will need to submit the appeal form and to
sign a statement, under penalties of perjury, to represent that they
were unable to pay on time for reasons related to the impacts of the
coronavirus from “reasonable cause and circumstances beyond the
taxpayer’s control” under current state law. Valid reasons to seek
penalty cancellation, which may change if state law changes, may include
illness, recent effects from under- or unemployment, and business
losses (including loss of rental income). Eligible taxpayers will
include homeowners, small businesses and small landlords. Documentation
will be required, specific to COVID-19.
What is not clear from the Alameda County Treasurer-Tax Collector’s
statement is how an affected property taxpayer proves an illness,
under-employment, or business losses, and must the taxpayer prove that
COVID-19 caused these things? Similarly, pursuant to a statement issued
by the
San Diego County Treasurer-Tax Collector’s office,
penalty cancellation requests related to COVID-19 require documentation
of how the taxpayer was impacted by the virus and how that interfered
with their ability to deliver the payment by April 10 (
e.g. hospitalization).
However, even though evidence of hospitalization may be required to
prove that a taxpayer qualifies for penalty relief,
San Diego County is
advising persons who are sick to “stay home for seven days to avoid
getting others infected whether you have COVID-19 or not.” The website
further provides that at the moment, COVID-19 testing is being
considered for only a select group of people.
This lack of a clear standard will likely prove troubling for many
taxpayers who are seeking a penalty wavier in the months to come. Simply
indicating that the county is willing to provide penalty waivers isn’t
enough. Counties also need to provide taxpayers with information about
the standards for qualifying for the waiver in the first place.
Moreover, for affected property taxpayers, even obtaining a penalty
waiver request form is no simple task. The Los Angeles County Treasurer
and Tax Collector, for example, has provided a downloadable form on its
website. To access the form, however, taxpayers must first read a page
of “instructions” which provide that “[t]he California Revenue and
Taxation Code (R&TC) grants the Treasurer and Tax Collector the
authority to cancel penalties in limited circumstances.”
The instructions also provide examples of requests that the Tax
Collector will deny. For instance, Step #1 provides that “[t]he Tax
Collector will deny a request to cancel a penalty based on the financial
circumstances of a taxpayer, which prevented the taxpayer from paying
the amount due prior to the delinquency date. Under the R&TC, there
is no provision to cancel penalties due to financial circumstances that
prevented a timely payment.”
As Step #2, the taxpayer must select the R&TC section that
applies to his/her request. Once a code section is selected, the
taxpayer has only 500 characters including spaces and returns to
describe the nature of his/her request.
Disaster Relief
Taxpayers who find themselves hard pressed to receive a penalty
waiver may have other, albeit different, options for pursuing some form
of property tax relief. Pursuant to R&TC section 170, a county’s
board of supervisors, by ordinance “may provide that every assessee of
any taxable property, or any person liable for the taxes thereon, whose
property was damaged or destroyed without his or her fault, may apply
for reassessment of that property” if certain conditions are met. To be
eligible for reassessment under section 170, damage to the property must
have been caused by “[a] major misfortune or calamity, in an area or
region subsequently proclaimed by the Governor to be in a state of
disaster, if that property was damaged or destroyed by the major
misfortune or calamity that caused the Governor to proclaim the area or
region to be in a state of disaster.” Section 170(a)(1) defines “damage”
to include “a diminution in the value of property as a result of
restricted access to the property where that restricted access was
caused by the major misfortune or calamity.”
Considering that disaster relief is only available in counties that
have adopted R&TC section 170, this option may not be available for
all taxpayers. At least 15 counties have adopted this section including:
Alameda, Contra Costa, Fresno, Kern, Los Angeles, Napa, Orange,
Riverside, Sacramento, San Bernardino, San Diego, San Luis Obispo, Santa
Clara, Solano and Sonoma. Additional counties may have adopted section
170. However, counties haven’t made it easy for inquiring property
owners to determine whether or not this type of relief is available. In
fact, most do not mention section 170 or “disaster relief” on their
website. Rather, inquiring property taxpayers must review the applicable
county’s municipal code.
The Governor’s Authority
Although the county tax collectors and the state comptroller do not
have the power to change the property tax filing deadline, the governor
does. California government code section 8571 grants the Governor the
authority to suspend a statute during a State of Emergency if he
determines that strict compliance with the statute would “in any way
prevent, hinder, or delay the mitigation of the effects of the
emergency.”
In an
open letter to
Governor Newsom penned on March 21, the California Association of
County Treasurers and Tax Collectors, along with city, county and school
district government groups urged the Governor to retain of the April 10
deadline. In their letter, they argued that “[e]xtending the deadline
by 60 or 90 days would have a dramatic impact on local funding, as
almost all local agencies rely on the property tax for the majority of
their general funds.” Which, they said, would consequently impact local
agencies ability to respond to the pandemic.
In a separate letter penned to Governor Newson on April 3, members of
the California Taxpayer Association urged the governor to extend the
property tax deadline to July 15 for all property taxpayers except those
using impound accounts. They wrote:
We are not unaware that property taxes are primarily a local revenue
source, and we are sensitive to the needs of local government at this
extraordinary time . . When considering the balance between the needs of
the taxpayers and the needs of local government, we ask you to consider
the following:
- Taxes on all business personal property already have been fully paid;
The first installment (50%) of property taxes on the secured roll was
paid in December. Some taxpayers paid their entire property tax at that
time for income tax reasons;
About 57% of homeowners use impound accounts, and local government would receive that money as well.
The group further argued that this partial suspension is an
effective means of providing property taxpayers some relief while also
ensuring that counties receive a vast majority of the property tax
revenue they otherwise would have gotten on April 15. As such, they
asserted that “a 90-day delay in receiving the remaining tax is a
reasonable share of the burden for local government to bear when
balanced against the daily fight to survive that taxpayers are facing.”
What’s Next?
In response to the COVID-19 pandemic, California’s political leaders
have acted at both the state and local level to provide assistance to
many of those who are suffering from the resulting economic impact. So
why should property owners be any different? Although advocating for
penalty relief waivers is a step in the right direction, the issuance of
unambiguous guidance is a necessary next step.
