California Grants Relief for Certain Property Tax Penalties and Filing Business Personal Property Tax Statements
May 8, 2020
Relief for Certain Property Tax Penalties, Costs and Interest. On May 6, 2020, Governor Gavin Newsom issued an Executive Order that suspends until May 6, 2021, the mandatory imposition of penalties, costs, and interest for certain unpaid property taxes. The specific Revenue and Taxation Code penalty provisions are laid out in the Order, but these generally cover charges for taxes on real property on the secured or unsecured local tax roll, or charges in respect of a supplemental local tax bill. Local tax collectors are ordered to cancel any such penalties, costs, and interest if all of the following conditions are satisfied:
- The property for which the taxes were not paid is either (1) a residential property that is occupied by the taxpayer or (2) real property owned and operated by a small business;
- The taxes owed on the property were not delinquent prior to March 4, 2020 (for example, penalties on the first installment of secured property taxes not paid by December 10, 2019 are not covered);
- For property taxes being paid pursuant to an installment plan, any taxes owed will not be considered delinquent if, on or before March 4, 2020, all payments required by the plan were made;
- The taxpayer files a claim for relief in the manner prescribed by the local tax collector;
- The taxpayer demonstrates that the taxpayer has suffered economic hardship, or was otherwise unable to tender payment of taxes in a timely fashion, due to the COVID-19 pandemic or to any local state or federal government response to COVID-19; and
- The taxes in question are not being paid through an impound account.
Note that the Executive Order provides relief only be granted upon a demonstration that the taxpayer has suffered economic hardship or was otherwise unable to tender payment under the conditions noted above. By inference, it may be the case that the general state-wide hardship under the present State of Emergency is not enough of a showing. As we observed previously penalty waivers are generally administered by each county individually. We would have liked to have seen the Executive Order provide blanket relief or, alternatively, provide criteria to use in requesting this relief.
Given the continuing uncertainty surrounding the process to waive penalties and interest, including the criteria each jurisdiction will use to determine whether to grant such a waiver, taxpayers are encouraged to make timely payments, to the extent possible, to avoid potential issues in the future. With that said, since the suspension applies until May 6, 2021, there appears to be time for future guidance to be issued and provide more clarity in this area.
Relief for Filing Business Personal Property Tax Statements. In addition to the relief described above, the Executive Order suspends until May 31, 2020, the imposition of penalties for failure to file taxable business personal property tax statements on or before May 7, 2020. The Order states that no penalty shall be imposed upon a taxpayer if the taxpayer files a personal property tax statement as required by Revenue and Taxation Code Section 441(a) on or before May 31, 2020.
May 31, 2020 falls on a Sunday. The California State Board of Equalization (BOE) has issued guidance that provides, “Assessors shall accept Property Statements that are filed on or before June 1, 2020 without applying a penalty. This extension applies to all County Assessors in the state of California.” The BOE’s guidance also clarifies that the “mailbox rule” applies, so that that a personal property tax statement that is mailed and postmarked on the next business day, which is Monday, June 1, 2020, shall be deemed to have been filed timely.
General Duty to Pay Tax; Local Assessors May Grant Broader Relief. To be clear, the Executive Order does not excuse the underlying liability for taxes. It only excuses the relevant penalties, costs, and interest that would have accrued prior to the new date (May 6, 2021 or May 31, 2020, as indicated above). Also, the Order specifically provides that it does not limit or restrict the existing authority of a tax collector, auditor, or board of supervisors to waive, cancel or excuse penalties costs or interest.
We recommend that taxpayers check with their local tax authorities to confirm whether relief provisions in their county expand on or clarify the relief found under the Executive Order.
The full text of the Executive Order can be found here.
We will keep you updated as we learn more about California’s response to the COVID-19 crisis, but please do not hesitate to contact us directly if you have any questions or would like to discuss these issues in more detail.