Update on HB 291 to prohibit billing non-tax fees on property tax bills

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Feb 12, 2012 3 Comments ›› Brett

HB 291 was amended during the legislative process last year and ultimately failed to pass.

I have continued to discuss with many my proposal (HB 291) to prohibit billing non-tax fees on property tax bills and the measure has gained significant support including the Georgia Association of Realtors and the Mortgage Bankers Association of Georgia. The Georgia Department of Revenue informs me that based on the current process and information reporting (inadequate as a result of the practice of billing of non-tax fees on property tax bills) the Department has no means to audit or determine the extent of lost revenue due the state. The DOR agrees, however, that revenue is lost and supports measures that would aid in accurate reporting. Tax Commissioners, in general, are cooperative with local governments, but most would prefer that any fee or assessment appearing on a property tax bill have the same lien ability as a tax. In as much as most of these fees and assessments do not have the same lien status as a property tax, these Tax Commissioners would prefer they be removed.

I have also continued to work with the Association of County Commissioners and the Georgia Municipal Association as well as individual county and city governments in an attempt to develop some compromise. To date, areas of compromise with one appear to create issues with another. ACCG and GMA, to the best of my knowledge, continue to oppose based on an argument of increased billing cost and delinquencies. HB 291 would permit mailing two statements in the same envelope should the local governments decide – mitigating the increased cost argument. Other local governments and Tax Commissioners report similar collection rates with billings separate from property taxes – again, mitigating the increased delinquency argument.

As you may recall, HB 291 received unanimous “do pass” support from Republican members of the Ad Valorem Tax Subcommittee last year. Ways & Means Vice Chairman David Knight is a co-sponsor and Ad Valorem Subcommittee Members Bob Bryant, Don Parsons, and Tom Rice are co-signers on HB 291.

I am most grateful to Ways & Means Chairman Channell that has had prepared a 2012 Committee substitute to place HB 291 back into its original language. I have requested and anticipate a hearing on HB 291 within the next few weeks.

HB 291 Prohibits Billing Non-Tax Fees on Property Tax Bills

Legislation: “No property tax bill . . . shall include any nontax related fees or assessments . . .”

Intent: Prohibit local governments from including non-tax fees on ad valorem property tax bills.

Statement of practice: Increasingly local governments while claiming not to raise property taxes are implementing various non-tax service fees and placing them on property tax bills for collection. Some of these fees include: sanitation, storm water, nuisance abatement, street lights, fire fee, landfill fee, speed bumps, parking maintenance, ambulance fee, subdivision improvement, and paving district fee. Routinely, ten to twenty percent or more of property tax bills are actually non-tax fees and in most instances, these fees are not tax deductible. Additional counties and cities are adopting this billing scheme and the trend suggests fees will continue to consume a greater percentage of the total bill.

Issues created by the practice:

Local governments claim administrative cost savings
[HB 291 permits flexibility such as providing a separate invoice in the same mailing.]

Local governments claim reduction in delinquent payments and bad debts
[Tax Commissioners report similar collection rates with separate billings.]

Increases probability of filing an erroneous tax return
[Georgia Society of CPAs estimates significant numbers claim non-tax fees as tax deductions by removing the non-tax fees from the tax bills we know the number will be zero]

Increases underwriting requirements for qualifying for a home mortgage
[Underwriters include total estimated taxes and fees included on tax statements calculating ratios]

If homeowner escrows, increases monthly escrow account and thereby monthly mortgage payment
[Mortgage companies include fees in monthly escrow calculations increasing mortgage payments]

Expands potential for fifa, lien, or non-judicial foreclosure on private property for non-tax fees
[Many Tax Commissioners do not distinguish between payments and move to file against properties for any underpayment regardless of tax or fee]

Reduces revenue due state and federal government via claiming deductibility of non-tax fees
[Erroneously claiming non-tax fees as tax deductible reduces income and revenues due other taxing jurisdictions and may subject taxpayer to future IRS penalties]

Without consent, local governments have used mortgage companies as collection agents for
non-tax and non-mortgage fees
[Tax Commissioners’ primary Constitutional responsibility does not include collection of non-tax fees. Many volunteer this service and in some cases generate additional revenue for their operations. Some have been mandated to collect the fees via local legislation.]