Delinquent Real Estate Tax Collection Process

• The Pennsylvania Statutes provide for designated time periods for the payment of taxes as follows:

Current Taxes:• Within the first 60 days of billing at 2% discount.• Next 60 days at face amount of tax bill.• After 120 days at face amount plus 10% penalty.

Delinquent Taxes:• On January 1, of the immediate following year any unpaid taxed begin to accrue 9% interest. And

any notification or collection cost is added to the tax bill and becomes a first lien on the underlying property. (Note: taxing districts can set their own penalty and interest rates, these are the maximums.)

• The portion of “current” taxes that are not collected during the tax year are usually collected during the ensuing three or four years, depending on the procedures in place with the County Tax Claims Bureaus operating within each county.

• In Dauphin County the 2013 turnovers (that is the new delinquent taxes that are delinquent for the 1st time as of 1-1-14 from the 2013 fiscal year) have to be paid by June 30, 2015 in order to avoid the property being placed on the County’s “upset sale” list to be sold at the September 2015 sale.

Delinquent Real Estate Tax Collection Process

Potential reasons why there is a delinquent backlog in the Dauphin County Tax Claim Bureau:

• The Tax Claim Bureau pursues delinquent taxes subject to property owners rights to stay proceedings in Bankruptcy Court; their right to file exceptions and file appeals; and by making payment arrangements which amount to the Bureau becoming a “compassionate collector” receiving payments rather than dispossessing persons of their homes.

• While the goal of the Tax Claim Bureau is to generate as much revenue for the Bureau as possible they share the frustration by the constant and repeated Bankruptcy filings, appeals and exceptions with the District due to the chronic non-payment.

• The cumulative amount of the last three (3) years of real estate tax delinquencies (years 2010, 2011 and 2012) is $4,997,182.00.

Delinquent Real Estate Tax Collection Process

How HASD receives revenue from “old” delinquents still on the books:• The Harrisburg Authority purchase price is based on the face value of the last

four years of delinquencies only. Although they purchase 100% of the liens this is to secure a priority security interest in those liens and for ease of process for the tax claim bureau so that they remit all of the revenue to one location instead of being confused each year as to where to remit collections.

• When the collections come in the revenue generated from the “old” delinquencies (those older than the four years value that were the basis of the purchase price) as well as the interest and penalties that are not being retained are kept in the authority’s bank’s clearing fund until the next year’s closing and those funds are used to pay down the authority’s Note, thus creating more borrowing power so that the Authority can purchase even more liens the following year. That is how the HASD receives the value of the old liens, interest and penalty that are purchased but not paid.

ACT 32 & ACT 511 Tax Collections• These are the Earned Income (EIT) and Occupational (OAS) taxes due the District by each employed

person in the District who meets the statutory qualification.• These are collected by outside agencies contracted by the Counties Tax Collections Committee, who

have the right to pursue delinquent collections. • The District has the right to bypass these collectors and hire their own delinquent collector.• The taxes are considered delinquent 60 days after they are due. • The collector has the following tools at its’ disposal in collecting these taxes:

– The tax collector levies the amount of the tax, penalty and costs by distress and sale of personal property of the delinquent taxpayer, wherever these goods are located. Costs set by law are chargeable to the taxpayer.

– The Local Tax Enabling Act authorizes wage attachments for delinquent occupation, occupational privilege, per capita and earned income taxes. The employer may not with hold more than 10 percent of the wages of the delinquent taxpayer or spouse at any one time. Wage attachment for Act 511 personal taxes requires prior notice to the taxpayer. The tax collector must give at least 15 days notice to the delinquent taxpayer by certified or registered mail prior to submitting the wage attachment order to the employer.

– PA political subdivisions (except Philadelphia and its’ School District) can deduct delinquent taxes from the wages of their officers and employees.

ACT 32 & ACT 511 Tax Collections

Per the 2012-2013 Audit there remains uncollected $14,938,338 in Occupation taxes. The amount for the last four years totals more than $7.2 million delinquent.

SUGGESTIONS

Real Estate Taxes:• Work with State legislature to increase interest rates to a significant level to make failure to pay

more punitive.• Open a dialogue with the City building permit office to discuss cooperating on sharing information

to enforce tax collecting in conjunction with issuing permits.• Compare the list of commercial delinquent taxpayers with the City occupancy permit office to seek

enforcement of their permit requirements in coordination with the payment of delinquent liens.

Act 32 and 511 Taxes:• Increase collection efforts, including using all remedies available at law to collect the taxes due

including the wage attachments and distraints available• Improve your computer modeling between Act 32 /511 taxes and delinquent real estate taxes to

support the case that the Legislature should provide stronger penalties for failure to pay these voluntary taxes.