TACS FACTS ● VOLUME XI ISSUE 2 ● Page 1

TACS FACTSSM

Volume XI, Issue 2 Spring 2016

A Resource for Treasurers on Developments and Trends in Collection and Bankruptcy and Other Areas From Taxing Authority Consulting Services, P.C. (TACS)

GENERAL DISTRICT COURT:

Tips, Traps and Tricks By Andrew Neville, Taxing Authority Consulting Services, P.C.

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When one thinks of going to court, images of stern, gavel-pounding

judges and exclamations of “OBJECTION!” often come to mind. Fortunately,

getting a judgment for delinquent taxes and other fees is much less dramatic and

scary than Hollywood makes it seem. Filing a lawsuit against a delinquent

taxpayer can be an extremely effective collection tool.

First, you might wonder why it is even worth your time to learn and

navigate the court process. You are right in thinking that Treasurers in Virginia

have a plethora of other tools to use to get taxpayers to pay their share. The court

process though is an additional, important tool that many Treasurers may not be

using. A Treasurer can use the court process to preserve the statute of

limitations, to get a taxpayer to provide much-delayed documentation regarding

a move or disposition of a vehicle, etc. (thus, cleaning up your books), or just to

show a taxpayer (and his or her friends) that you are serious about collecting

delinquent taxes, especially those that are now out of state. Below are some tips

and tricks for navigating the General District Court (“GDC”) process.

1. Know what qualifies

- You can take accounts totaling up to $25,000 in tax, penalty, and

interest to GDC (anything above that amount must go to Circuit

Court). This limit does not include attorney fees or the costs of filing

the suit or getting good service.

- If the total TPI for an account is more than $25,000, you can break the

various tax years up into separate cases. However, if you are going to

do this, organization is key. Continued ►

TACS FACTS is a publication of Taxing Authority Consulting Services, P.C. (TACS). You may register to receive this

quarterly newsletter and other TACS alerts by subscribing at our website, www.taxva.com. Please also visit our website for more information about the firm, our newsletter archive and sample forms and letters. Please contact us at info@taxva.com or (804) 649-2445 if you need help registering or to gain access to the site. The articles and

content of this publication may not be reprinted without the written permission of Taxing Authority Consulting Services, P.C. Copyright 2016

TACS FACTS ● VOLUME XI ISSUE 2 ● Page 2

"On my income tax [Form] 1040 it says "Check this box if you are blind." I wanted to put a check mark about three inches away." -- Tom Lehrer

GENERAL DISTRICT COURT continued from page 1

2. Get to know the Clerk

- Before you get your paperwork together to file your cases, schedule some time to sit down

with the Clerk to go over the logistics of the process. You can find out: how they like your

filings to be organized, how many cases you can file at once, what dates are available and

how much time they need between when you file and when your return date can be set, how

many copies they need, what type of paper they require, what are the costs of service

(including any agreements your Sheriff’s Office may have with other jurisdictions), etc.

- The Clerks do 95% of the legwork in GDC. They are the first ones to see the filings, and the

last ones to touch the cases after the judge has made a ruling. They can be the difference

between a smooth GDC experience, and a Nightmare on Court Street.

3. Organization is key- Before, During and After the Court Process

- Compile a master list of accounts that you are considering filing suit on. Include all relevant

information, such as: account number, name, address (including locality they are in), amount

due, tax years due, notes from taxpayer interactions, etc.

- If you are filing suit to preserve a statute of limitations, (5 years for personal property and

many other types of taxes, 20 years for real estate) make sure that you file your case before

December 31st. If you do, the statute of limitations is tolled, and you have some additional

time to pursue your judgment and collect the debt.

- Create additional lists of accounts that you are going to file on, breaking them out into the

maximum number of cases the Clerk says you can bring on any one day.

Good organization is critical. It will enable your office to be more efficient, let you

interact more effectively with the Courts, and will make the Clerk’s job easier too, which

will, in turn, make your job easier.

- Create a separate list of accounts you have received a judgment on. This is important on the

back end, because if you receive a judgment, you can have it docketed with the Circuit Court.

This gives you a lien on any land owned (or later purchased) by the taxpayer within that

locality (and it extends the judgment period from 10 years to 20 years). It is also important

because if the taxpayer satisfies the judgment amount you must file a notice of satisfaction

with the General District Court Clerk (and the Circuit Court if you docketed the judgment).

- When getting ready for your return date, create, what we call, a Disposition Sheet. This is a

list of all of your cases for a specific court date. Sometimes taxpayers will call up after

receiving the court papers (but before the court date) to dispute the alleged amounts due, and

they may get an adjustment. Sometimes they will call to set up a payment plan or pay the

account in full. When this happens, the desired outcome of the case will change (from

judgment, to a continuance, adjustment or non-suit dismissing the case). The Disposition

Sheet is a good way to keep track of exactly what you will be asking the judge for on the day

of court. Some Clerks will even let you fax this sheet over a day or two before your court date

so they can go through it beforehand (which speeds up the court process tremendously).

Continued ►

TACS FACTS ● VOLUME XI ISSUE 2 ● Page 3

WHO IS

TACS?

Taxing Authority

Consulting Services,

P.C. is a Virginia law

firm formed to meet

the needs of

treasurers and local

tax officials.

Jeffrey Scharf, Mark

Ames, John Rife and

Andy Neville are

dedicated to serving

the needs of local

taxing authorities.

TACS’ focus is on

tax collection,

assessment and

bankruptcy issues

faced by

governments. TACS

can provide

assistance to your

locality to help

increase your

revenue stream from

your delinquent

accounts.

Please contact us at:

(804) 649-2445 or by

e-mail to

info@taxva.com to

discuss your

collection needs or

for more information

about the firm.

GENERAL DISTRICT COURT continued from page 2

- Make sure you have all the necessary documentation together

on the day of court. This includes a copy of the case you filed, a

statement of account, a copy of your locality’s ordinance

allowing for interest (if higher than 6%, which is the judgment

rate of interest) or attorney’s fees, if applicable, and anything

else you might think is helpful for any taxpayer who shows up

(such as important phone numbers, a receipt book, etc.).

- Staying organized about court dates is a must. Some cases may

be “continued,” which means you are not setting them for trial,

but rather you are pushing them out to a new return date so that

the taxpayer may have some time to dispute or pay what is due

to avoid a judgment. Some cases may be set for trial, and if

pleadings are requested you will need to make sure to get those

prepared and sent by the date they are due.

4. Communication is crucial

- Before starting a new court process, be sure to communicate

with your staff, the Commissioner of Revenue or Assessor’s

Office, and the GDC Clerk. Let them know what you are about

to do, and give them a chance to voice any concerns or

suggested changes. Also make them aware that they may soon

be receiving some calls from potentially angry, confused, or

concerned taxpayers.

- If you are working with a collection attorney you may have

specific accounts you want to make sure they take to court. As a

result, there may be some increased back and forth about

specific accounts, or they may file on or get a judgment on an

account that you then have to make sure not to write off, among

other things.

- Being clear with the taxpayers, both before and in court, is

important. Letting them know what documents they need to

provide to get an adjustment, and when they need to provide

them by, can help you avoid having to set a trial. Making them

aware of what type of payment plan will be acceptable to avoid

having a judgment entered against them may enable them to

avoid having to come to court at all (which allows you to avoid

lengthy discussions in court while a judge is waiting).

- Keeping an open line of communication with the GDC Clerks is

vital.

Continued ►

-

♦

TACS FACTS ● VOLUME XI ISSUE 2 ● Page 4

GENERAL DISTRICT COURT continued from page 3

5. Court – It’s not as scary as it seems

- Before your court date, make yourself familiar with the

courthouse, the courtroom, the GDC Clerks, and the Judge(s).

- Arrive Early. Plan to get to court at least 30 minutes prior to when

your cases start. You can even have discussions with the people

you sued ahead of time to see if they have a dispute or just need

time to pay.

- Be confident in front of the taxpayer and the judge (if you are

organized, this will be easy).

- You can’t really mess up a Return Date (anytime you file a case in

GDC, the first date will always be a Return Date – think of it as an

administrative day). When in doubt, continue it out.

- Always bring two pens. (Learned this one the hard way!)

6. Your demeanor is important

- Always treat the Clerks, Judges, and taxpayers with respect.

- Be fair and impartial to taxpayers, and show them not only that

you are willing to listen, but that you have listened to them and

want to help.

- Remember that a judgment is just a piece of paper; once you get

one, you still have to collect on it. Helping a taxpayer “avoid” a

judgment can be a bargaining tool. If you “work” with them by

giving them some time, it usually makes them more willing to

work with you.

- The Clerk, Secretary, and Bailiff are the people who truly “run”

the court. Thank them for their time, and ask them what you

could have done to make things easier for them in the future.

- Introduce yourself to the judge, and answer all questions honestly

– it’s not good to lie under oath. If a judge asks a question, it does

not necessarily mean she thinks you are wrong, she may just not

be as familiar with the nuances of your case (e.g. “how can you

charge personal property tax on a double wide?”). They hear a lot

of different types of cases, so it can be hard for them to remember

everything.

While this may seem like a lot of information, it really boils down to a

few main things. First, the GDC process is a lot easier if you are organized

throughout – from when you start thinking about filing, all the way through

docketing your judgments and filing notices of satisfaction. Second, clear

and effective communication on the front end can save you a lot of hassle on

the back end. Finally, treat everyone with respect – especially the Clerks.♦

TACS FACTS is

looking for contributions

from YOU to help keep your fellow

tax collectors informed on

news, trends and developments of

interest to tax collectors

throughout Virginia.

Please send us

your stories about your

successes, your collection

attempts and creativity in

collections. Or feel free to share your comments,

thoughts or ideas on anything

you’ve read or would like to see addressed in a future issue of TACS FACTS

with us at info@taxva.com.

TACS FACTS ● VOLUME XI ISSUE 2 ● Page 5

“TACS”ing Thoughts

No government can exist without taxation . . . . This money must necessarily be levied on the people; and the grand art consists of levying so as not to oppress.

— Frederick the Great

Answers to Some Frequently Asked Questions:

Q: We have delinquent business tangible taxes owed by an LLC. They changed the name of their LLC and put it

in an LLC under his brother's name.....but we know that the original owner is still the one running the business. I

know we can seize the tangible property, but are we allowed to place a bank lien on any account other than the

previous LLC's account? I know where the new LLC banks and also where the “former owner” banks personally, but

because the taxes are under the old LLC, I am not sure what I can do.

A: You might want to take a look at Code of Virginia §58.1-7. Under this section, if the new LLC received a

distribution from a business it knew owed taxes (and you can impute this due to the familiar relationship), you would be able to pursue the new business to the extent of that distribution. This would allow you to lien their bank account. Before taking action, you should send the new LLC a letter informing them of their liability and then move forward.

§ 58.1-7. Same; liability of recipient of improper corporate distribution.

If any corporation assessed with a tax, including penalties and interest thereon, distributes its assets without first

paying such assessment to the Commonwealth or to the proper political subdivision, as the case may be, any person

with actual notice of such assessment receiving any moneys or other property from such distribution shall be held

personally liable for such assessment to an amount not in excess of his participation in such distribution and any

purchaser with actual notice of any such assessment shall be liable therefor to the extent of the assets of the

corporation coming into his hands. Nothing in this section shall be construed so as to affect the rights of any bona

fide purchaser for value.

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Q: We are getting ready to have our first vehicle auction of vehicles seized by the sheriff for delinquent taxes.

When there is a lien from a financial institution on the vehicle do the taxes or the lien holder get paid first?

A: If the taxes are owed on the vehicle that is seized they get paid prior to the lienholder pursuant to Code of Virginia §58.1-3942C. The only thing that would be paid ahead of the taxes would be the costs of the sale, if ther sare any. If the taxes are owed on other property than that which was seized (e.g. other vehicles); the lienholder gets paid before taxes can be applied on the other (not seized) property.

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Q: A taxpayer filed Chapter 13 Bankruptcy on December 7, 2015. We had placed a DMV Stop on the taxpayer

for delinquent taxes/citations. The taxpayer did not list the City as a creditor in the bankruptcy. Are we required to remove the DMV Stop?

A: The automatic stay prevents any collection action against the debtor, which would include imposing a DMV stop. It doesn’t matter that you didn’t get notice of the bankruptcy as the automatic stay still applies. If the DMV hold is just sitting there, you are really not taking any collection action; however, should the person need to renew their tags while they are in bankruptcy, you would have to release the stop due to the bankruptcy

case. That release can be reported back to DMV as a bankruptcy release and no fee will be charged. ♦