Senate Considers Legislation Decreasing Interest on County Chargebacks

Posted on January 31, 2014 by Dene Westbrook

Earlier this week the Senate Finance Committee reported HB 5074, a bill that would change the monthly interest rate that a county treasurer can charge other taxable units in the county that have delinquent property taxes due. The current monthly rate of interest is one percent. Under the bill, the monthly rate of interest would be “up to” one percent.

Under Michigan’s tax reversion process, county treasurers can assess “chargebacks” under the protocol they follow when local units of government have borrowed from a county’s delinquent tax revolving fund. If summer and winter property taxes are not collected by March 1 of the following year that the tax is owed, local treasurers pass on notices of unpaid or delinquent taxes to county treasurers. In many counties, the county treasurer runs a delinquent tax revolving fund.

Upon receiving the notices of unpaid taxes, the county treasurer advances funds to those

local governments that are owed taxes, making them financially whole at that time with

the understanding that local treasurers will pay back the advance, either after the taxes in

arrears are paid by the property owners, or after the property is sold at a public auction.

Under state statute, county treasurers charge a monthly interest rate of 1 percent for advancing the money to make the local unit of government whole. This legislation would give the county discretion to charge “up to” one percent.

The legislation now goes to the full Senate for their consideration.

Samantha Harkins is the Director of State Affairs for the Michigan Municipal League. She can be reached at 517-908-0306 or email at [email protected]

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