Major Changes Discussed for Summer Tax Bill Proposal

Posted on May 29, 2020 by chackbarth

The House Local Government & Municipal Finance committee took testimony from business groups, the MML, and other local government organizations on a recently introduced proposal to provide relief for residents and businesses experiencing financial hardship from the current COVID-19 pandemic.

As originally introduced, House Bill 5761 would have waived penalties and interest for unpaid property taxes in 2020.  The League expressed significant concern over the impact that this original proposal could have had on local governments and schools and explained the need for any COVID-related relief proposal to ensure the uninterrupted flow of critical tax revenues for local units from the summer tax bill.

As a result of these conversations, the bill’s proponents subsequently introduced  House Bill 5810 and Senate Bill 943 that add a new component to the taxpayer relief effort.

In this week’s House committee hearing, a substitute version for HB 5761 was brought before the committee alongside HB 5810.  Together, the direction being discussed as part of the continuing development of these two bills would allow a taxpayer who meets certain COVID-related hardship eligibility criteria to delay the payment of their summer 2020 tax bill until March of 2021 while providing the local taxing jurisdictions with equivalent revenues to match what is being delayed.

Following discussions with League members and submitting their feedback/comments to the bill sponsor, we expressed the need for any relief proposal to maintain the vital summer flow of revenues for local units of government and schools, focus relief on small/downtown businesses to help preserve vibrant downtowns and communities, ensure that any new program is simple to administer and understand with clear, unambiguous eligibility standards, and would only apply to the summer 2020 tax period.

Under the new version still being drafted, an eligible taxpayer, who is not subject to having their property taxes escrowed, would be able to file a hardship affidavit with the local unit by August 28th and have their summer tax bill delayed without penalty or interest.  The local unit would then turn these eligible parcels over to the county treasurer as part of a special, early tax settlement process.  The county would then utilize its existing Delinquent Tax Revolving Fund to provide a separate, early settlement for all of the local taxing jurisdictions within a specified (still being negotiated) time frame after those parcels have been turned over to the county.  All existing tax deferment or installment programs for taxpayers would remain distinct from this hardship program and taxpayers in those programs would not be eligible to participate in this new program.  All other taxpayers/parcels remain with the local unit and are subject to the normal tax collection and/or delinquency and settlement process in early 2021.  Taxpayers who qualify for this early settlement program will still be subject to their local unit’s normal winter 2020 tax bill and that bill’s current payment deadlines.

Parcels turned over to the county under this program would be required to pay their summer 2020 property tax liability by March of 2021 unless they request additional assistance and the county would then place those taxpayers on an installment payment plan from that point forward.

To cover the costs of this penalty/interest free early settlement, the proposed language also requires the state to appropriate sufficient funds to the county to reimburse for their administration.

The committee took testimony only during their hearing this week and is expecting to take the bills up again next week with new, still-being-drafted language.  We continue to engage with  the legislative sponsors and bill proponents to address the issues being raised by communities.  It is likely these bills will continue to be refined in the coming weeks and the Administration has not weighed in with their feelings on the proposal.  More information and substitute bill language will be provided here as it becomes available.

Chris Hackbarth is the League’s director of state & federal affairs. He can be reached at 517-908-0304 and [email protected].

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