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Newsom’s property-tax relief extends further than expected

San Francisco Window Replacement Center

Gov. Gavin Newsom’s executive order giving counties the right to waive late penalties, fees and interest for many homeowners and small-business owners who are unable to pay their property taxes due to the coronavirus extends beyond what some counties requested or expected.

As recently reported in The San Francisco Chronicle, the order issued recently extends through next May 6 and covers the second half of this year’s property taxes that were due April 10 and the first and second payment for 2020-21 taxes due Dec. 10 and April 10.

However, if a property-tax payment is just one day late, the penalty is 10% of the amount due. If the December or April payment is still due after the fiscal year ends June 30, interest begins accruing at the rate of 1.5% each month or 18% a year. Delinquency fees may even apply.

A state law allows county tax collectors to waive late penalties for an individual taxpayer if a late payment “is due to reasonable cause and circumstances beyond the taxpayer’s control.” It was not clear if that exception would apply to a financial hardship due to the coronavirus.

A few counties and county tax collectors asked Gov. Newsom to issue an executive order regarding this.

However, “our preference was for just this tax season,” said Sandie Arnott, San Mateo County treasurer-tax collector. “We were not expecting him to include it through May of next year.” She added, “We don’t know where 2021 came from.” Whether it will create a financial hardship “is an unknown. We will deal with it accordingly.”

The California State Association of Counties also “requested the executive order to clarify the county treasurer tax collector authority to waive penalty related to the April 10 deadline,” Graham Knaus, the association’s executive director, said in a statement. “We’re reviewing the other elements of the order to determine the impact on taxpayers and the counties.”

Property owners need to apply for a waiver and show that they “suffered economic hardship ... due to the COVID-19 pandemic, or any local, state, or federal government response to COVID-19,” the order says.

Tax collectors are working with the State Controller’s Office to create a model coronavirus form, Arnott said. Counties can use it, modify it or create their own.

The waiver does not apply to any taxes that were already delinquent March 4.

It also does not apply property taxes paid through an impound account. Homeowners who have impound or “escrow” accounts pay their taxes every month with their mortgage.

“If you have a second home that you occupy and don’t rent, it seems to me you could have it on the second property,” said Brad Marsh, a tax lawyer with Greenberg Traurig.

Newsom’s order does not waive taxes, only the penalty in some cases. Tax collectors don’t have to record a lien on secured property such as real estate, because if a property is sold, delinquent taxes are paid first, Arnott said. However, once taxes are delinquent for five years, a tax collector can take action to sell the property in an auction to collect the unpaid taxes.

On April 6, a large group of taxpayer and business groups sent a letter asking Newsom to extend the April 10 property-tax deadline until July 15 for all taxpayers statewide — for exception of taxes already paid through impound accounts — rather than granting late-payment waivers on a case-by-case basis.

“Our concern was that once there are too many restrictions, it creates uncertainty for people who are on the border: Do they count as a small business or not? It gives counties too much ability to deny an extension for property owners as opposed to applying it uniformly to everyone,” said David Kline, a spokesman for the California Taxpayers Association.

Newsom’s order “is very significant for someone who has a high property-tax bill,” Kline said. “We like consistency and uniformity, so we would like everyone covered.” But the executive order “helps a lot of people so we are not going to criticize it.”

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