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Home My WebLink AboutMINUTES - 04201993 - 1.51 1 . 51 TO: BOARD OF SUPERVISORS Contra FRGM: - Phil Batchelor, County Administrator Costa County April 14 , 1993 DATE: �,ou. SUBJECT: LEGISLATION: AB 1498 (Campbell) SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION RECOMMENDATION: ADOPT a position in SUPPORT of AB 1498 by Assemblyman Campbell, which would provide that personal property taxes are to be given priority over all other claims on the property and that in the case of a tax sale, taxes are to paid first. BACKGROUND: Traditionally, taxes due on personal property have been given priority for payment from the proceeds of a liquidation sale. In a recent federal appellate decision in the State of Washington, the Court ruled that taxes which become due and payable after a petition for bankruptcy is filed are subject to the automatic stay provisions of the Bankruptcy Code and further that in the case of a liquidation sale, such taxes do not have priority for payment from the proceeds of the sale, thereby reducing taxes to the level of an unsecured debt. The California Tax Collectors and Treasurer' s Association has asked Assemblyman Campbell to author legislation which would clarify State law and preclude the possibility that a .similar ruling could be applied in this State. AB 1498 has been introduced for this purpose. As introduced, AB 1498 applies the current priority which ..- a tax lien on real property has to personal property and specifies that any tax or assessment has priority over any judgment. In addition, the bill provides that in the case of a liquidation sale, all taxes which are due and payable at the time of sale have first claim on the proceeds of the sale, after only the expenses of the sale itself. CONTINUED ON ATTACHMENT: X YES SIGNATURE: RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE APPROVE OTHER SIGNATURE S: ACTION OF BOARD ON April 90, 1993 APPROVED AS RECOMMENDED OTHER VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE UNANIMOUS(ABSENT ) AND CORRECT COPY OF AN ACTION TAKEN AYES: NOES: AND ENTERED ON THE MINUTES OF THE BOARD ABSENT: ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN. ATTESTED Contact: PHIL BATCHELOR.CLERK OF THE BOARD OF cc: County Administrator SUPERVISORS AND COUNTY ADMINISTRATOR Treasurer-Tax Collector County Counsel Les Spahnn, Heim, Noack & Spahnn BY DEPUTY -2- It is felt that this language will protect the Tax Collector' s interest in collecting personal property taxes from a business which files for bankruptcy, where additional taxes become due and payable after the bankruptcy petition has been filed. Mr. Lomeli recommends that the Board of Supervisors support AB 1498 and this office concurs with that recommendation. CONTRA COSTA COUNTY TREASURER-TAX COLLECTOR 625 COURT STREET, ROOM 100 MARTINEZ, CA 94553 DATE: January 25, 1993 TO: Phil Batchelor, Countv Administrator Attn: C. L. Van Marter, Assistant County Administrator FROM: Alfred P. Lomeli, Treasurer-Tax Collector G" SUBJECT: BANKRUPTCY For your information, the California Association of County Treasurers and Tax Collectors are extremely concerned with the holding of the Ninth Circuit Court of Appeals Re: Glasply Marine Industries, Inc. , a case which severely restricts the ability of all fifty-eight County Tax Collectors to collect post petition taxes on real estate property by a bankruptcy estate. Glasply ruled that the imposition of local real estate tax lien is subject to the automatic stay provisions of 11 USC 362 of the Bankruptcy Code. In other words, the effect of Glasply is essentially this: real estate taxes, traditionally a first claim against real estate, are reduced to unsecured status. The California Association of County Treasurers-Tax Collectors respectfully requested Assemblyman Robert Campbell to author the attached bill (an amendment to Section 2192. 1 and adding Section 2192. 2 of the Revenue & Taxation Code) . I met with Assemblyman Campbell in my office on January 22, 1993 to discuss the effects of this holding. Contra Costa County has over $1 million dollars of potential losses. When multiplied by all 58 counties, the effect is substantial. The National Association of County Treasurers and. Finance Officers has named me to the Bankruptcy Committee which will meet to propose legislation on the national level, but this could take years to accomplish. The state level of action becomes important because Maryland National Bank v. Mayor and City Council of Baltimore, 728 F. 2d 1188 ( 4th Cir 1983 ) is distinguishable because Maryland law requires a trustee to first apply the procedures of the sale to back taxes, even if the taxes had not yet become due and payable. APL:gm Enclosure CALIFORNIA LEGISLATURE-1993-94 REGULAR SESSION ASSEMBLY BILL No. 1498 Introduced by Assembly Member Campbell March 4, 1993 An.act to amend Section 2192.1 of, and to add Section 2192.2 to, the Revenue and Taxation Code, relating to taxation, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST . AB 1498, as introduced, Campbell. Property taxation: collection: priority. Existing property tax law provides that a tax or assessment declared to be a lien on real property has priority over all other liens on that real property, regardless of when those other liens are created. This bill would apply this provision to taxes or assessments declared to be alien on personal as well as real property, and would additionally specify that the tax or assessment shall, pursuant to that provision, be given priority over matters including, but not limited to, certain obligations or responsibilities. This bill would additionally require that whenever real property, upon which property taxes are due and unpaid,is sold by a ministerial officer, other than at a tax sale, the proceeds from the sale be first applied, after the payment of sale expenses, to the payment of due and unpaid property taxes and be transmitted to the appropriate tax officer. This bill would declare that it is to take effect immediately as an urgency statute. Vote: %. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. 99 90 h AB 1498 — 2 — The 2 — The people of the State of California do enact as follows. 1 SECTION 1. Section 2192.1 of the Revenue and 2 Taxation Code is amended to read: 3 2192.1. Every tax declared in this chapter to be a lien 4 on res4 property, and every public improvement 5 assessment declared by law to be a lien on real property, 6 have priority over all other liens on the real property, 7 regardless. of the time of their creation. Any tax or 8 assessment described in the preceding sentence shall be 9 given priority over matters including, but not limited to, 10 any recognizance deed, judgment, debt, obligation, or 11 responsibility with respect to which 'the subject real or 12 personal property may become charged or liable. 13 SEC. 2. Section 2192.2 is added to the Revenue and 14 Taxation Code, to read: 15 2192.2. Upon the sale, other-than a tax sale under this 16 division, conducted under judicial process or otherwise 17 by any sheriff, constable, receiver, or other ministerial 18 officer, of any real property upon which ad valorem 19 property taxes are due and unpaid at the time of sale, the 20 proceeds from that sale shall, after .the payment of 21 necessary and incidental sale expenses, be first applied to 22 the amount of those ad valorem property taxes and be 23 transmitted by the conducting officer to the officer 24 responsible for the collection of those taxes. 25 SEC. 3. This act is an urgency statute necessary for 26 the immediate preservation of the public peace, health, 27 or safety within the meaning of Article IV of the 28 Constitution and shall.go into immediate effect. The facts 29 constituting the necessity are: 30 In order to preserve the ability of California counties 31 during a period of severe fiscal strain. to collect the full 32 amount of property taxes that are due and payable, it is 33 necessary that this act take effect immediately. O 99 120