Purpose

Establishes a tax lien expiration and modifies the current procedures within the office of the county treasurer regarding tax liens, unclaimed refunds and distribution of taxes.

Background

Currently, state statute allows for the foreclosure on real property that has a tax lien which has not been redeemed by the purchaser of the lien or the owner of the property for five years after the sale of the lien. However, there is no time limit for a tax lien holder to redeem the certificate of purchase or foreclose on the property. This has resulted in a number of old tax liens compounding on the county treasurers' tax rolls. In addition, while the certificates of purchase are outstanding, the holder of the tax lien is unable to provide documentation to support a business loss deduction on federal and state income tax filings.

This legislation establishes a statutory lifetime for certificates of purchase of tax liens. The bill requires that after five years from the last day of the month in which it was purchased, tax liens automatically terminate if the holder of a tax lien does not initiate foreclosure by means of supplying the county treasurer with the required copy of the 30-day notice. The county treasurer would then notify the tax lien holder that the tax lien expired and is no longer valid.

S.B. 1041 makes other numerous changes to streamline the process, including the direct distribution of the vehicle license tax monies to cities and counties, refund overpayment of taxes and electronic funds transfers of tax payments.

There is no fiscal impact to the state general fund associated with this legislation.

Provisions

Tax Liens

1. Establishes an expiration of a tax lien five years from the sale of the lien for those purchased after October 1, 1999, if the tax lien is not redeemed by the owner of the property and the purchaser fails to foreclose on the property. Exempts a parcel for which the lien was purchased that is subject to a judicial proceeding at the time of expiration.

2. Requires the treasurer to notify the purchaser of the pending expiration between 30 and 60 days before the expiration date.

3. Details the procedure to process tax liens that are more than five years old.

4. Conforms statute to reflect the use of paperless certificates of purchase, or registered certificates.

5. Limits the notification of intent to file for foreclosure to 180 days before filing the action to foreclose.

Vehicle License Tax

6. Requires the Arizona Department of Transportation (ADOT) Director to deposit the incorporated cities and towns vehicle license tax monies directly to the incorporated cities and towns, except for the cities and towns in Pinal County. Currently, the ADOT Director distributes the cities and towns monies to the county treasurer to be further distributed to the cities and towns.

7. Directs the ADOT Director to continue to deposit the vehicle license tax monies to the Pinal County Treasurer for the incorporated cities and towns in the County until the court order that requires such distribution is satisfied.

8. Requires the Pinal County Treasurer to notify the ADOT Director when the court order has been satisfied and then requires the ADOT Director to directly distribute the vehicle license tax monies to the cities and towns of Pinal County.

Miscellaneous

9. Requires the county treasurer to credit monies received as penalties assessed on escaped personal property tax to the county general fund.

10. Authorizes the county treasurer to require payment by electronic funds transfer to the bank account designated by the treasurer.

11. Requires the taxpayer to provide the treasurer with any supporting documentation and electronic information requested.

12. Specifies procedures for processing invalid electronic funds transfers.

13. Removes the requirement that the mortgagee that receives or possesses an unsatisfied tax statement return the tax statement to the county treasurer.

14. Requires any refunds that are unpaid and unclaimed for two years after the fiscal year for which they were budgeted to revert to the general fund of the political subdivision that levied the tax rather than only the county general fund.

15. Makes technical and conforming changes.

16. Provides for a general effective date.

Prepared by Senate Staff