County Responsibilities Under “Tag & Tax Together” Chris McLaughlin Assistant Professor, UNC...

County Responsibilities Under “Tag & Tax Together”

Chris McLaughlinAssistant Professor, UNC SOGmclaughlin@sog.unc.edu919.843.9167

September 2013

2

Two Thorny County Issues

• Bankruptcy & Registration Blocks

• Gap Billing

3

Bankruptcy & Registration Blocks

4

Registration Blocks and the Automatic Stay

• Automatic stay arises immediately at filing

5

The Automatic Stay

• Bans “process, proceeding or action” against debtor for claim that arose before filing

• Creating a registration block (or refusing to remove a block) is definitely an “action” covered by automatic stay

• Which means . . . 6

The Automatic Stay

May not block registrations for unpaid RMV taxes that arose before the taxpayer filed for bankruptcy.

7

Post-Petition RMV Taxes

• Automatic stay also bans any act to “obtain possession” or “exercise control” over debtor’s property for any claims (pre- or post-petition)

8

Post-Petition RMV Taxes

Key question: is a registration block an act to exercise control over the debtor’s property?

•No!! MV registrations (and drivers’ licenses) considered privileges and not property

•Which means . . .

9

The Automatic Stay

May block registrations for RMV taxes that arose after the taxpayer filed for bankruptcy.

10

The Automatic Stay

• When does RMV tax arise for bankruptcy purposes?

– Existing registration expires

– New registration applied for

11

The Automatic Stay

• The good news:

• Under Tag & Tax Together, unpaid RMV taxes will usually be post-petition.

• DMV may require payment of RMV taxes.

12

When are unpaid RMV taxes pre-petition?

Two situations in which unpaid RMV taxes will be pre-petition and therefore not subject to registration block:

13

When are unpaid RMV taxes pre-petition?

Bankruptcy filing after registration expires but before renewal

14

When are unpaid RMV taxes pre-petition?

Bankruptcy filing after obtaining limited registration on new vehicle but before obtaining regular (full-year) registration

15

The Bottom Line on Blocks

• Permitted for post-petition taxes:– Registration expires or taxpayer applies for

new registration after bankruptcy filing

• Not permitted for unpaid pre-petition taxes:

– 2 limited situations

16

Example 1

• Billy files for bankruptcy on September 1, 2013.

• Billy Blue Devil’s registration expires Oct. 31, 2013.

• Billy renews his registration on Nov. 20, 2013.

• DMV requires payment of 2013-14 property taxes on vehicle.

17

• Did the DMV violate the automatic stay by requiring Billy to pay the 2013 taxes on his vehicle?

18

Example 2

• Tina Tar Heel’s registration expires Oct. 31, 2013.

• Tina files for bankruptcy on Nov. 2, 2013.

• Tina renews her registration on Nov. 10, 2013.

• DMV requires payment of 2013-14 property taxes on vehicle.

19

• Did the DMV violate the automatic stay by requiring Tina to pay the 2013 taxes on her vehicle?

20

Example 3

• Susie Seahawk buys a new car on Oct. 31, 2013. She obtains a limited registration.

• Susie files for bankruptcy on Nov. 5, 2013.

• Susie applies for a full registration on Dec. 10, 2013.

• DMV requires payment of 2013-14 property taxes on vehicle.

21

• Did the DMV violate the automatic stay by requiring Susie to pay the 2013 taxes on her vehicle?

22

Example 4

• Wanda Wolfpack files for bankruptcy on October 20, 2013.

• Wanda’s registration expires on Oct 31, 2013.

• Wanda renews her registration on Nov. 5, 2013.

• DMV requires payment of 2013-14 property taxes on vehicle.

23

• Did the DMV violate the automatic stay by requiring Wanda to pay the 2013 taxes on her vehicle?

24

The Process

• How will DMV know not to place block on taxpayer?

• Taxpayer must provide proof of bankruptcy filing to county

• County must inform DMV to flag accounts and to remove those flags after bankruptcy

25

Bankruptcy and Registration Blocks

26

Gap Billing

• DMV collecting taxes on registered motor vehicles

• County obligation to bill and collect property taxes on unregistered motor vehicles

27

Gap Billing

• Who is responsible for property tax collection when a vehicle moves back and forth between registered and unregistered status?

• Late Renewals

28

Key Issue: Did Tax Year Change?

• Tax year tied to registration year

• When registration and tax years change, there will be a gap during which vehicle was unregistered

29

Key Issue: Did Tax Year Change?

30

Key Issue: Did Tax Year Change?

• DMV will change registration year:

1. Vehicle not drivable

2. More than 12 months since expiration

31

Key Issue: Did Tax Year Change?

32

Gap Bills: GS 105-330.3(a1)

• Prorated for # months unregistered– Unregistered 4 months, pay 1/3 of full year tax

• Due & Delinquent 1st day of 2nd month after bill prepared– Bill prepared in November, due January 1

• Interest at 5% first month, then .75%/month

33

Gap Bills: GS 105-330.3(a1)

• Collection remedies same as those for “regular” personal property bills: – Attachment/Garnishment– Levy– Foreclosure if taxpayer owns RP– No registration blocks

34

How Will You Know You Need to Create a Gap Bill?

• VTS report shows RMVs with new registration (and tax) years

35

Draft of Ptax Bulletin #165

• Example 1: Billy Blue Devil– No change in tax year, car

always registered

– No need for gap bill

36

Draft of Ptax Bulletin #165

• Example 2: Wanda Wolfpack– Tax year changed due to car

not drivable

– Gap bill for 8 months

37

Draft of Ptax Bulletin #165

• Example 3: Tina Tarheel– Tax year changed; > 12

months since expiration

– Gap bill for 24 months

38

Discovery Bills?

• Current GS 105-303 calls for discovery bill if car unregistered for an entire fiscal year (July to June)

• Too complicated! – 2 bills (discovery & gap)– Different values, tax rates due dates, interest

• Will change statute to require only gap bill

39

Gap Billing

40