Governor Newsom Signs Executive Order Providing Last Minute Property Tax Relief

On Tuesday we authored a blog post commending San Francisco County Assessor Carmen Chu for moving the deadline for businesses to file their Business Property Statements (Form 571-L) to June 1 of this year. We noted that California statutory authority provides that if the property tax filing deadline falls on a date when the county assessor’s office is closed for the entire day, a property statement that is mailed and postmarked on the next business day is deemed to have been timely filed. We further explained, however, that despite the fact that most, if not all, county assessor offices across the state are closed due to COVID-19, most assessors have been reluctant to provide relief to the taxpayers struggling to meet the May 7 deadline. Consequently, we urged county assessors to follow the example set by the San Francisco County assessor and to likewise extend the business property tax deadline.

In April, we also authored a blog post encouraging the State Board of Equalization and county officials to issue clear, unambiguous guidance regarding the late-payment penalty waivers being offered to taxpayers who were unable to timely pay the second installment of their secured property taxes by the April 10th deadline due to hardship caused by COVID-19. We stated that although the provision of penalty waivers was an important first step, the ambiguity surrounding how a taxpayer might “prove” that he or she was “impacted by COVID-19” necessitated additional guidance.

Yesterday, on May 6, 2020, Governor Gavin Newsom announced that he had signed a new executive order (Executive Order N-6-20) as a means of providing certain property taxpayers with much-sought relief.

“The COVID-19 pandemic has impacted the lives and livelihoods of many, and as we look toward opening our local communities and economies, we want to make sure that those that have been most impacted have the ability to get back on their feet,” said Governor Newsom.

As a first step, the executive order suspends, until May 6, 2021, penalties for failing to pay certain property taxes that were not delinquent before March 4, 2020, for taxpayers who demonstrate they have experienced financial hardship due to the COVID-19 pandemic. This extension applies to residential property owners and businesses that qualify as a small business under the Small Business Administration’s Regulations Code. To be eligible for the penalty waiver, a taxpayer must demonstrate “to the satisfaction of the tax collector that the taxpayer has suffered economic hardship, or was otherwise unable to tender payment of taxes in a timely fashion due to the COVID-19 pandemic, or any local, state, or federal government response to COVID-19.”

Second, the order also extends the deadline for certain businesses to file their Business Personal Property Tax Statements (Form 571-L) from May 7 to May 31 of this year. Specifically, the order suspends California Revenue and Taxation Code (“RTC”) section 441, subdivision (b) and RTC section 463, subdivision (a) until May 31, 2020, to the extent that either imposes a penalty for failure to file a property tax statement on or before May 7, 2020, such that no penalty shall be imposed upon a taxpayer if the taxpayer files a personal property tax statement as required by RTC section 441(a) on or before May 31, 2020.

Normally, subdivision (a) of RTC section 441 mandates the filing of a signed property tax statement with the assessor by each person owning taxable personal property, other than a manufactured home, having an aggregate cost of one hundred thousand dollars ($100,000) or more for any assessment year. Pursuant to subdivision (b), the signed statement must generally be filed by May 7 or the next business day if May 7 falls on a Saturday, Sunday, or legal holiday.  The extension to May 31, 2020, implemented by the Governor falls on a Sunday.  Thus, this morning, the State Board of Equalization issued a letter to all county assessors (LTA No. 2020/024) stating that assessors “shall accept Property Statements that are filed on or before June 1, 2020, without applying a penalty.”

Although taxpayers now have clarity regarding the due date for business property statements, the order’s penalty waiver provision for failure to timely pay taxes lacks a clear standard for taxpayers to apply when seeking to demonstrate that they “suffered economic hardship” or were “unable to tender payment of taxes in a timely fashion due to the COVID-19 pandemic.” This lack of a clear standard likely will prove problematic going forward as taxpayers seek to uncover exactly how counties will exercise their discretion with regard to the penalty waiver. Consequently, we renew our call for the issuance of unambiguous guidance by county tax officials regarding available relief measures and the standards that apply. This remains a necessary next step to ensure that even more California families and businesses are not displaced.

Charles Moll, IIICharles Moll, III
Charles (Chuck) Moll focuses his practice on state and local tax (SALT), primarily concentrating on the resolution of tax controversies. He regularly appears before the various California tax authorities—including the State Board of Equalization, the California Franchise Tax Board, the California Department of Tax and Fee Administration, and the Office of Tax Appeals—as well as local authorities such as assessors and assessment appeals boards. He has litigated at all levels of California’s courts, the US Tax Court, and the US Supreme Court. View Chuck's full bio.


Elle KaiserElle Kaiser
Elle Kaiser focuses her practice on state and local tax (SALT) matters. She advises clients in various industries, including technology, banking, consumer products, energy, insurance, retail and transportation. Elle is experienced in both tax planning and tax disputes. View Elle's full bio.


AvatarMarcy Jo Mandel
Marcy Jo Mandel focuses her practice on state and local tax (SALT) controversies, in addition to advising clients of federal tax controversies, corporate mergers and acquisitions, and provides state tax strategies for clients on a full range of state tax issues. View Marcy's full bio.


Troy M. Van DongenTroy M. Van Dongen
Troy Van Dongen focuses his practice on the resolution of state and local tax (SALT) controversies through negotiation and litigation. He advises clients across the country in a variety of state and local tax matters, including income, franchise, sales, and use taxes, and he has a particularly strong background in property taxation. View Troy's full bio.

STAY CONNECTED

TOPICS

ARCHIVES