Volume 6 - Opinions of Counsel SBEA No. 102
School districts (taxes) (fees, interest and penalty provisions - notice requirement) - Real Property Tax Law, §§ 1328, 1330; Town Law, § 37:
The fee, interest and penalty provisions for school district taxes contained in sections 1328 and 1330 of the Real Property Tax Law have been designed to encourage timely remittance of taxes. Actual notice of the statutory penalties to be imposed for failure to make timely payment is not a prerequisite to liability for such penalties.
Our opinion has been requested concerning the interest and penalty provisions for school taxes contained in sections 1328 and 1330 of the Real Property Tax Law. A taxpayer failed to pay school taxes due in September of 1976, and, as was noted on the school tax bill, a two percent interest charge - covering the period through October 31 - was imposed for such failure. Subsequent to October 31, he sought to pay this bill at the town collector’s office but was informed that payment could only be made to the county treasurer. In December, he attempted to pay school taxes to the county treasurer but was informed that he would have to wait to pay such taxes until after January 1. 1977, and that the payment would then include a seven percent penalty in addition to the two percent interest charge. The taxpayer has asked for an explanation of these various collection procedures and whether lack of notice on the school tax bill of all possible late charges is grounds for waiving fees not mentioned on that bill.
In New York State, taxes on real property are levied on the basis of each parcel’s assessed value. These taxes are levied, extended and collected at the local level and serve to support local governments (cities, towns, counties, villages, school districts, and special districts). These jurisdictions depend upon the timely flow of revenue, including tax collections, for meeting their day-to-day costs of operation. To encourage timely remittance of taxes, a schedule of interest and penalties for late payment has been enacted. Provision for the imposition of fees, interest and penalties for the collection of school taxes is found in sections 1328 and 1330 of the Real Property Tax Law and section 37 of the Town Law.
In addition, the Real Property Tax Law provides that real property taxes are levied upon the real property itself and not against the owner thereof (see, Real Property Tax Law, §304), and that the primary remedy for nonpayment of taxes is a sale of the property to satisfy the tax lien, rather than a general right of recourse against the owner personally (i.e., rather than a lien on other assets of the owner (cf., §926)). Therefore, when school district taxes (or any other real property taxes) are not paid, the appropriate enforcing officer (in this case the county treasurer) is authorized to sell the tax lien against the property at public auction to satisfy the amount of unpaid taxes and the expense of the sale. Before this action is taken, however, the taxpayer is given ample opportunity to make good his default by paying the tax with the interest and penalties added for delay.
The amount and the time for the imposition of interest and penalties on unpaid school taxes may vary due to a number of factors. The first of these is whether the district is located wholly or partly within a city having a population of less than 125,000 (“city school districts” as defined in Education Law, §2501), or is located in towns only (see, e.g., Education Law, §§1805, 2124, 2130).
City school districts
In fiscally independent school districts, provision for the imposition of interest on unpaid taxes is found in section 1328, subdivision 3, of the Real Property Tax Law. As a general rule, after the expiration of the one month interest free period (§1324), unpaid city school taxes bear interest at the rate of one percent for that month plus one percent for each month or portion thereof thereafter until paid. (For example, if a city school district’s interest-free period expired on July 31 and a property owner offered payment on August 5, his payment would include an interest charge of two percent of the basic tax liability.) Upon the expiration of the warrant for collection and its return to school authorities (§1332(2)), those taxes remaining unpaid would bear interest at the rate of one-half of one percent for each month or part thereof until paid.
However, subdivision 3 of section 1328 also gives city school authorities the right to adopt a resolution to impose on unpaid city school taxes the same rates of interest as those payable on unpaid city taxes in that city.
After a review of the return made by the collecting officer, city school authorities must transmit copies of the list of unpaid taxes, for purposes of collection and enforcement of collection (§1332(5)) to the city tax enforcement officer, county treasurer, or both, depending upon whether the list includes properties both within and without the city’s geographical boundaries (§1332(3)). A five percent charge is immediately added to the amount of unpaid tax and interest, which charge is retained by the city or county. (Unlike an unpaid non-city school district tax, an unpaid-city school tax is not relevied and does not become part of any ensuing city or county levy against the property (cf. §§1332(5) and 1330(5)).)
Non-city school districts
The only provision for payment of interest on unpaid non-city school taxes is in the case of taxes collected by a school appointed tax collector who receives a fixed compensation in lieu of fees (§1328(2); Education Law, §§2130(4), 1805). In this situation, upon the expiration of the first month for collection, unpaid taxes bear interest at the rate of one percent for that first month and for each month or part thereof until paid or until the return of the warrant (§1328(2)).
In all other cases, the collecting officer is entitled to a one percent fee for taxes paid in the first month of collection and five percent thereafter (§1328(1)), with one possible exception. That exception is set forth in section 37 of the Town Law which provides, generally, that in towns of the first class (see, Town Law, §§10, 12), it is the duty of the town’s receiver of taxes and assessments to collect school taxes on property located within the town. This section further provides that collections shall include the fees otherwise prescribed by law (i.e., those in §1328(1) of the Real Property Tax Law), except that the town board, by resolution, may provide for a first month collection fee of zero to one percent, and for a fee thereafter of “not more than five percentum” (Town Law, §37(1)). With the exception of these fees, however, there is no authority to impose charges for nonpayment of non-city school taxes if those taxes are collected by a town receiver of taxes and assessments or a school appointed collector who is paid on a fee basis (see, 11 Op.State Compt. 18).
In any event, upon the expiration of the collecting officer’s warrant, a statement of unpaid taxes (including interest where the collector receives fixed compensation in lieu of fees (see, §1330(1)) must be delivered by the collecting officer to school authorities (§1330(1)). By November 15, the school authorities must transmit this list to the county treasurer (§1330(2)), who can accept payment until the county relevies these taxes (§1330(6)). A five percent fee must be added to the amount of unpaid taxes, except that for taxes which accrued interest under section 1328(2), the latter interest is in lieu of the five percent fee otherwise payable to the county treasurer (§§1328(2), 1330(6)).
Once the county legislature has relevied any unpaid school taxes, a seven percent charge is imposed upon the amount of unpaid taxes and interest. which seven percent belongs to the county to compensate it for the cost of collection (§1330(5)). Based upon the refusal of the county treasurer herein to accept payment, we assume the delinquent school taxes had been relevied by the county, and that the property owner was then required to await receipt of his town and county tax bill before payment could be made (§1330(6)).
Under Real Property Tax Law, section 922, whether or not a taxpayer receives actual notice of the statutory penalties which will be imposed, he remains liable for the payment of these penalties. Subdivision 3 of that section provides a failure to mail a tax bill or a failure to receive one “shall not in any way affect the validity of the taxes or interest prescribed by law with respect thereto” (emphasis added). Since failure to receive the tax bill itself would not affect the validity of the tax or any interest thereon, we fail to see how a lack of specification of additional penalties which might accrue after expiration of the school tax warrant can affect those penalties. Interest and penalties are added to a tax bill automatically, as outlined above, and the tax bill’s lack of actual notice to the taxpayer of their amount and imposition does not limit the application of those charges.
January 20, 1977
Revised April 27, 1979