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1520-1523 Cancellations: Types of Cancellations

1520. ERRONEOUS OR ILLEGAL ASSESSMENTS
All or any portion of any uncollected tax, penalty, or cost that is erroneously or illegally levied or charged may be canceled under Revenue and Taxation Code section 4986(a).

EXAMPLES: An insufficient description, or a levy on improvements that did not exist on the lien date, is an erroneous assessment. An assessment against tax-exempt land is an illegal assessment, where property is clearly all tax-exempt (Star Kist Foods, Inc. v. Quinn, 54 Cal. 2d 507). Where classification of the taxable and exempt property within an assessment is questioned, the taxpayer may be required to petition the county board of equalization in order to have the taxable and exempt property segregated (San Francisco v. San Mateo County, 36 Cal. 2d 196, 201).

1521. UNENFORCEABLE TAX LIEN
Whenever it is discovered that collection of a tax cannot be enforced because of an error in description, assessment, equalization, levy, or any other proceeding, the board of supervisors must be notified and a cancellation of the tax requested (Rev. & Tax. Code §§3438, 4946).

The board of supervisors shall order the assessor to place the uncollected taxes on the next roll, if the board determines that the tax should be enforced. The procedure for rescinding the cancellation is found in Revenue and Taxation Code sections 4946 et seq.

1522. PENALTIES AND COST
Any uncollected delinquent penalty, cost, redemption penalty or other charge that resulted from tax delinquency may be canceled, by either the tax collector or the auditor (Rev. & Tax. Code §4985.2).

For the tax collector or the auditor to cancel the above changes, he/she must find that the taxpayer failed to make a timely payment because of reasonable cause or circumstances over which the taxpayer had no control and that the taxpayer was not neglectful and did exercise reasonable care.

When exercising the power to waive penalties and/or costs, it is important to respond consistently to all requests. Requiring all requests for waivers to be made in writing can be helpful. The tax collector may keep a file or database for all requests, including the reason and whether or not the request was granted. Written documentation will enable the tax collector to demonstrate consistency and fairness in granting or not granting a waiver.

The delinquent penalty or cost may be canceled only under the following circumstances.

1) The principal payment is made no later than June 30 of the forth fiscal year following the fiscal year in which the tax became delinquent.

2) There is an inadvertent error in the amount of payment made by the taxpayer, provided the principal payment for the proper amount of the tax due is made within ten days after the notice of shortage is mailed by the tax collector (Rev. & Tax. Code §4985.2).

NOTE: Revenue and Taxation Code section 4985.2 does not apply where the assessee is making installment payments in accordance with Revenue and Taxation Code section 4837.5.

3) The cancellation is ordered by a local, state, or federal court.

NOTE: In a "joint interim policy statement on the payment of State and Local Real Taxes" dated July 12, 1990, the Federal Deposit Insurance Corporation (FDIC), and the Resolution Trust Corporation (RTC) stated that, in both their corporate and their receivership capacities, they "will neither pay, nor recognize liens for, any penalties, fines or similar claims imposed for the non-payment of taxes, whether arising before or after acquisition of the subject property" (Section 15, Federal Deposit Insurance Act, 12 U.S.C. 1825 (B)(3)).

1523. ASSESSMENT APPEAL
In the case of cancellations made to the roll pursuant to Revenue and Taxation Code section 1646.1, where a taxpayer has failed to pay an amount of tax computed upon assessed value that is the subject of a pending assessment appeal, the relief from penalties shall apply only to the difference between the county board's final determination of value and the value on the assessment roll for the fiscal year covered by the application. "County board" means either a county board of supervisors that meets as a county board of equalization or an assessment appeals board (Rev. & Tax. Code §4985.3).

The county board shall cause notice of the requirements of Revenue and Taxation Code section 4985.3 to be mailed to each taxpayer or to be presented to each taxpayer upon filing an application for assessment reduction with the county board, if that taxpayer will be impacted by the penalty (Rev. & Tax. Code §4985.3).

For any taxpayer who has paid at least 80 percent of the amount of tax finally determined due by the county board, within 60 days of mailing or presentation of the notice prescribed, the tax collector shall accept payment of the balance of the tax due without penalties or interest (Rev. & Tax. Code §4985.3).

This procedure shall apply only to those properties for which an application for assessment reduction is pending before the county board on the effective date of the act adding this section or for which an application for assessment reduction is filed with the county board after the effective date of the act adding this section (Rev. & Tax. Code §4985.3).

This procedure shall become operative only if the board of supervisors of a county, with the approval of the county's tax collector and the county's auditor, adopts a resolution or ordinance approving such procedure (Rev. & Tax. Code §4985.3).