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1540-1547 Cancellations: Acquisition by Public Entity

1540. NEGOTIATED PURCHASE
If property is acquired by a public entity through a negotiated purchase after the lien date but before July 1, the taxes for the fiscal year beginning July 1 shall be canceled (Rev. & Tax. Code §5085).

If the purchase is negotiated after July 1, the person who sells the property to the public entity is required to pay his/her pro rata share of the current taxes, penalties, and costs accruing from July 1 to the day before acquisition by the public entity, or the date of actual possession, whichever is earlier (Rev. & Tax. Code §5086).

The pro rata portion owing is transferred to the unsecured roll, and demand for payment is made upon the former owner. The public entity's pro rata portion remaining on the secured roll is canceled (M-1543).

If the amount of taxes or special assessment liens is unknown, the portion of the current taxes attributable to the period of the fiscal year that ends on the day before the date of apportionment shall be ascertained by the auditor, on a pro rata basis of the previous year's taxes, and paid to the tax collector. The auditor shall adjust the assessment roll and the tax charge accordingly (Rev. & Tax. Code §5086(c)).

NOTE: The board of supervisors may prescribe that any uncollected tax, penalty or cost subject to transfer from the secured roll or abstract pursuant to the provisions of Revenue and Taxation Code section 5090, and amounting to less than $20, shall be canceled rather than transferred to the unsecured roll (Rev. & Tax. Code §5089).

1541. EMINENT DOMAIN
The proportionate share of current and delinquent taxes, penalties and costs that have accrued against the property, prorated to but not including the date of possession by a public entity, shall be certified to the court by the tax collector (Code Civ. Proc. §1260.250).

The court will then enter an order that the amounts so certified should be paid to the tax collector from the award (Code Civ. Proc. §1260.250(b)(6)(e)). The portion of such taxes, penalties and costs pertaining to the part of the fiscal year that begins on the date of the property acquisition of the property by the public entity, shall be canceled (Rev. & Tax. Code §5086(b)).

NOTE: Revenue and Taxation Code section 4986 does not mention special assessments because, under California State Constitution, Article XIII, section 3, public agencies are not exempt from such assessments (Turlock Irrigation District v. Williams, 76 Cal. 360). Pre-existing special assessment liens against properties acquired by public agencies are not subject to outright cancellation (Redevelopment Agency of City of Fresno v. Penzer, 8 Cal. App. 3d 417 [87 Cal. Rptr. 183]).

1542. ALTERNATIVE
The board of supervisors may provide that all delinquent taxes, penalties and costs, and a pro rata share of current taxes, penalties and costs accrued while on the secured roll, computed in accordance with Article 5 (commencing with Rev. & Tax. Code §5081), shall be transferred to the unsecured roll and collected pursuant to Revenue and Taxation Code section 2921.5. Amounts transferred pursuant to Revenue and Taxation Code section 2921.5 shall continue to be subject to delinquent penalties until the amounts are paid, and they are collectible from either the person from whom the property was acquired or the public entity that acquired the property. If such transfer is made or has been made, the court will not make any award of taxes payable to the tax collector in the eminent domain proceedings (Rev. & Tax. Code §§5087-5088, 5090). Proration of current taxes shall be based upon the date specified in the Code of Civil Procedure section 1260.250(c)(3).

1543. PARTIAL ACQUISITION
If a public entity does not acquire title to the improvements and/or personal property, the full amount of tax due on either, or both, is transferred to the unsecured roll, unless the assessor determines that a remaining parcel provides sufficient security.

If only a part of the land in an assessment is taken, the former owner's pro rata share of taxes, penalties and costs on the portion taken is transferred to the unsecured roll. The remainder of the assessment should be canceled, since it is not a lien against the property not taken.

NOTE: Any tax, penalty or cost totaling less than $20 with respect to a given fiscal year shall be canceled rather than transferred to the unsecured roll (Rev. & Tax. Code §5089).

1544. ANNEXATION BY PUBLIC ENTITY
This section was deleted on January 1, 2001.

1545. FORECLOSURE BY PUBLIC ENTITY
According to federal law (15 U.S. Code, Ch. 14a, §646 and Internal Rev. Code §6323(b)), liens held by the Small Business Administration (SBA) or the Internal Revenue Service (IRS) are subordinate to a county's lien for property taxes. The priority of a county's property tax lien on real property survives foreclosure by the SBA and the IRS and can be enforced against the property after it is acquired by the SBA or the IRS (Rev. & Tax. Code §2192.1; see United States v. California-Plywood, 527 Fed. Rptr. 2d 687 (1975); Garcia v. County of Santa Clara, 87 Cal. App. 3d 319).

NOTE: This is not the change of ownership that empowers the county to transfer taxes to the unsecured roll (Rev. & Tax. Code §5090). Since the property is still subject to sale for delinquent taxes, the former assessee is not personally liable for secured taxes (M-1540 and M-1541).

1546. STRIPS AND ROADS
Strips, lots, or parcels identified on either a filed or a recorded subdivision map, record of survey map, etc., as streets or roads dedicated to public use are tax-exempt (Cal. Const., Art. XIII, §1) if they are:

1) Accepted by the board of supervisors; or

2) Accepted through prescription, i.e., long-continued public use.

An assessment of a public road can be canceled as illegal (Gaspard v. Edwin M. LeBaron, Inc., 107 Cal. App. 2d 356).

Any of the above assessments discovered by the tax collector should be brought to the assessor's attention.

1547. ASSESSMENT BOND FORECLOSURE
Taxes may be cancelled on property acquired after the lien date by a city through foreclosure under the Improvement Bond Act of 1915 or otherwise acquired in lieu of foreclosure by city council resolution (Rev. & Tax. Code §4986.3).

This does not apply if the property has become tax-defaulted property subject to the tax collector's power of sale prior to foreclosure. See annotations following Revenue and Taxation Code section 3712 regarding the effect of deeds from two agencies.