2400-2408 Delinquent Payment Enforcement: Property Seizure and Sale

2400. PURPOSE AND EFFECT
Physical seizure of property allows for the immediate possession of property. Prior to seizure and as soon after delinquency as possible, record a certificate of tax lien. The filing of a certificate of tax lien for delinquent taxes constitutes a lien on all personal and real property belonging to the assessee at the time of seizure and acquired thereafter. Once the asset has been seized by the tax collector, the property cannot be sold by the assessee until the taxes are paid.

NOTE: The certificate of lien is not valid for personal property against a bona fide purchaser for value without specific knowledge of the lien.

Seizure will usually provide immediate payment on businesses and boats ahead of other creditors. However, tax bills that are more than one year delinquent may lose their priority status in subsequent bankruptcy cases.

The seizure and sale process can be done in a short period of time and is a much faster process than enforcement trough a writ of execution. Seizure avoids the posting of costs with the sheriff or marshal where such posting is required. Seizure also avoids judicial deductions and litigation over possible defenses permitted by executions of judgments. No prior judgment or lien is required.

Property owners are entitled to an administrative hearing prior to sale; however, any necessary administrative hearing can be relatively informal.

2401. PRE-SEIZURE REVIEW
Determine whether the assessee is in bankruptcy. If so, suspend further collection activity, except for ABC liquor license holds. Flag the account for monthly review and file a claim with the bankruptcy court.

The following steps should be taken prior to actually seizing the property.

1) Check with the California Secretary of State for UCC liens and with the recorder's records for other liens.

2) Use records of previous years' processed checks to determine if a bank account can be located.

3) Search for other assets/holdings. Sources to accomplish this include:

a. Property statement filed with the assessor, with the assessor's permission;

b. DMV or FAA records; and

c. Field inspection.

2402. SEIZURE PRIOR TO TAX DELINQUENCY
The tax collector may initiate seizure and sale action prior to the delinquency date (normally August 31) by filing a written declaration, made under penalty of perjury, with the clerk of the board of supervisors. The declaration must set forth the grounds and necessity for seizure (Rev. & Tax. Code §2953). See form SCO 2-05. The tax collector must deliver a copy of the declaration to the assessee at the time of seizure.

EXCEPTION: If any property has been assessed on the unsecured roll and advertised for sale pursuant to California Uniform Commercial Code sections 6101-6107, inclusive, or advertised to be sold at public auction, or seized for prior-year delinquent taxes, it may be seized by the tax collector prior to delinquency without filing a declaration with the clerk of the board of supervisors (Rev. & Tax. Code §2953.1).

The tax collector should have justifiable reasons for determining that seizure and sale prior to the date of delinquency are necessary. It must be clear that the prospect of collecting the tax is in jeopardy.

Examples of suitable reasons for seizure prior to delinquency include:

1) The taxpayer’s financial condition;

2) The taxpayer’s attempt to conceal, dispose of, or ruin the property;

3) The assessee's attempt to remove the property from the county; and

4) The assessee's obvious pending loss of income (i.e., jail sentence, seasonal work, etc.).

2403. FILING OF DECLARATION
This section was deleted on January 1, 2005.

2404. EXCEPTIONS TO FILING OF DECLARATION
This section was deleted on January 1, 2005.

2405. DECLARATION DELIVERED TO THE ASSESSEE
This section was deleted on January 1, 2005.

2406. SEIZURE
Once the declaration of seizure has been delivered to the assessee, the tax collector should provide a copy to any other person who may be in possession of the property to be seized. No notice is statutorily required; however, a reasonable effort should be made to notify the assessee to provide opportunities for payment prior to the sale.

If it is necessary to safeguard seized property, it should be put in the custody of a keeper. The keeper holds the property until relieved from that duty. A record should be kept of all property seized (Rev. & Tax. Code §2952). Form SCO 2-07 is recommended.

A seized business in operation should be allowed to continue to operate, with merchandise and money available for operation. If the assessee does not pay the taxes and fees shortly after a business seizure, the keeper should remove all cash not necessary to operate the business, as partial payment of taxes and fees.

As a precautionary measure against incurring liability for damages, any vehicle that is seized should be towed by a professional towing service rather than moved under its own power. Local law enforcement officials should be contacted before a vehicle is towed.

Other property available for seizure can include the assessee's bank account, rents, accounts receivable, etc., property that is often in the possession of third parties (M-2401).

NOTE: Two witnesses should be present when seizure is made.

2407. RECORD OF SEIZURE AND SALE
A record must be kept of property seized and sold (Rev. & Tax. Code §2952). Form SCO 2-06 is recommended (M-9911).

 

2408. PROTESTING PRE-DELINQUENCY SEIZURE
In the case of a pre-delinquency seizure, the assessee may challenge the seizure by filing a petition in the superior court. To obtain release of the property from custody by the county, the assessee must file a bond sufficient to pay the taxes, fees and charges incurred by the tax collector in seizing the asset (Rev. & Tax. Code §2954).

If the assessee's challenge prevails, he/she is entitled to recover from the county all costs, including attorney fees incurred by virtue of the seizure and subsequent actions; in such an instance, the county bears all costs of seizure and any fees and expenses of keeping the property (Rev. & Tax. Code §2955).

The courts usually give a speedy hearing when seizure of property is challenged by an assessee (Rev. & Tax. Code §2956).

Although there is no period set in law for protesting seizure, such action would of necessity fall within, or before, the minimum seven-day framework that is imposed by the publication/posting statute before a sale can be conducted (M-2420).