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2610-2612 Reporting and Distribution: Special Circumstances

2610. CALIFORNIA INTERAGENCY OFFSET PROGRAM
When a judgment has been recorded for delinquent unsecured property taxes, the State Controller may offset, from a potential state refund to the taxpayer, any amount that the person owes a county for delinquent taxes.

NOTE: This procedure cannot be used if an automatic stay in a bankruptcy proceeding is in effect.

The Controller deducts and retains from any amount offset in favor of a county an amount sufficient to reimburse the Controller and the Franchise Tax Board for the administrative costs of processing the offset payment (Gov. Code §12419.8).

Upon the tax collector's request for taxpayer identification numbers required by the Controller's procedures, the assessor shall immediately notify the appropriate assessee, by registered or certified mail, that the request has been made for the purpose of intercepting refunds from the state government due the taxpayer, in order to offset the delinquent property tax obligation.

The letter shall state that, if the assessee does not pay the outstanding tax amount to the tax collector within 20 days, the assessor will provide the required taxpayer identification number to the tax collector.

The assessor shall not be named in any action that may be brought as a result of compliance with this provision (Gov. Code §12419.8).

2611. IN-LIEU TAXES PAID BY PUBLIC RETIREMENT SYSTEMS 
Government Code section 7510 requires public retirement systems to reimburse cities and counties in an amount equal to the difference between the taxes that would have accrued and the taxes due for possessory interests in the acquired property, for revenue loss resulting from their acquisition of real property. If a public retirement system acquires property within its boundaries--for example, if PERS or the State Teachers' Retirement System purchases real property anywhere in California-- this property is exempt from taxation except for private possessory interests.

Government Code section 7510 does not apply to local public retirement systems that are already authorized by statute or ordinance to invest in real property.

The difference between the current market value tax and the possessory interest tax is paid as an annual in-lieu fee. The county is thereby guaranteed that the acquisition of real property within the county by a public retirement system will not cause a decline in tax revenue below the level that would have prevailed had the acquiring person or entity been taxable.

If the public retirement system acquires real property outside its boundaries, the property will not be removed from the local secured assessment roll.

The law is unclear as to billing and collection techniques and includes no delinquency provisions. Presumably, the in-lieu fee is computed and billed by the auditor once the assessment has been made. Should no payment be received, apparently the county's only recourse is court action. See State Board of Equalization Letter No. 83-3 for more information.

2612. CALIFORNIA DEPARTMENT OF TRANSPORTATION (CalTrans) - POSSESSORY INTEREST
For some years, CalTrans has been required to pay rent to counties in compensation for property tax revenues lost on lands held for future highway needs. Twenty-four percent of rental revenues received by the state on such lands has been paid to the counties.

In 1983, the Legislature amended Streets and Highways Code section 104.13 of Division 1, Article 3. This statute requires CalTrans to pay possessory interest taxes to each county for leased (rental) property held for future highway needs. Formerly, the county billed individual lessees for possessory interest taxes. Now, each bill is transmitted directly to CalTrans. The department must collect enough extra "rent" from each lessee to cover the tax. The rental agreement between CalTrans and the holder of the possessory interest created by the lease must state that the department will pay all possessory interest taxes arising from the lease and that the rent charged reflects such extra cost.

CalTrans returns bill payment stubs to assist in reconciling the accounts. The 24-percent in-lieu reimbursement is calculated on gross revenue collected from leases before deduction of administrative expenses.

The tax collector should flag possessory interest assessments subject to Streets and Highways Code section 104.13 so they will not become subject to regular lien-perfection techniques. Perhaps the best way to handle such accounts is as manual exceptions to the computerized system. Although no special distribution of these possessory interest revenues is required, delinquency charges should not be applied nor should the revenues be shown as reducing delinquent charges. Therefore, it seems desirable to establish a separate subaccount for these possessory interest tax billings.

Note that a provision of Streets and Highways Code section 104.13 instructs CalTrans to make payment to the county "not later than the first day of November following the close of any fiscal year."