COUNCIL REFORMS DELINQUENT TAX POLICY

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PHILADELPHIA, PA – Philadelphia moved a step closer to resolving its chronic tax delinquency problem, passing a pair of bills designed to encourage payments from delinquent taxpayers and bring Philadelphia’s revenue collection efforts up to contemporary standards.

Both measures seek to modify sections of Philadelphia City Code Title 19 and were co-sponsored by Council Majority Leader Curtis Jones, Jr. (D – 4th) and Councilman Bill Green (D – At Large) on behalf of the Nutter Administration.

“We want to encourage people to bring their accounts into compliance with the law and realize whatever revenue we can,” Councilman Green said. “If we give people a rational path to pay off what they owe and stop the meter running, they are far more likely to do so.”

The first measure, Bill 120822, passed Council unanimously on April 4. It establishes fixed and more reasonable interest and penalty rates for all delinquent taxes other than real estate taxes and clarifies the language covering limitations of actions to recover and assess taxes for the City and School District.

“We want to make it easier for people to work with us in good faith to pay off their delinquent tax liability,” Councilman Jones said. “This measures provide reasonable terms for taxpayers to encourage them to pay off their delinquent accounts.”

Prior to this some delinquent business tax accounts saw interest at levels close to 50% between penalties and interest. These astronomical bills created tax payer paralysis. “The exorbitant level of interest and penalties in Philadelphia has been a long-standing issue that our members wanted to see addressed on behalf of their clients,” said Cheryl Upham, Secretary and Chair-Elect of the Philadelphia Bar’s State and Local Tax Committee.

This bill establishes simpler and more reasonable rates applied to interest and penalties, rates that are in line with contemporary standards throughout the financial community and other municipalities.

The second, Bill 120823-AA, became law at today’s Council session. It applies all payments made on delinquent accounts first to the principal amount owed, replacing the current system which applies payments to interest, principal and fees on a pro rata basis. It will also require receipts of all transactions upon tax payer request starting in 2015.

The result will be payments going towards reducing the principal, encouraging and enabling tax payers to actually get out of their debts.

“This is an important change for taxpayers,” Councilman Jones said. “This measure stops the process of taxpayers making regular payments and never seeing their balance go down.”

The bill originally applied the principal-first payment scheme to Business Income and Receipts Taxes (BIRT) and the enacted bill was amended by Councilmen Green and Jones to also apply to delinquent real estate accounts.

“The tax professional community has been seeking these changes for decades, both the reduction of interest and penalties regarding delinquent accounts and the reversal of proration by having payments go to principal first“ said Frances Beckley Chief Counsel to the Philadelphia Revenue Department.

Written by: Richard Doran

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