Property tax collection remedies are not limited to the collection of property taxes.  This blog provides an overview of how local governments may collect other taxes and fees.  For more details, please see this bulletin.

Note that the collection rules described below are those established by generally applicable statutes; some jurisdictions may possess additional collection authority under local bills.

Attachment & Garnishment

Local governments may target bank accounts, wages and other funds owed to the taxpayer using the property tax attachment and garnishment remedy (GS 105-368) for any local tax thanks to the provisions of GS 153A-147 and GS 160A-207. This blanket authorization means attachment & garnishment is available to collect delinquent occupancy taxes, food & beverage taxes, and gross receipts taxes on the rental of vehicles and heavy equipment.

There is one exception to this broad rule.  Local governments have no collection remedies for taxes levied on registered motor vehicles.  See GS 105-330.4(c)(limiting use of Machinery Act remedies to taxes on unregistered motor vehicles).  Note that gap bills are taxes on periods for which vehicles are unregistered, meaning that Machinery Act remedies can be used for their collection.

Attachment & garnishment may also be used for any fees or costs charged by a local government that by statute may be collected in the same manner as property taxes.  These charges include solid waste fees billed with property taxes (GS 153A-293, GS 160A-314.1), special assessments (GS 153A, Art. 9 and 9A, GS 160A, Art. 10 and 10A), nuisance abatement costs (GS 153A-140, GS 160A-193), housing code enforcement costs (aka “demo liens”)(GS 160D-1125), and EMS/ambulance fees for those counties and municipalities covered by GS 44, Art. 9B.

It is important to remember that attachment & garnishment is not available for contractual fees charged by local governments for water and sewer service and other utilities.  The primary collection remedies for those fees are termination of services and litigation in state district courts.

Levy & Sale

The rules described above for the use of attachment & garnishment to collect other taxes and fees also apply to the use of the levy & sale remedy aimed at tangible personal property such as cars and boats (GS 105-367).   If attachment & garnishment can be used to collect a particular tax or fee, then the levy & sale remedy is also available. 

While the levy & sale remedy can be more difficult to employ because it requires the seizure and storage of personal property, local governments should not be shy about threatening to use it against recalcitrant debtors.  Simply raising the prospect of shutting  down a business to inventory its personal property for potential levy and sale may be enough to prompt payment.

Foreclosure

The forced sale of a debtor’s real property is available as a collection remedy only if the debt in question gives the local government a lien on that real property. 

No taxes other than property taxes provide for a lien on real property, which means that foreclosure is not an option for occupancy taxes, food & beverage taxes, or gross receipts taxes.

Foreclosure is an option for those fees and costs that provide for a lien on real property, including solid waste fees (if billed with property taxes), EMS/ambulance service fees, special assessments, nuisance abatement costs, and housing code enforcement costs.

Some of these liens must be filed with the clerk of superior court in order to be enforceable, including those for EMS/ambulance service fees and nuisance abatement fees imposed under the general ordinance enforcement authority provisions (GS 153A-123 and GS 160A-175).

Liens for “summary” nuisance abatement costs liens (GS 153A-140 and GS 160A-193) and for housing code enforcement costs (aka demo liens under GS 160D-1125) do not need to be filed in court or recorded with the registrar of deeds in order to be enforceable through foreclosure.  Regardless, I strongly recommend that local governments file or record all such liens so that potential purchasers of the properties subject to those liens are aware of them and cause them to be paid at closing.

Set-Off Debt Collection

This remedy, usually referred to as “debt set-off,” is available to any local government for any debt of $50 or more.  GS 105A  It may be used for all of the taxes and fees discussed above. The process involves submission of the debt to a clearinghouse that will then seek to recover the debt from state income tax refunds, lottery winnings, or other payments owed to the debtor by the state.  

Who Should Collect These Other Taxes and Fees?

State law does not answer this question, which means it is up to each local government to decide how these debts may be most effectively collected.  Many local governments assign their property tax collector responsibility for other taxes such occupancy taxes and gross receipts taxes because they can be collected using property tax remedies. The same is often true for non-taxes debts that are subject property tax collection remedies such as solid waste fees, special assessments, nuisance abatements costs, and housing code enforcement costs. But some local governments assign collection responsibility for these debts to their finance offices or other departments. 

Either approach can work, so long as the tax office and the other departments share information and collaborate when appropriate on collection efforts. For example, if a property owner owes both property taxes and nuisance abatement costs, any attachment & garnishment aimed at that owner should include both debts. 

Collaboration is even more important for foreclosures, because failure to include a lien in a foreclosure may render it unenforceable.  Before initiating a tax foreclosure, the tax collector should inquire about non-tax liens held by their local government on the property in question.

The collection question becomes more confusing when a municipality contracts with a county for the collection of the municipality’s property taxes.  The fact that a county agrees to collect a municipality’s property taxes does not automatically obligate the county to collect other debts owed to the municipality even if those debts can be collected using property tax remedies. If the municipality wants the county to collect other taxes, solid waste fees, special assessments, nuisance abatements, or demo liens, the contract between the two governments must explicitly create that obligation.  See this blog post for more on interlocal tax collection agreements.