Advertising Tax Liens

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Chris McLaughlin

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It’s February, which means that tax lien advertising season is right around the corner.  Early this month tax collectors must report to their governing boards the delinquent taxes that are liens on real property.  Governing boards then issue orders to advertise those liens.  With this in mind, consider the following statements and determine which, if any, are true.

1.   Tax lien advertisements are mandatory only for counties that use the in rem foreclosure process.

2.   Tax liens may be advertised on a county’s web site in lieu of a newspaper ad.

3.   Tax liens must be advertised in the largest newspaper in the county.

4.   Roy Williams will win his third national championshionship this April and solidify his claim as the greatest basketball coach in the Triangle. 

Well, number 4 is obviously false—I’ll take Coach K’s 900+ wins over Roy and his missing 14 seconds in a heartbeat.  But what about the first three statements?

They’re false, too.  Read on for the details . . .

Advertising tax liens is mandatory for all local governments that levy property taxes.  GS 105-369 uses the terms “must” or “shall” more than a dozen times when describing the obligation to advertise delinquent taxes that are liens on real property.  Without question, the Machinery Act requires these advertsisements.   This requirement applies to counties as well as to cities that collect their own property taxes.

If a taxing unit fails to advertise tax liens, then . . . well, nothing much happens, really.  The only concrete consequence is that taxing units cannot proceed with in rem foreclosures if they do not advertise; GS 105-375 makes the advertisement the first step in the in rem foreclosure process.

But otherwise, the Machinery Act does not create negative repurcussions for the failure to advertise.  In fact, GS 105-369 explicitly states that the failure to satisfy the advertising and related notice requirements “does not affect the validity of the taxes or liens.” 

So, does this mean that so long as a local government does not plan to use the in rem foreclosure process it can simply ignore the advertising requirement?  Maybe. But I would not recommend this approach.

For one thing, the advertising process—especially the notice of the intent to advertise—does in fact motivate some delinquent taxpayers to cough up the cash they owe.   I see no reason to abandon a process that produces voluntary payment and might spare taxpayers from the embarrassment of wage garnishments and other invasive collection remedies.

For another, the Machinery Act does not require the local government to absorb the cost of the advertisements.  These costs are charged to the delinquent taxpayers who are advertised, meaning the taxing unit will recover most of what it spends on  this process.

Finally, from a public relations and ethical perspective I don’t think it is ever wise for a government to ignore a legal obligation even if no negative consequences will result.  Character is what we do when nobody is watching, right?

The county website can’t substitute for a local newspaper.  There’s no problem at all with local governments listing delinquent taxpayers on their websites. Heck, a county could rent one of those electronic billboards on route 40 to post lists of property tax scofflaws.  But it also need to print an ad in the newspaper.  GS 105-369 explicitly requires that the delinquent tax liens be published “in one or more newspapers having general circulation in the taxing unit.”   Bills have been introduced at the General Assembly to permit web advertising of tax liens in recent years, but none has become law.

“General circulation” does not mean “largest circulation.”   Great Southern Media, Inc. v. McDowell County, 304 N.C. 427 (1981), the only state court decision interpreting the advertising requirement, tells us that “general circulation” means having more than a de minimus number of paid subsribers in more than one section of the taxing unit.  

What qualifies as a de minimus number of subscribers? I think that requirement varies based on the size of the taxing unit.  In Great Southern Media, the court approved McDowell County’s use of a newspaper with fewer than 500 subscribers. I don’t think a county the size Wake or Mecklenburg could justify using a paper with only 500 subscribers. 

However, the court’s interpretation does not require taxing units to advertise in the newspaper with the largest circulation in the jurisdiction. This ruling gives taxing units some leverage  when negotiating advertising prices with newspapers: just because the one newspaper dominates the battle for local subscribers does not mean the county must choose that newspaper for the tax lien ad.  A smaller newspaper with a sprinkling of paid subscribers across the county is sufficient.

To sum it up, the requirements described in GS 105-369, in the Great Southern Media case, and in the general publication statute GS 1-597 prohibit taxing units from relying on:

–          newspapers with only a handful of subscribers;

–          newspapers with subscribers in only a certain portion of the taxing unit;

–          free newspapers;

–          Internet-only newspapers;

–          newspapers in existence for fewer than six months; and,

–          monthly newspapers. 

Advertise the record owners as of the delinquency date, January 6.  Tax offices should get updated deed information from their registers of deeds to ensure that the advertisements include the correct taxpayers for properties that changed hands since the listing date for 2011-2012 taxes.  All taxpayers owing delinquent taxes on real property should be advertised, except:

–          Taxpayers who are in pending bankruptcies; and,

–          Taxpayers who have appeals of their 2011-2012 tax assessments pending before the board of equalization and review or the Property Tax Commission.

For more details on the advertising process, check out chapter 9 of my new property tax collection book.

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