After days of back and forth ahead of the April 10 property tax deadline, Orange County officials are now saying people impacted financially by the coronavirus pandemic will have to roll the dice on whether they’ll pay late fees.
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Other counties have given their residents more certainty, with San Bernardino County saying it will waive late fees for all owner-occupied homes and a large majority of small businesses. State law gives each county tax collector the power to waive late fees to people who show they can’t pay due to “reasons outside [the] taxpayer’s control.”
Orange County is taking a different approach.
Last week, Treasurer-Tax Collector Shari Freidenrich said she would not waive late penalties for taxpayers who are impacted financially by COVID-19 pandemic, citing advice from county lawyers.
On Monday, she changed course and opened the door to waiving late fees in certain income loss scenarios, which she declined to define specifically.
In a news release Monday, Freidenrich said taxpayers with “significant demonstrated economic hardship” could ask for a late fee waiver by submitting a form with proof. She said the law requires that taxpayers wait until after the deadline, then request the waiver when paying late, and then find out if there will be late fees.
Freidenrich wouldn’t say what kind of economic impact would qualify for the waivers, such as a business closure required by statewide health orders.
“After April 10, if the taxpayer is a homeowner, small business or other property owner with significant demonstrated economic hardship due to COVID-19 or believe that they qualify for one of the other limited exceptions and can’t pay by April 10, then as soon as the taxpayer is able to pay, they should request a Penalty Cancellation. All requests will be reviewed on a case-by-case basis,” Freidenich’s office said in the news release.
“I understand and sympathize with the financial impacts that COVID-19 may have had on our taxpayers,” Freidenrich said in the release.
“I also understand that the upcoming property tax payment may be one of the largest single expenditures that taxpayers make each year,” she said, adding, “Property taxes fund critical local government services, including those services needed during this emergency, and we encourage taxpayers to pay by April 10 if they can.”
In a response Monday to Voice of OC’s questions, Freidenrich declined to say if she would grant waivers to businesses that she believes have demonstrated they have been shut down by the broad government health orders to combat COVID-19. She instead provided an overall analysis of how she said she would make her decisions.
“We will be reviewing each penalty cancellation request on a case-by-case basis as previously indicated,” Freidenrich wrote.
“My responsibility, as the Treasurer-Tax Collector, is to verify that the taxpayer seeking cancellation of penalties meets the requirements of [state law], and that means that the taxpayer’s failure to make a timely payment of property taxes must be shown to be due to reasonable cause and circumstances beyond the taxpayer’s control, and that the failure to make the timely tax payment occurred notwithstanding the exercise of ordinary care, and in the absence of willful neglect,” she added.
“However, my office will deny a request to cancel a penalty when the taxpayer had the ability to pay his or her property taxes, but chose not to do so, or when the circumstances suggest that the taxpayer failed to exercise ordinary care.”
It was the latest twist in the county’s back-and-forth over late fees, and came on the heels of a Voice of OC article Friday about how Orange County was taking a more restrictive stance on late fee waivers than other counties and state legislators, who have urged a broad relaxing of property tax deadlines for people financially impacted by the crisis.
Among the concern from state and local officials has been that a patchwork of different county-by-county approaches would lead to individual property owners facing different treatment across the different counties where they own property.
Behind Freidenrich’s more restrictive views are fears among OC officials that the county will take a financial hit from property owners who can pay their taxes will find a way out through a waiver.
However, she and other officials have pointed to no evidence that people would improperly take advantage of the waivers. And Freidenrich has discretion on which waivers to grant after reviewing the documents submitted as proof.
Public health shutdowns from the ongoing coronavirus pandemic have triggered mass job losses nationwide on a scale and speed not seen since the Great Depression. At least 10 million Americans have filed for unemployment benefits in recent weeks, far eclipsing previous records. Businesses and families across OC and the state have been losing work and income.
At the same time, Orange County officials have privately expressed deeply concerns that if too many people don’t pay their property taxes on time, it will starve local governments of the resources needed to fight the COVID-19 pandemic and provide a safety net for vulnerable members of the public.
So far, property taxes revenues have been coming in ahead of normal in Orange County, according to Freidenrich and other county officials.
County officials across California have been trying to strike a balance where people who can pay property taxes are still required to pay by the April 10 deadline, while helping those whose income has been decimated by the pandemic, including governor’s orders that have closed many non-essential businesses. Property taxes are the main revenue stream for the county and other local governments that are responding to the ongoing pandemic.
Different counties have been handling the waivers in different ways. In nearby San Bernardino County, for example, officials have said late fee waivers will be granted until June 30 for all owner-occupied homes and a large majority of small businesses. OC last week took a harder line.
In late March, Freidenrich said she would waive late fees for taxpayers who can’t pay on time due to “reasonable cause and circumstances beyond their control,” after they submit a form and documentation that they’ve been impacted by the pandemic.
Then, last week, when Voice of OC asked for more clarity, Freidenrich said the county’s attorneys had advised she could not issue waivers for financial hardships due to COVID-19, including loss of income due to the widespread forced closure of businesses.
The resulting article on Friday noted her position was at odds with the state legislature and other counties, which have urged a broad relaxing of property tax deadlines for people financially impacted by the crisis.
It sparked a flurry of questions and pushback against OC from the public and legislators, and a series of internal county discussions over the weekend that resulted in Monday’s announcement.
OC’s position last week was more restrictive than other counties.
“This emergency calls for government’s best efforts at all levels,” said Ensen Mason, San Bernardino County’s tax collector, in a news release in late March.
“I plan to grant waivers on penalties for property owners with qualified real property and qualified small businesses to help them through these extremely difficult economic times as far as the law allows, which is June 30,” he added.
Freidenrich’s position also stood in contrast with the broad relief from property tax late fees called for state legislators and other counties.
“As you know, the Governor recently issued a ‘stay at home’ order to protect the health and wellbeing of all Californians. Individuals and business owners are dealing with an unprecedented disruption to their daily lives and many are already experiencing financial hardship,” wrote the chairs of the state Assembly committees on budget and taxation, in a March 20 letter to county tax collectors’ statewide association.
“Taxpayers who are unable to pay their property taxes by April 10th because of the COVID-19 pandemic should be granted every form of relief available.”
In their March 20 letter, the Assembly chairs said they planned to introduce emergency legislation to “retroactively waive interest and penalties for homeowners and other taxpayers adversely impacted by this pandemic.”
A coalition of local government associations then urged the state not to change the law, saying each county tax collector already has the authority to waive late penalties for people affected by COVID-19.
With that assurance that relief would be granted, state legislators then backed off efforts to change the law. But Freidenrich’s position against financial hardship relief, which was first brought to light by Voice of OC, then triggered internal concerns among legislators.
Now, the chairwoman of the OC Board of Supervisors, Michelle Steel, is calling for Gov. Gavin Newsom to postpone the April 10 property tax deadline altogether.
“The federal, state and county government has done a lot to help small business owners and other taxpayers, but homeowners also need help, and the prudent thing to do is postpone the April 10th deadline,” said a news release Monday from Steel’s election campaign.
On Thursday, Newsom said counties have said they expect the state to backfill any financial losses if the state does move to more broadly require waiving late penalty waivers for property taxes.
“We’re working with the counties. They’re very anxious, as I said, in this space. And we’re seeing if there’s ways to soften this,” Newsom said at his news conference.
“This is a conversation in real time. But, again, the purpose of full transparency, they were very clear – the assessors and the county officers – about their hope and expectation. But I am carrying that weight, as governor for the state of California, to answer the question to you and the millions of homeowners in this state, that are feeling that anxiety coming up on April 10th. And we’re gonna see what our options are, and see what we can do to help in this moment. But I don’t want to over-promise in this space.”
Nick Gerda covers county government for Voice of OC. You can contact him at ngerda@voiceofoc.org.