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County Responsibilities Under “Tag & Tax Together” Chris McLaughlin Assistant Professor, UNC SOG 919.843.9167 September 2013.

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Presentation on theme: "County Responsibilities Under “Tag & Tax Together” Chris McLaughlin Assistant Professor, UNC SOG 919.843.9167 September 2013."— Presentation transcript:

1 County Responsibilities Under “Tag & Tax Together” Chris McLaughlin Assistant Professor, UNC SOG September 2013

2 2

3 Two Thorny County Issues Bankruptcy & Registration Blocks Gap Billing 3

4 Bankruptcy & Registration Blocks 4

5 Registration Blocks and the Automatic Stay Automatic stay arises immediately at filing 5

6 The Automatic Stay Bans “process, proceeding or action” against debtor for claim that arose before filing Creating a registration block (or refusing to remove a block) is definitely an “action” covered by automatic stay Which means... 6

7 The Automatic Stay May not block registrations for unpaid RMV taxes that arose before the taxpayer filed for bankruptcy. 7

8 Post-Petition RMV Taxes Automatic stay also bans any act to “obtain possession” or “exercise control” over debtor’s property for any claims (pre- or post-petition) 8

9 Post-Petition RMV Taxes Key question: is a registration block an act to exercise control over the debtor’s property? No!! MV registrations (and drivers’ licenses) considered privileges and not property Which means... 9

10 The Automatic Stay May block registrations for RMV taxes that arose after the taxpayer filed for bankruptcy. 10

11 The Automatic Stay When does RMV tax arise for bankruptcy purposes? –Existing registration expires –New registration applied for 11

12 The Automatic Stay The good news: Under Tag & Tax Together, unpaid RMV taxes will usually be post-petition. DMV may require payment of RMV taxes. 12 Registration Expires Bankruptcy Petition Filed Registration Renewed

13 When are unpaid RMV taxes pre-petition? Two situations in which unpaid RMV taxes will be pre-petition and therefore not subject to registration block: 13

14 When are unpaid RMV taxes pre-petition? Bankruptcy filing after registration expires but before renewal 14 Registration Expires Bankruptcy Petition Filed Registration Renewed

15 When are unpaid RMV taxes pre-petition? Bankruptcy filing after obtaining limited registration on new vehicle but before obtaining regular (full-year) registration 15 Limited Registration Issued Bankruptcy Petition Filed Full Registration Issued

16 The Bottom Line on Blocks Permitted for post-petition taxes: –Registration expires or taxpayer applies for new registration after bankruptcy filing Not permitted for unpaid pre-petition taxes: –2 limited situations 16

17 Example 1 Billy files for bankruptcy on September 1, Billy Blue Devil’s registration expires Oct. 31, Billy renews his registration on Nov. 20, DMV requires payment of property taxes on vehicle. 17

18 Did the DMV violate the automatic stay by requiring Billy to pay the 2013 taxes on his vehicle? 18

19 Example 2 Tina Tar Heel’s registration expires Oct. 31, Tina files for bankruptcy on Nov. 2, Tina renews her registration on Nov. 10, DMV requires payment of property taxes on vehicle. 19

20 Did the DMV violate the automatic stay by requiring Tina to pay the 2013 taxes on her vehicle? 20

21 Example 3 Susie Seahawk buys a new car on Oct. 31, She obtains a limited registration. Susie files for bankruptcy on Nov. 5, Susie applies for a full registration on Dec. 10, DMV requires payment of property taxes on vehicle. 21

22 Did the DMV violate the automatic stay by requiring Susie to pay the 2013 taxes on her vehicle? 22

23 Example 4 Wanda Wolfpack files for bankruptcy on October 20, Wanda’s registration expires on Oct 31, Wanda renews her registration on Nov. 5, DMV requires payment of property taxes on vehicle. 23

24 Did the DMV violate the automatic stay by requiring Wanda to pay the 2013 taxes on her vehicle? 24

25 The Process How will DMV know not to place block on taxpayer? Taxpayer must provide proof of bankruptcy filing to county County must inform DMV to flag accounts and to remove those flags after bankruptcy 25

26 Bankruptcy and Registration Blocks 26

27 Gap Billing DMV collecting taxes on registered motor vehicles County obligation to bill and collect property taxes on unregistered motor vehicles 27

28 Gap Billing Who is responsible for property tax collection when a vehicle moves back and forth between registered and unregistered status? Late Renewals 28

29 Key Issue: Did Tax Year Change? Tax year tied to registration year When registration and tax years change, there will be a gap during which vehicle was unregistered 29

30 Key Issue: Did Tax Year Change? 30 Registration Expires Gap Billing New Registration Issued

31 Key Issue: Did Tax Year Change? DMV will change registration year: 1.Vehicle not drivable 2.More than 12 months since expiration 31

32 Key Issue: Did Tax Year Change? 32 Registration Expires Gap Billing New Registration Issued

33 Gap Bills: GS (a1) Prorated for # months unregistered –Unregistered 4 months, pay 1/3 of full year tax Due & Delinquent 1st day of 2nd month after bill prepared –Bill prepared in November, due January 1 Interest at 5% first month, then.75%/month 33

34 Gap Bills: GS (a1) Collection remedies same as those for “regular” personal property bills: –Attachment/Garnishment –Levy –Foreclosure if taxpayer owns RP –No registration blocks 34

35 How Will You Know You Need to Create a Gap Bill? VTS report shows RMVs with new registration (and tax) years 35

36 Draft of Ptax Bulletin #165 Example 1: Billy Blue Devil –No change in tax year, car always registered –No need for gap bill 36

37 Draft of Ptax Bulletin #165 Example 2: Wanda Wolfpack –Tax year changed due to car not drivable –Gap bill for 8 months 37

38 Draft of Ptax Bulletin #165 Example 3: Tina Tarheel –Tax year changed; > 12 months since expiration –Gap bill for 24 months 38

39 Discovery Bills? Current GS calls for discovery bill if car unregistered for an entire fiscal year (July to June) Too complicated! –2 bills (discovery & gap) –Different values, tax rates due dates, interest Will change statute to require only gap bill 39

40 Gap Billing 40


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