Mayor Kenney today announced the launch of a feasibility study of business tax delinquency sales.
The Mayor was joined in the announcement by City Councilman-at-large Allan Domb, a longtime advocate of debt sales to recoup delinquent tax dollars.
“A tax debt sale can be a vital tool in the City’s effort to bring in delinquent tax dollars,” said Mayor Kenney. “And I appreciate Councilman Domb’s leadership in this area.”
The feasibility study will focus delinquencies of the Business Income and Receipts Tax (BIRT). The City currently has effective tools in place to recapture recent debts of companies still in operation, including the use of collection agencies and the ability to close non-compliant businesses. The feasibility study will examine Councilman Domb’s proposal to sell older BIRT debts to a third party.
“I campaigned on the promise to help reign in the city’s tax delinquency, and I appreciate the mayor’s willingness to give these proposals serious examination,” said Councilman Domb. “A sale of business tax debts, I believe, will prove to be an effective tool in making businesses compliant.”
The Law Department is currently reviewing all relevant state and local law to determine if there are any restrictions on the City’s ability to sell these debts. Once the legality of this approach is confirmed, the feasibility study will assess the operational requirements and costs associated with selling these debts and potential revenues that would be generated. The overall collections and cost per dollar collected will be compared against existing strategies. This phase of the assessment will require analysis by outside specialists to value the debt; as well as internal review of the administrative requirements.
The mayor’s announcement comes as the Revenue Department continues its collaboration with Councilman Domb and the National Tax Lien Association on a separate feasibility study to expand and improve the City’s use of Real Estate Tax Lien sales to increase collections.
Two pilot sales of property tax liens were held in 2015, generating over $17 million in collections, primarily from owners who paid or entered into payment agreements to avoid the sale of liens on their property. More than 2,700 properties made payments, and 795 properties had their liens sold. The Revenue Department looks forward to understanding the feasibility of expanding this initiative.