School taxpayers could see relief
Local state Senators Michele Brooks and Scott Hutchinson are in favor of legislation that would allow individual school districts the option to extend their property tax discount periods and their base periods, as well as remove penalties for payments through June 30, 2021, in response to the COVID-19 pandemic.
Senate Bill 1125, sponsored by Sen. Scott Martin, R-Lancaster County, unanimously passed the state Senate recently and is now awaiting approval in the state House of Representatives. It was referred to the House Finance Committee on Monday.
“Millions of Pennsylvanians are still out of work due to Governor Wolf’s shutdown orders, and hundreds of thousands of them haven’t been able to access unemployment benefits because of flaws in the system. It has never been more important to offer assistance and flexibility for taxpayers,” Martin said. “It is encouraging to see this bill moving forward to give school boards the ability to offer a helping hand to those who need it most.”
The bill mirrors a law that Martin authored in April that allows counties and municipalities to provide property tax relief to taxpayers affected by the COVID-19 pandemic. The law gives county and municipal governments the option to extend deadlines for property tax discount rates to any date up until August 31, and waive any fee or penalty for late payments of property taxes if paid in full by the end of the year.
The legislation amends section 10 of the Local Tax Collection Law (relating to discounts; penalties; notice) such that for the school year that begins July 1, 2020, the board of directors of a school district may by majority vote, by resolution, extend the time period that qualifies taxpayers for a discount or waive a penalty for failure to make timely payment of any such taxes charged against them, or both.
If a board of school directors of a school district adopts such resolution, the school board shall immediately deliver the resolution to the tax collector via mail or electronic mail, and the tax collector shall, in consultation with the board of school directors, modify the contents of the late payment notice required under the Local Tax Collection Law accordingly and may send an additional notice explaining the provisions of such resolution.
The Independent Fiscal Office’s latest School District Property Tax Forecast from February projects that 2020-21 current-year school district property tax revenues to be $14.745 billion. If all school district property taxpayers benefited from a two percent discount period, the value of the discount would be $300 million a year. A financial analysis of Martin’s legislation shows that to the extent Senate Bill 1125 extends the discount period for the 2020-21 school year, some portion of the $300 million that might typically fall out of the existing discount period and be owed by taxpayers may be foregone by school districts that opt to extend it.
Under existing law, taxpayers who fail to make payment of property taxes for four months after the date of the tax notice are charged a penalty of up to 10% percent of the taxes owed. According to the IFO’s School District Property Tax Forecast, school year 2020-21 delinquent taxes are projected to be $582 million. Assuming these delinquent collections are subject to a maximum 10% penalty, revenue collections from penalties would be approximately $58 million annually. To the extent school districts opt to waive penalties for the 2020-21 school year, up to $58 million of school district revenue may be foregone.