Property tax deadline looming, but extension for pandemic unlikely
photo by: Chris Conde
The coronavirus pandemic has delayed much, but it appears it won’t delay the property tax collector.
Home and business owners ought to be prepared to meet the quickly approaching May 10 deadline for property tax payments, as state and local officials told the Journal-World they were not considering delaying the deadline date. The decision to keep the deadline unchanged has some local governments that rely heavily on property taxes breathing a sigh of relief, but has some property owners — particularly businesses that have seen their operations greatly curtailed by public health orders — nervous.
Some also have questions about why the state has pushed back other important deadlines because of the pandemic — the income tax deadline was delayed from April 15 to July 15 — but not this one.
Judy Paley, who owns several buildings downtown that she rents out to businesses, said the impending deadline is a “nightmare” that is piling up on other expenses.
“It’s just such a quagmire right now,” Paley said.
Conversely, the revenue created through those property taxes is still much needed to keep important entities operating, such as the Lawrence school district. Kathy Johnson, executive director of finance for the school district, said the district is relying on the incoming property taxes so it can finish paying its current budget and close out its fiscal year at the end of June. But if the taxes aren’t collected on schedule, it may not be able to do that.
“This would cause significant cash flow problems if delays were to occur,” Johnson said in an email.
Plus, there seems to be one other problem with delaying the property tax deadline. No one can quite seem to agree who has the authority to do it. County officials collect the tax, but they say the state establishes the date, and thus the state would have to change the law. But the state’s tax collection office indicated such delays should be a local decision.
The question may largely be theoretical this year, as neither state nor local officials expressed much support for a delay when interviewed by the Journal-World.
No deadline delay
In Kansas, property taxes are often collected by the county governments and then transferred to each corresponding taxing entity the revenue belongs to. Douglas County collects property taxes for 45 entities in the area, including the cities of Lawrence, Eudora and Baldwin City; the area school districts; multiple townships; and many other smaller government entities like cemetery boards and drainage districts.
County Administrator Sarah Plinsky said Douglas County tax bills were sent out earlier this month and the due date for the second-half payment of 2020 taxes is May 10. The first half of the taxes were due in December. But the county did not consider delaying the May 10 deadline because it does not believe it has the authority to do so on its own, she said. She also said Douglas County is not aware of any other Kansas counties extending their property tax deadlines.
“The tax calendar is set by Kansas Statute and Douglas County is unable to unilaterally change property tax structure or payments in general,” she said in a written statement emailed to the Journal-World.
Plinsky noted the property taxes are used for many services, such as feeding the community, providing assistance to vulnerable populations and ensuring public safety, among many other services.
“Local government is working diligently to provide critical services to support our citizens during this extraordinary time,” she said.
The state government does not appear to be considering such a move either. Zach Fletcher, a spokesman for the Kansas Department of Revenue, said the state believes delaying property tax deadlines is more of a local government decision and Gov. Laura Kelly also does not have the unilateral authority to delay the payment deadline.
“Property taxes collected at the local and county level help fund critical functions like public safety and schools,” Fletcher said via email. “The governor cannot unilaterally change property tax structures or payments in general, and would not be inclined to cut critical funding sources during a prolonged public health emergency.
“The question as to whether there will be a property tax extension is up to local or county governments,” he added.
Some of Paley’s properties in downtown Lawrence are rented out to restaurants, she said. Those businesses are some of the hardest hit by the stay-at-home orders, which have disrupted their operations.
With lower revenues coming in for those businesses, they cannot pay their full rents to Paley. That then leads to Paley being unable to pay her mortgage for those properties or the taxes they are required to pay by May 10.
“It’s going to be difficult to meet the deadline,” she said. “But what’s more worrisome is going forward I still have greatly reduced rental income; how does someone who owns property pay all the other bills?”
In Kansas, business properties are taxed at a higher rate than residential properties. A resident’s home is taxed on 11.5% of its value, while commercial and industrial properties are taxed on 25% of their value, according to the City of Lawrence’s website. Owning several rental properties leads to the amount of taxes growing quickly.
“I don’t think people understand it’s a business like everything else,” she said of her rental properties. “It’s all difficult.”
Joe Flannery, president of Weaver’s Department Store in downtown Lawrence, said the store is also feeling the pinch. He pointed to the state’s decision to push back the deadline for Kansas residents to file their personal income taxes, and wondered why the same could not be done for property taxes. Income taxes are normally required to be filed by April 15, but the state and the IRS pushed the date back to July 15.
“Real estate taxes are one of the largest expenses for individuals and businesses,” Flannery said. “It seems to me that if the state of Kansas defers the income tax deadline, they could extend the real estate tax deadline until the state opens back up.”
However, Paley said she understands the revenue from property taxes is needed to fund important services throughout the community.
“I shouldn’t whine,” she said, later adding, “When we all start getting depressed, we have to realize everyone is in the same boat.”
Property taxes paid in Douglas County provide funding for local services, like the sheriff’s department, the fire departments and so on. But even school districts, which get a large chunk of their funding from the state government, also rely on residents and businesses paying their property taxes.
Johnson said the May 10 property tax collection date is important for school districts across Kansas because it helps fund the expenses of their current fiscal year. She said the state sends funding allotments to all schools on June 5, and 35% of the funding Lawrence receives during that month comes from property taxes.
If the property tax deadline were pushed back, the state would likely need to push back when it provided its June allotments to schools or provide a smaller amount of aid. But Johnson said the school districts rely on that funding to pay for June expenditures — which is the last month of the school districts’ fiscal year — and a delay from the state would cause problems.
“If the tax payments are delayed and that dominoes to our June tax distribution being received after June 30, we will have 35% less tax revenues to close out the current budget year end (on) June 30,” Johnson said via email.
Additionally, the state government is also experiencing a sharp decline of revenue because of the economic downturn during the pandemic. On April 20, Gov. Kelly announced the state cut its tax revenue projections over the next 15 months by $1.37 billion, which would leave the state with a $653 million budget shortfall by June 2021.
To make up for the shortfall, cuts to the state budget will be needed. In the meantime, Johnson said school districts expect to receive their funding without cuts.
“The change in the state’s revenue forecast is concerning,” Johnson said. “At this time, the Kansas State Department of Education has directed school districts to plan for funding of budgets as is outlined in current law.”
What happens when property taxes aren’t paid
The property tax issue doesn’t just impact businesses. Homeowners also pay a property tax.
Many homeowners who have a mortgage pay their property taxes to their banks, a little bit each month, as part of their monthly payment. So a delay in the May 10 deadline may not benefit those homeowners much. But, homeowners who don’t have a mortgage will have to make the May 10 payment, unless they paid their taxes in full in December. Missing the payment can have serious consequences, including eventually losing the home. However, state law does provide quite a bit of protection and time before the county could take that sort of action.
Interest, though, will pile up on unpaid taxes. Plinsky said state law outlines that properties with less than $10,000 of taxes are subject to a 10% annual interest rate and properties with more than $10,000 of taxes are subject to a 15% annual interest rate. Those rates are broken down by the day, so if a resident is delinquent on taxes for 10 days after the deadline, they would only be subjected to the 10 days of delinquency, rather than the whole month, she said.
Eventually, the county has the right to seize a property that is delinquent and sell it to recoup the unpaid taxes. But state laws also provide a certain timeline on when that can happen. For a home, the county cannot sell the property to recoup taxes until the property’s taxes are delinquent for at least three years, said County Treasurer Paula Gilchrist. Then the county must go through a court process to make sure it can sell the property in a tax sale.
That can take quite some time, as the county’s most recent tax sale in the fall occurred about six years after its previous one. Additionally, property owners can pay their back taxes and prevent the county from selling their property up to the moment of the sale, Gilchrist said.
Although property tax deadlines will likely not be extended, Kansas has pushed back some deadlines, including important dates for drivers.
Zach Fletcher, a spokesman for the state’s Department of Revenue, said the deadlines for renewing driver’s licenses and motor vehicle registrations have both been extended.
He said drivers whose licenses and vehicle registrations expire during the state’s emergency declaration for the pandemic will have 60 days after the state lifts the declaration to renew them.
The state also extended temporary car tags for Kansas residents who purchased a vehicle on or after Jan. 1 and are operating it with a valid 60-day permit. Those drivers may continue to use that 60-day tag while the order is in effect, he said.
Although Douglas County offices are mostly closed to the public, residents can still renew their vehicle registration during the pandemic. According to the Douglas County website, there are three options:
• Online at ikan.ks.gov
• Through mailing to P.O. Box 884, Lawrence, KS 66044
• Placing it in the drop box in the south parking lot of the Douglas County Courthouse, 1100 Massachusetts Street, or at the east end of the parking lot at 2000 West 31st St.
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