Tax Collection Options under RETSL and MCTLA
Pennsylvania school districts and municipalities are often surprised to find that they have options when choosing who will collect their delinquent real estate taxes and the laws under which collections can be made. Most delinquent taxes are collected by either the county tax claim bureau or a private collector. County tax claim bureaus were created under a set of Pennsylvania statutes known as the Real Estate Tax Sale Law or RETSL. RETSL establishes the procedures and time frames under which the tax claim bureau can initiate collections, charge fees and list properties for tax sale. The procedures are rather rigid, with a one-size-fits-all approach due to the high volume of claims that are submitted at one time to the county.
The procedures under RETSL are relatively simple. The county is required to send out a boilerplate notice by July 31st of the year after the taxes are due, informing the taxpayer that the property will be sold at tax sale unless the delinquent taxes are paid. The next collection activity occurs a year later, with an upset tax sale scheduled in September. A judicial tax sale is then generally held the following year. An individual taxing district has little control over the collection process after its claims are turned over to the county. Payment extensions are limited under RETSL and are set at the discretion of the county commissioners.
Outside of RETSL, school districts and municipalities have the ability to utilize a more favorable set of Pennsylvania statutes known as the Municipal Claims and Tax Liens Act or MCTLA. Under the MCTLA, taxing districts may hire a third party collector to collect their delinquent taxes in lieu of the county tax claim bureau. The MCTLA allows taxing districts to pass through all collection costs, including attorney’s fees, to the delinquent taxpayer.
This shifting of collection costs creates strong incentive to make payment quickly and to pay future taxes on time. The MCTLA permits taxing districts to look at individual delinquencies on a more case-by-case approach, with wide authority and flexibility to establish payment plans for taxpayers with legitimate financial hardships. The MCTLA also allows the taxing district to make numerous contacts with the delinquent taxpayer during the first year of delinquency. Portnoff’s collection procedures under the MCTLA seek to maximize contact with the delinquent taxpayer in order to create incentive to pay quickly. Because the MCTLA allows for all collection costs and fees to be shifted to the delinquent taxpayer, Portnoff will advance litigation costs on behalf of its clients and charges all attorney fees directly to the delinquent taxpayer. This allows Portnoff’s clients to actively collect their delinquent real estate taxes from day one, and to retain full control over the collection process, at little to no cost to the taxing district.