BILL ANALYSIS S.B. 1151 By: Ellis Finance 05-10-95 Committee Report (Amended) BACKGROUND Local governments in Texas have accumulated millions of dollars in delinquent property tax receivables. Due to the costs associated with collection, many local governments have been unable to maximize their returns on these assets. In many instances, these receivables sit uncollected on a local government's books until they are eventually written off, representing millions of dollars of lost revenue. As an innovative solution to this problem, various local governments have recognized the advantages of transferring delinquent tax receivables, known as "tax liens" to private entities which are willing to pay cash for these liens. By purchasing a tax lien from a local government, the purchaser typically steps into the shoes of the government and is entitled to collect the tax itself through the same procedure that the government would have used. By selling tax liens, the local government realizes certain benefits. PURPOSE As proposed, S.B. 1151 authorizes a governing body of a tax unit to provide for the sale and transfer of tax liens. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not grant any additional rulemaking authority to a state officer, institution, or agency. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 32.06, Tax Code, as follows: Sec. 32.06. TRANSFER OF TAX LIEN. (b) Authorizes the governing body of a taxing unit to adopt, in the manner required by law for official action by the body, a procedure to provide for the sale and transfer by the taxing unit of any tax lien existing in its favor which represents a delinquent tax. Authorizes a taxing unit to sell or transfer a tax lien on a residence homestead, as defined by Section 11.13, under this subsection only if all or part of the delinquent tax on that residence homestead has been delinquent for at least three years. Requires the provisions of the procedure to be those deemed appropriate by the governing body, subject to the provisions of this section. Authorizes tax liens of a taxing unit to be sold and transferred pursuant to this subsection to any person, in any lot or block, and for any purchase price deemed appropriate by the governing body, provided that, prior to any such sale and transfer, the collector for the taxing unit shall cause to be inserted in the legal organ for the taxing unit once a week for two consecutive weeks, the second publication being at least 30 days prior to the sale and transfer, a notice listing all the names of all delinquent taxpayers and the related properties subject to such sale and transfer. Requires the sale and transfer of each tax lien pursuant to this subsection to be evidenced by a sworn document issued by the taxing unit reciting the full amount of the tax lien, including penalties and interest then accrued, and naming the purchaser of the tax lien, the delinquent taxpayer, and the related property. Authorizes the taxing unit to set a minimum price for the sale and to accept or reject any offer made to purchase the lien. (c) Makes conforming and nonsubstantive changes. (d) Requires the transferee of a tax lien and any assignee or successor in interest of such transferee to be subrogated to and to have the same rights, powers, liens, and priority of payments as might have been exercised or claimed by the taxing unit before the transfer, including the right to collect the full amount of the delinquent tax together with all penalties, interest, and other amounts provided by law and the right to foreclose the lien in the manner provided by law for foreclosure of tax liens. Authorizes a taxing unit to provide in its procedure for the sale and transfer of a tax lien under Subsection (b) limitations on the authority of the transferee of the lien to protect a delinquent taxpayer from abusive, deceptive, or unfair debt collection practices and to provide as a sanction for a violation of a limitation the reversion of the transferee's interest in the lien to the taxing unit. Redesignates existing Subsection (c). (e)-(g) Redesignate existing Subsections (d)-(f). (h) Prohibits a suit to foreclose a tax lien transferred as provided by Subsection (a) of this section from being instituted within one year from the date on which the lien is recorded in all counties in which the property is located. Prohibits a suit to foreclose a tax lien transferred as provided by Subsection (b) of this section from being instituted within 60 days from the date on which the lien is recorded in all counties in which the property is located. Redesignates existing Subsection (g). (i)-(k) Redesignate existing Subsections (i)-(j). Makes conforming and nonsubstantive changes. SECTION 2. Emergency clause. Effective date: upon passage.