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By: Janek S.B. No. 447
(In the Senate - Filed February 10, 2005; February 15, 2005,
read first time and referred to Committee on Intergovernmental
Relations; April 26, 2005, reported adversely, with favorable
Committee Substitute by the following vote: Yeas 3, Nays 1;
April 26, 2005, sent to printer.)
COMMITTEE SUBSTITUTE FOR S.B. No. 447 By: Deuell
A BILL TO BE ENTITLED
AN ACT
relating to the sale of tax receivables by a local government.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle C, Title 8, Local Government Code, is
amended by adding Chapter 274 to read as follows:
CHAPTER 274. SALE OF TAX RECEIVABLES
Sec. 274.001. DEFINITIONS. In this chapter:
(1) "Date of sale" means:
(A) for a sale made through competitive bidding,
the date designated by the applicable local government for the
submission of bids; and
(B) for a sale negotiated by a local government,
the date the tax receivable sale and purchase agreement is signed.
(2) "Local government" means a county, municipality,
school district, special purpose district or authority, or other
political subdivision of this state.
(3) "Tax receivable" means a right to receive the
revenue from:
(A) a delinquent ad valorem tax imposed by a
local government on real property for a specific tax year or a
specific tax account; and
(B) a delinquent assessment or other charge
imposed by a local government that is secured by a lien on real
property.
Sec. 274.002. AUTHORITY TO SELL TAX RECEIVABLES OR
UNDIVIDED INTEREST IN TAX RECEIVABLES. (a) At any time, a local
government may sell all or any part of its tax receivables,
including an undivided interest in all or any part of the
receivables.
(b) A sale by a local government of a tax receivable under
this chapter is a sale and not a borrowing by the local government.
(c) The local government shall determine the terms and
conditions of a sale of a tax receivable.
(d) The sale by a local government of a tax receivable is
governed exclusively by this chapter.
(e) The sale of a tax receivable under this chapter does
not:
(1) include the sale of a right to receive real
property associated with the tax receivable; or
(2) entitle the purchaser to foreclose on real
property associated with the tax receivable.
Sec. 274.003. AMOUNT OF TAX RECEIVABLE; INCLUDED COSTS.
The amount of a tax receivable sold under this chapter may include:
(1) the original amount of a delinquent ad valorem tax
plus the amounts of any penalty and interest that accrued on that
delinquent tax under Section 33.01, Tax Code, through the date of
sale that remain unpaid on the date of sale; and
(2) the original amount of a delinquent assessment or
other charge other than a delinquent ad valorem tax plus the amount
of any interest that accrued on that assessment or charge and
remains unpaid on the date of sale.
Sec. 274.004. INTEREST AND PENALTIES ON CERTAIN TAX
RECEIVABLES. After the date of sale of a delinquent ad valorem tax
receivable:
(1) interest and all penalties, as provided by Chapter
33, Tax Code, continue to accrue on the unpaid original amount of
the tax as if the tax receivable had not been sold; and
(2) in a suit to collect the delinquent tax, the local
government is entitled to recover the court costs and other
expenses specified by Section 33.48(a), Tax Code.
Sec. 274.005. ENFORCEMENT OF TAX RECEIVABLE. (a) The sale
of an ad valorem tax receivable under this chapter does not affect
an existing contract for the collection of delinquent taxes under
Section 6.30(c), Tax Code, between the local government or an
entity acting on behalf of the local government and an attorney.
Performance by the attorney under that contract includes the
collection of the delinquent ad valorem tax by suit filed on behalf
of the local government, by tax sale, or by other means, as if the
tax receivable had not been sold. Collection of a tax receivable
sold under this chapter and any related lien continues to be
enforceable by the selling local government in its own name as if
the tax receivable had not been sold.
(b) The local government may not:
(1) sell an ad valorem tax receivable to a person who
controls, is controlled by, or is under common control with a
private attorney under contract to collect the related delinquent
ad valorem tax entered into under Section 6.30(c), Tax Code; or
(2) after the date of sale of an ad valorem tax
receivable to a person, enter into a contract under Section
6.30(c), Tax Code, with an attorney who controls, is controlled by,
or is under common control with that person.
(c) In this section, control of a person includes the direct
or indirect ownership of a majority of the voting power of that
person.
Sec. 274.006. METHOD OF SALE. (a) A sale of a tax
receivable authorized by this chapter may be made through:
(1) competitive bidding; or
(2) a negotiated sale.
(b) Notwithstanding any other law to the contrary, in
determining whether and to whom to award a sale of a tax receivable,
a local government may take into account any factor the local
government considers to be in the best interest of the local
government, including the price at which the tax receivable is
offered for sale and the terms and conditions of a tax receivable
purchase and sale agreement.
(c) The local government may enter into negotiations with
one or more prospective purchasers to determine the terms and
conditions under which a tax receivable is proposed to be sold.
Sec. 274.007. SALE THROUGH COMPETITIVE BIDDING. (a) A
local government that elects to sell all or part of its tax
receivables through competitive bidding shall publish a notice of
its intention to sell the tax receivables through competitive
bidding.
(b) The notice must include:
(1) the terms and conditions of the sale;
(2) the criteria by which bids will be evaluated; and
(3) a description of any other information or
documents that the local government may require a bidder to
provide.
(c) The notice must:
(1) identify separately the tax receivables intended
to be sold; or
(2) state the approximate number and aggregate amount
of those tax receivables and that a copy of a list of those tax
receivables may be obtained from the local government on request.
(d) The notice shall be published once a week for two weeks
in a newspaper of general circulation in the county in which the
administrative offices of the local government are located not
later than the 30th day before the date designated by the local
government for the submission of bids.
(e) The local government may reject any or all bids or may
accept any combination of bids received in a sale conducted through
competitive bidding.
Sec. 274.008. SALE THROUGH NEGOTIATED SALE. (a) A local
government that elects to sell all or a part of its tax receivables
through a negotiated sale shall publish a notice of its intention to
sell tax receivables through a negotiated sale.
(b) The notice must:
(1) state that a request for statements of interest to
purchase tax receivables is available at the location specified in
the notice; and
(2) include any requirement by the local government
for a person seeking to purchase tax receivables to provide the
local government any information or documents.
(c) The notice must:
(1) identify separately the tax receivables intended
to be sold; or
(2) state the approximate number and aggregate amount
of those tax receivables and that a copy of a list of those tax
receivables may be obtained from the local government on request.
(d) The notice shall be published once a week for two weeks
in a newspaper of general circulation in the county in which the
administrative offices of the local government are located not
later than the 30th day before the date designated by the local
government for the receipt of statements of interest.
Sec. 274.009. PAYMENT OF TAX RECEIVABLE BEFORE SALE. A
local government may not proceed with the sale of a tax receivable
if the property owner pays the full amount of the tax receivable
associated with the property before the proposed date of sale of the
tax receivable.
Sec. 274.010. POSTPONEMENT OR CANCELLATION OF SALE
AUTHORIZED. (a) A local government may postpone or cancel any
proposed sale of a tax receivable for which notice has been
published.
(b) A local government is not liable for damages as a result
of the postponement or cancellation of a proposed sale of tax
receivables and a cause of action does not arise from a postponement
or cancellation of a proposed sale.
Sec. 274.011. PURCHASE AND SALE AGREEMENTS. (a) A local
government may enter into a purchase and sale agreement with the
purchaser of a tax receivable sold under this chapter.
(b) A purchase and sale agreement may contain any term,
provision, condition, representation, or warranty consistent with
this chapter that, in the judgment of the local government, is
necessary or in the best interest of the local government.
(c) A purchase and sale agreement must specify:
(1) the purchase price of each tax receivable covered
by the agreement, which amount may:
(A) be more or less than the face amount of the
tax receivable; and
(B) include nonmonetary consideration;
(2) any other amounts that may be made available to the
local government on a contingent basis under the terms of the
agreement; and
(3) that the local government and the officers,
employees, agents, and attorneys of the local government are not
liable for damages for any failure to collect the tax receivable,
and that a failure to collect the tax receivable does not give rise
to a cause of action.
(d) A purchase and sale agreement may require the local
government to:
(1) repurchase a tax receivable, or to substitute
another tax receivable of equivalent value, under conditions that
may be specified in the agreement;
(2) sell to the purchaser subsequent tax receivables
associated with the property on substantially the same terms as
those on which the initial tax receivable was sold; and
(3) use its customary and reasonable efforts to
enforce the collection of the tax receivable, as if the tax
receivable had not been sold.
(e) A purchase and sale agreement may not require the local
government to prohibit a person from paying the person's taxes in
installments under Section 31.031, 31.032, or 33.02, Tax Code.
(f) A purchase and sale agreement may not require a local
government that under Section 31.035 or 31.036, Tax Code, permits
individuals to perform services in lieu of paying taxes, or that
under Section 31.037, Tax Code, permits business entities to
provide employees to perform services in lieu of paying taxes, to
refrain from entering into a contract under those sections. A local
government that enters into such a contract may agree to repurchase
any related ad valorem tax receivable.
(g) A purchase and sale agreement may not contain any
provision that would interfere with the right of an individual to
defer or abate a suit to collect a delinquent tax under Section
33.06 or 33.065, Tax Code. The local government may agree to
repurchase the related tax receivable if the individual defers or
abates the suit.
(h) A purchase and sale agreement may not require the local
government to demand of its officers, employees, agents, or
attorneys a standard of performance of their statutory or
contractual duties in the collection of a tax receivable that is
different from the customary and reasonable standard of performance
required of those persons.
Sec. 274.012. TAX RECEIVABLE CERTIFICATES; ISSUANCE AND
OPERATION; TRANSFERABILITY. (a) On the sale by a local government
of a tax receivable, the local government shall issue to the
purchaser a tax receivable certificate evidencing the sale and
transfer of the tax receivable to the purchaser.
(b) A tax receivable certificate operates to transfer and
assign the tax receivable only for:
(1) the amount provided by Section 274.003;
(2) interest on any unpaid amounts of the tax
receivable that accrues under Section 274.004 on and after the date
of sale to the date of payment; and
(3) the amounts of any penalty and interest on the
unpaid original amount of an ad valorem tax receivable that accrues
under Section 33.01, Tax Code, on and after the date of the sale to
the date of payment.
(c) Any amount, other than an amount specified by Subsection
(b), that may be collected by the local government under Chapter 33,
Tax Code, or another law is not transferred or assigned by a tax
receivable certificate. Any amount described by this subsection
that is collected shall be retained by the local government for
distribution in accordance with the applicable law or, if
applicable, the terms of a contract entered into under Section
6.30(c), Tax Code.
(d) The holder of a tax receivable certificate may transfer
the certificate to any other person.
(e) Except as otherwise agreed to in a purchase and sale
agreement under Section 274.011(d)(1) or (2), the holder of a tax
receivable certificate holds the certificate without recourse, in
contract, in tort, or otherwise, against the local government or
the officers, employees, agents, or attorneys of the local
government because of a failure to collect the related tax
receivable.
(f) An assessor-collector who collects taxes for a local
government other than a county, whether by contract or operation of
law, may not be required to perform any additional duty or function
relating to the sale of tax receivables by the local government
unless, by contract entered into with the local government, the
assessor-collector agrees to perform that function or duty. This
subsection does not apply to an assessor-collector who is an
employee of the local government.
Sec. 274.013. CONTENTS OF TAX RECEIVABLE CERTIFICATE.
(a) Each tax receivable certificate must contain a transfer and
assignment by the local government of the tax receivables
transferred to the purchaser and must state:
(1) the date of the sale;
(2) the aggregate amount of the tax receivables
transferred to the purchaser;
(3) as separate items, the amounts included in each
tax receivable specified in Section 274.003;
(4) the rate of interest that accrues on the unpaid
amount of the tax receivables; and
(5) a description of the real property associated with
each tax receivable, by block and lot or by other means sufficient
to identify and locate the property.
(b) A tax receivable certificate may evidence the transfer
of more than one tax receivable relating to more than one property.
Sec. 274.014. LOST TAX RECEIVABLE CERTIFICATES. (a) On
application to a local government accompanied by proof sufficient
to show that a tax receivable certificate issued on behalf of the
local government under this chapter is lost, the local government
may issue a duplicate original certificate to the person entitled
to the original certificate or to the applicant as authorized by the
person entitled to the original certificate.
(b) The local government may require the person or applicant
to post a bond of indemnity in favor of the local government.
Sec. 274.015. ENTITLEMENT TO PROCEEDS OF TAX SALE.
(a) This section applies to real property associated with a tax
receivable sold under this chapter if the property is sold in
compliance with an order of sale following a suit for foreclosure of
a local government's lien on the property, regardless of whether
the suit to foreclose the lien is brought by the local government
that sold the tax receivable or by another local government.
(b) From the proceeds of a sale of the property under
Section 34.01, Tax Code, or of the resale of the property under
Section 34.05, Tax Code, the holder of the applicable tax
receivable certificate is entitled to receive an amount equal to
the amount the local government that sold the tax receivable
certificate would otherwise be entitled to receive and retain for
its benefit.
Sec. 274.016. DUTY OF LOCAL GOVERNMENT TO PAY OVER CERTAIN
MONEY. (a) A local government shall promptly pay over to the
holder of a tax receivable certificate, or to the person designated
in writing by the holder, any money received by the local government
in connection with the tax receivable evidenced by the tax
receivable certificate.
(b) A local government shall pay over to its attorney,
including a private attorney retained under a contract entered into
under Section 6.30(c), Tax Code, any money received to which the
attorney is entitled by virtue of a contract or otherwise,
including:
(1) attorney's fees and any other amount collected for
the benefit of the attorney; and
(2) any costs of court and expenses advanced by the
attorney.
Sec. 274.017. AFFIDAVITS OF PUBLICATION. (a) Each local
government that sells a tax receivable under this chapter shall
obtain and preserve affidavits of the publication of all
advertisements and notices required by this chapter to be
published.
(b) An affidavit of publication is presumptive proof of the
related publication in any court of this state.
Sec. 274.018. PUBLIC INFORMATION. Information collected,
assembled, or maintained in connection with the sale of a tax
receivable of a local government and in connection with the
issuance of a tax receivable certificate under this chapter is
public information that is available to the public under Chapter
552, Government Code.
Sec. 274.019. CALCULATION OF EFFECTIVE TAX RATE AND
ROLLBACK TAX RATE. The officer or employee designated to calculate
the effective tax rate and the rollback tax rate of a local
government under Section 26.04(c), Tax Code, may not include the
amount of any proceeds received by the local government from the
sale of a tax receivable under this chapter in making those
calculations.
Sec. 274.020. EFFECT OF SALE BY SCHOOL DISTRICT OF TAX
RECEIVABLE. The sale by a school district of an ad valorem tax
receivable under this chapter does not affect:
(1) the allocation of state or federal funds to the
school district or the entitlement of the school district to state
or federal funds under the Education Code; or
(2) the taxable value of property in the district for
the purposes of the allocation of or entitlement to those funds.
Sec. 274.021. MINIMUM PURCHASE PRICE FOR SCHOOL DISTRICT
TAX RECEIVABLES. The sale by a school district of a tax receivable
must meet the following minimum price criteria:
(1) for a tax receivable that has been delinquent for
less than one year, the minimum purchase price must be equal to at
least 95 percent of the principal owed;
(2) for a tax receivable that has been delinquent for
one year or more, but less than two years, the minimum purchase
price must be equal to at least 90 percent of the principal owed;
and
(3) for a tax receivable that has been delinquent for
two years or more, the minimum purchase price must be equal to at
least 75 percent of the principal owed.
SECTION 2. Subdivision (6), Section 1.04, Tax Code, is
amended to read as follows:
(6) "Intangible personal property" means a claim,
interest (other than an interest in tangible property), right, or
other thing that has value but cannot be seen, felt, weighed,
measured, or otherwise perceived by the senses, although its
existence may be evidenced by a document. The term [It] includes:
(A) a stock, bond, note or account receivable,
franchise, license or permit, demand or time deposit, certificate
of deposit, share account, share certificate account, share deposit
account, insurance policy, annuity, pension, cause of action,
contract, and goodwill; and
(B) a tax receivable under Chapter 274, Local
Government Code, or a tax receivable certificate issued under that
chapter.
SECTION 3. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2005.
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