Gov. Gavin Newsom signed an executive order that waives penalties on property taxes paid after the April 10 deadline for residents and small businesses based on COVID-19 and experts say reassessment of property values at the county level could be next.
“This will allow people with hardships to get on payment plans and not have to experience that penalty,” Gov. Newsom said at a virtual press conference where he announced the new order.
The order extends, through May 2021, the penalty waiver for fees and related fines associated with the 10% tax code requirement.
"Surely there will be some who are concerned that these tax dollars aren't making it to the public services that communities rely on but let's not forget that most small businesses are hanging by a thread and any extra costs they must incur right now could put them out of business and send their workers to the unemployment line so this relief is welcomed and appreciated," said John Kabateck, California state director with the National Federation of Independent Business (NFIB), which represents some 15,000 small businesses throughout the state.
The caveat, however, is that applicants must show hardship directly related to the coronavirus or its resulting shutdown order.
"The taxpayer timely files a claim for relief in a form and manner prescribed by the tax collector; and the taxpayer demonstrates to the satisfaction of the tax collector that the taxpayer has suffered economic hardship, or was otherwise unable to tender payment of taxes in a timely fashion, due to the COVID-19 pandemic, or any local, state, or federal government response to COVID-19," states executive order N-61-20.
“We think this could be significant relief, particularly with a timeline that extends into the new year as many have had 10% assessed through no fault of their own, maybe just neglect or many are just struggling to make ends meet,” said Gov. Newsom. “Those property tax bills are so large for people and so challenging at this time.”
The deadline to file a personal property tax statement has also been extended but only through May 31 of this year to avoid penalties.
“We're providing small businesses that relief at least through the end of the month to give people more time,” Gov. Newsom said. “We've been working with the Board of Equalization on this. They were assessing how many calls they were getting, how many concerns were being raised and providing more time will give us more time as well as provide more clarity through the end of this month.”
Gov. Newsom's order was issued nearly two months after State Controller Betty T. Yee said she had received numerous inquiries about property tax payments after the coronavirus outbreak.
“While the California Franchise Tax Board, which I chair, has the legal authority to extend filing and payment deadlines for income taxes, I do not have authority over county property tax collection,” said Controller Yee on March 20 in a statement online. "Each county treasurer tax-collector has the power to waive penalties and interest for late payments due to circumstances beyond the taxpayer’s control. It is my expectation that county leaders will consider exercising those powers.”
As of May 13, there were 71,141 coronavirus cases statewide and 2,934 associated deaths, according to the Department of Health.
“We’ll see where the real estate market goes but we may even be looking at reassessment of property values at the county assessor level which will add some additional relief,” predicted Philip L. Liberatore, a La Mirada-based CPA and operator of IRS Problem Solvers.
Gov. Newsom declared a state of emergency on March 4 in response to a national COVID-19 outbreak, which lead to a shutdown that is gradually being modified.
“Right now, small businesses are ill-equipped to be able to meet tax requirements, let alone keep their doors open for much longer as they wait for these PPP loans,” Kabateck told the Southern California Record.
A PPP loan is paycheck protection granted through the Small Business Administration that was created to help businesses hold on to their employees during the coronavirus plague
“Keeping property taxes in check in an already high-tax state gives small business owners one more opportunity to stay afloat and make ends meet at least for the short term,” Kabateck said.