Knowledgebase-Collection of Delinquent Property Taxes

Information Product

Title:Collection of Delinquent Property Taxes
Summary:MTAS was asked how far back a city may go to collect delinquent taxes, whether the city may authorize partial payments of delinquent taxes, and whether the city may forgive or waive penalty and interest accrued on delinquent taxes.
Original Author:Shechter, Leslie
Product Create Date:04/30/93
Last Reviewed on::10/30/2009
Subject:Tax collection--Delinquent taxes; Taxes--Personal property
Type:Legal Opinion
Legal Opinion:

Reference Documents:

Text of Document: April 30, 1993

You have asked several questions regarding collection of delinquent property taxes. Specifically, you want to know how far back a city may go to collect delinquent taxes, whether the city may authorize partial payments of delinquent taxes, and whether the city may forgive or waive penalty and interest accrued on delinquent taxes. The answers are: 10 years, no and no.

Tennessee Code Annotated, 67-5-1806 provides:

All taxes assessed against real and personal property in this state shall be barred, discharged and uncollectible after the lapse of ten (10) years from April 1 of the year following the year in which such taxes became delinquent ...[Emphasis mine.]

The Attorney General provides an example of how this language is to be interpreted:

...the ten year bar begins to run thirteen months later, on April 1 of the year after the March 1 date when the taxes became delinquent. For example, a tax accruing on January 1 of 1988 becomes payable on October 1 of 1988 and delinquent on March 1 of 1989. The ten year limitations period begins to run on April 1, 1990, and the tax is barred, discharged and uncollectible "after the lapse of ten (10) years" from that date in the year 2000. [OAG 90-35, March 16, 1990]

It could be argued, I believe, that waiving penalty and interest accrued on delinquent taxes, in effect, rewards taxpayers who do not pay taxes on a timely basis and, in essence, treats them differently than taxpayers that pay their taxes when due. The only option afforded to the taxpayer is to pay the delinquent taxes, penalty and interest and appeal to a court of equity for a refund of the penalty and interest. Only a court of equity has the ability to remit interest and penalty and has done so in the following circumstances:

1. In Benson, Commissioner v. United States Steel Corporation, 225 Tenn. 164, 465 S.W.2d 124 (1970), Supreme Court affirmed a lower court decision refunding sales tax collected because the Sales Tax Law was ambiguous and the taxpayer had made a good faith effort to pay the correct amount of tax when due;

2. In East Tennessee Brewing Company v. John M. Currier Clerk, 126 Tenn. 535, 150 S.W. 541 (1912), the Supreme Court authorized the refund of a penalty for privilege taxes over which there was some doubt, even in the minds of the Commissioner of Revenue, that such taxes were due;

3. In Tidwell, Commissioner v. Goodyear Tire and Rubber Company, 520 S.W.2d 721 (Tenn. 1975) the court allowed the recovery of penalty on use taxes paid under protest because payment was delayed based upon representations by and agreement of the Commissioner of Revenue;

But, the courts have denied recovery where late payment was a result of financial difficulties experienced by the taxpayer. Daniel v. Metropolitan Government of Nashville and Davidson County, 696 S.W.2d 8 (Tn.Ct.App. 1985).

Regarding partial payments, it is clear that a municipality cannot accept partial payment as a "compromise" of the tax due. White v. Kelly, 215 Tenn. 576, 387 S.W.2d 821 (1965). Your question, though, is whether the municipality may accept an installment payment of the tax due with, I presume, the understanding that at some point in the future the remaining amount due will be paid.

There are a few statutes that specifically authorize the payment of taxes on an installment basis, but none of these statutes applies to your Town. In counties with consolidated governments, payments in two equal installment are authorized. Tennessee Code Annotated, 7-3-203. In Shelby County, retired people 65 or older and living on a fixed income are allowed to pay county real property taxes levied on a primary residence in quarterly installments. Tennessee Code Annotated, 67-5-1807.

The existence of these specific statutory provisions leads me to the conclusion that absent such express statutory authority (by charter or general law) it is doubtful a municipality can accept an installment payments of property taxes due and owing.

If you have additional questions regarding delinquent taxes, please call. Thanks for asking MTAS to help.

Leslie Shechter
Legal Consultant

Please remember that these legal opinions were written based on the facts of a given city at a certain time. The laws referenced in any opinion may have changed or may not be applicable to your city or circumstances.

Always consult with your city attorney or an MTAS consultant before taking any action based on information contained in this database.