DOCUMENTS: OUTSTANDING TAX LIENS

TOTAL $735 MILLION

 

Policymakers Ignore Liens, Raise Taxes, Can't House Criminals

 

(January 26, 2015) Documents1 obtained by the Policy Foundation from the state Department of Finance and Administration show total outstanding tax liens number 178,612 and total $735,470,927, while policymakers raise taxes and fail to fully reimburse counties for housing state inmates in county jails.

 

DFA filed 70,525 liens in 2012-14, seeking $312,851,427,2 the documents show.  Liens released in the same period totaled 131,292 but 178,612 remained outstanding with $735 million owed to the state, DFA records show.

 

Consequences: Tax Increases, More Criminals on Streets

 

The size of the problem has led to consequences for law-abiding taxpayers.  One consequence are tax increases. The state Senate increased the state capital gains tax last week, repealing a 2013 measure3 that increased its exclusion from the state income tax from 30 to 50 percent.  A reduction in the top state income tax rate from 7.0 to 6.9 percent was also postponed to 2016.

 

Another consequence are more criminals on Arkansas streets.  The County Judges Association of Arkansas (CJAA) and the Arkansas Sheriffs’ Association (ASA), in an October 2014 release, noted there are "about 2,300 state inmates being held in county jails throughout Arkansas, which represent "about 25 percent of county jail beds statewide..."  The CJAA and ASA note the number of state inmates held in county jails is "more than the largest state prison."  The cost to counties for housing 2,300 state inmates "would be almost $24 million," the groups note, but delays in "payment of jail reimbursement and inadequate payments create an unnecessary and severe economic hardship on county governments and local taxpayers in Arkansas."

 

The policy "increases lawlessness," according to the groups' 2014 release.

 

The state's failure to house its own inmates means some counties, including Pulaski, are unable to always accept new prisoners, meaning more criminals remain out on the streets.

 

"It is vital that the state of Arkansas take responsibility for its inmates and discharges the paramount duty under the Arkansas Constitution and laws of Arkansas to protect the public and provide for the detention of convicted felons," the CJAA and ASA said.

 

Collection of Tax Liens

 

The liens are for "any debt currently due the state for taxes," a DFA report explains.4 Taxpayers are given multiple opportunities to pay "the state tax debt," and may enter into a payment agreement that plan "allows payment of the tax liability (including the penalty and interest) over a period of time. Interest accrues at the rate of 10 percent per year.  The Arkansas Taxpayer Bill of Rights also provides for an appeals process. If the taxpayer fails to pay the total amount due the DFA's Collection Section "will file a state tax lien(s) in the taxpayer's county of residence," to collect the tax debt, the report explains.

 

The Taxpayer Bill of Rights states the DFA "Director is authorized to file a Certificate of Indebtedness (state tax lien) with the circuit clerk of any county of this state ... for the amount of tax due ... the certificate .. shall have the same force and effect as the entry of a judgment rendered by a circuit court and shall constitute a lien upon the title of any real and personal property of the taxpayer ... the Director may take all steps authorized by law for the collection of the tax, including the issuance of a writ of execution, garnishment, and cancellation of any state tax permits or registrations."

 

Upon payment of an outstanding tax debt the DFA "notifies the circuit clerk of the county in which the lien(s) was filed that the judgment is satisfied and the state tax lien is then released."  A copy is also mailed to the taxpayer.

 

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1  DFA to Policy Foundation, January 16 and January 23 documents.

2  DFA to Policy Liens Filed, CY 2012: (Count) 24,672, (Amount) $114,039,097.11; CY 2013, 20,169, $87,389,093.94; CY 2014, 25,684, $111,423,235.69

3  PA 1488 of 2013

4 "Collection Procedures and Release of Lien(s) Information," Arkansas State Revenue Tax Quarterly, July, August and September 2011