1	Personal Property Tax Distraint Warrants & Seizures Colorado County Treasurers’ Association 10-24-2007 Bruce Moore Tax Collections Manager City & County of Denver
2	Prefatory Remarks Experience: 18 years – City and County of Denver – Tax Collections Manager. Denver (on average) issues 15 to 20 Personal Property Tax Distraints monthly. Have overseen, authorized and executed over 3,500 personal property tax distraint warrants.
3	The Distraint Process Why Do We Issue Distraints? 1. C.R.S. 39-10-111 – Beginning in October, Following Advertising in September 2. C.R.S. 39-10-113 – Personal Property that may be dissipated or distributed (example: Company is closing) or personal property may be removed from the State of Colorado - Collection of Taxes in Jeopardy.
4	Steps Leading Up to The Issuance of a Distraint Warrant Our 1^st objective is to try to always obtain voluntary payment of the tax (thereby avoiding the necessity to even issue a distraint warrant) however, if that fails – follow these steps: 1. Confirm legal reason for distraint (it is now October and the property has been advertised in September, or you have declared the collection of the taxes in jeopardy). 39-10-111. Distraint, sale of personal property – redemption of mobile home. (1) (a) At any time after the first day of October, the treasurer shall enforce collection of delinquent taxes on personal property by commencing a court action for collection or employing a collection agency as provided in section 39-10-112 or by distraining, seizing, and selling the property………… 39-10-113. Removal or transfer of personal property – collection of taxes. (1) (a) If at any time after the lien of general taxes has attached the treasurer believes for any reason that any taxable personal property may be removed from the state of Colorado or may be dissipated or distributed, so that taxes to be levied for the current year may not be collectible, the treasurer may at once proceed to collect the taxes and, if the treasurer deems it necessary, may distrain, seize, and sell the property to enforce collection. If 39-10-113 is the reason for the distraint - collect all taxes, penalty and interest due (the current year taxes and any prior years). “Believes for any reason,” although this provides great latitude, always have solid objective and supportable reasons that “could easily be defended in court.” Examples: 1) Business is closing and has outstanding taxes, and has either refused to pay or asked to pay close to or after the closure date. In this case the property is in jeopardy of being dissipated or distributed. 2) The business is moving out-of-state. 3) The business is moving out of your county and you have reason to believe that a material amount of the personal property may be dissipated or distributed. 3) The company is selling a material part of the assessed assets. “Material” can be based on either the dollar value of an asset(s) or a volume % of the assessed assets.
5	Steps Leading Up to The Issuance of a Distraint Warrant (continued) 2. Verify total taxes, penalties and interest amounts owed (include current interest accrual). If the taxpayer filed one - check declaration of personal property list filed with the Assessors’ Office to determine what type of tangible personal property you will be seizing. 4. If the Company is a corporation, LLC, LLP check the Colorado Secretary of State’s web-site for their Agent of Service. 5. Do a field visit to the location (even if the taxpayer filed a declaration) to: a) Verify that the personal property is still there. b) Survey the premises: 1) how many doors/entrances that will require lock changes 2) alarm systems 3) hazards 4) location of personal property in the premises 5) (if applicable) customer traffic 5) adjacent businesses (any issues) 6) location of landlord or management company on premises or located elsewhere. 6. If you don’t already have arrangements – contact a qualified locksmith, and a good auctioneering company (have them provide pricing schedules). 7. If you don’t already have standard arrangements (Sheriff’s Department, Commissioned Deputy, Private Server of Process – has to be approved by Sheriff’s Department) – contact Sheriff’s Department to coordinate actual service of the distraint warrant. 8. Coordinate date and time of distraint & seizure as much as possible (sometimes if immediate jeopardy – there is no choice on the date & time). Be mindful of issues such as weekends and holidays if they would adversely impact successful execution (availability of your personnel, Sheriff’s, building management). Serve the distraint as early in the day as possible (allows for unexpected issues).
6	Serving the Distraint Warrant Arrange specific meeting time of execution with Sheriff’s Department or Commissioned Deputy and locksmith. Always have Treasurer’s Office personnel accompany. This is primarily for the purpose of collecting payment (Approximately 90% of the time – taxpayers who either refused to pay or claimed they had no money, will pay when faced with seizure, and only 10% actually let the property go to auction). Additionally, Treasurer’s personnel can explain the taxes, and the collection process. Be sure to take the original of the distraint and at least four copies. If the taxpayer is not there – contact them and inform them of the situation and tell them that they must come immediately and pay the total amount due (cash, certified funds). Same procedure if they are there. NOTE: If the taxpayer is there – deliver a copy of the distraint warrant to them or their agent (“Agent” – is usually their designated agent of service listed with the Colorado Secretary of State. Can also be given to designated legal representatives – attorneys, accountants, bookkeepers).
7	Serving the Distraint Warrant (continued) If the taxpayer is not there and you cannot contact them, or if they refuse to pay/cannot pay: Post the distraint warrants facing out so they can be read from the outside of the building in a conspicuous place (on the inside of a window or the front door if it is a windowed door *Never post on the outside where anyone can just rip them down). 2. Order everyone from the premises and ensure that everyone has left the building. 3. Have locksmith proceed to change the locks. When the locks are changed – make sure the locksmith provides you with a minimum of 3 sets of keys. Generally – you will provide the landlord with a set of keys. Inspect locksmith’s work and make sure all doors and windows are secured. Obtain locksmith’s invoice and verify it with work done. 4. Contact landlord.
8	"5" 5. Contact alarm company (if applicable). If the premises has an alarm you will generally have to have the Sheriff’s Department or Police Department “vouch” for the seizure and either have the alarm system disabled or have the alarm company reset it with new password’s. 6. Contact utility company (if necessary) Contact Police Department (if necessary) 8. Video or take digital pictures of the entire premises and the tangible personal property distrained. This memorializes the condition of the premises and the property that was present at the time of seizure (this protects you). 9. Take a thorough inventory of all property distrained, provide concise descriptions and where possible note model and serial numbers. Upon returning to the office, have the list typed up (Titled: Account of Property Distrained). A copy of this list may be the one that you end up mailing (certified) to the owner (or agent) if you obtain payment prior to an auctioneer doing a full inventory and appraisal.
9	"Special Issues with Distraints &..." Special Issues with Distraints & Seizures Landlords – to pay rent or not to pay rent….that is the question? During the time you have possession of a premises you can be liable for rent. If you must pay rent (this is an expense added to the cost of making the seizure that you recover from the taxpayer or at auction) require the landlord to provide a copy of the lease for the tenant that was there (generally the taxpayer you distrained). This will tell you the going rate, but always try to negotiate that down (remind the landlord that they are not getting any money now – so any amount is better than nothing – start with 50%). Always work with the landlord by giving them keys and telling them they are free to show the premises to prospective tenants, just make sure they understand that nothing can be removed from the premises and that they know not to let the distrained taxpayer have access. Never agree to pay rent owed to the landlord from the taxpayer. You only pay rent for the time you have possession of the premises. Note: Sometimes the seized taxpayer is also the landlord/real property owner, in which case – do not pay rent – nor allow access – may sometimes have to remove property – see #2 below. Removing the personal property from the location and storing it elsewhere – is this a good idea? Sometimes you have no choice, landlords will sometimes refuse to allow you to hold an auction at the premises. If this is the case, try to make arrangements with a department of your county (Maintenance, etc..anyone with trucks and a warehouse) to pick-up the property and store it. If you have no other department in the County and/or warehouse you can contract with a moving company and a storage facility (more expenses to add to the seizure costs, remember – that even if you get another county department to do this – estimate reasonable costs and add it to your costs of making the seizure). Remove property if the premises are unsafe or have hazards. In General: Avoid moving personal property where possible (reduces expenses, and the possibility of damage).
10	Auction & Sale To reiterate, most taxpayers will pay when faced with seizure or after being seized, only 10% allow the property to go to auction. Therefore, continue to try to get the taxpayer to pay even after seizure, and if payment arrangements are made – keep the time frames short. It is recommended that you always obtain full payment (certified funds, cash) prior to releasing the property. If you still cannot get payment: Prior to going any further, try to determine the value of the property (thinking in terms of an auction). If the amount garnered at an auction will not cover the expenses of conducting the sale and at least a reasonable amount of the taxes, penalties and interest owed then it is not cost-effective to proceed. If you are completely unable to determine value, then you can have your professional auctioneer do an appraisal for you (remember however, this will add costs).
11	"If You Have Determined to..." If You Have Determined to Proceed with the Auction: 1. Coordinate with Auctioneer for sale date (the Auction Must Be Held Within 180 Days of the seizure). Remember - it is In The County’s Best Interest to Schedule a Sale as Quickly as Possible to Keep Costs Down & to Retain The Value of The Property Being Sold & To Maximize the Return On the Property Being Sold at Auction. Generally try to schedule Auctions Monday – Wednesday, mid-morning. This allows for ample time to conduct the auction and have time left in the day for people to remove property that day (you want removal the same day - so that you don’t have to continue to be responsible for safe-keeping or storage). 2. Have the auctioneer complete an inventory of all of the property to be sold at auction (if the distraint and seizure reach this point, it is generally this list that you will send to the owner or agent). Additionally, have the auctioneer provide you with an appraisal of the amount they believe the property will bring at auction (this is not provided to anyone else).
12	"Prior to the Auction" Prior to the Auction, determine the market interest in the property to be sold (Professional Auctioneer Instrumental In This). Determining Market interest helps you to decide if you need to do additional advertising of the sale in other venues (Trade Magazines or websites) other than just a newspaper published in your County (if no such newspaper – post a notice of sale in the county courthouse and 2 other conspicuously public places in the county seat). Probably publish in one of the major Denver Newspapers (Sunday & Wednesday Auction Block). The objective is to generate as much interest as possible to make your auction a success.
13	"Schedule the publication of the..." Schedule the publication of the notice of sale to occur within 10 days of the sale date. The published notice of sale language: NOTICE OF TREASURER’S SALE Taken by virtue of Treasurer’s Distraint Warrant issued out of the office of the County Treasurer, in the State of Colorado for delinquent taxes, penalties, interests and costs associated with seizure and sale, as provided by the Colorado Revised Statutes, assessed against the personal property, goods, and chattel of for the tax years . I have distrained and will expose for sale at public auction at (address) on the day of , 2007 at a.m. to the highest and best bidder, all or so much of the following described property as is necessary to satisfy the Claim of the said Treasurer, to wit: (Provide Description of Property) (name) County Treasurer Terms of sale: Cash or certified funds. Buyers must remove purchased property by 3:00 p.m. on the same date of the auction. Property is sold as is, no guarantees or warranties are expressed or implied. Sale is subject to cancellation without notice upon payment of the taxes and costs due.
14	"Mail (certified), as..." Mail (certified), as soon as you have finalized the date of sale (can and should be earlier than the 10 days required of publication, but make sure it is at least 10 days): a) “Account of Property Distrained” inventory list (either the one you prepared or the inventory from your auctioneer), b) a statement of the amount demanded (include all taxes, penalties, and interest as well as all expenses now incurred – itemize the list), c) a notice of the time and place fixed for the sale. 6. Make sure your Auctioneer has plenty of “certificates of sale” to issue to buyers. 7. Make sure the Auctioneer understands that they must record and itemize each item sold and list the amount it was sold for, and each purchaser’s name and address.
15	"Conducting the Auction" Conducting the Auction At the start of the auction – read the notice of sale: NOTICE OF TREASURER’S SALE On behalf of the County Treasurer, the personal property, goods and chattel of is being offered for sale at public auction this day of 2007. The personal property, goods and chattel was taken by virtue of a Treasurer’s Distraint Warrant issued by the County Treasurer to satisfy the claim of said Treasurer for delinquent taxes, assessed against the personal property, goods and chattel of ,with interest and penalties for the tax year(s) of , and costs of the seizure and sale, for a total amount of $ . All or so much of the following described property as is necessary to satisfy the claim of the said Treasurer is offered for sale to the highest and best bidder. (Provide brief description of property)
16	"2" 2. Read the terms of the sale (as published in notice). Buyers are advised that the Treasurer’s Agent (the auctioneer) has the right to reject any and all bids. Have auctioneer begin the sale by offering a bulk bid for all of the property. If a bulk bid does not generate the minimum required (remember taxes, penalties, interests, and all costs), then proceed with piecemeal. Monitor the sale and ensure the Auctioneer is proceeding as you would wish. Ensure the Auctioneer is recording each item sold, how much sold for, the buyers name and address. Ensure the Auctioneer is providing a “Certificate of Sale” to each purchaser (Auctioneer’s vary on providing as each item is sold or at the end of the auction). 9. Once all of the property has been sold – close the auction and provide instructions to buyers (Auctioneer will generally do) regarding payment, pick-up of property, etc.
17	"10" 10. What happens if you don’t generate enough bids to cover the minimum – should you declare the property purchased by the County? If Purchased By The County: Must sell the property within 150 days from the initial Auction/Sale date anyway - so if you have to sell anyway, why bother declaring it purchased by the County? It has been rare for a county to have purchased (it has been done for good fiscal & practical reasons) – but with the Statutory Change that took place in 2004, there is virtually no reason to declare property purchased by the county. One Exception – If you have facts that lead you to believe that by holding for 150 Days you will be able to generate better bidding (this assumes you could not cover the minimum at the initial auction).
18	Summary Plan Distraint Warrants & Seizures (planning will ensure success). Be Mindful of Statutory Time Frames (make sure you follow all statutory time frames). Get a Good Auctioneer (preferably one that has handled tax auctions). Plan your auctions (again – planning will ensure success). Contact Information: Bruce Moore 720-865-7049 bmoore@ci.denver.co.us