NC Tax & Tag Together Program - Presentation to Local Government Finance Officers

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Presentation of the NC Department of Transportation's "Tax & Tag Together" presentation, from March 19, 2013, webinar to local government finance officers.

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  • With this slide, you can introduce the project by starting with the need for the system. Outline the inefficiencies of the old system of Billing in Arrears. This is leaving a lot of money on the table - $80 million statewide to be exact.
  • Here you can verbally explain what HB1779 will do (combine the notices and require payment of taxes prior to vehicle registration) and what NCVTS is (the system that will be used to manage vehicle taxes going forward and make the combined notices possible).
  • Here you can verbally explain what HB1779 will do (combine the notices and require payment of taxes prior to vehicle registration) and what NCVTS is (the system that will be used to manage vehicle taxes going forward and make the combined notices possible).
  • With this slide, you can introduce the project by starting with the need for the system. Outline the inefficiencies of the old system of Billing in Arrears. This is leaving a lot of money on the table - $80 million statewide to be exact.
  • NC Tax & Tag Together Program - Presentation to Local Government Finance Officers

    1. 1. HB1779 for Finance Officers W.A. (Pete) Rodda, CAE, RES David Baker, MPA, PPS Sharon Edmundson, MPA, CPA
    2. 2. Why Implement HB1779? Major Issues: Average of 66% of RMV bills are paid on time Average Collection Rates at Fiscal Year End by County Population: RMV Annual Statewide Average 87.22% 97.91% 100,000+ 88.09% 98.37% 50,000 – 99,999 85.37% 96.96% 25,000 – 49,999 84.01% 96.61% 24,999 and Below 84.08% 95.23% *Source: LGC Memorandum #2012-14, 4/17/2012HB 1779 Vehicle Property Tax Collection 2
    3. 3. Current System: “Billing In Arrears” Why it doesn’t work: • Even at 5%, first month interest not much of an incentive to pay timely. • Many vehicle owners prefer to pay only when the tag needs to be renewed. • Sheer volume of RMV bills versus local collection resources: – The older the RMV bill, the harder it is to collect. – Demographic data (employers, SSNs, banking information) is not in DMV database. • Staggered System versus Fiscal Year.HB 1779 Vehicle Property Tax Collection 3
    4. 4. How HB1779 & NCVTS will Help Improve the citizens’ experience: • Reduce the number of government interactions. • Eliminate the need for delinquent collections. Reduce/share costs: • Duplicate mailings (postage, materials, handling, and so on) Increase Efficiency of an Existing Tax • Improved collections and revenues. • Improved compliance.HB 1779 Vehicle Property Tax Collection 4
    5. 5. New System: “Simultaneous Billing” In the new system property taxes will be included with the “invitation to renew” – now called the Combined Notice. Taxes are collected by DMV/License Plate Agencies (LPAs). DOT Fiscal will distribute money to the Counties on the 10th of each month.  Counties will distribute money to the municipalities. Costs will be allocated among the taxing jurisdictions based upon each jurisdictions contribution to the total bill.HB 1779 Vehicle Property Tax Collection 5
    6. 6. Key Differences Registered Motor Vehicle Tax Levy includes • Renewals/Issuances that have actually been paid • All issued Limited Registration Plates, even if unpaid No More Billing in Arrears • Billing is done when the invitation to renew is sent • Vehicles can not be registered until the taxes are paid The assessor will need to prepare a tax base estimate for registered motor vehicles in a "similar manner" as in the past.HB 1779 Vehicle Property Tax Collection 6
    7. 7. Budgeting for FY2014 Expenses: • Counties will need to account for: • Billing costs ($1.69/notice – includes LPA reimbursement) • Debit & Credit card fees associated with their collections • 4 months operating/maintenance costs for the old system • Costs for developing integration between NCVTS and their current financial system. • Mailing and postage costs will decrease $3 million statewide.HB 1779 Vehicle Property Tax Collection 7
    8. 8. Budgeting for FY2014 (cont.) Revenue: • Counties will see increases in revenue based on: • Higher collection rates (estimated between 9-15 percentage points higher statewide) • Retention of 3% first-month interest after June 30th, 2013 • Counties will receive a one-time distribution of the remaining $18 million balance (approximate) in the special account. • FY2014 will have 16 billing cycles • Four under old system (March 2013 – June 2013 registrations) • Twelve under new system (July 2013 – June 2014 registrations)HB 1779 Vehicle Property Tax Collection 8
    9. 9. Budgeting for FY2014 (cont.) Many of the costs involved in billing in collections are already incurred by the counties and are being transferred to DMV: • Vehicle valuation • Postage and printing • Software/hardware maintenance • Cashiering• The Assessor’s responsibilities remain the same: • Determining values and tax situs • Processing exemptions and appealsHB 1779 Vehicle Property Tax Collection 9
    10. 10. General Rules A registered motor vehicle is a vehicle with an active NC registration (license plate).  Subject to the Tax and Tax Together process. An unregistered motor vehicle does NOT have an active NC registration.  NOT subject to the Tag and Tax Together process. Owners who renew late but within the same registration year pay interest. Vehicles without registrations after the registration year are subject to discovery as personal property in the annual levy.HB 1779 Vehicle Property Tax Collection 10
    11. 11. General Rules For budgetary purposes, the estimated tax value of motor vehicles is included in the total assessed value noted in the budget ordinance. The assessor prepares a tax base estimate in a similar manner as in the past. The registered motor vehicle levy is not charged to the tax collector. The levy consists of “bills for registrations/property taxes actually paid in full through the renewal/issuance process or created through the LRP process. 10
    12. 12. General Rules Financial reports should include net vehicle values, taxes and interest paid by jurisdiction. A methodology for allocating billing and collection costs, credit card and debit card costs shall be provided. The financial report will initially be provided by month of collection. A subsequent version will provide collections by registration month. Both reports will include a year-to-date summary page. Refunds are handled by local governments.HB 1779 Vehicle Property Tax Collection 12
    13. 13. General Rules DOT fiscal will distribute money by the 10th day of the month following collection.  Counties will distribute revenues to the municipalities and other taxing jurisdictions within the county. DOT will show gross collections, billing, credit card and debit card costs, and net revenue.  Costs will be extracted. Costs for the initial mailings will be paid from the Special Account as we start the project.HB 1779 Vehicle Property Tax Collection 13
    14. 14. A Few Other Points Counties will no longer charge municipalities up to 1.5% of collections.  Replaced by cost distribution method. 5% first month interest remains in effect after July 1, 2013. The 3% interest diversion to pay for the system will no longer be diverted to the Special Account after July 1, 2013. Remaining funds in the Special Account will be distributed back to local governments.  Some funding will be withheld for start-up costs, initial maintenance and enhancements.HB 1779 Vehicle Property Tax Collection 14
    15. 15. Reporting NCVTS Financial Report Distribution Reports Valuations, Exemptions Refund Reports  Proration and “appeal based” Appeals Reports Specialty reportingHB 1779 Vehicle Property Tax Collection 15
    16. 16. Reporting NCVTS Financial Report • Obtained from VTS on a monthly basis. • May be imported as a .csv or .xls file or keyed manually into your financial system.  Daily Distribution Report • Obtained daily from VTS – information from previous day  Other reports • Values, exemptions, appeals, etc.HB 1779 Vehicle Property Tax Collection 16
    17. 17. Reporting DOT Fiscal will provide a monthly Remittance Report showing: • Overall collections for your county • Billing and collection costs • Credit card and debit card costs • Net collections after expenses are deductedHB 1779 Vehicle Property Tax Collection 17
    18. 18. The NCVTS Finance ReportHB 1779 Vehicle Property Tax Collection 18
    19. 19. Valuations and Levy Displays • The number of vehicles with renewals, issuances or LRPs. • The net value of registered vehicles, issuances and LRPs • The net taxes and fees billed/collected through renewals, issuances and LRPs. • The net taxes billed on vehicles issued an LRP 19
    20. 20. Collections Displays • The total value of taxes paid through renewals and issuances • The total value of taxes collected through the LRP process • The aggregate collection rate for LRP and Renewal collectionsHB 1779 Vehicle Property Tax Collection 20
    21. 21. Cost Allocation  3 Categories of costs • Billing Costs • Credit Card Costs • Debit Card Costs  Counties should allocate the lump sum costs across their taxing jurisdictionsHB 1779 Vehicle Property Tax Collection 21
    22. 22. Total Collections/Uncollected Provides • Interest collected for each jurisdiction • Total collections (Levy + Interest) per jurisdiction • Total LRP and Levy uncollectedHB 1779 Vehicle Property Tax Collection 22
    23. 23. Cash Flow Vehicle Owners may renew their registration 90 days in advance of expiration • July, 2013 registrations may renew as early as May 1. • The first local revenue distribution should occur in June, 2013. • May collections – July renewals • The second distribution will occur in July, 2013. • June collections – July and August renewals • The third distribution will occur in August, 2013 • July collections – July, August and September renewalsHB 1779 Vehicle Property Tax Collection 36
    24. 24. Cash Flow G.S. 105-330.5(d) states that a county must include taxes on vehicles in the levy in the fiscal year in which the taxes are collected. Remember, there is no levy and therefore no legal obligation to pay until the registration is requested (new registration on which taxpayers chooses limited plates), processed (new registration on which taxpayers opts to pay tax at registration) or renewed (existing registration). Units may choose to track amounts at year end that would have previously been considered pre-paid (generally amounts collected in April – June for registrations not due until July or later) as prepaids.HB 1779 Vehicle Property Tax Collection 35
    25. 25. Cash Flow  Revenues will start small, build each month, then stabilize  About 87% of all renewals are made by the expiration date (with grace period)  About 90% of all renewals are made within 2 months past due  About 92% of all renewals within a July – June fiscal year are made by June 30.HB 1779 Vehicle Property Tax Collection 38
    26. 26. Bankruptcy  New Attorney General’s Opinion that vehicle taxes levied under Tag and Tax Together are subject to bankruptcy provisions.  Vehicle Owner under bankruptcy protection must come forward with evidence of the bankruptcy.  Tax personnel are not required to identify records in advance.  VTS will utilize an exemption code to release taxes appearing on the combined notice.  DMV registration fee is not subject to bankruptcy provisions.HB 1779 Vehicle Property Tax Collection 39
    27. 27. Bad Debt (Bad Checks)  Bad checks will be handled by the DMV.  Block is placed on the renewal of all vehicles and drivers license.  Cash will be distributed to counties initially regardless of the bad debt.  VTS will be flagged that bad debt has occurred.  Flag will be removed when bad debt is satisfied  If bad debt is not satisfied after 13 months, the local tax share of the bad debt will be extracted from monthly distributions.HB 1779 Vehicle Property Tax Collection 40
    28. 28. How HB1779 & NCVTS will Help Improve the citizens’ experience: • Reduce the number of government interactions. • Eliminate the need for delinquent collections. Reduce/share costs: • Duplicate mailings (postage, materials, handling, and so on) Increase Efficiency of an Existing Tax • Improved collections and revenues. • Improved compliance.HB 1779 Vehicle Property Tax Collection 41
    29. 29. Why Implement HB1779? Major Issues: Average of 66% of RMV bills are paid on time Average Collection Rates at Fiscal Year End by County Population: RMV Annual Statewide Average 87.22% 97.91% 100,000+ 88.09% 98.37% 50,000 – 99,999 85.37% 96.96% 25,000 – 49,999 84.01% 96.61% 24,999 and Below 84.08% 95.23% *Source: LGC Memorandum #2012-14, 4/17/2012HB 1779 Vehicle Property Tax Collection 42
    30. 30. Questions?HB 1779 Vehicle Property Tax Collection 43

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