Governor Lamont’s Executive Order 7S Contains Critical Information Relating to Collection of Property Taxes

On April 1, 2020, Governor Ned Lamont issued Executive Order No. 7S (the “Order”) which directs municipalities to establish one or both of two new tax relief programs offered for eligible taxpayers, businesses, nonprofits, and residents who have been economically affected by the COVID-19 pandemic (the “Programs”).

The Programs

• The two short-term tax relief Programs include the Deferment Program and the Low Interest Rate Program.  The Order requires all towns, cities, and boroughs as well as their water pollution control authorities to adopt either or both Programs by a vote of the legislative body, or, in any town in which the legislative body is a town meeting, by a vote of the board of selectmen.  The Deferment Program defers payments by 90 days for taxpayers based on a showing of need, while the Low Interest Rate Program reduces the interest chargeable for all taxpayers in the municipality for 90 days.  This requirement to adopt either or both Programs does not apply to special taxing districts or special services districts.  All municipalities must notify the Secretary of the Office of Policy and Management (“OPM”) no later than April 25, 2020 which Programs it is electing.
• The “Deferment Program” delays payments due on any tax, utility, or other assessment by 90 days if taxpayers, businesses, nonprofits and residents demonstrate significant economic impact caused by COVID-19 and/or demonstrate that they are assisting people who are experiencing significant economic impact caused by COVID-19. This program applies to charges which would otherwise be due from March 10 to July 1, 2020. OPM intends to provide guidance on which taxpayers, businesses, nonprofits, and residents are eligible for the program.  Municipalities have the option to expand eligibility for the program to other categories of taxpayers, businesses, nonprofits and residents.  This program is likely to result in delayed and decreased collections for the property taxes due in July which would have a negative effect on cash flow. Municipalities interested in this program should consider evaluating the need to issue tax anticipation notes (“TAN’s”) to mitigate the potential cash flow issue. 
• The “Low Interest Rate Program” lowers the interest rate to 3% per annum (0.25% monthly) on any tax, utility, or other assessment that is due or will become due between March 10, 2020 and July 1, 2020 and is not paid on time and also those which were already delinquent before March 10, 2020.  After the 90-day period which begins on the tax due date, the regular rate of interest is restored on all remaining balances.

Tax Sales

• The Order suspends all non-judicial tax sales effective immediately, and postpones them until a date the tax collector selects that is at least 30 days after the Governor declares the COVID-19 emergency to have ended.  The Order also extends all redemption periods for tax sales conducted in the prior six months by the duration of the emergency, and reduces the interest rate for doing so to 3% per annum (0.25% monthly).

Please feel free to contact any member of our Government Finance team to assist you with any tasks related to implementing the Programs including drafting the details for the Programs, issuing TANs as set forth above and/or to assist you in drafting any applicable resolutions. 

Pullman & Comley attorneys have been closely monitoring the many developing implications of the COVID-19 pandemic for businesses and for professionals, including law firms.  We have been responding, and will continue to respond, to a wide range of risk management questions.  The firm’s FOCUS page for the latest COVID-19 advisories may be found here.