2001-5 Delinquent Tax Revolving Funds Revisions to Accounting after Public Act 123 of 1999

February 8, 2001

To: County Treasurers, Controllers, Board of Auditors, Board of Commissioners

From: Richard L. Baldermann, CPA, CGFM Administrator, Local Audit and Finance Division Bureau of Local Government Services

RE: Accounting for Delinquent Tax Revolving Funds (100% Tax Payment Funds)

The county treasurer is required by the General Property Tax Law (Act 206 of 1893, as amended, Michigan Compiled Law (MCL) 211.1 to 211.157) to collect delinquent real property taxes levied by all local units of government within the county. Public Act 123 of 1999 amended the General Property Tax Law to subject tax delinquent property to forfeiture, foreclosure, and sale over a three-year period. Public Act 123 of 1999 applies to taxes levied after December 31, 1998. All property returned for delinquent taxes, and upon which taxes, interest, penalties, and fees remain unpaid after the property is returned as delinquent to the county treasurers, is subject to forfeiture, foreclosure, and sale for the enforcement and collection of the delinquent taxes. The act reformed the tax reversion process by decreasing the process to three years and amended the May Tax Sale process. It established the primary responsibility for administration with the foreclosing governmental units. Under the act, "foreclosing governmental unit" is defined to mean a county treasurer or the state, if the county has elected not to handle the process. The act added several new fees as a result of changes in the delinquent property tax process. How the fees are handled, in most cases, depends on whom the "foreclosing governmental unit" (FGU) is. However, the accounting for the delinquent tax revolving funds did not change significantly with the enactment of PA 123 of 1999 and in most situations Numbered Letter 7-88 issued August 17, 1988 by Treasury still apply.

This letter discusses the accounting procedures for recording transactions when the county board of commissioners authorizes the creation of a delinquent tax revolving fund taking into consideration the amendments associated with PA 123 of 1999. The General Property Tax Law authorizes the county treasurer to "buy" any or all delinquent real property taxes and special assessments owed to the county and local units of government in the county. Under MCL Section 211.87b-d, the county treasurer pays the local unit treasurer in full for delinquent real property taxes owed according to the delinquent tax roll "returned" to the treasurer. Taxes eligible for payment under this section are:

...all delinquent taxes, except taxes on personal property, due and payable to the taxing units in the county, except those units which collect their own delinquent taxes after March 1...(MCLA 211.87b(1))

The county treasurer shall pay from the fund any or all delinquent taxes which are due and payable to the county and any school district, intermediate school district, community college district, city, township special assessment district, or any other political unit...(MCLA 211.87b(3)) Pursuant to Michigan Compiled Laws 211.87b, the board of commissioners may establish the Delinquent Tax Revolving Fund (DTRF). This fund must be segregated into separate funds or accounts for each year's delinquent taxes. The board must adopt a resolution establishing the separate fund or accounts for each tax year. Each year's separate fund or accounts continue in existence until the delinquent taxes for that tax year have been collected and the county board of commissioners have transferred any surplus to the county's general fund, in accordance with MCL section 211.87b. (7). The county retains all delinquent taxes, interest and penalties collected to offset its tax collection costs.

The surplus earned, after any borrowing is paid off, is under the control of the board of commissioners. The surplus may be accumulated to reduce or avoid future borrowings, or expended for other purposes as authorized by the board of commissioners.

This section allows local units and county funds to receive full payment for all delinquent real property taxes due them within 20 days (30 days if the county population exceeds 1,500,000) after sufficient money is deposited into the Delinquent Tax Revolving Fund.

The county treasurer (hereafter referred to as the treasurer) also avoids the complications of having to make monthly payments to local units for their share of collections of delinquent taxes and related interest (MCL 211.87).

As further described in the "Uniform Chart of Accounts for Counties and Local Units of Government in Michigan," a Delinquent Tax Revolving Fund (DTRF) "accounts for money advanced by a county to pay other local taxing units and various county funds for their delinquent taxes."

Delinquent property taxes are accounted for by the year that the delinquent taxes become delinquent in a fund segregated for the individual year's delinquent tax collections. The fund is called the Delinquent Tax Revolving Fund referred to as DTRF throughout this letter.

DTRF(s) must clearly indicate the tax delinquency year, either by fund number or, if only one DTRF is used, by separate activity numbers. The three fund/activity structure options follow. Option "a" is used in this letter. The yearly suffix number will correspond to the year of the general obligation limited tax notes, if notes are issued.

a) A series of DTRF's including a control DTRF, number 616, plus a separate DTRF for each year for which delinquent taxes are being collected by the treasurer. Each year's DTRF should be numbered to reflect the year of delinquency, i.e., fund 616.84 would account for taxes that become delinquent March 1, 1984. When notes reach final maturity and payment is made, and the tax sale for properties with unpaid delinquent taxes has been held, that year's DTRF may be closed to the General Fund. The board of commissioners could then transfer the surplus to the control DTRF for use in the purchase of future delinquent taxes.

b) A series of DTRF's as in option "a," including a control DTRF, number 615, and funds for each year numbered 616-625. The last digit would correspond to the last digit of the delinquent tax year (625 for taxes delinquent as of March 1, 1985).

c) A single DTRF, number 616, may be used. The accounts related to each tax levy are then designated by a unique activity number, such as "085" for taxes that become delinquent March 1, 1985.

Section 60 of the General Property Tax Law (which was added as results of PA 123 of 1999 amendments) authorizes the county treasurer to cancel the 2000 tax lien sale and the 2001 tax lien sale respectively, if there are no county delinquent tax revolving fund notes or bonds outstanding. If the county treasurer canceled the 2000 tax-lien sale or the 2001 tax-lien sale, then the 1997 delinquent taxes or 1998 delinquent taxes are subject to forfeiture and foreclosure. It provides in Section 60a (which was also added as results of PA 123 of 1999 amendments) that if a tax lien sale is canceled, delinquent taxes on the property will be subject to a 4 percent county property tax administration fee. Non-compounded interest at a rate of 1 percent per month can be added computed from the March 1 when the taxes were returned delinquent.

All activity, prior to the property tax foreclosure process under the regular delinquent property tax collection process, should be accounted for under activity number 253. For example, interest and penalties on taxes go to activity number 253 as in the past. All revenue and expenditures after the property tax foreclosure process goes into activity number 254 within the delinquent tax revolving fund.

On March 1, forfeiture date certain, MCL 211.78g requires that the following fees may be charged and collected by the county treasurer prior to redemption of the parcel from forfeiture and subsequent foreclosure.

  • On March 1, in each tax year, certified abandoned property and property that is delinquent for taxes, interest, penalties and fees for the immediately preceding 12 months or more is forfeited to the county treasurer for the total amount of those unpaid delinquent taxes, interest, fees and penalties. If property is forfeited to a county treasurer under this subsection, the county treasurer does not have a right to possession of the property until 21 days after a judgment of foreclosure is entered under 78k. If property is forfeited to a county treasurer under this subsection, the county treasurer shall add $175 fee, as adjusted under section 78p, to each parcel of property for which those delinquent taxes, interest, penalties and fees remain unpaid.
  • Property forfeited to the county treasurer under subsection (1) may be redeemed at any time before 21 days after the entry of judgment foreclosing the property under section 78k upon payment to the county treasurer of all of the following:
    (a) The total amount of unpaid delinquent taxes, interest, penalties and fees for which the property was forfeited.

    (b) In addition to the interest calculated under section 60a(1) or (2) and 78(3) additional interest computed at the non-compounded rate of ½% per month or fraction of a month on the taxes that were originally returned as delinquent computed from March 1 preceding the forfeiture.

    (c) All recording fees and all fees for service of process or notice.

PA 123 of 1999 allows the County Treasurer (or State if it's the FGU) to sell the forfeited property to recover the amount owed for delinquent property taxes if the property is not redeemed. The foreclosing governmental unit must deposit the proceeds from the sale of tax delinquent property into a "restricted account" created for each year a property sale is held. We recommend that the County establish the restricted accounts within the Delinquent Property Tax Revolving Fund based on the year of the sale. Activity # 254--Delinquent Tax Property Sales should be used to record the sale proceeds and the authorized expenditures from the proceeds. When the forfeited property is sold, the proceeds from the sale should be recorded in the Delinquent Property Tax Revolving Fund under revenue account number 642 "Charge for Services-Sales." The proceeds in the fund can only be used for the following expenditures.

1. The delinquent tax revolving fund shall be reimbursed for all taxes, interest, and fees on all of the property whether or not it was sold.
Foreclosed property reimbursement

  1. Reimbursement of all unpaid base tax, interest, administration fee paid to the local units of government at settlement, pre-forfeiture notices mailing fees, certified mailing fee, publication costs, pre-foreclosure personal property visits, certified mailing, publication costs, and recording fees that have not been reimbursed through redemption and were originally expended from the delinquent tax revolving fund to the last day prior to all redemption rights being extinguished.

2. All costs of the sale of property for the year shall be paid.
Foreclosed property auction sales cost examples

  1. Contracting costs for hiring sales auctioneer, property sale publications, property sale signs, supplies and materials necessary for conducting the sales, etc.

3. Any costs of the foreclosure proceedings for the year, including costs of mailing, publication, personal service, and outside contractors, shall be paid.
Foreclosure proceeding cost examples

  1. Foreclosure petition filing fees and any subsequent court motion filing fees; costs of outside title search contractors; process service contractors; other contractors; and any other costs that were originally expended from the county's general fund or another source of revenue other than the delinquent tax revolving fund and not reimbursed to the last day prior to all redemption rights being extinguished.

4. Any costs for the sale of property or foreclosure proceedings for any prior year that have been paid or reimbursed from that prior year's property sales proceeds shall be paid.

5. Any costs incurred by the foreclosing governmental unit in maintaining foreclosed property before the sale, including costs of any environmental remediation, shall be paid.
Property maintenance cost examples

  1. Boarding up empty dwellings, disconnecting utilities, environmental clean-up costs, posting property as no trespassing, mowing grass, evicting tenants, etc.

6. If the foreclosing unit is the State, any remaining balance shall be transferred to the Land Reutilization Fund.

The county treasurer must direct the investment of surplus funds and credit the interest and earnings from the investments to the restricted activity. The revenue and expenditures in activity 254 must be closed to a separate restricted earnings account in the fund equity within the Delinquent Tax Revolving Fund.

JOURNAL ENTRIES FOR TRANSACTIONS INVOLVING DELINQUENT PROPERTY TAXES

I. PROPERTY TAXES ARE LEVIED AND COLLECTED PRIOR TO BECOMING DELINQUENT

The county treasurer records all property taxes from county millage(s). Collections are termed "current levy" from December 1 until March 1 and "delinquent taxes" beginning March 1.

Records county portion of taxes levied on December 1, 20X1 in each fund for which millage has been levied. In accordance with the modified accrual basis of accounting, the receivable if offset by deferred revenue. Some adjustments may be necessary due to December Board of Review or Tax Tribunal actions *101-000-020 Taxes Receivable
--Real Property
--Current Levy
Debit
*101-000-339 Deferred Revenue
--Real Property
--Current Levy
Credit
After the local unit treasurer collects the property tax and pays the county treasurer, the collection is recorded in the Trust and Agency Fund as undistributed current taxes until March 1, 20X2. 701-000-001 Cash Debit
701-000-274 Undistributed Tax Collections Credit
Property tax collections are transferred to the General Fund and other funds with voted millage after December 31. The 701-000-274 balance will then be $0.00. When paying other units for taxes collected, only the entry in Fund 701 is needed. 701-000-274 Undistributed Tax Collections Debit
701-000-001 Cash Credit
*101-000-001 Cash Debit
*101-000-402 Current Property Taxes
--Allocated
Credit
Current tax levy receivable and deferred revenue balances are reduced when money is receipted in as Current Property Taxes--Allocated (previous entry).

NOTE: An entry is contained in III, which fully eliminates the receivable and deferred revenue account balances.

*101-000-339 Deferred Revenue
--Real Property
--Current Levy
Debit
*101-000-020 Taxes Receivable
--Real Property
--Current Levy
Credit
* Use the number for the fund(s) receiving property taxes.

II. FUNDS ARE PROVIDED TO PURCHASE DELINQUENT TAXES (3 ALTERNATIVES)

BORROWING ALTERNATIVE A: from General Fund
General Fund advances cash to the Delinquent Tax Revolving Fund (DTRF) or, alternatively, the 20X1 DTRF, 616.X1. 101-000-198 Long-Term Advances to
Other Funds
Debit
101-000-390 Fund Balance Debit
101-000-369 Fund Balance Reserved for
Advances to Other Funds
Credit
101-000-001 Cash Credit
Advance is recorded in the DTRF (or 616.X1). 616-000-001 Cash Debit
616-000-314 Advances from Other Funds Credit
DTRF (or 616.X1) repays
General Fund
(reverse of two preceding entries)
BORROWING ALTERNATIVE B: from Delinquent Tax Revolving Fund
DTRF (or control DTRF or prior year DTRF surplus) advances funds to purchase delinquent taxes to 616.X1. 616-000-198 Long-Term Advances to
Other Funds
Debit
616-000-001 Cash Credit
  616.X1-000-001 Cash Debit
616.X1-000-314 Advances from Other Funds Credit
BORROWING ALTERNATIVE C: from General Obligation Limited Tax Notes (GOLT)
The GOLT Notes and Notes Proceeds are recorded in 616.X1. Account 007, Cash--Note Payment Reserve, records the "Note Reserve Fund" required in some note issues. The entry to accounts 001 and 007 is the note proceeds net of any discount and/or costs and fees. 616.X1-000-001 Cash (unreserved portion) Debit
616.X1-000-007 Cash--Note Payment Reserve Debit
616.X1-000-997 Borrowing Costs and Fiscal
Agent Fees
Debit
616.X1-000-129 Unamortized Note Discount Debit
616.X1-000-207 Notes Payable--Current Credit
616.X1-000-307 Notes Payable--Long Term Credit
At the end of the year, the amount of principal due with the following year is transferred from Long Term to Current Notes Payable. 616.X1-000-307 Notes Payable--Long Term Debit
616.X1-000-207 Notes Payable--Current Credit
Payment of interest and/or principal is made. 616.X1-000-207 Notes Payable--Current Debit
616.X1-000-702 Treasurer's Agent Salary Debit
616.X1-000-995 Interest on Note Payable Debit
616.X1-000-820 Note Borrowing Costs and
Fiscal Agent Fees
Debit
616.X1-000-001 Cash Credit
The final payment of principal is made. 616.X1-000-207 Notes Payable--Current Debit
616.X1-000-007 Cash--Note Payment Reserve Credit

III. DELINQUENT PROPERTY TAXES PURCHASED FROM UNITS (March settlement)

During March 20X2, each unit settles with the treasurer. When funds are on hand, the treasurer writes a check on the DTRF in the amount of its delinquent taxes as recorded in its delinquent tax roll (MCL 211.44, 211.54). 616.X1-000-
026.XX
Taxes Receivable
--Delinquent Real
Debit
616.X1-000-001 Cash Credit

IV. PROPERTY OWNERS PAY DELINQUENT TAXES

From March 1, 20X2, all taxes are paid to the treasurer along with interest and property tax administration fee (PTAF). Expense of sale (accounts 228.13 and 214.02) is also charged beginning October 1, 19X4 (MCL 211.59, 211.60, 211.87b(6)). 616.X1-000-001 Cash Debit
616.X1-000-
026.XX
Taxes Receivable--Delinquent
Real
Credit
616.X1-000-
228.13
Due to State of Michigan
--State Tax
Credit
616.X1-000-445 Interest on Taxes Credit
616.X1-000-447 Property Tax Administration
Fee (borrowing) OR
Credit
616.X1-000-
214.01
Due to General Fund
--Property Tax
Administration Fee
(no borrowing)
Credit
616.X1-000-
214.02
Due to General Fund--County
Expense of Sale
Credit
To simplify receipting, the Expense of Sale (account 449) is shown above as a 616.X1 Fund Payable (account 214.02) during the year, then at year-end the balance in account 214.02 is transferred to the General Fund. If there is no borrowing, the PTAF (account 214.01) is likewise transferred to the General Fund 616.X1-000-
214.01
Due to General Fund
--Property Tax
Administration Fee
(no borrowing)
Debit
616.X1-000-
214.02
Due to General Fund--County
Expense of Sale
Debit
616.X1-000-001 Cash Credit
101-000-001 Cash Debit
101-000-447 Property Tax Administration
Fee (no borrowing)
Credit
101-000-449 County Expense of Sale Credit
A portion of interest included in delinquent tax collections may be used to offset DTRF costs; and the treasurer may be paid an agent fee (MCL 211.87c(3)) subject to subsection (16). The board of commissioners must approve requisitions of supplies and materials prior to the ordering and payment of agent fees by resolution for the tax year (MCLA 211.87c(3)). If the General Fund provides salaries, supplies and/or materials for delinquent tax collections, the DTRF may reimburse the General Fund. A county treasurer elected or appointed to office after the effective date of PA 123 (10/1/99) is not eligible for payment for services as agent for the county. 616.X1-000-702 Treasurer's Agent Fee Debit
616.X1-000-715 Employer's Social Security Debit
616.X1-000-726 Office Supplies Debit
616.X1-000-146 Office Equipment Debit
616.X1-000-991 Cash Credit
ALTERNATIVE: Set up a payable for payment to the treasurer at a later date. If the year's DTRF is closed to the control DTRF, this payable would be transferred to the control DTRF.
616.X1-000-702 Treasurer's Agent Fee Debit
616.X1-000-204 Treasurer's Agent Fee Payable Credit
The board of commissioners may transfer a DTRF surplus to the General Fund (MCL 211.87b(7)). If Borrowing Alternative C is used, notes and interest must be fully retired before any surplus is transferred. 616.X1-000-999 Transfer Out Debit
616.X1-000-001 Cash Credit
101-000-001 Cash Debit
101-000-699 Transfer In Credit

V. IF MAY TAX SALE IS HELD; OWNERS HAVE ONE YEAR TO REDEEM PROPERTY (Under Old Process Prior to PA 123 of 1999. Effective December 31, 2003, the May tax sale process by the county treasurer as defined in MCL 211.70 is repealed by PA 123 of 1999. Effective December 31, 2006, the process to purchase state bids after the tax sale as defined by MCL 211.84 is repealed.)

At the May tax sale, property may be purchased for delinquent taxes, subject to redemption by the original owner. On the first Tuesday of May 19X5, lands delinquent for taxes are sold. Unsold properties are bid to the state (MCL 211.70, 211.74 and 211.84). (The entry for purchases or for owner redemption of lands bid to the state in the 6 months following the sale is the same as in IV, except that interest is computed at 1.25% per month on the sale price from May 1, 19X5 to April 20, 19X6 if purchasing (MCL 211.84), or to before the next sale if redeeming (per MCL 211.74)).

VI. MAY TAX SALE CANCELED UNDER PA 123 OF 1999 (per example on pg. 10 and 11)

The May tax sale was repealed by Public Act 123 of 1999. Unsold properties are no longer bid to the State of Michigan. (MCL 211.70, and 211.84 are repealed effective December 2003 and 2006, respectably) Section 60 authorizes the treasurer to cancel the 2000 tax lien sale and the 2001 tax lien sale. If both years are canceled, 1997 and 1998 delinquent taxes will be subject to forfeiture and foreclosure under PA 123 of 1999.







 

Although PA 123 repealed the May Tax Sale, property still may be sold for the delinquent taxes through forfeiture and subsequent foreclosure by the foreclosing governmental unit. The entry for the redemption of property is similar as noted above and in IV. However there will be additional fees.

The statute provides that forfeited property may be redeemed at any time before 21 days after entry of a foreclosure disclosure judgment and is recorded as revenue to the FGU. The person with a legal interest in the property must pay all of the following:

(1) total of unpaid taxes, interest, penalties and fees for which the property was forfeited,
(2) additional interest at a non-compounded rate of 0.5 percent per month
(3) all recording, service of process, and notice fees.

Accounting for the 1997 delinquent taxes redemption would be recorded the same as in prior years noted in Numbered Letter 7-88 issued August 17, 1988 by Treasury within the Delinquent Tax Revolving Fund.
616.97-000-001 Cash 157.50
616.97-000-026.XX Taxes Receivable
--Delinquent Real
100.00
616.97-000-447 Property Tax Administration
Fee (borrowing) or
4.00
616.97-000-214.01 Due to General Fund--Property
Tax Administration (no
borrowing)
 
616.97-000-214.02 Due to General Fund--County
Expense of Sale
5.00
616.97-000-228.13 Due to State of Michigan
State Tax
5.00
616.97-000-445 Interest on Taxes 43.50
Accounting for the 1999 delinquent taxes redemption would be recorded as follows with the new fees under Act 123.
616.99-000-001 Cash 363.31
616.99-000-026.XX Taxes Receivable
--Delinquent Real
120.00
616.99-000-447 Property Tax Administration
Fee (borrowing) or
4.80
616.99-000-214.01 Due to General Fund
--Property Tax Administration
(no borrowing)
 
616.99-000-445 Interest on Taxes 23.40
616.99-000-639 Title Search Fee (new) 175.00
616.99-000-228.51 Due State of Michigan
Title Search Fees (County
Opts Out)
 
616.99-000-088.01 Forfeiture Certificate Recording Fee Receivable 9.00
616.99-00-222 Due to County Register of Deeds Redemption Certificate Fee 9.00
616.99-000-640 Notice Fees-Mail (new) 7.11
616.99-000-641 October 1 Fee (new) 15.00
Note: Forfeited property is not redeemed from forfeiture and subsequent foreclosure unless the total amount of all taxing years are paid in full. That includes any additional costs and interest non-compounded at 1.5% per month on the base tax for each delinquent tax year added from March 1 to date that all redemption rights expire. All redemption rights expire if the redemption is not made within 21 days after the foreclosure judgment is entered on the property and no appeal is filed. Partial payments can be made but the property is not redeemed from forfeiture and subsequent foreclosure until each forfeited parcel has a zero balance due on all tax years.

Given these statutory provisions of PA 123 of 1999, the costs of redemption from forfeiture and subsequent foreclosure for the March 1, 2001 forfeiture year, is shown in the example noted based on the following assumption.

Assumption: one parcel with 1997 and 1999 tax years with unpaid balances for each year on March 1, 2001. Both tax years forfeited must be paid within 21 days after the foreclosure judgment is entered in order to redeem the parcel from forfeiture and succeeding foreclosure.

Example: February and March Redemption Cost Calculation plus Accounting for Fees
Assume that the property owner paid the delinquent 1997 and 1999 taxes subject to forfeiture and the 2000 tax sale was cancelled. The following accounting entries would be made with the new fees as required by Act 123 of 1999 based on the following information.

  1997   1999  
Tax Years Unpaid
Base Tax
$100.00
 
$120.00
 
4% Administration Fee
(not less than $1.00)
4.00
 
4.80
 
1% Interest Per Month
36.00
(36 mo)
14.40
(12 mo)
$10 Expense of Sale
10.00
 
00.00
 
$15 October Fee
00.00
 
15.00
 
         
February Total Due
$150.00
 
$154.20
 

Computation of the Amount Due on March 1, 2001

  1997 1999
Tax years Forfeited
February Delinquent Amount Due

$150.00

$154.20

Add February delinquent due plus additional fees added on March 1, forfeiture date

Additional .5% Interest Added
to the Prior 12 Months
$6.00
(12 mo)
$ 7.20
(12 mo)
1.5% Interest for March
1.50
(1 mo)
1.80
(1 mo)
Title Search Fee
0.00
 
175.00
 
Forfeiture Certificate Recording Fee(1)
0.00
 
9.00
 
Redemption Certificate Recording Fee(2)
0.00
 
9.00
 
Cost of June Notice (3)
0.00
 
1.88
 
Cost of September Notice (4)
0.00
 
2.40
 
Cost of February Publication (5)
0.00
 
2.83
 
         
Total Additional Fees Added on March 1
Forfeiture Date
$7.50
 
$209.11
 
(1) Forfeiture Certificate Recording fees are $9.00 first page and $2.00 each additional page unless the State and Register of Deeds allows recording one generic Forfeiture Certificate with an appended list of parcels forfeited. If an appended list is approved, the recording fee for each parcel would be calculated as (cost of recording/number = cost of recording each parcel)
(2) Redemption Certificate Recording fee is $9.00. Each parcel shall have a separate Redemption Certificate recorded.
Notice Fee Example
(3) June notice stamps and envelopes = ($1,500/800 parcels) $1.88 per parcel
(4) September notice stamps and envelopes = ($1,200/500 parcels) $2.40 per parcel
(5) Optional pre-forfeiture publication = ($850/300 parcels) $2.83 per parcel

Redemption Amount Due March 1, 2001 = $520.81

Section 78g(3)(c) states: All recording fees and all fees for service of process or notice. The costs of the June and September notices and optional pre-forfeiture certified mail publication notice may be added to the 1999 tax year redemption under 78g(3)(c).

Costs for the 1999 parcel for redemption could also include:

(6) FGU show cause hearing notice certified mailing costs and circuit court foreclosure hearing costs (Section 78i(2))

(7) Personal property visit process service costs for occupant/posting notice of FCU show cause hearing and circuit court hearing (Section 78i(3)(a-d) assuming both notices served on one visit.

(8) Publication costs for service of process for FGU show cause hearing for persons entitled to receive notice and whose address can not be ascertained or unable to serve those persons (78i(6)).

(9) $9 recording fee for FGU show cause hearing and circuit court hearing notice proof of service on persons entitled to receive notice (78 i (4)) assuming both notices were served at the same time and 1 page proof of notice recorded.

(10) $9 recording fee for service of notice of the FGU show cause hearing and circuit court foreclosure hearing on occupants of the properties subject to foreclosure (78 i (3)(4)) assuming both notices served at the same time and 1 page proof of notice recorded.

(11) $9 and $2 per each additional recording fee for publication of FCU show cause hearing and circuit court hearing notice publication (78 i (6)) assuming notices with an appended list of properties to equal more than a one page recording.

VII. AFTER THE MAY TAX SALE, UNPAID DELINQUENT TAXES ARE CHARGED BACK TO LOCAL UNITS. THE COUNTY POLICY WILL DETERMINE WHETHER THE CHARGE BACKS OCCUR IMMEDIATELY AFTER MAY TAX SALE OR AT A LATER DATE. TAX TRIBUNAL ADJUSTMENTS ARE LIKEWISE CHARGED BACK. (Under Old Process Prior to PA 123 of 1999)

Because unpaid property taxes are ultimately the liability of the local taxing units (MCL 211.87b(1)), the treasurer charges taxes unpaid by first recording the liability 616.X1-000-
081.XX
Due from Other Units of
Government
Debit
616.X1-000-084 Due from Other Funds Debit
616.X1-000-
026.XX
Taxes Receivable--Delinquent
Real
Credit
Payment of the liability by the levying unit is recorded. Alternatively, at the next March settlement the treasurer may deduct the amount due from the payment to the local treasurer. 616.X1-000-001 Cash Debit
616.X1-000-
081.XX
Due from Other Units of
Government
Credit
616.X1-000-084 Due from Other Funds Credit

VIII. DTRF 616.X1 IS CLOSED TO THE GENERAL FUND

The DTRF 616.X1 is closed out on December 31, 19X5. Where tax anticipation notes have been issued, all principal and interest debt must be retired. The accumulated surplus in Fund 616 belongs, according to statute, to the General Fund. This money should be transferred to the General Fund. Good and consistent management would require that the surplus be reserved for the purchase of additional delinquent taxes, or immediately advanced to another DTRF for the purchase. 616.X1-000-999 Transfer Out Debit
616.X1-000-001 Cash Credit
616.X1-000-
026.XX
Taxes Receivable--Delinquent
Real
Credit
101-000-001 Cash Debit
101-000-699 Transfer In Credit
END OF YEAR    
616.X1-000-395 Retained Earnings Debit
616.X1-000-400
to 699
All Revenue and Transfer
In Accounts
Debit
616.X1-000-700
to 999
All Expenditure and Transfer
Out Accounts
Credit

IX. ENTRIES TO RECORD THE COLLECTION OF TAXES

Entries to record the collection of taxes after chargeback to the tax assessing units (delinquents or redemptions) include: 616.X1-000-001 Cash Debit
616.X1-000-214 Due to Other Funds Credit
616.X1-000-221 Due to Cities Credit
616.X1-000-225 Due to Schools Credit
616.X1-000-226 Due to Townships Credit
616.X1-000-
228.13
Due to State of Michigan
--State Tax
Credit
616.X1-000-445 Revenue--Interest Credit
616.X1-000-447 Property Tax Administration
Fee
Credit

X. ENTRIES TO RECORD THE SALE OF FORFEITED PROPERTY

Entries to record the sale of forfeited property for the unpaid taxes, interest and fees if the property is not redeemed. The proceeds from the sale must be deposited into a "restricted account" created for each year a property sale is held. The restricted account should be established in the Delinquent Property Tax Revolving Fund based on the year of the sale. Activity #254 should be used to account for the sale proceeds and the authorized expenditures from the proceeds. 616.X1-254-001 Cash Debit
616.X1-254-642 Charge for Services--Sales Credit
CHART OF ACCOUNTS USED IN ACCOUNTING FOR
DELINQUENT TAXES

The following account numbers are in accordance with the Uniform Chart of Accounts (UCA), Michigan Department of Treasury, 1984. Where the UCA does not specify an account, an appropriate open account number has been recommended. Further information on the purpose of these accounts is provided below and/or in the UCA, as referenced.

DELINQUENT TAX REVOLVING FUNDS (616.XX)

ASSET ACCOUNTS REFERENCE
001 Cash a, UCA
007 Cash--Note Payment Reserve a
026.XX Taxes Receivable--Delinquent Real b, UCA
081.XX Due from Other Units of Government c, UCA
084 Due from Other Funds UCA
088.01 Forfeiture Certificate Recording Fee Receivable d
129 Unamortized Note Discount UCA
146 Office Equipment UCA
198 Long-Term Advances to Other Funds UCA
LIABILITY ACCOUNTS  
204 Treasurer's Agent Fee Payable e
207 Notes Payable--Current UCA
214 Due to Other Funds UCA
214.01 Due to General Fund--Property Tax Administration
Fee
l, UCA
214.02 Due to General Fund--County Expense of Sale m, UCA
221 Due to Cities UCA
222 Due to County--R of D Redemption Certificate Fee f
225 Due to Schools UCA
226 Due to Townships UCA
228.13 Due to State of Michigan--State Tax g, UCA
228.51 Due to State of Michigan--Title Search Fee
(Opt out Counties Only)
h, UCA
307 Notes Payable--Long Term UCA
314 Advances from Other Funds UCA
FUND EQUITY ACCOUNTS  
395 Retained Earnings UCA
396 Retained Earnings Reserved for Notes Payable UCA
397 Retained Earnings Reserved for Delinquent Property Tax Sales u, UCA
ACTIVITY ACCOUNTS  
253

254

Treasurer--Delinquent Tax--Prior to Act 123
Process
Other Treasurer's Activities--Delinquent Tax
Property Sales--After Act 123 Process
I, UCA

j, UCA

REVENUE ACCOUNTS  
445 Interest on Taxes k, UCA
447 Property Tax Administrative Fee (if borrowing) l, UCA
639 Title Search Fee n
641 Pre-forfeiture Mailing Notice Fee (Cost) o
665 Interest on Investments--Regular p, UCA
670 Interest on Note Reserve Investments p, UCA
676 Reimbursement q, UCA
698.1 Premium/Discount on Note Proceeds UCA
EXPENDITURE ACCOUNTS  
702 Treasurer's Agent Fee r, UCA
715 Employer's Social Security r, UCA
726 Office Supplies r, UCA
807 Other Contractual Services--Title Search Company s
980 Capital Outlay r, UCA
995 Interest on Note Payable UCA
997 Note Borrowing Costs and Fiscal Agent Fees t
999 Transfer Out UCA

GENERAL FUND (101)

ASSET ACCOUNTS REFERENCE
001 Cash UCA
020 Taxes Receivable--Real Property--Current Levy UCA
084 Due from Other Funds UCA
198 Long-Term Advances to Other Funds UCA
OTHER CREDITS  
339 Deferred Revenue--Real Property--Current Levy UCA
FUND EQUITY ACCOUNTS  
369 Fund Balance Reserved for Advances to Other Funds UCA
390 Fund Balance UCA
REVENUE ACCOUNTS  
402 Current Property Taxes--Allocated UCA
412 Delinquent Real Property Taxes UCA
422 Redemptions and Reconveyance UCA
445 Interest on Taxes UCA
447 Property Tax Administration Fee (if no borrowing) l, UCA
448 Processing Fee on Redemptions UCA
449 County Expense of Sale m, UCA
699 Transfer In UCA
TRUST AND AGENCY FUND
ASSET ACCOUNTS  
001 Cash UCA
LIABILITY ACCOUNTS  
228.13 Due to State of Michigan--Expense of Sale UCA
228.51 Due to State of Michigan--Title Search Fee
(Opt Out)
h, Optional
274 Undistributed Tax Collections UCA

ACCOUNT DESCRIPTIONS FOR DELINQUENT TAX REVOLVING FUND(S)

a) ACCOUNT 007, CASH--NOTE PAYMENT RESERVE, provides a restricted cash account for a note reserve "fund," if the note payment reserve is established in the note resolution according to MCL 211.87d(6)(c). A portion of note proceeds is recorded in account 007 according to the resolution. The "purchase" of delinquent taxes is made from account 001. The balance in account 007 must equal any note payment reserve required in the note resolution or note covenants. This note payment reserve is pledged to repay principal and interest on the notes or the purchase of notes, and may be used to retire the notes and accrued interest. In any case, this account must be maintained until final payment of bonds and interest is made. At that time, the reserve fund cash will be used in making the final payment. (per Letter #99-June 14, 1982)

NOTE: Joint or combined investments with other DTRF cash accounts or other county funds can be made (unless restricted in the note resolution or by note covenants) where detailed accounting is maintained which shows the amount invested for each fund, and where the interest earned is prorated to the funds with money in the combined investment.

b) ACCOUNT 026.XX TAXES RECEIVABLE--DELINQUENT REAL, records delinquent taxes purchased by the county treasurer from local taxing units and county funds. Delinquent taxes equal the unpaid property taxes levied plus the local Property Tax Administration Fee of 1% if the unit elected to levy that fee (MCL 211.44(6)). THE ACCOUNT SHOULD BE POINTED OFF TO ALLOW A SEPARATE SUB-ACCOUNT FOR EACH TAXING UNIT OR FUND (i.e., account 026.14 records delinquent taxes for township 14). If tax anticipation notes have been issued, the delinquent taxes receivable, interest and PTAF are pledged for payment on the notes (MCL 211.87c(4)). Collection and receipting procedures are discussed in MCL 211.58. There must be detail sub-accounts for each taxing unit and they must be balanced to the controls monthly.

c) ACCOUNT 081.XX, DUE FROM OTHER UNITS OF GOVERNMENT, is used here for simplicity. We recommend that a separate account for each unit type (accounts 071-077, UCA) be used, and that the account number be pointed off where multiple units of the same type exist. In any case, detailed sub-ledgers listing the amount due from each taxing unit must be maintained and reconciled to the control account.

d) ACCOUNT 088.01, FORFEITURE CERTIFICATE RECORDING FEE RECEIVABLE, is used to record the forfeiture certificate recording fee paid to the register of deeds from the delinquent tax revolving fund prior to the collection of the actual fees. The amount must be recorded as a receivable (asset account) in the Delinquent Tax Revolving Fund for the year which it's added to the parcel under the receivable account number 088.1 as "Forfeiture Certificate Recording Fee Receivable" with the off-setting credit to cash. At the time of redemption of the property, debiting cash and crediting the 088.1 account will eliminate the asset account. The cost is $9.00 for the first page and $2.00 for each additional page assessed to each parcel forfeited. The MCL 211.78g (2) states that within 45 days after forfeiture, the county treasurer is required to file with the register of deeds a certificate placing parties on notice that property has been forfeited. It also must state that title to the property will be lost 21 days after entry of a foreclosure judgment. The county treasurer must forward a copy of each certificate to the State Treasurer if that county elects to have the State foreclose on tax-delinquent property within that county.

e) ACCOUNT 204, TREASURER'S AGENT FEE PAYABLE, records the portion of the interest on delinquent taxes (recorded in account 445) which, on approval of the board of commissioners, may be restricted for payment to the treasurer as an agent fee. The fee due to the treasurer should be computed at least annually and recorded by a debit to account 702 and a credit to account 204 or, if paid when earned a credit to account 001. The payment should be included in the payroll system so that the taxes withheld and the W-2 form are proper.

(f) ACCOUNT 222, DUE TO COUNTY REGISTER OF DEEDS--REDEMPTION CERTIFICATE FEE, the amount collected for the redemption certificate when the property is redeemed is due to the Register of Deed's Office. The amount should be recorded in the Delinquent Tax Revolving Fund for the year in which it's added to the parcel under the liability account 222 Due to the County-Register of Deed for the "Redemption Certificate Recording Fee." The statute provides that forfeited property may be redeemed at any time before 21 days after entry of a foreclosure judgment and is recorded as revenue to the FGU. The amount should be transferred to the general fund and recorded under the Register of Deed's Office revenue account 422 for redemption certificate recording. Note: The person with a legal interest in the property must pay all of the following to redeem the property:
(1) total of unpaid taxes, interest, penalties and fees for which the property was forfeited;
(2) additional interest at a non-compounded rate of 0.5 percent per month; and
(3) all recording, service of process, and notice fees.

g) ACCOUNT 228.13, DUE TO STATE OF MICHIGAN--STATE TAX, records the state portion of the County Expense of Sale fee. See account 449 for details.

(h) ACCOUNT 228.51, DUE TO STATE OF MICHIGAN--TITLE SEARCH FEE (Opt out Counties Only)--If the county has opted out and allows the State to foreclose property under the tax reversion process, the county treasurer must collect $175 statutory fee for the title search to be transmitted to the State of Michigan. In this case, the amount should be recorded as a liability Due to the State of Michigan when collected under accounts number 228. 51. The liability may be set up either within the Delinquent Tax Revolving Fund or as a liability in the Trust and Agency Fund.

i) ACTIVITY ACCOUNT 253, TREASURER--DELINQUENT TAX (Prior to Act 123 process) All activity prior to the property tax foreclosure process which occur under the regular delinquent property tax process should be accounted for under activity 253.

j) ACTIVITY ACCOUNT 254, OTHER TREASURER'S ACTIVITIES--DELINQUENT TAX PROPERTY SALES (After Act 123 process) All revenue and expenditures after the property tax foreclosure process goes into activity 254 within the delinquent tax revolving fund. The act states the foreclosing governmental unit must deposit the proceeds from the sale of tax delinquent property into a "restricted account" created for each year a property sale is held. The restricted accounts should be established within the Delinquent Property Tax Revolving Fund based on the year of the sale. This activity (Activity # 254--Delinquent Tax Property Sales) is used to record the sale proceeds and the authorized expenditures of the proceeds. When the forfeited property is sold, the proceeds from the sale should be recorded in the Delinquent Property Tax Revolving Fund under revenue account number 642 "Charge for Services-Sales."

k) ACCOUNT 445, INTEREST ON TAXES, records interest collected on delinquent property tax payments. The interest is calculated by month or any fraction thereof as follows, subject to exceptions in MCL 211.59(3) and higher rates provided for taxes levied December 1 of 1980-82 (see MCL 211.89).

Interest is 1% per month or fraction of a month on delinquent taxes paid during the period from March 1 following the tax levy until May 1, proceeding the May tax sale applying to that tax year (MCL 211.44(3) and 211.59(1)). The interest rate may be changed by act of the legislature.

Interest is 1.25% per month or fraction of a month beginning on May 1 of the year the lands are listed to be sold for delinquent taxes at the May tax sale. This rate applies whether the original property owner redeems the property, or another party buys the tax lien at the May tax sale or thereafter. (MCL 211.60, 211.74, and 211.84).

l) ACCOUNT 447, PROPERTY TAX ADMINISTRATIVE FEE (formerly known as the collection fee), records the county Property Tax Administration Fee (PTAF) which is included in all delinquent property tax collections. The PTAF is the greater of 4% of the delinquent taxes paid or $1.00 (MCL 211.59(1), (6) and 211.87b(6)). Where the issuance of notes has been authorized, the PTAF is credited to the DTRF. Expenses of borrowing must be repaid from the PTAF. The balance of the PTAF may be pledged by resolution to the note repayment (MCL 211.87d(6)(a) or transferred to the General Fund (MCL 211.59(2)). WHERE NOTES HAVE NOT BEEN AUTHORIZED, THE PTAF IS GENERAL FUND REVENUE. Alternatively, the PTAF may be recorded upon collection as a DTRF payable in Account 214.01, then transferred to the General Fund at the end of the year.

m) ACCOUNT 449, COUNTY EXPENSE OF SALE, records the county portion of the Expense of Sale Fee (account 228.13 records the state portion). The county portion reimburses the county for the expenses incurred in preparing the list of delinquent lands for sale. The fee is to go to the General Fund as revenue (MCLA 211.59(1)).

The fee is $10.00 from October 1, preceding the May tax sale at which the property would be sold for delinquent taxes ($5.00 for the county and $5.00 for the state).

n) ACCOUNT 639, TITLE SEARCH FEE--If the property is forfeited to the county treasurer under MCL 211.78g, the county treasurer must add a $175 statutory fee, as adjusted under 78p, to each parcel of property for which the delinquent taxes, interest, penalties and fees remain unpaid.

The amount should be recorded as revenue (if the County is the FGU) in the Delinquent Tax Revolving Fund for the year in which it's added to the parcel under revenue account number 639 as "Title Search Fee." Note: The actual amount recorded for the expense of the title search may be more than the title search fee.

o) ACCOUNT 641,PRE-FORFEITURE MAILING NOTICE FEE (or OCTOBER 1st FEE). For certified abandoned property, on the October 1 immediately succeeding the date that unpaid taxes are returned to county treasurer for forfeiture, foreclosure, and sale under section 60a(1) or (2) or returned to the county treasurer as delinquent under section 78a, the county treasurer must add a $15.00 fee, as adjusted under section 78p, on each parcel of property for which the delinquent taxes, interest, penalties, and fees remain unpaid.

Record as revenue in the Delinquent Tax Revolving Fund for the year in which it's added to the parcel under revenue account number 641 as "Pre-forfeiture mailing notice cost."

p) ACCOUNT 665, INTEREST ON INVESTMENTS--REGULAR; AND ACCOUNT 670, INTEREST ON NOTE RESERVE INVESTMENTS, record interest on investments. Where a note reserve exists (account 007), the interest on investment of the note reserve is recorded separately.

q) ACCOUNT 676, REIMBURSEMENT--Upon the request of a holder of a tax lien purchased under the Michigan tax lien sale and collateralized securities act (MCL 211.921 to MCL 211.941), and payment to the county treasurer of the actual costs incurred in complying with that request, the county treasurer shall provide a list identifying the parcels of property for which a notice is required under sections 78 to 78l.

Record the revenue as account number 676 for "reimbursement" of costs incurred in complying with the request within activity 254 in the Delinquent Tax Revolving Fund.

r) ACCOUNT 702, TREASURER'S AGENT FEE; ACCOUNT 715, EMPLOYER'S SOCIAL SECURITY; ACCOUNT 726, OFFICE SUPPLIES; AND ACCOUNT 980, CAPITAL OUTLAY, (plus others as needed) record the expenses of administering a DTRF if the board of commissioners has authorized payment of the expenses from that DTRF. Expenses incurred in the administration and collection of delinquent taxes may be expensed to the DTRF. Expenses may be up to the limit of 5% of the treasurer's office budget for the year or the applicable 1/27 or 3/64 of the interest collected each month in all delinquent tax revolving funds, whichever is smaller. Of the amount specified, the treasurer is entitled to an agent fee limited to the lesser of 20% of the total allocation for the delinquent tax administration expenses, or 20% of the treasurer's authorized salary (MCL 211.87c(3)). The balance, after deducting the agent's fee, may be spent for any other cost attributed to collecting delinquent taxes. Unexpended administration expenses, excluding the agent's fee, will remain in the delinquent tax funds. Capital assets may be purchased but are titled in the name of the county.

Note: Public Act 123 of 1999 amended this section (MCL 211.87c). Section 16 was added and states that a county treasurer elected or appointed to office after the effective date (October 1, 1999) of the amendatory act is not eligible for payment for services as agent for the county. To be eligible for payment of agent fees, the county treasurer must have held office on the effective date of amendatory act and had not vacated the office, after the effective date of the amendatory act that added this subsection.

s) ACCOUNT 807, OTHER CONTRACTUAL SERVICES--TITLE SEARCH COMPANY--The expense of the title search may be more than the title search fee. The expense to the vendor or title search company should be recorded as "Other Contractual Services" under activity 254 within the Delinquent Property Tax Revolving Fund

t) ACCOUNT 997, NOTE BORROWING COSTS AND FISCAL AGENT FEES, records the expenses of borrowing from the DTRF which are to be repaid from the PTAF (see Item g, above).

u) FUND EQUITY ACCOUNT 397, RETAINED EARNINGS--RESERVED FOR DELINQUENT PROPERTY--The foreclosing unit must direct the investment of surplus funds and credit the interest and earnings from the investments to an restricted activity. The revenue and expenditures in activity 254 must be closed to a separate restricted earnings account in the fund equity.

RECONCILEMENT OF DELINQUENT TAXES RECEIVABLE

Tax Rolls to General Ledger

The delinquent taxes receivable control account 026 for every tax year and every DTRF should be reconciled periodically, but at least annually. The reconciling procedures include the preparation of an adding machine tape of the unpaid real property taxes for the specific month ending date of a delinquent tax roll or rolls for the applicable tax year. The total amount of the unpaid delinquent real taxes indicated by the adding machine tape should equal the balance recorded in the Taxes Receivable--Delinquent Real sub-ledger account for the applicable tax collecting unit.