D.C. Council Pursuing Reform of Controversial Tax Lien Program

The District of Columbia is an entity unto itself. Those who live within its boundaries know well that they have no vote in Congress. For many, that has sparked cries that they suffer taxation without representation.

Whether that is true is not something this blog is intended to address. What this blog does seek to speak to are questions regarding tax controversies, especially those involving the Internal Revenue Service, and the challenges individuals may face unless they enlist the help of an experienced attorney. And because of its unique government structure, D.C. has some unique tax issues of its own.

One that has moved to the front burner recently is the city’s century-old tax lien program. Under the program, the city sells outstanding tax liens to private investors. Those investors, many from out of town, then can attach big-dollar fees. And when the homeowners fail to pay up, the investor can take the property.

What’s happened, as was revealed in a recent Washington Post exposé, is that hundreds have lost their homes to this predatory practice. Many who did were elderly and disabled. In one case, the tax debt owed was just $44. In another, the homeowner was in a coma and dying of cancer. Yet another, a Vietnam war veteran, lost his home over a $134 tax debt.

So the District Council voted this week to order city officials to determine whether some homeowners lost their property because of unjust tax liens and if they should be compensated for their losses. It also approved a measure capping the fees that lien investors can impose and banning sales of liens that are less than $2,000.

Both actions were handled as emergency measures, which makes them effective for just 90 days. Officials say they will pass permanent bills in the coming weeks and the mayor’s office has said he will sign them when they reach him.

One local attorney hails the council’s action, but questions the decision to leave the review in the hands of internal auditors. She says it would be better to have an outsider handle things.

Source:WashingtonPost.com, “D.C. Council orders review of cases where people lost homes over small tax debts,” Michael Sallah, Debbie Cenziper and Mike DeBonis, Sept. 17, 2013

Tags: Blog, IRS