# OUTLINE

### Title:
Predatory Practices in Property Tax Collection: How Outside Agencies Take Advantage of Delinquent Taxpayers

### Introduction:

Outsourcing government tax collection to private firms has become increasingly common in recent years, raising concerns about the potential for overcharging taxpayers. Unlike government tax collection practices, which ensure fairness, transparency, and compliance with the law, outsourced government tax collectors often overcharge taxpayers due to a lack of transparency and accountability in fee assessments. This essay will explore the problem of overcharging by outsourced government tax collectors, discuss legal perspectives on not burdening taxpayers with excessive fees, and conclude with a call to action.

There have been numerous cases where outsourced government tax collectors have overcharged taxpayers. These cases highlight the need for greater transparency and accountability in fee assessments. For example, in Pennsylvania, lawyers appointed as school tax collectors were found to be charging excessive attorney fees that far exceeded their actual costs. (CITE NEEDED) This lack of oversight allowed these collectors to exploit taxpayers and burden them unfairly with unnecessary charges.

The Pennsylvania and U.S. Supreme Courts have addressed the issue of not burdening taxpayers with excessive fees. In one case, the Pennsylvania Supreme Court ruled that an excess charge of 25% above costs was unreasonable and violated due process protections. (CITATION NEEDED) Similarly, the U.S. Supreme Court emphasized that taxes should only cover reasonable costs associated with collection activities. (CITATION NEEDED)

These court rulings contribute to a fair and equitable taxation system by ensuring that excessive charges do not unfairly burden taxpayers. They establish legal principles that guide future tax collection practices and help protect taxpayers from exploitation. It is incumbent on schools, municipalities, and counties to protect taxpayers by requiring transparency and accountability from all private collection firms it engages.

- **Background on Property Taxes in Pennsylvania**: Briefly describe the property tax system in Pennsylvania, highlighting its importance for local governance.

The property tax system in Pennsylvania is a critical source of revenue for local governance, serving as a primary funding mechanism for municipalities, counties, and school districts. The system is based on the assessment of real estate properties, and the collected taxes contribute significantly to funding essential public services and infrastructure.

**Key Features of the Property Tax System in Pennsylvania:**

- **Assessment of Real Estate:** Property taxes in Pennsylvania are primarily based on the assessed value of real estate properties. Local taxing authorities assess the value of properties to determine the amount of property taxes owed by property owners.
- **Local Autonomy:** The property tax system grants a considerable degree of autonomy to local governments, allowing them to set their own tax rates and determine how the collected revenues will be allocated. This local control enables municipalities, counties, and school districts to address their specific funding needs.
- **Stability and Predictability:** Property taxes are considered a stable and predictable source of revenue for local governance. Unlike other forms of taxation that may fluctuate based on economic conditions, property values tend to change more gradually, providing a consistent revenue stream for municipalities and school districts.
- **Local Decision-Making:** Local governments have the authority to make decisions regarding property tax rates and usage of funds. This flexibility allows communities to tailor their tax policies to meet the unique needs and priorities of their residents.

**Importance for Local Governance:**

The property tax system's significance for local governance cannot be overstated. It is a dependable revenue source that sustains the operations of municipalities, counties, and school districts. The funds collected through property taxes enable local governments to:

- **Maintain Public Services:** Property taxes contribute to the funding of essential services, including public safety, waste management, and infrastructure maintenance, ensuring the well-being and quality of life for residents.
- **Support Education:** School districts heavily rely on property taxes to finance educational programs, hire qualified teachers, and maintain school facilities. Property tax revenues are a cornerstone of funding for K-12 education in Pennsylvania.
- **Invest in Infrastructure:** Local governments use property tax revenues to invest in and maintain critical infrastructure such as roads, bridges, and utilities, contributing to community development and economic growth.
- **Address Local Needs:** The autonomy granted to local governments allows them to respond to their communities' unique needs and priorities. Property tax revenues provide the financial means to address local challenges and implement community-specific initiatives.

The property tax system in Pennsylvania plays a fundamental role in sustaining local governance by providing a stable and essential source of revenue. Its impact is evident in the funding of public services, support for education, and the overall development and well-being of communities across the state.

- **Delinquency Rates**: Include statistics on property tax delinquency rates in Pennsylvania, particularly in Lehigh.
- **Thesis Statement**: Explicitly state that the paper will analyze how private collectors in Lehigh use aggressive techniques to exploit taxpayers.

### Main Body:
1. **Legal Frameworks Governing Tax Collection**:
- **Description of RETSL and MCTLA**: Detail the Real Estate Tax Sale Law (RETSL) and the Municipal Claims and Tax Liens Act (MCTLA), citing specific clauses and differences. ()

Pennsylvania's Real Estate Tax Sale Law (RETSL) is a comprehensive set of regulations governing the process of selling properties due to delinquent real estate taxes. Enacted to ensure that property owners fulfill their tax obligations, the law outlines the procedures and safeguards involved in tax sales.

Under RETSL, local taxing authorities, such as municipalities or counties, can initiate the tax sale process when property owners fail to pay their real estate taxes. The law provides a structured framework for notifying property owners about their outstanding tax liabilities, allowing them to settle the debt before the property is subject to sale.

The Municipal Claims and Tax Liens Act (MCTLA) in Pennsylvania is a crucial piece of legislation that empowers local municipalities to collect delinquent property taxes and municipal claims effectively. Enacted to safeguard the financial stability of local governments, this act outlines the procedures for placing liens on properties with outstanding tax and municipal debts, ultimately leading to the sale of these properties to satisfy the owed amounts.

- **Comparative Analysis**: Contrast the legal boundaries and implications of RETSL and MCTLA in tax collection.

2. **Standardized Process under RETSL**:
- **Tax Claim Bureaus' Methods**: Explain the step-by-step process followed by tax claim bureaus, emphasizing the uniformity and passive nature of their approach.

The collection process under Pennsylvania's Real Estate Tax Sale Law (RETSL) involves several steps designed to ensure fairness, transparency, and compliance with the law.

- **Determination of Delinquency:** The process begins when property owners fail to pay their real estate taxes within the specified timeframe. Local taxing authorities, such as municipalities or counties, identify delinquent properties based on unpaid taxes. Determining delinquency is a crucial trigger for initiating the tax sale process.
- **Notice to Property Owners:** Upon identifying delinquent properties, RETSL mandates that local taxing authorities notify the property owners of their outstanding tax liabilities. This notice is an official communication informing property owners about the delinquency and potential consequences of unpaid taxes.
- **Publication of Notice of Tax Sale:** To ensure transparency and inform potential buyers and interested parties, RETSL requires local taxing authorities to publish notices of tax sales. These notices are typically published in local newspapers and other public forums, providing details about the upcoming tax sale, including the properties involved, auction date, and location.
- **Tax Sale Auction:** One of the central features of RETSL is the public auction of tax liens. The tax sale auction is open to the public, allowing investors and interested parties to bid on the tax liens associated with delinquent properties. Bidders compete to offer the highest amount for the right to collect the outstanding tax debt from the property owner.
- **High Bidder Acquires Tax Lien:** The highest bidder at the tax sale auction acquires the tax lien for the delinquent property. This means the winning bidder gains the legal right to collect the unpaid taxes and any associated costs from the property owner. The property owner retains ownership of the property during this stage.
- **Redemption Period:** RETSL incorporates a redemption period during which property owners can reclaim their properties by satisfying the outstanding tax debt. The redemption period is a crucial safeguard, providing property owners the chance to rectify the situation and prevent the loss of their properties. Property owners must pay the total amount of the unpaid taxes, penalties, and other associated costs to redeem the property.
- **Transfer of Ownership:** If the property owner fails to redeem the property within the specified redemption period, the high bidder may proceed with the legal process to transfer ownership of the property. This typically involves foreclosure proceedings, leading to the transfer of the property to the winning bidder.
- **Distribution of Proceeds:** Once the tax lien is satisfied, either through redemption by the property owner or through foreclosure and transfer of ownership, the proceeds from the tax sale are distributed accordingly. The local taxing authority uses the funds to cover the unpaid taxes, penalties, and other costs associated with the delinquent property.

Collecting taxes under Pennsylvania's Municipal Claims and Tax Liens Act (MCTLA) involves a series of well-defined steps to address delinquent property taxes and municipal claims. The Act provides municipalities with legal mechanisms to ensure the timely collection of outstanding debts.

- **Identification of Delinquent Properties:** The process begins when property owners fail to pay their property taxes or other municipal debts within the specified timeframe. Municipalities identify delinquent properties based on the outstanding taxes or claims owed by property owners.
- **Filing of Claims:** Municipalities initiate legal action by filing claims against the properties with unpaid taxes or municipal debts. These claims serve as formal notices of the debt owed by property owners and are essential for establishing liens on the properties.
- **Establishment of Liens:** MCTLA allows municipalities to establish liens on properties with outstanding taxes or municipal claims. These liens serve as encumbrances, indicating that the properties are collateral for the unpaid debts. Liens provide municipalities with a legal interest in the properties, creating a mechanism for debt recovery.
- **Notice to Property Owners:** Property owners facing liens on their properties are entitled to receive notice regarding the filing of claims and the establishment of liens. This notice ensures that property owners are aware of the legal actions taken against their properties and the potential consequences of the outstanding debts.
- **Publication of Liens:** MCTLA may require municipalities to publish information about the established liens. This publication informs the public and potential buyers about the existence of liens on specific properties. It contributes to transparency in the process and provides notice to interested parties.
- **Tax Lien Auction:** While the primary focus of MCTLA is on establishing and enforcing liens, the Act allows municipalities to sell tax liens through public auctions. Interested parties, including investors, may bid on these tax liens, with the highest bidder gaining the right to collect the unpaid taxes or municipal debts from the property owner.
- **Redemption Period:** Like RETSL, MCTLA incorporates a redemption period during which property owners can redeem their properties by settling the outstanding debts. Property owners must pay the total amount of unpaid taxes, penalties, and other associated costs within the specified redemption period to reclaim their properties.
- **Foreclosure Proceedings:** If the property owner fails to redeem the property within the specified redemption period, the municipality may proceed with foreclosure proceedings. Foreclosure allows the municipality to transfer property ownership to satisfy the outstanding tax or municipal debt.
- **Distribution of Proceeds:** The proceeds from the tax lien auction, redemption, or foreclosure are used to cover the unpaid taxes, penalties, and other associated costs. Any surplus funds may be distributed according to legal provisions, ensuring the municipality recovers the owed amounts.

Both RETSL and MCTLA emphasizes transparency, fairness, and compliance with legal requirements throughout each stage of the process. In conjunction they contribute to a structured and regulated framework for effectively collecting property taxes and municipal claims in Pennsylvania.

- **Limitations**: Discuss the limitations in payment options/plans under this system, potentially using case studies or real-life examples.

3. **Aggressive Practices by Private Collectors**:
- **Case Study of Portnoff Law Associates**: Provide a detailed analysis of Portnoff Law Associates' collection methods under MCTLA.
- **Specific Tactics and Fees**: Present real-life examples of the fees charged, pressure tactics used, and the impact of these practices on taxpayers.
- **Criticism and Ethical Concerns**: Include criticisms of these practices, possibly quoting experts or citing specific legal or ethical arguments.

4. **Financial Incentives for Collectors**:
- **Revenue Generation for Collectors**: Examine how private collectors benefit financially, both from fees charged to clients and from property sales.
- **Impact Analysis**: Discuss the broader economic and social impacts of such practices, particularly on vulnerable taxpayers.

5. **Comparative Analysis**:
- **Ethical Implications**: Compare the ethical implications of the methods used by tax claim bureaus and private collectors.
- **Alternatives and Best Practices**: Suggest alternative methods or best practices from other regions or states that strike a balance between effective tax collection and ethical considerations.

### Conclusion:
- **Summary of Findings**: Recap the aggressive tactics of private collectors like Portnoff and the contrasting approach of tax claim bureaus.
- **Call for Ethical Reform**: Argue for reform in the system to protect vulnerable taxpayers and ensure ethical practices in tax collection.
- **Closing Thoughts**: Emphasize the need for balance between effective tax collection and the protection of taxpayer rights.

### Additional Sections (Optional):
- **Interviews or Testimonials**: Include interviews with affected taxpayers, legal experts, or officials from tax claim bureaus to provide personal insights and testimonies.
- **Statistical Analysis**: Incorporate more detailed statistical data to illustrate the scope of the problem and the effectiveness of different collection methods.
- **Policy Recommendations**: Offer specific policy recommendations for Pennsylvania to reform its tax collection practices.

# PAPER

Here is the beginging of a draft paper with notes in all caps indicating where more information or citations could be added, plus it may need a different outline:

Title: Predatory Practices in Property Tax Collection: How Outside Agencies Take Advantage of Delinquent Taxpayers

Introduction

The collection of delinquent property taxes is a complex process that varies across different municipalities in Pennsylvania. Tax claim bureaus and private collection agencies both play a role, but have very different approaches. [**NOTE: This paper will argue that private collectorsin Lehigh utilize aggressive techniques that take advantage of taxpayers struggling to pay their property taxes.**]

ADD MORE DETAIL ON CONTEXT OF PROPERTY TAXES AND DELINQUENCY RATES

Main Body

In Pennsylvania, school districts and municipalities have two main options for collecting unpaid property taxes: using the county tax claim bureau or hiring a private collection agency (CITATION). Tax claim bureaus operate under the Real Estate Tax Sale Law (RETSL), while private collectors work under the Municipal Claims and Tax Liens Act (MCTLA) (CITATION). These differing legal frameworks create contrasting approaches. (WE MAY NEED MORE INFORMATION ON THE LAW WITH CITATION)

Under RETSL, tax claim bureaus follow standardized, passive procedures for all delinquent accounts submitted by municipalities (CITATION). After a boilerplate notice is sent, an upset tax sale occurs a year later, followed by a judicial sale the next year (SUMMARY OF KEY PROCESSES). This one-size-fits-all approach leaves taxing authorities with little control over collections for individual cases (CITATION).

ADD DETAILS ON LIMITED PAYMENT OPTIONS/PLANS

In contrast, private collectors like Portnoff Law Associates use the flexibility of MCTLA to take an aggressive, tailored approach (CITATION). MCTLA allows all collection costs and attorney fees to be passed on to delinquent taxpayers (EXPLAIN MCTLA PROVISIONS). Portnoff capitalizes on this by making frequent contact with taxpayers from day one, pressuring quick payment (DISCUSS PORTNOFF TACTICS). Their procedures aim to “maximize contact” and create urgency to pay before fees escalate (CITATION).

ADD EXAMPLES OF FEES PASSED ON AND PRESSURE TACTICS

This contrast shows how private collectors exploit MCTLA to their benefit. The threat of accumulating legal fees and charges coerces taxpayers to pay promptly (ANALYSIS). Such punitive practices have been criticized as unethical, likened to bullying (DISCUSS CRITICISMS). The passive role of tax claim bureaus under RETSL highlights that aggressive collection is a choice, not a necessity (ANALYSIS/COMPARE APPROACHES).

WE MAY NEED TO DISCUSS HOW THESE COLECTORS MAKE MONEY ON BOTH SIDES, FIRST THEY CHARGE THE CLIENT FEES, THEN THEN GET MONEY ON THE SALE OF THE PROPERTY

ADD DISCUSSION OF IMPACT ON VULNERABLE TAXPAYERS

Conclusion

In conclusion, while tax claim bureaus take a standardized approach under RETSL, private collectors like Portnoff Law Associates utilize coercive techniques enabled by MCTLA to pressure delinquent taxpayers. Their frequent contacts and threats of escalating costs can be perceived as predatory practices. More ethical reform is needed to protect taxpayers who genuinely cannot afford to promptly settle their property tax debts. (SO FAR THIS CONCLUSION WHILE CORRECT IS NOT WELL WRITTEN. I NEED TO WORK ON IT A LOT MORE)

ADD EXECUTIVE SUMMARY LATER SHOULD BE AT THE BEGINING.

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# NOTES

The property tax collection process in Allentown and Lehigh County, Pennsylvania, involves several key steps:

1. **Assessment of Properties**: In Lehigh County, properties are assessed to determine their taxable value. This assessment is crucial for calculating the amount of property tax owed.

2. **Issuing Tax Bills**: The City of Allentown does not issue real estate bills to mortgage companies. It is the responsibility of the property owner to ensure their bill is paid on time. Property owners can direct their questions regarding City Real Estate bills to the Bureau of Revenue and Audit in Allentown.

3. **Payment of Current Taxes**: Current City Real Estate taxes can be paid in person at City Hall, in the City Treasury, or at the Bureau of Revenue and Audit between the hours of 8 a.m. and 4 p.m. Allentown also provides a drop box for after-hours payment.

4. **Collection of Past Due Taxes**: The process for collecting past due taxes differs based on the year they are due. Taxes for the year 2012 and prior are collected by Portnoff Law Associates, Ltd. For taxes from 2013 to the present, the collection is handled by Northeast Revenue Service, LLC.

5. **New Changes in Tax Bills**: Recently, there have been changes in how the City of Allentown handles real estate tax bills. These changes aim to improve the efficiency of payment processing and posting.

This process ensures that property taxes are assessed, billed, and collected efficiently, contributing to the funding of local services and infrastructure. Property owners are responsible for being aware of their tax obligations and ensuring timely payment to avoid penalties for late payment.

The collection of property taxes in different municipalities within Lehigh County, Pennsylvania, varies slightly depending on the specific procedures of each municipality.

For example, in Upper Saucon Township, an elected Tax Collector is responsible for the collection of real estate taxes levied by both the township and the school district. The real estate tax bills in Upper Saucon Township are mailed out the first week of April. Taxpayers are granted a discount if they pay by May 31, and a penalty is applied for late payments after July 31. The Tax Collector's office hours are listed on their website, providing residents the option to pay their taxes in person or via mail.

In Salisbury Township, the Tax Collector has specific office hours, usually on Tuesdays, for residents to pay their tax bills in person. The Tax Collector is responsible for Salisbury Township and Salisbury Township School District Real Estate tax payments. Payments can also be made by mail or using drop-off boxes. After December 15, only certified funds such as a certified bank check or money order are accepted. If taxes remain unpaid by January 1st, they are turned over to Portnoff Law Associates for collection.

These examples indicate that each municipality within Lehigh County has its own tax collector or designated office for tax collection, and the procedures can vary slightly. For more detailed information on tax collection in other municipalities within Lehigh County, you can visit the [Lehigh County website](www.lehighcounty.org) and the websites of the respective municipalities like [Upper Saucon Township](www.uppersaucon.org) and [Salisbury Township](www.salisburytownshippa.org).

In Lehigh County, Pennsylvania, the Tax Claim Bureau, operated by Elite Revenue Solutions, plays a key role in managing delinquent real estate taxes. The Bureau's services and processes include:

1. **Collection of Delinquent Taxes**: The Bureau is responsible for collecting delinquent real estate taxes on behalf of the county, as well as for boroughs, townships, and school districts within Lehigh County.

2. **Payment Options for Delinquent Taxes**: Taxpayers can make delinquent tax payments using various methods such as credit cards, debit cards, electronic checks, money orders, personal checks, or cashier's checks. Payments can be made online, by mail, or in person at the Tax Claim Bureau’s offices.

3. **Property Search and Access to Public Information**: The Bureau's website allows citizens to research properties, understand different types of tax sales, and access information on every delinquent tax parcel in Lehigh County.

4. **Certified Tax Searches**: The Bureau provides the facility to order certified tax searches through its website. This service is particularly useful for attorneys, abstractors, mortgage companies, and other entities that require verified information about property taxes.

5. **Administration of Tax Sales**: The Bureau administers Upset Sales and Judicial Sales to manage and sell properties with delinquent taxes. These sales are conducted in accordance with state laws, and properties are advertised well in advance.

6. **Electronic Payments for Current Real Estate Taxes**: For current Lehigh County Real Estate Taxes, electronic payments are accepted, including credit/debit cards and eChecks.

7. **Contact and Customer Service**: Elite Revenue Solutions, as the agent for the Tax Claim Bureau, offers customer service for queries related to delinquent real estate taxes.

For more detailed information about the services offered by the Lehigh County Tax Claim Bureau and to access their online services, you can visit their official website [Lehigh County Tax Claim](https://lehighcountytaxclaim.com/) and the [Lehigh County Fiscal Department / Tax Claims Bureau page](https://www.lehighcounty.org/).

In Lehigh County, Pennsylvania, when you are late paying your property taxes, specific fees are assessed. For electronic payments of current real estate taxes, a convenience fee is charged: 2.25% for credit/debit card transactions and a flat $1.00 for eCheck transactions. These fees are added to your transaction amount. It's important to note that these fees are applicable for payments made over the Internet. For more detailed information regarding late payment fees for property taxes, or for assistance with delinquent real estate taxes, you can contact Elite Revenue Solutions at 610-782-3119, who collect on behalf of the Lehigh County Tax Claim Bureau. For further details, please visit the [Lehigh County website](https://www.lehighcounty.org).

Portnoff
Portnoff Law Associates typically gets involved in the collection of delinquent real estate taxes for certain municipalities and school districts, often after taxes have been unpaid for a specific period, such as one or two years. Their involvement usually begins when the local tax collecting authority transfers the delinquent accounts to them for more specialized collection efforts. While both Portnoff Law Associates and Elite Revenue Solutions focus on collecting delinquent taxes, they may serve different municipalities or have varying methods and strategies for tax collection and enforcement. Elite Revenue Solutions, for instance, is known to act as an agent for the Tax Claim Bureau in Lehigh County.

Incentive or Bullying
Tax Collection Options under RETSL and MCTLA
Pennsylvania school districts and municipalities are often surprised to find that they have options when choosing who will collect their delinquent real estate taxes and the laws under which collections can be made. Most delinquent taxes are collected by either the county tax claim bureau or a private collector. County tax claim bureaus were created under a set of Pennsylvania statutes known as the Real Estate Tax Sale Law or RETSL. RETSL establishes the procedures and time frames under which the tax claim bureau can initiate collections, charge fees and list properties for tax sale. The procedures are rather rigid, with a one-size-fits-all approach due to the high volume of claims that are submitted at one time to the county.

The procedures under RETSL are relatively simple. The county is required to send out a boilerplate notice by July 31st of the year after the taxes are due, informing the taxpayer that the property will be sold at tax sale unless the delinquent taxes are paid. The next collection activity occurs a year later, with an upset tax sale scheduled in September. A judicial tax sale is then generally held the following year. An individual taxing district has little control over the collection process after its claims are turned over to the county. Payment extensions are limited under RETSL and are set at the discretion of the county commissioners.

Outside of RETSL, school districts and municipalities have the ability to utilize a more favorable set of Pennsylvania statutes known as the Municipal Claims and Tax Liens Act or MCTLA. Under the MCTLA, taxing districts may hire a third party collector to collect their delinquent taxes in lieu of the county tax claim bureau. The MCTLA allows taxing districts to pass through all collection costs, including attorney’s fees, to the delinquent taxpayer.

This shifting of collection costs creates strong incentive to make payment quickly and to pay future taxes on time. The MCTLA permits taxing districts to look at individual delinquencies on a more case-by-case approach, with wide authority and flexibility to establish payment plans for taxpayers with legitimate financial hardships. The MCTLA also allows the taxing district to make numerous contacts with the delinquent taxpayer during the first year of delinquency. Portnoff’s collection procedures under the MCTLA seek to maximize contact with the delinquent taxpayer in order to create incentive to pay quickly. Because the MCTLA allows for all collection costs and fees to be shifted to the delinquent taxpayer, Portnoff will advance litigation costs on behalf of its clients and charges all attorney fees directly to the delinquent taxpayer. This allows Portnoff’s clients to actively collect their delinquent real estate taxes from day one, and to retain full control over the collection process, at little to no cost to the taxing district.

Tax Collector: https://lehighcountytaxclaim.com/images/Lehigh-County-2022-Tax-Collectors-updated-as-of-1-21-2022.pdf