A California appeals court has upheld a lower court’s ruling that a Fresno shopping mall hit hard by the economic recession is still responsible for unpaid property taxes, rejecting the mall’s argument that a provision of the Revenue and Taxation Code relieved the mall of its duty to pay property tax penalties.
In Ashlan Park Center LLC v. Vicki Crow, the Ashlan Park Shopping Center was purchased prior to the recession in 2006 by five LLCs that owned the property as tenants-in-common, and sold to the petitioner in 2013. Property taxes assessed in 2010, 2011 and 2013 for the mall were unpaid and delinquent. Petitioner assumed liability for the unpaid property taxes, which totaled $568,628 with penalties as of September 2013.
In August 2013, petitioner requested that the Fresno County tax collector cancel penalties totaling $142,522 pursuant to Section 4985.2, subdivision (a) of the Revenue and Taxation Code, which states outstanding penalty payments may be cancelled if the failure to pay “is due to a reasonable cause and circumstances beyond the taxpayer’s control.” Petitioner argued that the economic recession that shuttered many of the mall’s stores, thus impeding the previous owners’ ability to pay property taxes, was beyond its control.
In its opinion, the Fifth Appellate District Court disagreed, ruling that Section 4985.2 was not intended to assist commercial property owners adversely affected by an economic downturn, but to provide relief from “outside forces” such as natural disasters, hospitalization of a taxpayer or fraud by a third party that introduced uncertainty about ownership of the property.
“Interpreting the statute to allow cancellation of delinquency penalties due to a recession would seriously impede the tax collector’s efforts to collect both the penalties and the underlying tax payments, which are necessary to the continued provision of essential services to the public,” the Court noted.
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