Key Takeaways:
- Property Tax Relief: A “Misfortune or Calamity” (M&C ) application can help fire-affected property owners by 1) Delaying filing dates 2) Deferring taxes 3) Reassessing property value, potentially lowering tax bills.
- Mortgage Holder Guidance on taxes: Filing an M&C application can automatically trigger property tax deferment for non-escrow holders, but mortgage holders with an escrow account need to coordinate directly with their mortgage providers to coordinate next steps on property tax payments.
- Timely Action: Filing an M&C claim quickly ensures faster tax adjustments and can help with financial recovery.
The recent wildfires that swept through Los Angeles County have left a trail of devastation, impacting homes, businesses and lives. While the physical and emotional toll of such calamities is undeniable, the financial implications, including regarding property taxes, are another concern for affected residents. In this blog, we break down the basics of how property taxes may be affected following the fires and what property owners need to know about managing their taxes after such a disaster.
The M&C Application Process: A Lifeline for Property Owners
Los Angeles County uses a standard “Misfortune or Calamity” (M&C) application process which provides relief for property owners from damage caused by calamities, including these recent wildfires. When a property sustains at least $10,000 in damage, property owners can file an M&C claim with the Los Angeles County Assessor here. The process is different depending on whether a mortgage holder has an escrow account with their mortgage lender or pays their taxes directly.
Non-escrow Mortgage Holders
For taxpayers who pay their property taxes directly, the M&C application allows for deferral of property taxes for the current year. This deferral does not carry penalties or interest, offering immediate financial breathing room. The M&C application prompts the County Assessor to reassess the value of the damaged or destroyed property. This reassessment can lead to an adjusted property tax amount that more accurately reflects the current state of the property. For example, the taxes may now be based entirely on the value of the land and not include an assessment for the structure. Once an M&C claim is approved, the process includes several steps:
- Adjusted Property Tax Bill: The Auditor-Controller (A-C) will adjust the property tax roll based on the Assessor’s reassessment. The Treasurer and Tax Collector (TTC) then issues an Adjusted Annual Secured Property Tax Bill.
- New Payment Timeline: The adjusted bill will often result in a reduced tax liability and may be payable in two installments. The first installment is due at the end of the month following the bill’s issuance, and the second installment is due four months later.
- Guidance for Direct Payers: For borrowers who pay their property taxes directly to the TTC, it is recommended that they hold off paying any outstanding installments for the original Annual Secured Property Tax Bill until the M&C claim is processed. This ensures they only pay the adjusted amount based on the reassessed property value.
Escrow Mortgage Holders
For property owners who pay their property taxes through an escrow account, an M&C claim should still be filed which will serve the single purpose of requesting the Assessor to reassess the value of the property damaged or destroyed by the calamity. It does not serve as a request or an automatic trigger for deferral of current year property taxes. Instead:
- Coordination with Mortgage Lenders: Once the TTC issues the adjusted tax bill, the updated liability is communicated to mortgage lenders before the delinquency date of April 10 for the second installment. Property owners should proactively contact their mortgage lender to discuss how adjustments to tax liabilities will be handled within the fiscal year.
- Impact on Escrow Accounts: Filing an M&C claim ensures the property’s tax liability is updated, but it’s important to note that lenders’ policies regarding changes to escrow accounts can vary. Borrowers should make clear communication with their lender a priority to help avoid confusion or missed payments.
The Importance of Timely Action
For properties affected by the recent LA wildfires, filing an M&C claim is a critical step toward financial relief. The sooner a property owner takes action, the sooner their property’s value can be reassessed and the tax liability adjusted, providing much-needed help as they navigate all of the challenges of recovery. Property tax relief is just one piece of the recovery puzzle, but it’s an important one. By leveraging the M&C application process, affected property owners can ease their financial burden and focus on rebuilding their lives.
Resources
More information and guidance on filing a claim are available from:
