The Atlanta Journal-Constitution’s continuing investigation of the tax lien system has revealed how it can put property owners in jeopardy of losing their homes over small debts they may not know they owe. Using a database obtained after a two-year open records battle, the AJC documented how the sale of liens to private collection firms had cost Fulton County as much as $20 million in potential revenue over 11 years. For today’s story, the AJC obtained more documents through an Open Records Act request and discovered that the system had ensnared the property of the Indian Consulate in Sandy Springs, sparking a minor international flap.
A minor international flap is stirring after $20,000 in tax liens were slapped on a property that serves as the Indian Consulate.
The debt has been turned over to a private collection firm, and the U.S. State Department, citing an international treaty that makes foreign missions tax-exempt, has intervened on behalf of the consulate that opened in October in Sandy Springs.
Welcome to Fulton County.
Fulton Tax Commissioner Arthur Ferdinand’s rapid-fire process of placing liens on delinquent taxpayers and selling the debts to investment firms has long been criticized as harmful to property owners, putting them at risk of losing their homes over what started as small overdue sums. A recent investigation by The Atlanta Journal-Constitution found quick sales to be lucrative for the company that does most of the buying, since it gets to collect a 90-day, 10 percent penalty rather than taxpayers.
It has now evolved into a diplomatic tiff over the consulate, one of five India has established in the United States.
The dispute has apparently embarrassed a foreign dignitary and has city officials miffed.
“This was total incompetence by Fulton County, to issue a tax lien on a property owned by a foreign country,” said Sandy Springs Mayor Eva Galambos, who courted India for years before it placed a diplomatic office there. “How would we feel if they did that to our consulate in India?”
At issue: Should a consulate be billed for taxes the year of the purchase, or is it immediately exempt?
The State Department says taxes should be charged only for the months prior to the sale, which the Indians apparently worked out with the seller. Facing a similar situation, DeKalb County complied when a Bahamian diplomat bought a residence outside Lithonia in 2009.
But Fulton has levied a full year’s taxes on the Indian consulate and the consul general’s Buckhead residence.
Ferdinand said in a written statement that the county is following state law, which has no procedure for prorating taxes. The Indian government bought the house on West Paces Ferry Road in March 2012 for $3.25 million, tax records show. Four months later it bought the palatial office building on Glenridge Drive — formerly a plastic surgeon’s office — for $3.85 million.
Ferdinand says that unless the State Department acts to “pre-empt Georgia law,” someone has to pay last year’s bills since they are based on the owner as of Jan. 1. The overdue taxes, interest and penalties on both properties total more than $92,000.
Emails obtained by The Atlanta Journal-Constitution through an Open Records Act request show attorneys for the county and the consulate have considered asking the State Department to use a federal procedure to make the properties retroactively tax-free. It’s unclear what that would be, since the federal Office of Foreign Missions already sent Fulton the same type of letters that prompted DeKalb to knock $10,600 off the Bahamian consul general’s tax bill.
By the time the Indians learned of the bills, records show, Ferdinand’s office had already sold two liens against the consulate property to Investa Services, a sister company of Atlanta-based Vesta Holdings, the largest buyer of municipal tax liens in Fulton and Gwinnett counties.
No liens have been placed against the residence, according to the county’s tax website and a statewide lien database. Ferdinand and his department’s attorney did not give an explanation.
When taxes are 30 days late, tax commissioners can file liens — a legal claim — on the properties. Unlike other Georgia counties, Fulton regularly sells those liens within months.
A recent AJC investigation found that over the past 11 years, Ferdinand’s sales of delinquent bills before the 90-day penalty kicked in resulted in the county handing as much as $20 million in potential profits to Vesta, with a corresponding potential loss to taxpayers of $20 million.
Ferdinand has responded that Vesta receives no favoritism from his office. Lien sales are legal, he said, and lien buyers reap the benefit of penalties and interest because they take the risk of collecting overdue taxes.
He also says quick lien sales keep the county and cities flush with cash, preventing scofflaws from holding up the flow of hundreds of millions of dollars in revenue to pay for roads, police, firefighters and other services.
Indian Consul General Ajit Kumar was out of town this week but said in an emailed statement, “We have been assured by all concerned that this issue will be resolved soon.”
Galambos said she was sure the tax liens made Kumar “feel very uncomfortable.”
“The whole idea of selling a lien on a consulate, without even approaching the consulate personally … to me, it’s not acceptable behavior,” she said.
According to county records obtained by the AJC, Catherine Rodriguez, the Miami-based regional director of the State Department’s Office of Foreign Missions, sent letters to the Fulton County Tax Assessors Office last year saying that both the consulate and Kumar’s residence should be exempt from property taxes effective on the purchase dates.
She sent the letters again in March after hearing from the Indians’ attorneys about the bills. Rodriguez initially suggested that the county misplaced her letters, which Chief Appraiser David Fitzgibbon denied.
Fitzgibbon told her the county can’t waive 2012 taxes unless the State Department requests that in writing.
“If you look at the letters that I sent,” Rodriguez said in an email, “I believe we cover this requirement.”
Dan Davis, the executive director of the Georgia Association of Tax Officials, agrees with Ferdinand that a county can’t prorate taxes. He said the Indians and their attorneys should have known 2012 taxes would be billed for the full amount in the name of the Jan. 1 owner.
Said Davis, “The federal government’s confused, too.”
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