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Sunday, April 08, 2007

Ind. Gov't. - Lake County treasurer removes discharged bankruptcies from property tax rolls

Joe Carlson of the NWI Times writes today:

When John Petalas became Lake County treasurer in October 2005, he could scarcely have known that thousands of taxpayers under his new jurisdiction were receiving tax breaks to which they were not entitled.

Petalas said he inherited a tax roll that contained about 12,000 properties with owners who did not pay taxes. And those parcels could not be sold at auction because they were protected by federal bankruptcies, he said.

After The Times spotlighted one of the delinquent properties -- $440,000 in unpaid taxes on a funeral home protected by an inactive bankruptcy -- Petalas said his staff made a list of every bankruptcy in the system and set out to confirm them all.

Petalas said thousands of the bankruptcies, perhaps 6,000 of them, had been discharged from court, meaning that all those people should have been paying taxes. Those bankruptcies have since been removed from the system, and tax bills are going out, he said.

"It's the first time anyone's done it," Petalas said. "We're going to do a quarterly update. ...The only way to keep it accurate is to do (the search for discharged bankruptcies) ourselves."

Petalas said he also is in the process of forming a new oversight board that will meet in public to discuss proposed settlements for large outstanding tax bills. In the past, such tax-settlement talks have mostly happened in private, he said.

The office also created new forms and a filing system to document how properties are included or excluded from tax sales, he said.

A related story, also today, also written by Joe Carlson, begins:
EAST CHICAGO | Year after year, a home and a business connected to an East Chicago political player have dodged property taxes without the threat of government seizure, county tax records show.

More than $470,000 in unpaid taxes have piled up on the two buildings since at least 1999, though they were shielded from property taxes using an old bankruptcy filed by a relative of political insider Eunice Roper in 1993, county records show.

But no more. If delinquent taxes on the properties owned by Roper and others could be eligible for the county's tax sale this summer if the back taxes are not paid, the county treasurer says.

In addition to an ongoing federal investigation into unpaid Lake County taxes, county Treasurer John Petalas said his office recently began cracking down on bankruptcies like those connected to Roper.

"There were a lot of things that we wanted to button down on, and that was one of them," said Petalas, who has served as treasurer since late 2005. "The first year was really hectic here."

The Times reported last year that Roper's business, the Allen Funeral Home, 3546 Guthrie St., had not paid any taxes at least since 1999, when computerized records began.

Some background to these stories can be found in this Carlson story from Dec. 17, 2006, that concludes:
Katona said it's similar to the situation that probably allowed the Allen Funeral Home in East Chicago to ring up $440,000 in taxes and penalties and yet avoid being sold to someone who could pay the tax.

County records show the funeral home has not paid any taxes since at least 1999. When asked how the outstanding taxes had built up for so long, a clerk in the county treasurer's office presented a copy of a 1992 bankruptcy filed by Andrew Suett, the person who legally owned the land the home was built on. Suett died in 1997.

Greg Jordan, a tax-collection consultant and former Marion County treasurer, said county officials have long been aware that people use the bankruptcy system to avoid paying taxes.

"If I was a good attorney, I could keep you in bankruptcy, and you wouldn't have to pay taxes for six or seven years," said Doug DeGlopper, a private attorney and former corporation counsel of Indianapolis. "I think it's pretty clear people have taken advantage of Chapter 13 bankruptcy."

Cathy Gross, the treasurer of White County and president-elect of the Indiana County Treasurers' Association, said she believes the loophole in the law was closed when the federal bankruptcy code was revised in 2005 to prevent repeat filers.

"I don't see the repeat filers, if you will, that we saw in the past," Gross said. "Although the system is not perfect, it's the best we've got."

For more, see the original story, from Dec. 10, 2006, "Six figures under", that begins:
As senior citizens across Lake County went scrambling for money to avoid losing their homes to tax sale this year, the Allen Funeral Home in East Chicago apparently had no worries.

The small business had a $440,000 bill for unpaid taxes and penalties, yet managed to avoid tax sale with one phone call to the county treasurer's office.

The arrangement was nothing new. The funeral home hasn't paid a cent of tax since at least 1999, avoiding tax sales by claiming protection through a bankruptcy, county officials say.

A Times review of county tax and federal court records has found the bankruptcy may have been used as a long-running tax dodge.

Posted by Marcia Oddi on April 8, 2007 08:34 AM
Posted to Indiana Government