When a Mississippi municipality buys taxable land, who pays the year's property taxes, and can the county forgive them?

Plain-English summary

The Village of Pachuta bought property in January 2020 from a private owner. The deal was complicated:

• The Village agreed to pay 2019 ad valorem taxes
• The Village would "dispense with" 2020 taxes
• The County Board adopted an order in late 2019 purporting to forgive the 2019 taxes
• Despite this, the County sold the property at the tax sale in August 2020

Multiple parties asked the AG for guidance on the legal mess. The Mayor of Pachuta and the Clarke County Attorney both submitted requests on the same matter.

The AG broke down the issues:

Question 1: Could the Village pay the 2019 and 2020 taxes?
A Mississippi public body (like a municipality) can agree as part of a purchase contract to pay current-year ad valorem taxes. But the public body has no authority to "assume" the seller's tax liability. The County cannot compel the Village to pay; the seller (the January 1 owner of record) remains personally liable.

The relevant doctrines:

• The owner of property on January 1 of a tax year is liable for the entire year's taxes, even if they later sell
• Pro rata allocation by time of ownership is not allowed
• A subsequent exempt purchaser does not become liable, but can voluntarily contribute to the seller's tax liability as part of the purchase price

Question 2: Could the County forgive the unpaid taxes and cancel the tax sale?
No on both counts. The County has no authority to forgive ad valorem taxes. A 2017 AG opinion (Riley) and a 2014 AG opinion (Lewis) established that forgiveness of taxes due to the County would be an unlawful donation under Article 4, Section 100 of the Mississippi Constitution. The County's purported forgiveness order was therefore beyond the County's authority.

Question 3: Are existing tax liens extinguished when a public body acquires the property?
Yes. Mississippi law has long held that ad valorem tax liens are extinguished when a public body buys the property. Davis v. City of Biloxi (1938) is the seminal case. Multiple AG opinions (Miller 1995, Melton 1994, Eaton 1993) confirm this. The previous private owner remains personally liable for the unpaid taxes, but the lien on the property is gone.

Tax sale implications:
Real property owned by a public body cannot be sold for unpaid taxes, because the tax lien is extinguished as of the date the public body acquires the property. The opinion cites Riley (Nov. 9, 2018) for the point that a tax sale that was improper in the first instance can be voided.

The AG was careful about the limit on its own role: official opinions answer prospective questions of state law under Section 7-5-25 and "can neither validate nor invalidate past action." So the opinion does not rule on whether Pachuta's particular August 2020 tax sale was valid. It states the general rules that govern the situation:

• The owner of record on January 1 is liable for the full year's taxes, even after a mid-year sale to an exempt buyer
• A public body may agree in a purchase contract to pay an amount equal to the current year's taxes, but it cannot assume the seller's tax liability
• A county board has no authority to forgive ad valorem taxes; doing so would violate Article 4, Section 100
• A tax lien is extinguished when a public body acquires the property, and publicly owned property may not be sold for the pre-acquisition taxes

What this means for you

For Mississippi municipalities buying private property

The opinion holds that a public body may agree, as part of a purchase contract or lease, to pay an amount equal to the current year's ad valorem taxes, and may agree as consideration to pay up to fair market value to offset the owner's personal tax liability. What it cannot do is assume the seller's tax liability, and the county cannot compel the municipality to pay the taxes. After the public body acquires the property, the tax lien on the property is extinguished, but the seller's personal liability for the taxes survives.

For Mississippi county boards of supervisors

The opinion holds that the county has no authority to forgive or reduce ad valorem taxes, penalties, or interest. Quoting the Riley (2017) opinion, it states that a failure to collect taxes due "would amount to extinguishing a debt that is due and owing to the County in violation of Art. 4, Section 100 of the Mississippi Constitution." A board order purporting to forgive taxes is therefore outside the board's authority. Once the property is acquired by a public body, the lien is extinguished, and the opinion states that publicly owned property may not be sold for the pre-acquisition taxes.

For Mississippi tax collectors

Under the opinion, liability for a year's real property taxes is fixed at the owner of record on January 1, and the taxes may not be apportioned pro rata by time of ownership. The county must look to that January 1 title-holder for the full year's taxes. A later exempt purchaser does not become liable, and once the property is held by a public body the tax lien on it is gone.

For sellers of property to a tax-exempt buyer

The opinion holds that the previous owner remains personally liable for the ad valorem taxes owed even after conveying the property to a municipality. The transfer extinguishes the lien against the property, but not the owner's personal obligation.

For tax sale purchasers

The opinion does not address the rights of a tax sale purchaser directly. It states only that real property owned by a public body may not be sold for unpaid taxes because the lien is extinguished on acquisition, and that a tax sale "improper in the first instance" can be voided, citing Riley (Nov. 9, 2018).

Common questions

Q: Who owes the property taxes when land is sold partway through the year?
A: The owner of record on January 1 owes the full year's taxes. The opinion states this holds "even if the property is transferred to an exempt party during the middle of the year," and that the taxes may not be split pro rata between successive owners.

Q: Can a city or county agree to pay the taxes as part of buying the property?
A: Yes, within limits. The opinion says a public body may agree, as part of a purchase contract or lease, to pay an amount equal to the current year's taxes, and may agree to pay consideration up to fair market value to offset the seller's tax liability. It may not "assume" the seller's tax liability, and the county cannot force it to pay.

Q: Can the county forgive the unpaid taxes?
A: No. The opinion states there is "no authority for a county board of supervisors to forgive or reduce the amount of ad valorem taxes, penalties and interest due on property," because that would extinguish a debt owed to the county in violation of Article 4, Section 100 of the Mississippi Constitution.

Q: What happens to the tax lien when a public body buys the property?
A: It is extinguished as of the date of acquisition. The opinion relies on Davis v. City of Biloxi (1938) and a line of prior AG opinions for the rule that an ad valorem tax lien against real property is extinguished when a public body acquires the property.

Q: Does the previous owner still owe anything after the sale?
A: Yes. The opinion states the previous owner "remains personally liable for the ad valorem taxes owed on the real property." The lien is gone, but the personal debt is not.

Q: Can publicly owned property be sold at a tax sale for old taxes?
A: The opinion says no. Real property owned by a public body may not be sold for unpaid taxes, because any tax lien is extinguished as of the date of acquisition. It cites Riley (Nov. 9, 2018) for the voidance of a tax sale that was improper in the first instance.

Q: Does this opinion decide whether the Pachuta tax sale was valid?
A: No. The AG notes that its opinions answer prospective questions of state law under Section 7-5-25 and "can neither validate nor invalidate past action." The opinion gives the governing rules; it does not rule on the validity of the specific transactions described in the request.

Background and statutory framework

Mississippi's ad valorem tax framework rests on several core rules:

The January 1 rule: Real property tax liability is fixed at the owner of record on January 1 of the tax year. The owner remains liable for the full year's taxes regardless of subsequent transfers. AG opinions Seard (2008), Ellis (1990), and Mathis (2008) all apply this rule.

Lien extinguishment on public acquisition: When a public body acquires real property, ad valorem tax liens on the property are extinguished. The property, now publicly owned, is exempt from further taxation. Davis v. City of Biloxi (1938) is the leading case; AG opinions Miller (1995), Melton (1994), Eaton (1993) confirm the rule.

Personal liability survives: The lien extinguishment does not extinguish the personal liability of the previous private owner. The County retains a personal claim against the owner of record on January 1.

No tax forgiveness without authority: Section 100 of Article 4 prohibits public bodies from forgiving debts. AG opinions Riley (2017), Lewis (2014) confirm. Tax forgiveness orders are beyond county authority.

No-pro-rata rule: Within a tax year, taxes are not allocated pro rata between successive owners. The January 1 owner pays everything. This rule simplifies administration but creates the situations like Pachuta's, where a public body's mid-year purchase leaves the seller holding the bag for the year's taxes.

Public body purchase agreements: A public body can voluntarily agree, as part of the purchase price, to fund the seller's payment of taxes. This is essentially a price allocation. It does not legally shift liability; it is just a payment mechanism.

The Hollingsworth (2013) opinion and Mathis (2008, 2009) opinions developed the framework for public body purchases. The pattern: public body pays the seller; seller pays the County; lien extinguishes; future taxes are zero (because the property is now exempt).

The opinion does not rule on the Pachuta transactions themselves, because an AG opinion answers prospective questions and cannot validate or invalidate past action. As a matter of the governing rules, a county board has no authority under Article 4, Section 100 to forgive a tax debt owed to the county, and a tax sale that was improper in the first instance can be voided, citing Riley (Nov. 9, 2018). Real property already owned by a public body may not be sold for unpaid taxes, because the lien is extinguished on acquisition.

Citations and references

Constitutional provision:

• Miss. Const. art. 4, § 100, prohibition on extinguishment of public debts

Statutes:

• Miss. Code Ann. § 7-5-25, AG opinions limited to prospective state law

Cases:

• Davis v. City of Biloxi, 184 So. 76 (Miss. 1938), tax liens extinguished on public acquisition

Prior AG opinions:

• MS AG Op., Magee (Aug. 29, 2008), AG opinions cannot validate or invalidate past action
• MS AG Op., Brock (Nov. 8, 2019), same
• MS AG Op., Mathis (Mar. 16, 2009), public body cannot assume tax liability
• MS AG Op., Mathis (June 20, 2008), January 1 owner liable for full year
• MS AG Op., Seard (Aug. 15, 2008), full year liability rule
• MS AG Op., Ellis (Feb. 21, 1990), no pro rata allocation
• MS AG Op., Hollingsworth (Oct. 11, 2013), public body may agree to pay tax-equivalent amount
• MS AG Op., Greco (Feb. 9, 2001), exempt party cannot assume tax liability
• MS AG Op., Riley (Mar. 10, 2017), county cannot forgive taxes
• MS AG Op., Lewis (Oct. 3, 2014), forgiveness violates Section 100
• MS AG Op., Miller (Feb. 23, 1995), lien extinguished on state acquisition
• MS AG Op., Melton (Mar. 9, 1994), lien extinguished on public acquisition
• MS AG Op., Eaton (Apr. 14, 1993), same
• MS AG Op., Prichard (Aug. 7, 1998), seller's personal liability persists
• MS AG Op., Riley (Nov. 9, 2018), improper tax sales are voidable

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2021/10/P.Fuller-and-W.Hammack-October-11-2021-Payment-of-Taxes-After-Acquisition-of-Property-by-Municipality.pdf

Original opinion text

October 11, 2021

Mayor Phil Fuller
Village of Pachuta
Post Office Box 189
Pachuta, Mississippi 39347

William C. Hammack, Esq.
Attorney for Clarke County
1724 A 23rd Avenue
Meridian, Mississippi 39301

Re: Payment of Taxes After Acquisition of Property by Municipality

Dear Mayor Fuller and Mr. Hammack:

The Office of the Attorney General has received your requests for official opinions on the same matter.

Background

According to your requests, the Village of Pachuta (the "Village") purchased real property within its municipal limits in January 2020 from a private, non-governmental entity/individual. In negotiations for the purchase, the Village agreed to pay the ad valorem taxes for 2019, "dispense with" the taxes for 2020, and, thereafter, requested the Clarke County Board of Supervisors (the "County Board") to forgive the 2019 ad valorem taxes. The County Board adopted an order in late 2019 purporting to forgive that year's taxes when they became due. However, the County subsequently sold the property at its annual tax sale in August 2020.

Issues Presented

1. May the Village pay the 2019 and 2020 taxes?
2. May the County Board and Tax Collector forgive unpaid taxes and cancel the tax sale, when all participants in the sale relied upon the County Board's forgiveness order even though private entities owned the property for the entirety of the 2019 tax year, and even though the said private parties paid no taxes for 2019 (through pro-ration or otherwise) or for the short period in 2020 prior to the conveyance to the purchaser (a municipality)?
3. Are existing tax liens protecting a public taxing authority immediately extinguished upon the acquisition by a separate public body of the property to which the tax liens relate?

Brief Response

In response to the first question, if the Village agreed as part of its purchase agreement with the previous owner, to pay ad valorem taxes on the property, it may pay such taxes consistent with certain limitations. However, because the Village has no authority to assume a tax liability, the County cannot compel the Village to pay the taxes.

In response to the second and third questions, the County Board has no authority to forgive unpaid taxes owed by the previous land owner, as such forgiveness would amount to an unlawful donation. We have previously opined that real property owned by a public body may not be sold for unpaid taxes since any tax lien is extinguished as of the date of its acquisition.

Applicable Law and Discussion

As a threshold matter, official opinions of this office are issued on prospective questions of state law pursuant to Mississippi Code Annotated Section 7-5-25. An Attorney General's opinion can neither validate nor invalidate past action. MS AG Op., Magee at 1 (Aug. 29, 2008); MS AG Op., Brock at 1 (Nov. 8, 2019) (citing Miss. Code Ann. § 7-5-25). Accordingly, this office provides the following guidance for future application only.

With respect to your first question, this office has previously analyzed a factual scenario similar to yours, wherein a regional housing authority, a tax-exempt public body, purchased property mid-year from taxable entities/individuals. MS AG Op., Mathis (March 16, 2009); MS AG Op., Mathis (June 20, 2008). There, we opined the County was prohibited from assessing taxes on real estate the housing authority purchased, mid-year, from a taxable entity.

Moreover, "the owner of the property on January 1 is required to pay the full amount of taxes for the ensuing year." MS AG Op., Seard at 1 (Aug. 15, 2008). "This is the case even if the property is transferred to an exempt party during the middle of the year." Id. (citing MS AG Op., Ellis (Feb. 21, 1990)). In addition, "[b]ecause the year's taxes on real estate may not be attributed to the exempt and non-exempt parties pro-rata by time of ownership, the County must look to the title-holder at the time of assessment for the payment of taxes owed on the entire year." MS AG Op., Mathis at 1 (June 20, 2008).

"With respect to the authority of a municipality to pay current ad valorem taxes, we have previously recognized that a public body may agree, as a part of a purchase contract or lease agreement, to pay an amount that is equal to the current year's taxes." MS AG Op., Hollingsworth at 3 (Oct. 11, 2013) (citing MS AG Op., Mathis at 1 (June 20, 2008). "In regard to any delinquent ad valorem taxes, a municipality, as a part of a purchase contract, may agree to pay as consideration a certain amount of money, up to the fair market value, to offset the land owner's personal tax liability." "However, the exempt party has no authority to assume a tax liability." MS AG Op., Mathis at *1 (Mar. 16, 2009) (citing MS AG Op., Greco (Feb. 9, 2001)).

Accordingly, if the Village, as part of its purchase agreement for the subject property, agreed to pay certain ad valorem taxes on the property, it could do so, subject to these limitations. However, the County may not require the Village to pay taxes on the property in question, since the Village could not assume the previous owner's tax liability.

Turning to your second and third questions, the County may not forgive or reduce the amount of ad valorem taxes due. MS AG Op., Riley at *2 (Mar. 10, 2017) ("There is no authority for a county board of supervisors to forgive or reduce the amount of ad valorem taxes, penalties and interest due on property."). A county's failure "to collect the taxes, including mandatory penalties and interest, from the taxpayer entity would amount to extinguishing a debt that is due and owing to the County in violation of Art. 4, Section 100 of the Mississippi Constitution." Id.; (citing MS AG Op., Lewis (Oct. 3, 2014)).

It is well-established that any ad valorem tax lien against real property is extinguished upon acquisition of such real property by a public body. Davis v. City of Biloxi, 184 So. 76, 78 (Miss. 1938); MS AG Op., Miller (Feb. 23, 1995) (tax lien extinguished when property acquired by state); MS AG Op., Melton (Mar. 9, 1994) (tax liens extinguished when property acquired by public entity); MS AG Op., Eaton (Apr. 14, 1993) (ad valorem lien extinguished if public body acquires real property). The previous owner of the property acquired by the municipality remains personally liable for the ad valorem taxes owed on the real property. MS AG Op., Mathis (June 20, 2008); MS AG Op., Prichard (August 7, 1998). In addition, we have previously opined that real property owned by a public body may not be sold for unpaid taxes since any tax lien is extinguished as of the date of acquisition. MS AG Op., Mathis (March 16, 2009); see also MS AG Op., Riley (Nov. 9, 2018) (discussing voidance of tax sale where such "tax sales were, in the first instance, improper.").

If this office may be of any further assistance to you, please do not hesitate to contact us.

Sincerely,

LYNN FITCH, ATTORNEY GENERAL

By: /s/ Phil Carter
Phil Carter
Special Assistant Attorney General