At a recent Municipal Law for Treasures and Tax Collectors class, several attendees asked questions about the federal Soldiers’ and Sailors’ Relief Act. Because of the current conflicts in Afghanistan and in Iraq, a repeat of that information in this newsletter may be timely.
If a taxpayer is on active duty in the Armed Forces, the Soldiers' and Sailors' Relief Act (the “Act,” 50 U.S.C.A. Appx §§ 501 et seq.) protects the taxpayer in two ways, described below, while that person is in military service.
The period of military service shall not be . . . included in computing any period . . . provided by any law for the redemption of real property sold or forfeited to enforce any obligation, tax, or assessment.
In addition, 50 U.S.C.A. Appx. § 560, which should be read in conjunction with § 525, establishes a special rule governing the enforcement of tax collection against persons serving in active military service when the property in question is personal property or real estate owned and occupied for dwelling, professional, business, or agricultural purposes by a person in military service or occupied by his or her dependents at the commencement of the period of military service. With this type of property, the taxpayer has a special period of redemption running for six months from the date the taxpayer leaves military service. This provision of federal law does not prevent the tax collector from recording the tax lien. However, it does prevent the foreclosure of a tax lien in the usual time period.
The effect of this law is to prevent a municipality from counting any time during which the assessed owner of record serves on active duty toward the 18-month redemption period. Presumably, if the taxpayer enlists before or within the 18-month redemption period, then the clock stops running on the period until the taxpayer ceases active military service. In any case, automatic foreclosure cannot occur during the time the taxpayer is in the service. With regard to the kinds of property listed above, there is a special six-month period of redemption that begins to run when the taxpayer leaves military service. Please note that this law does not apply to property acquired by a person after he or she enters active military service; it applies only to the types of property already owned by the person at the time he or she enters the service.
No obligation or liability bearing interest at a rate in excess of 6 per centum per annum incurred by a person in military service prior to his entry into such service shall, during any part of the period of military service . . . bear interest at a rate in excess of 6 per centum per annum unless, in the opinion of the court, upon application thereto by the obligee (the person to whom the interest is owed), the ability of such person in military service to pay interest upon such obligation or liability at a rate in excess of 6 per centum per annum is not materially affected by reason of such service, in which case the court may make such order as in its opinion may be just.
What this section of the Act means is that if property tax interest is being charged at a rate greater than 6% before a person enters military service, which is commonly the case in Maine and has been for decades, then not more than 6% interest may be charged to that person while he or she is in active military service unless the obligee (the municipality) applies to the court. If the court finds that the ability of the taxpayer to pay interest in excess of 6% is not materially affected by serving in the Armed Forces, then the court may order the taxpayer to pay the full amount of interest. Since the costs of obtaining court authorization to apply a higher rate of interest would probably be prohibitive, the practical effect of this law is to establish a special interest rate for all taxpayers in active military service of 6%.
50 U.S.C.A. Appx. § 560 likewise specifies a 6% rate of interest on delinquent taxes during the period of military service, if the property was owned and occupied by the serviceperson or his or her dependents at the commencement of military service for dwelling, professional, business or agricultural purposes.