Straighten up and tax right

Got my school district tax bill last week.

Yay.

But on the plus side, that bill reminded me of one of my all time most favorite topics of conversation – proration of property taxes!

For REALTORS®, it is important to know the tax year when you’re pro-rating taxes for settlement. If your buyer is closing at the end of March it will matter quite a bit if they’re going to be expected to reimburse for three months of taxes on a fiscal year basis (April – June) or nine months on a calendar year (April – December).

Municipal taxes are all done on a calendar year basis – that’s easy. School taxes are a bit harder. As the PAR Agreement of Sale reminds you: “For all school districts, other than the Philadelphia, Pittsburgh and Scranton school districts, the period covered by the tax bill is July 1 to June 30. For the Philadelphia, Pittsburgh and Scranton school districts, tax bills are for the period January 1 to December 31.”   

Every couple of years we’re contacted by a few people who insist that THEIR school district taxes on a calendar year rather than a fiscal year and that we need to change the Agreement to reflect that fact. It’s usually an agent looking for clarification, but we’ve also been contacted by attorneys representing school districts. Only problem is…well…they’ve all been wrong so far – at least as far as the law is concerned.

Pennsylvania state law says that school districts classified as First Class (Philadelphia) and First Class A (Pittsburgh) are automatically on a calendar year basis. All other classes of school districts (Second through Fourth) are automatically on a fiscal year for taxes, except that a Second Class district is permitted to change to a calendar year if an appropriate resolution is adopted by the local school board – which appears to be why Scranton taxes on a calendar year. No other districts are permitted to tax on a calendar year basis.

To put it in perspective, there are 501 school districts in Pennsylvania (maybe 500 by the time you read this). Of the other 498 not listed above, only 93 are Second Class districts. So if you’re calling me from one of those 93 there’s a possibility that the district is using a calendar year. Send a copy of the school board’s enabling resolution and we’ll be happy to change the form. But if you’re calling from any of the other 405 school districts, the law (24 P.S. §6-671, for those who are interested) requires that the district tax on a fiscal year basis. If they’re not doing it that way…well…um…they should probably fix it.