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Tax Chargebacks and Revenue Limits

Tuesday, June 22, 2021


We have been getting questions on property tax chargeback invoices that districts have received lately. As a reminder, the way chargebacks are treated under Revenue Limits depends upon what they are for—uncollectable taxes billed by municipalities, or rescinded taxes billed by the Department of Revenue.

Uncollectable Taxes Billed by Municipalities

After a district sets its property tax levy and sends municipalities tax invoices in November, the municipalities settle those invoices in full by the following August. A situation may arise where a municipality deems a portion of the taxes uncollectable, if they cannot collect it, even though the district has received its full share. In this case, the municipality can invoice the district for repayment of the uncollectable amount. Districts receive this invoice directly from the municipality, which can happen at any time during the year, with the repayment expenditure coded to WUFAR account 10E 972 492000.

Because the district is legally entitled to the full amount of the original levy, the district can charge back the tax base in the following year for the uncollectable amount that was repaid to the municipality. Neither DPI nor the Department of Revenue (DOR) are involved in chargebacks for uncollectable taxes, it is a purely local process.

If a district later receives payment of property taxes that the municipality previously deemed uncollectable, the revenue is coded to 10 R 972.

A district can levy the total amount of uncollectable taxes repaid to municipalities in the previous year, minus any payments received from municipalities for taxes previously deemed uncollectable, outside of the Revenue Limit. The levy amount is entered on Line 15C of the Revenue Limit worksheet, coded to 10 R 212, and reported to DPI as the Fund 10, Source 212 chargeback levy on the Tax Levy Report.

Rescinded Taxes Billed by DOR

Property owners may contest their tax assessments, which can involve court cases and take years to settle. If the owner ultimately succeeds, they can request a refund of the property taxes paid on the higher value from the Department of Revenue (DOR). After these “rescinded” taxes are refunded, DOR sends letters to districts referencing “a palpable error that would affect the equalized value.” These letters are sent around mid-November and the school district is required to repay DOR for the amount of any rescinded taxes refunded to local taxpayers by February 15. As with uncollectable taxes, expenditures for rescinded taxes are also coded to 10E 972 492000.

Again, the district is legally entitled to the full amount of the original levy and can charge back the tax base in the following year. However, state law handles this case by providing a non-recurring Revenue Limit exemption in the following year, shown on Line 10D of the Revenue Limit worksheet (Adjustment for Refunded or Rescinded Taxes). DPI receives district amounts for this exemption directly from DOR at the same time letters are sent to districts, which we include in our prepopulated Revenue Limit worksheet.

Since this is an exemption, the resulting levy is included in the district’s Revenue Limit as part of the General Fund tax levy (10 R 211). It should not be coded separately or levied outside the Revenue Limit as part of the levy for uncollectable taxes (10 R 212).

The 2021-22 prepopulated Revenue Limit worksheet includes amounts on Line 10D for the rescinded taxes submitted by DOR in November 2020. Please contact us as soon as possible if this amount differs from what your district paid to DOR for rescinded taxes.

For questions about this information, contact Ben Kopitzke (608) 267-9279