Monday, October 21, 2013

Notes: Kentucky Tax Delinquency Certificates

This is a first step into the unknown for me. This is an acknowledgement that I know nothing about Kentucky Tax Delinquency Certificates, but that I intend to get to the bottom of it. This blog post my personal repository of links and references, research notes, unanswered questions and ruminations on the subject which are all subject to change and revision without notice or warning. If you make the mistake of taking any of this as authoritative, then shame on you.

Overview. When folks don't pay their property taxes in Kentucky, laws and procedures in the Commonwealth provide a mechanism to sell those tax liabilities to private investors. The advantage of this to the taxing authority is that it gets much needed revenue immediately, without the expense, delay and uncertainty associated with collection. The advantage to the private investors who buy the tax liabilities is a relatively high rate of return on investment, which is 12%, more or less. The investment instrument is called a Certificate of Delinquency (KRS §134.101(1)).

Evolution. Although it remains a specialty investment vehicle, Certificates of Delinquency are still an emerging field. Basically, it looks to be a 21st Century phenomenon. In 2013 there were some 115 individual or group investors who had registered with the Kentucky Department of Revenue as non-incidental third  party purchasers of Delinquency Certificates. See: Third Party Purchasers Registered 2013 If market interest rates remain low, I expect interest in Certificates of Delinquency will continue to grow.

Statutory Authority: KRS Chapter 134.


Jefferson County Clerk's Delinquent Tax Website
Jefferson County Clerk’s Office Tax Bill Sale Procedures
Kentucky Department of Revenue - Property Tax
Kentucky Department of Revenue - Basic Information for Third Party Purchasers (PDF)