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 that pre-date the public body's acquisition. So the August 2020 tax sale of property the Village had bought in January 2020 was problematic. The Riley (2018) opinion noted that improper tax sales are voidable.
So the practical situation:
- The 2019 taxes are owed by the previous (private) owner personally; the Village cannot be compelled to pay them
- The Village's purchase extinguished the lien; the County cannot enforce against the property
- The County's purported forgiveness was an unlawful donation
- The August 2020 tax sale was likely improper because the property was already public
What this means for you
For Mississippi municipalities considering property purchases
When you negotiate to buy private property:
- You can agree to pay current-year ad valorem taxes as part of the purchase price (in essence, you are paying more for the property)
- You cannot "assume" the seller's tax liability
- The seller remains personally liable for taxes accrued before your purchase
- After your purchase closes, the lien on the property is extinguished
- The seller's personal liability survives
Document the tax handling in the purchase agreement. Make clear:
- Who pays what taxes
- That the public body is not assuming personal liability
- Any escrow or holdback for taxes
- Closing date (which determines when liens extinguish)
For Mississippi county boards of supervisors
The County cannot forgive ad valorem taxes. Section 100 of Article 4 of the Mississippi Constitution prohibits gratuitous extinguishment of debts owed to the County. Any board order purporting to forgive taxes is beyond the Board's authority and may face challenge.
If the property has been sold to a public body, the lien is gone. The County's recourse is against the previous private owner personally. The Tax Collector should pursue the personal liability (judgment, garnishment, lien on other assets) rather than attempting to enforce against the now-public property.
If a tax sale has been held on property already owned by a public body, the sale was improper. The County may need to refund the tax sale purchaser and correct the records.
For Mississippi tax collectors
When ad valorem taxes are due:
- Verify ownership as of January 1 of the tax year
- Bill the January 1 owner personally
- If the property has changed hands, the new owner is not liable for pre-acquisition taxes (whether the new owner is taxable or exempt)
- If the property is now held by a public body, do not include in the tax sale list
- If a tax sale already occurred, work with the County Attorney to resolve
For tax sale purchasers
If you bought property at a Mississippi tax sale and it later turns out the property had already been transferred to a public body before the sale, the sale was likely improper. You may have a right to:
- Refund of the purchase price
- Interest
- Reimbursement for any improvements made
The Riley (2018) opinion provides guidance for these situations. Consult a Mississippi tax attorney.
For Mississippi sellers of real property
If you sell to a tax-exempt buyer (municipality, county, school district, state):
- You remain liable for the full year's taxes if you owned the property on January 1
- The transfer extinguishes the lien on the property, but not your personal liability
- If your purchase agreement says the buyer "pays" the taxes, that means the buyer pays with money that flows through the deal (typically reducing what you receive at closing); it does not mean the buyer is legally responsible for your tax debt
- After the closing, you remain on the hook to the County for any unpaid taxes
If you cannot pay the taxes from the sale proceeds, you may face County collection actions personally.
For real estate attorneys structuring transactions involving public buyers
Build the deal carefully:
- Allocate taxes in the purchase price
- Have the buyer agree to pay (out of the purchase price) current-year taxes through closing
- Confirm the seller's pre-closing tax obligations are addressed
- Get a tax certificate from the County before closing
- Consider escrow for taxes if amounts are uncertain
After closing:
- File the deed promptly so the public ownership is on record
- Notify the County Tax Collector to remove the property from active tax rolls
- If a tax sale is pending, intervene to prevent the sale of public property
Common questions
Q: Why is the January 1 owner liable for the full year?
A: Mississippi tax law fixes liability at January 1, the assessment date. The legislature chose that bright-line rule to avoid pro rata calculations and to provide certainty. Whoever owns on January 1 owes the full year. If property changes hands during the year, the seller can negotiate (in the purchase contract) for the buyer to pay or contribute to the taxes, but that is a contractual allocation, not a statutory shift of legal liability.
Q: What if the seller and buyer agree the buyer pays the taxes?
A: Their private agreement is enforceable between them. The buyer pays the seller's tax liability as part of the purchase price (or directly to the County on the seller's behalf). But the County's legal claim is still against the seller. If the buyer fails to pay, the County's recourse is against the seller personally; the seller's recourse is against the buyer for breach of contract.
Q: Why is forgiving taxes an "unlawful donation"?
A: Section 100 of Article 4 of the Mississippi Constitution prohibits the legislature (and by extension, all state and local government bodies) from making gifts of public funds or assets without specific authorization. A tax debt is a public asset. Forgiving it is essentially giving away public money. Without specific statutory authority, that is unconstitutional.
Q: Why is the lien extinguished when a public body buys?
A: A long-standing rule, going back at least to Davis v. City of Biloxi (1938). The rationale: a public body cannot effectively "owe" itself property tax. Once the property is publicly owned, it is exempt from taxation. The private-ownership tax lien is extinguished as a function of the change in status.
Q: Can the County still collect from the previous owner personally?
A: Yes. Personal liability survives. The County can:
- Sue for the tax debt
- Get a judgment
- Pursue the judgment through normal collection means (garnishment, lien on other property, etc.)
Q: What if the previous owner is bankrupt or judgment-proof?
A: Then practically, the County may not collect. That is a risk the County bears. The 2021 opinion does not provide a way around that risk; it confirms the legal framework, which puts the County in the same position as any creditor of an insolvent debtor.
Q: What about delinquent taxes from years before the year of sale?
A: Same rule applies. Pre-sale tax debts are personal to the owner who was the January 1 owner of the year in question. Liens are extinguished by transfer to a public body.
Q: What if the property is sold from one private owner to another, then to a municipality?
A: Each transfer between private owners does not extinguish liens. Pre-existing tax debts remain a lien on the property. When the property eventually transfers to a public body, that final transfer extinguishes the liens. The personal liability of each January 1 owner during the years in question persists.
Q: How does this work for personal property taxes (vehicles, equipment)?
A: The 2021 opinion addresses real property. Personal property tax frameworks may be different. Consult specific personal property statutes for the rule.
Q: What does Section 100 of Article 4 say?
A: "No obligation or liability of any person, association or corporation held or owned by this state, or levee board, or any county, city, or town thereof, shall ever be remitted, released, or postponed, or in any way diminished by the legislature, nor shall such liability or obligation be extinguished except by payment thereof; nor shall such liability or obligation be exchanged or transferred except upon payment of its face value." That is the textual basis for the no-tax-forgiveness rule.
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 County Board's purported forgiveness order in the Pachuta case was the legal error. Under Section 100 of Article 4, the Board could not forgive the seller's tax debt. The order was void as exceeding the Board's authority. The Riley (2018) opinion established that improper tax sales (including those based on improper forgiveness orders) are voidable.
The August 2020 tax sale of the property was probably improper because the property was already publicly owned (the Village's January 2020 purchase). Tax sales of publicly owned property are not authorized.
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
- May the Village pay the 2019 and 2020 taxes?
- 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)?
- 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