By: Shane Dixon Kavanaugh
A Portland government watchdog says the city’s tax department should waive penalties for all high-income households that failed to pay a pair of newly created taxes to fund homeless services and universal preschool — or at least inform people that they are eligible to have the fines canceled or refunded.
Tony Green, a deputy city ombudsman, made the recommendation to Portland’s revenue and financial services bureau after his office learned the bureau had started relaxing late fines for some households but not others.
Green said the ombudsman’s office was contacted by a taxpayer who received a delinquent notice from the city in November and informed they owed approximately $1,100 in penalties and $294 in interest for both taxes.
The taxpayer learned they could seek to have the penalties — though not the interest — waived after contacting the city’s revenue office. Their penalties were later dropped.
“Because the tax is new, revenue is waiving penalties for delinquent taxpayers who contact revenue and say they did not know about the tax,” Green wrote last week in a strongly worded memo to Thomas Lannom, the city’s top revenue official. “However, revenue is not affirmatively informing all eligible taxpayers of this option.”
Lannom said in a statement Friday that the city was reviewing the recommendations made by the ombudsman’s office.
In the meantime, Lannom said, “the revenue division has been approving written penalty waiver requests on a one-time basis for these two new taxes.”
The revelation comes days after The Oregonian/OregonLive reported that almost a quarter of the high-income households — or about 12,000 — that owed Metro’s tax to fund homeless services failed to pay it in tax year 2021.
A large number of taxpayers also failed to pay a new Multnomah County tax to fund universal preschool in the same tax year, although county officials say they do not yet know the number of delinquent filers.
Portland’s revenue bureau administers the taxes for Metro and the county, both of which were due last April. The city only recently started sending letters to delinquent households.
The unpaid homeless services and preschool taxes are each accruing interest at a rate of 10% annually as well as other late fees and penalties. Both programs have yet to collect millions of dollars in delinquent taxes
None of the three local governments notified individuals or households that owed the tax in advance, a fact that the deputy ombudsman noted in the memo.
“Revenue said a targeted notification was not possible at the time because they did not have the ability to identify which taxpayers might owe the tax,” Green wrote. “They said there were discussions with Metro and Multnomah County about notifying all taxpayers, but both entities declined this option.”
According to the memo, the revenue bureau also acknowledged “that none of their written communications tell taxpayers about the waiver request process.”
“In circumstances when a significant number of taxpayers were informed that they owed a penalty at the same time they received their first notification of tax due, it unfair that the penalty waiver is being made available only to taxpayers who call and complain,” Green wrote, “particularly when revenue is not proactively informing delinquent filers of the option.”
Starting in January 2021, Metro began collecting a 1% income tax from individuals in Clackamas, Multnomah and Washington counties who made more than $125,000 annually or couples who made more than $200,000 combined as well as from businesses generating at least $5 million annually.
That money is supposed to fund housing, behavioral health services and other housing-related services for people experiencing or on the verge of homelessness.
As for Multnomah County’s preschool tax, single filers with taxable incomes of more than $125,000 and joint filers with incomes above $200,000 owe a 1.5% county income tax on earnings above those levels.
Single filers who bring in more than $250,000 and joint filers at more than $400,000 pay even more: a 3% tax on income above those levels.
For more information about paying your 2021 homeless services or preschool for all taxes, or to seek a penalty waiver, visit Portland’s revenue and financial services bureau.
Find and download 2021 tax forms for each here.
Note: This article was corrected on Feb. 7 to reflect the correct income threshold at which single tax filers begin to owe the preschool tax.