Sonoma, Napa counties win tussle with IRS over tax document fees

The IRS largely lost a short-lived fight it picked late last year with California counties over fees the federal agency is required to pay in order to process tax records, including liens.

In late September, the IRS sent letters to every California county declaring it would no longer pay the full price of recording liens or lien releases in the counties.

The agency claimed that a portion of the fees charged by California recorders represent unconstitutional taxes levied on the federal government, according to the letter.

Although local county officials worried of the potential loss of hundreds of thousands of dollars, the net result of the kerfuffle was a loss of $244. It ended for Sonoma County after some wrangling involving lawyers for both sides. The IRS agreed to pay the forgone fees, and in mid-November agreed to start paying Sonoma County’s stated fees in full, said Deva Proto, the county’s clerk, recorder, assessor and registrar of voters.

“From what I understand, that’s happened statewide,” Napa County Clerk and Recorder John Tuteur said, referring to California counties coming out on top. “It took a couple of weeks for us to get the $98 they owed us, but we were fine.”

Sonoma County is still waiting on its check, Proto said, with the IRS saying the county “should have it by the end of the month.”

Tuteur said there’s still an underlying dispute with some counties involving a fee charged by the district attorneys, which is tacked onto some of the documents those counties record. Neither Napa, nor Sonoma counties collect that fraud fee, which Tuteur said the IRS disputes because the fee goes above and beyond the simple cost to record the documents in question.

California State Association of Counties spokesman David Liebler said the organization doesn’t have much insight into the statewide issue, saying it varies from county to county.

A San Diego-based IRS spokesman previously declined to even confirm or deny the agency was disputing recording fees.

Sonoma County charges $14 to record or release a lien, with 1,504 of those requests processed for the IRS in 2018, amounting to about $21,000 in revenue.

The IRS had offered to pay Sonoma County $10 for each service, meaning a total revenue loss of $6,016 based on 2018 numbers.

Tuteur credited U.S. Rep. Mike Thompson, D-St. Helena, for helping to quickly address the issue.

You can reach Staff Writer Tyler Silvy at 707-526-8667 or at tyler.silvy@pressdemocrat.com. On Twitter @tylersilvy.