June 26, 2014

In the 2003 film House of Sand and Fog, Jennifer Connolly’s character loses her house due to nonpayment of a relatively small amount of delinquent county property taxes. Ben Kingsley’s character purchases the house at auction for a fraction of its appraised value and begins making renovations to the property. The movie ends with tragic loss of life – and Connolly’s character never gets her house back.

Comedian Conan O’Brien didn’t face tragedy on this scale, but he did come within days of losing his house, valued at more than $720, 000, due to $8,000 in delinquent taxes. The home was one of several that were slated for auction on Tuesday, June 24 by the town of Westerly, Rhode Island, where the house is located. (Source: USAToday)

Lost in the Mail

O’Brien, whose late night talk show on TBS has been renewed through 2018, was not facing financial difficulties that prevented him from paying the tax bill. Instead, the bill was apparently mailed to the wrong address and never reached his accountant in Los Angeles. O’Brien only learned of the risk of losing his house through a reporter’s story published in the Westerly Sun. O’Brien paid the bill on June 20 – as soon as he learned about the mix-up.

The heads-up from the local newspaper came just in time. As soon as O’Brien posted payment on the house, it was pulled from the auction list. Other homeowners who have gotten into arrears with their property taxes have not been nearly so fortunate.

Other celebrities in the news for tax troubles: Lauryn Hill, Courtney Love, Teresa Guidice

Search and Seizure

The story depicted in House of Sand and Fog was highly dramatized in the interest of drawing an audience. But the circumstances surrounding Connolly’s character losing her home and Kingsley’s character being able to purchase it for cheap were fairly accurate. Like the Treasury Department and the IRS, local municipalities and counties are serious about collecting tax revenues. Even when the collection process involves conducting fire sales of property owned by delinquent taxpayers.

Local and county governments routinely seize and sell properties due to unpaid property taxes that total only a fraction of the value of the homes that have been seized. While the execution of the policy can appear borderline ridiculous at times, the principle behind the practice is understandable. After all, a significant portion of the revenue of a city, town or county is derived from property taxes. No property tax collections=no revenue.

Want to know how ridiculous? Earlier this year, Pennsylvania widow Eileen Battisti lost her $280,000 home over a measly $6.30 tax bill. That’s right, six bucks.

Due Diligence

O’Brien’s near-loss of his home also illustrates the need for taxpayers to take a proactive approach to managing their affairs. In O’Brien’s case, the mistake was not made by him or by his accountant. Nonetheless, to learn about your own tax troubles in the news is risky. Had he not paid the amount in arrears in time, he would have lost the house because of a bit of lost mail.

It is possible that O’Brien could have taken legal action had the auction gone ahead. But the process would have been complex and messy, especially if his house had been purchased by a good faith purchaser in the interim. You can bet that O’Brien and his accountant will examine his financial affairs with a fine tooth comb going forward to prevent a similar incident in the future.