Postmark as Payment Date

State and local governments receive payments for income and property taxes, license fees, user fees, fines, utility charges, and various other receipts owed by residents, property owners or those doing business in these jurisdictions. These payments constitute much of the revenue for a government necessary to provide vital public services and fulfill its financial obligations.

The continued efficient functioning of public services and the timely payment of a government's obligations depend on the prompt receipt of payments due the government. Most governmental payments have a specific due date and are credited to the proper account as of a date determined by statute or at the discretion of the state or local government.

Federal legislative proposals have been advanced that would direct that payment required to be made on or before a prescribed due date shall be considered to have been received by the payee as of the date of the postmark stamped on the envelope instead of the date of actual physical receipt. Such a requirement would impinge on the rights of state and local governments to establish business terms with their customers and taxpayers and could create the following cash management and compliance difficulties for state and local governments:

• Due dates for many specific payments are currently mandated by state or local law, and are legally deemed paid at the time as determined by the jurisdiction. This proposal would either require legislative bodies to change these dates or would amount to an unfunded federal mandate.
• Increased manual handling of payments would be required in order to demonstrate compliance. For example, envelopes may have to be retained and attached to payments so that determination of the promptness of the payment could be made at a later date. Postmarks and statements may have to be manually reconciled. In addition, postmarks are often illegible or missing, creating additional compliance problems. Where only a partial payment is made after the deadline, the calculation of penalties or interests will be difficult.
• The increased cost of compliance that would be required by adding staff, reprogramming computers, and purchasing new equipment would be passed on to all state and local taxpayers, not just those who choose to mail their payments on or near the deadline.
• Interest income of the state or local government could decrease due to the delay in receipts. Even a short delay in payments, when exercised by even a small percentage of payors, will result in missed opportunities for short-term investments because the government will have less cash on hand to invest. These missed opportunities will result in a loss of income to the government and its taxpayers.
• Cash-flow forecasting could become less accurate as the timing of payments becomes more uncertain which, in turn, could result in less than optimal short-term investment or borrowing decisions.
• Because a certain percentage of state or local government payments are made late, thereby incurring penalties and interest, a reduction in the number of late payments would result in a loss of revenue to the government.

GFOA Position

The Government Finance Officers Association (GFOA) understands the concerns of consumers who encounter problems with the postal service that affect the timely receipt and crediting of their governmental payments. However, GFOA believes that corrective remedies should be developed at the state and local level that do not result in the loss of revenue to and administrative burdens on state and local governments and their citizens. GFOA opposes any federal regulation of payment procedures that constitutes an unfunded mandate on state and local governments.

• Publication date: May 1996