Can NSP funds be used to pay "back taxes," clear tax liens or other liens, code enforcement fines, if they are associated with acquisition costs?

Date Published: October 2012

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Yes, there are some situations where NSP funds could be used to pay these taxes, but the options are limited. If title to a foreclosed property is held by a private entity and the tax was levied by the NSP1 grantee or another jurisdiction, then NSP funds by be used indirectly to clear the tax liens through the acquisition process. For example, if the fair market value of a foreclosed property less the NSP required purchase discount is valued at $100,000, and the property has a $10,000 tax lien, the NSP grantee can acquire the property for $100,000. The title company disbursing the funds from the transaction will give the seller $90,000 less any applicable fees, and $10,000 will be forwarded to the jurisdiction that levied the tax lien. Keep in mind NSP grantees must meet obligation deadlines in order to retain their NSP funding. Therefore, it is important that grantees are careful not to take on acquisitions that may get mired in title or other issues preventing timely closing.

Tags: NSP Program Requirements - Eligible Costs