Property transfer tax hikes?

The Nevada legislature is considering four bills that would bump up the real property transfer tax in an effort to either raise additional revenue for the state's general fund or to earmark money for specific programs.

The Senate Committee on Taxation last week heard three of the bills, including testimony from area Realtors and county recorders from Carson City and Washoe and Clark counties who collect the tax when they process deeds.

A fourth bill to raise the tax - Assembly Bill 387 - also was scheduled to be heard in a meeting of the Assembly Committee on Taxation last week.

The real property transfer tax is assessed any time a residential or commercial property is sold or a deed is altered, such as when a spouse is added.

There are a number of exemptions to it.

In counties where the population is 400,000 or more, the tax is currently $1.25 per $500 of property value.

In counties where the population is less than that, the tax is now 65 cents.

In both instances, 10 cents of the tax goes to the state controller for an account for low-income housing.

For larger counties, 60 cents is remitted to the county treasurer for the county school district's capital projects.

The remainder - 55 cents from the bigger counties and 50 cents from the smaller ones - goes to the state controller for the Local Government Tax Distribution Account.

One bill heard last week - Senate Bill 385 - would raise the tax by $1 for all counties to beef up the state's general fund.

"It is the one tax that does help with the issue of growth," said Sen.

Raymond Rawson (R-Clark), testifying in favor of the bill, which he sponsored.

The Realtors didn't agree.

"We are opposed to an increase in the real property transfer tax," said Amy Jameson, representing the Nevada Association of Realtors.

"It will drive up the cost of housing and hits the first time home buyer the hardest."

"It is not a broad-based tax.

It's targeted at the real estate industry," said Penny Mayer, Mayer & Associates Real Estate in Sparks.

"Other forms of property, like stocks and bonds, are not taxed."

According to Jameson, the cost of the tax is negotiable between buyer and seller of a property, but is usually paid by the seller.

Several county recorders also testified.

"It is an extremely difficult task to administer this tax," said Kathryn Burke, county recorder for Washoe County.

The main problem is the number of exemptions, which must be reviewed and confirmed by the county recorder's office.

"Our auditor is in the year 2000," said Frances Dean, Clark County county recorder.

"With the many exemptions and the sheer volume it is difficult to stay on top of it."

Washoe County's Burke said, for example, that out of 2,564 recent documents, 1,177 were found to be taxable.

The remaining 1,387 fell under some kind of exemption, which had to be evaluated by the recorder's staff.

Senate Bill 270, also heard last week, would raise the real property transfer tax 10 cents across the board to add to the state's general fund for the Commission on Economic Development's budget.

A panel of economic development officials introduced an amendment to the bill that would limit the increase to commercial transactions.

"We discussed it with the Realtors' and homebuilders' associations and decided on a 10 cent increase on the transfer of commercial property only," said Russell Rowe, representing the Nevada Development Authority.

"It's a small amount of money, but it's enormous for economic development."

That means the increase would raise an additional $1.3 million annually for the economic development commission.

Rowe said 31 percent of all property transfers in 2001 were commercial transactions.

The bill would have raised a total of approximately $3 million if the remaining 69 percent in residential transactions were included.

The commission's budget is now approximately $7 million, according to Bob Shriver, executive director of the state's economic development commission.

That's dwarfed by most other states, including the surrounding states that Nevada most closely competes with to attract new business, he said.

"Out of 49 states reporting, we ranked 48th," in terms of money spent on economic development, said Shriver.

In terms of neighboring states, Wyoming, which has the smallest population, said Shriver, spends $19 million annually on economic development.

Oregon spends $50 million, California $42 million and Utah $63 million, he said.

Senate Bill 370, sponsored by Sen.

Dean Rhoads (R-Northern Nevada), would raise the tax 5 cents to be sent to the State Treasurer for use in the Plant Industry Program for dealing with the state's invasive species, such as the Mormon cricket.

The money raised would be returned to the county of origin, which would independently decide how to use the proceeds.

Right now, the counties don't receive any money from the state to deal with threatening pests.

They do receive some federal funds for specific species and the Nevada Department of Transportation is contracted to control noxious weeds.

The Senate taxation hearing was closed on all the bills with no action.

If all the bills pass, including the Assembly bill, it would add $1.65 to the tax, driving up the tax on a $100,000 home to $480, from today's $150, according to Washoe County's Burke.

After the meeting, Burke said the state needs to correct problems with the tax that make it unmanageable before hiking it.

She said that many of the existing exemptions, which cause some of the problem, cannot be eliminated.

She said the options are to get rid of the tax, turn its processing over to the state, or institute a flat tax rather than one based on property value.

"But we didn't come to the legislature this session because it was already so crowded," with other legislation like the major tax bills, said Burke.

"And we come here and are hit with four bills."