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Real property and real money

Anne Knowles

The Senate Committee on Taxation last week debated the state’s real property transfer tax, including eliminating some exemptions from it and raising the tax.

The committee didn’t discuss a specific bill, but looked into the feasibility of raising additional revenues through the tax that is levied when real estate changes hands.

Four bills increasing the tax were introduced into the legislature, but only one survives – Senate Bill 370, which would bump the tax up 5 cents and earmark the money to fight invasive species in the state.

The tax now has 16 exemptions and is collected by the counties’ recorders when deeds are recorded.

The exemptions make collecting the tax a headache, because determining whether a deed falls under an exemption can sap already strapped recorders’ resources.

“Whatever exemptions you can eliminate would make their lives easier,” said Alan Glover, Carson City Clerk- Recorder, during the meeting.

The exemptions are also leaving a lot of money on the table.

For instance, the committee talked about the fact that many large casinos exchange millions of dollars in stock – which is not taxable – when they sell large properties.

In such a transaction, the deed is eventually filed when the casino changes its name, but that, too, is currently exempt from the real property transfer tax.

“Is this what they mean when they say business doesn’t pay its fair share?” quipped Sen.

Ann O’Connell (R-Clark).

But Carole Vilardo, president, Nevada Taxpayers Association, cautioned that multimillion dollar deals such as that often take years to close and would not provide reliable cash flow for the state and counties.

She also warned that if the legislature is considering raising the real estate transfer tax, it should be a moderate increase.

“If you go too high on this tax, what kind of chilling effect will you have?” said Vilardo, especially on residential property.

Sen.

Randolph Townsend (R-Washoe) suggested the state could consider exempting all residences under $200,000, for example, which is above the average Nevada home price, as a way to protect home buyers.

Of the more than a dozen exemptions, a few, by law, cannot be eliminated.

Any property transferred to the U.S.

Government must be exempted as does property involved in a bankruptcy proceeding.

Glover said the state’s recorders had could come up with a handful of exemptions to keep.

In addition to the federal government exemption, Glover said exemptions that should be maintained are property transfers between spouses; transfer of title that recognizes the true status of ownership; conveyance of unpatented mining claims; or transfers to a person who is a relative, including spouses.

Sen.

Mike McGinniss (R-Central Nevada) said the state should tread lightly, too, when it comes to trusts.

“Yes, you could really upset how people transfer property to their heirs,” said Glover.

“The more I think about it the less I like deleting that one.”

The real property transfer tax is currently $1.25 per $500 of property value in counties over 400,000, and 65 cents per $500 in smaller counties.

In either case, 10 cents of the tax goes to the state for an account for low-income housing.

For larger counties, 60 cents goes to the county treasurer for the county’s school district’s capital projects.

The remainder goes to the state controller for the Local Government Tax Distribution Account.

Although the committee was not discussing a specific bill, the legislature is still crafting a tax package for the state.

Any larger bill can be amended to include changes such as the elimination of real property transfer tax exemptions.

The Assembly tax committee will also take testimony on the real property transfer tax at a meeting this Thursday.



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