Date: Tue, 25 Sep 2007 20:02:47 -0400
From: “Michael D. Resnik”
Subject: Land transfer tax questions–thank you
Several people sent me private emails in response to my questions.
Everyone was helpful and polite. Thank you, all of you.
Here is an answer to one question that I am pretty sure is correct:
Timber deeds will be taxed when they are recorded, since they are sales.
Selling timber without a deed would avoid alerting the County about the sale, but it might raise issues as to whether the sale should be taxed as a capital gain or as ordinary income.
My first two questions concerned whether the tax would be applied to gifts or bequests. Several of you told me that it would not. One even quoted Mike Cross stating that gifts and bequests would be exempt. However, your references to the language that will be on the ballot left me less confident than you. Read on. I have inserted a number of quotes, and I have commented on each. I apologize if I have not cut and pasted the full URLs.
Thanks again for your responses and thank you for reading this far.
Mike
From an NC State Communication Services “interview” with/ Dr. Mike Walden.
/
“The idea of the tax is fairly simple. It would be paid any time real property – real estate – changes hands. The tax, which can be no higher than .25 percent of the property’s value (for example, $400 on $100,000 of value) could generate around $300 million annually if all counties adopted it at the maximum rate. Voters in each county would have to approve use of the tax, and county commissioners would decide how the funds were spent.”
(http://www.ncsu.edu/project/calscommblogs/news/archives/2007/09/you_decide_is_a.html)
This one clearly implies that gifts and bequests are taxed (“any time real property…changes hands”).
From the Chatham County Website
(http://www.chathamnc.org/Index.aspx?page=19&recordid=175&ret)
“If approved by county voters on Nov. 6, the 0.4% land transfer tax would provide an alternative revenue source to fund county facilities, including schools. The proposed tax is a one-time assessment on real estate property sales. The Board of Commissioners has voted to reduce the current county School Impact Fee from $2.900 to $1,900 if the land transfer tax is approved.”
This one says the tax applies to sales (a “one-time assessment on real estate property sales”).
“Ballot Language:
The language for the ballot is set by State Law and cannot be changed by the Board of Commissioners or Board of Elections. The November ballot will read:
Real property transfer tax at the rate of up to four-tenths of one percent [0.4%] of value or consideration.
[ ] FOR [ ] AGAINST
*VOTING FOR: *A vote “FOR” would mean that the voter supports Chatham County levying a 0.4% land transfer tax, which would be applied to all residential, commercial and land sales in the county. The tax would be paid one-time at closing by the seller.”
(http://www.chathamnc.org/Index.aspx?page=814)
This starts by leaving open the question of whether the tax applies to gifts (“Real property transfer tax…”) but in the explanation section (“VOTING FOR”) states that the tax applies to sales. (I think the phrase “all residential, commercial and land sales” is confusing. Does it mean all sales of just land whether commercial or residential, exempting the value of the improvements? Surely not. The inclusion of “and” excludes this interpretation. But does it mean that all commercial sales, of any kind are subject to the tax?)
From the NC Association of County Commissioners Web page entitled “Frequently Asked Questions regarding new county authority referenda”
(http://www.ncacc.org/revenueauthority-q&a.html)*
Question:* Is there a prescribed format for the question of the ballot?
*Answer:* Yes. Legislation specifies how the question must be presented on the ballot:
_Land Transfer:_
Ballot Question – The form of the question to be presented on a ballot for a special election concerning the levy of the tax
authorized by this Article shall be: ‘[ ] FOR [ ] AGAINST
Real property transfer tax at the rate of up to [X] percent [X%]
of value or consideration.’
*Note: The land transfer tax amount can be set at a rate up to .4%, in increments of .1%.*
__
This one again leaves open the possibility of taxing gifts (“Real property transfer tax…).