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F I S C A L I M P A C T R E P O R T

SPONSOR Grubesic

ORIGINAL DATE

LAST UPDATED

2/23/07

HB

SHORT TITLE Municipal Tax on Property Transfers

SB 1056

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

NFI

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Finance and Administration (DFA)

New Mexico Municipal League (NMML)

SUMMARY

Synopsis of Bill

Senate Bill 1056 would prohibit municipalities from taxing real property sales. Currently, excise

taxes on the transfer of real property from one owner to another are not included in prohibited

items and so can be levied.

There is no effective date so it is assumed the effective date is June 15, 2007.

FISCAL IMPLICATIONS

Currently there are no municipalities that levy this tax so there is no fiscal impact associated with

this bill.

Senate Bill 1056 – Page

2

SIGNIFICANT ISSUES

A real estate transfer tax is an excise tax on the sale of real property. Some type of transfer tax is

in effect in all but 13 states. New Mexico is one of those states but the statute that gives munici-

palities taxing authority does not automatically exclude transfer taxes and some municipalities

have discussed enacting such a tax. This bill would preempt that discussion.

It is a generally accepted principle that increasing a tax on a transaction would increase the price

of that transaction and therefore lower demand for the related good or service. Levying a trans-

fer tax on real estate transfers, under this theory, would dampen demand for real estate. How-

ever, the size of the tax is a critical issue.

Currently, real estate agents typically charge a 6 percent commission on the transfer of real es-

tate, split between the buyer’s agent and the seller’s agent unless they are the same. There has

been anecdotal evidence that during the housing boom of the last few years there has been pres-

sure on these commissions which operate identically to a transfer tax. That pressure has been

more related to the volume of transfers and the huge increase in real estate agents giving both

buyers and sellers a negotiating point. There, however, has been no empirical evidence that this

convention of 6 percent has changed.

The NM Municipal League has endorsed a local option transfer tax on property above a certain

level and that the proceeds could be used for affordable housing. A transfer tax on transfers of

residential property over $1 million, for example, would impact very few New Mexicans and

would generate $10,000 per house at a one percent rate.

The City of Santa Fe has seen property values increase dramatically over the last few years and

that has put pressure on long time homeowners’ property taxes. The level of affordable housing

is extremely low and many workers have to find housing outside the city due to the high prices.

There has been discussion

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

Municipalities will be able to levy real estate transfer taxes.

POSSIBLE QUESTIONS

If a transfer tax were enacted in a municipality, what would the effect be on the real estate mar-

ket.

Does a transfer tax affect principal residences or second homes more.

NF/nt

Attachment

Senate Bill 1056 – Page

3

Attachment: Real Estate Transfer Taxes

State

Tax Description

Transfer Fee Rate

Alabama

Deeds: $0.50 per $500

Mortgages: $0.15 per $100

0.1%

0.15%

Alaska

None

Arizona

$2 fee per deed or contract

Flat fee

Arkansas

$3.30 per $1,000

0.33%

California

Local option transfer tax: $0.55 per $500

0.11%

Colorado

Transfer tax: $0.01 per $100

0.01%

Connecticut

Transfer tax rates: 0.61% to 1.11%; nonresidential is

1% and residential has two tiers of either 0.5% or 1%

based on value.

0.5% up to $800,000; and 1% of

value over $800,000, plus .11%

municipal tax.

Delaware

Transfer tax: state-local combinations from 1.5% to

2%

1.5% to 2%

District of Co-

lumbia

Transfer tax: 1.1%

Mortgage Tax: up to $250,000

1.1%

1.1%

Florida

Conveyance of realty: $0.70 per $100 (0.6% if county

surtax)

0.7%

Mortgage tax: $0.35 per 100

0.35%

Georgia

$0.10 per $100

0.1%

Hawaii

Transfer tax: $0.10 to $0.30 per $100;

$0.15 to $0.35 per $100 without homeowner exemp-

tion.

Mortgage fee 0.1%.

0.1% to 0.3%

0.15% to 0.35%

0.1%

Senate Bill 1056 – Page

4

State

Tax Description

Transfer Fee Rate

Idaho

None

Illinois

County: $0.25 per $500

State: $0.50 per $500

0.05%

0.1%

Indiana

None

Iowa

$0.80 per $500

0.16%

Kansas

Mortgage fee: $0.26 per $100

0.26%

Kentucky

Transfer tax: $0.50 per $500

0.1%

Louisiana

None

Maine

Transfer tax: $2.20 per $500

0.44%

Maryland

Mortgage tax (local): $2.20-$4.00 per $500

Transfer tax: 0.5% or (0.25% for first-time buyers)

0.44% to 0.80%

0.5%

Massachusetts

Transfer tax: $4.56 per $1000 (0.4% plus 14% sur-

tax); also $10 to $20 document fee

0.456%

Michigan

State: $3.75 per $500

County: $0.55 per $500 or $0.75 per $500 depending

on plus per 2 million population

0.75%

0.11% to 0.15%

Minnesota

Deed tax: $1.65 per $500

Mortgage registry tax: $0.23 per $100

0.33%

0.23%

Mississippi

None

Missouri

None

Montana

None

Senate Bill 1056 – Page

5

State

Tax Description

Transfer Fee Rate

Nebraska

Transfer tax: $1.75 per $1,000

0.175%

Nevada

$0.65 per $500 up to 400,000 county population

$1.25 per $500 more than 400,000 county population

(and local option mid-size county 0.1%)

0.13%

0.25%

New Hampshire

Transfer tax: $0.75 per $100, paid by buyer and by

seller

1.5%

New Jersey

Transfer tax varies based on price and tax status (sen-

iors, disability)

0.4%

Homes over $1 million add 1% surtax

1.21% rates based on value

.1% local rate

1%

New Mexico

None

New York

Realty transfer, state: $2 per $500 up to $1 million;

1% additional over $1 million

0.4% or 1.4% over $1 million

Mortgage recording tax, state: $1.00 per $100

1.0%

Mortgage, New York City: $1.00 to $1.12 per $100

1% to 1.12%

Realty transfer, New York City: 1% to 1.425% based

on plus per: $550,000 home value

1% to 1.425%

North Carolina

Transfer tax: $1 per $500

0.2%

North Dakota

None

Ohio

Transfer tax: $0.10 per $100 plus local option $0.30

per $100

0.4% (0.1% plus 0.3% local)

Oklahoma

Deed stamp tax: $0.75 per $500

Mortgage registration tax: $0.02 to $0.10 per $100

0.15%

Senate Bill 1056 – Page

6

State

Tax Description

Transfer Fee Rate

based on term of mortgage

0.02% to 0.1%

Oregon

None

Pennsylvania

Documentary stamp tax: 1%

Philadelphia 3% and Pittsburgh 1.5% to 2%

County rates widely vary

1%

Rhode Island

Realty conveyance tax: $2.00 per $500

0.4%

South Carolina

Deed recording fee: $1.85 per $500

($1.30 state, $0.55 county)

0.37%

South Dakota

$0.50 per $500

0.1%

Tennessee

$0.37 per $100

Mortgage tax: $0.115 per $100

0.37%

0.12%

Texas

None

Utah

None

Vermont

Property transfer tax: 1.25% unless property is owner-

occupied, in which case tax is 0.5% on the first

$100,000 of value and 1.25% over $100,000.

Qualified farms: 0.5% plus capital gains tax on land

sales, based on length of ownership

1.25%

(or marginal rates based on

value)

Virginia

Transfer tax: $0.50 per $500

0.1%

Mortgage tax: $0.15 per $100 up to $10 million value,

more thereafter.

Local option for 1 per 3 more of state recordation tax.

0.15%

Washington

Real property sale excise tax: 1.28% of sales price,

plus local option tax currently ranging from 0.25% to

1.28%

1.53% to 2.03% combined with

Senate Bill 1056 – Page

7

State

Tax Description

Transfer Fee Rate

0.75%.

local option

West Virginia

Transfer tax: $1.65 per $500 ($1.10 state, $0.55

county); local option $0.55 more.

0.33%

Wisconsin

Transfer tax: $0.30 per $100

0.3%

Wyoming

None

Sources: NCSL and Commerce Clearing House State Tax Guide May 2005. Compiled by National Conference

of State Legislatures Fiscal Affairs Program.