Private Transfer Tax Prohibition

LOS ANGELES (Feb. 28) – Because of a loophole in existing law, developers can impose private transfer taxes on unsuspecting home buyers. The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) today announced it will sponsor SB 670 (Correa), “Private Transfer Tax Prohibition,” to eliminate this unfair tax on Californians.“Under current law, developers legally can impose private transfer taxes on home buyers at the time of purchase, with no oversight from government, no accountability on how the money is spent, and no limit on who can impose the tax or how many private transfer taxes can be added to a home when it’s sold,” said C.A.R. President Colleen Badagliacco. “Senator Correa’s legislation, which C.A.R. is sponsoring, will put a stop to this unfair, costly practice.“This is an alarming trend in California, one that gives non-government entities like developers the power to tax, while threatening the dream of homeownership by pushing prices higher,” she said. “While the highest private transfer tax rate we are aware of currently is 1.75 percent of the home’s value, under existing law there’s no upper limit.”A private transfer tax of 1.75 percent on a $500,000 home skims nearly $10,000, while inflating the cost of a home. Private transfer taxes also impact affordability in California. According to C.A.R. research, for every $10,000 increase in the cost of a home, another 200,000 potential home buyers are eliminated from the marketplace.“Developers levying private transfer taxes are free to use the money for any purpose including their own use,” said Badagliacco. “There are no controls in place over how revenue collected from private transfer taxes is spent. Under current law, the private transfer tax assessments may never expire, so that every time a home is sold, the tax is collected again. It’s time to eliminate this loophole.”SB 670 (Correa), “Private Transfer Tax Prohibition,” will next be heard in the Senate.(From www.car.org)