« The Green, Green Grass Of Home | Home | Why Your Agent Should Be A Local Expert »
Private Transfer Taxes (PTT’s) = Free Money Straight OUT Of Your Pocket
By Tisza Major-Posner | July 8, 2007
Hi All,
I have been meaning to discuss this for a while now. Ever since I first heard about it. And now, the time has come. Have you ever wished someone would give you free money? Not money you earned or even money you got for selling something you owned, but actual free money? Well, if some folks get their way, you won’t be getting it… but they will. And they will get it for a very long time to come. How? By the use of a thing called a Private Transfer Tax.
Private Transfer Taxes or PTT’s were started (no one is quite sure by whom) with what I am certain were the best of intentions just like the California Lottery. The funds generated by Private Transfer Taxes have been used for everything from preserving habitat for endangered species to maintaining public parks. Sounds good right? But the California Lottery sounded good too. Remember, it was supposed to help get additional funding for much needed programs and services for our schools. But that’s not what happened. And like the California Lottery, Private Transfer Tax funds do not always come to such noble ends.
But what the money is used for is not really the problem, it is the way the money is acquired, who can acquire it, how long they can get it and that they don’t have to tell you about it until its too late, that is.
So What Is A Private Transfer Tax Anyway?
A Private Transfer Tax is a fee that is added on top of the purchase price of a property every time the property is sold and goes to the person, business or entity that assessed it. The tax can be very small or it can be quite sizable. Currently, the highest rate that has been imposed is 1.75% of the purchase price of a home, but there are no rules or limits on what amount could be applied. The real problem is that you may not even know that you are going to have to pay it until you sit down at the closing table and by then if you want the property you can’t or won’t refuse.
And a PTT could affect the future resale of your home. Adding just $10,000 to the purchase price of a home will prevent an additional 200,000 people from being able to afford it.
It also has no restrictions on what it can be used for, who can assess it, how long it remains in effect, or disclosure of its existence until the close of the sale. Since it is a “private” fee and not something government sanctioned, there is no opportunity to vote for or against the fee, no system for ensuring that the funds go where they were supposed to and no negotiating the fee because the information about it’s existence is buried in the deed information or perhaps the CC&R’s so that by the time it is discovered the time for negotiating the fee or canceling the contract is long passed. Not cool.
Also, these fees do not expire and are able to be applied to the sale or transfer of a property each and every time the property is sold or transferred. They can even be applied if no money changed hands for the transfer of the property such as in the case of a gift.
And, while the PTT’s may be going to support a charitable cause, the homeowner who is paying them does not get the write off. That tax benefit would go to the assessor of the PTT.
So, what can you do about this? Contact your local and state representatives and let them know that you are not OK with the PTT scheme. Encourage them to support legislation that would require the disclosure of the existence of a PTT and/or the prevention of the implementation of them to begin with.
AB 980 introduced by Assemblyman Charles Calderon (D-58th District) will address the disclosure of pre-existing PTT’s. Another Bill SB 670 introduced by Senator Lou Correa (D-34th District) was defeated by committee on May 8th, but perhaps if home buyer’s and home seller’s start letting their state representatives know how they feel the next time this issue comes up it won’t be dismissed so cavalierly.
If you have any questions or want to find out more, please feel free to give me a call.
Take care,
Topics: General, Buying and Selling Tips |
Enjoy this post? Subscribe to my feed or get updates via e-mail