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Conveyance Rate Extension A Small Victory For Local Realtors

By AMANDA FALCONE

March 26, 2010

HARTFORD — - It was a small victory for local real estate agents Thursday, but members of the Connecticut Association of Realtors were not celebrating as they left the Legislative Office Building.

The legislature's finance, revenue and bonding committee voted 35-15 to extend by two years the current conveyance tax rates — taxes levied when real estate changes hands. The rates were scheduled to drop next fiscal year, which begins July 1, and the original bill, which was amended by the committee, had called for making the current rates permanent.

The amended bill also includes a provision supported by Realtors exempting homeowners who are facing foreclosure or who have homes worth less than what they owe.

Lawmakers decided to increase the conveyance tax from 0.11 percent of the sale price to 0.25 percent for most cities and towns in 2003 in the midst of a state budget deficit. For 18 distressed communities, such as Hartford and New Haven, the tax rate was raised from 0.36 percent to 0.5 percent. The revenue goes to the city or town that collects it.

Since then, lawmakers have consistently extended the rate increases, and Realtors have lobbied against both extending the rates and making them permanent, saying the increases were never meant to be a revenue stream for cities and towns and that the higher rates often burden homeowners.

Meanwhile, the Connecticut Conference of Municipalities wants to keep the higher tax because cities and towns have come to rely on the revenue it generates. Reducing the tax would put a multimillion-dollar hole in local budgets.

Thursday, lawmakers were divided on the issue. Some said they worried about extending what was meant to be a temporary tax. Realtors have reasons to be concerned, said Sen. Antonietta Boucher, R-Wilton. The tax is not dependable or predictable and is really about taking money out of homeowners' pockets, added Rep. David Scribner, R-Brookfield.

Others, such as Rep. Cameron Staples, D-New Haven, co-chairman of the finance committee, favored making the tax permanent. Rep. Jeffrey Berger, D- Waterbury, said he felt the conveyance tax bill did not go far enough. It should include tax exemptions for members of the military or, if deceased, their immediate family, he said, referring to a bill passed by the veterans affairs committee.

Online Sales Tax

The conveyance tax bill still needs to be voted on by the General Assembly and signed by the governor before it becomes law, as does a bill that specifies that online retailers, such as Amazon, must collect a state sales tax when it uses an in-state affiliate to sell products.

The finance committee passed that bill 35-13.

Online retailers should already collect a sales tax but often don't, said Sen. Eileen Daily, D-Westbrook. She estimated the state could bring in an additional $8.5 million if it specifically outlines in state statute that the tax must be paid on items bought over the Internet.

Several lawmakers said they were voting against the bill because it could hurt small businesses. It could cause the larger online retailers to stop working with those businesses, they said. Others said it was time for the state to take action in the absence of a national policy on taxes and online retailers.