HOUSE BILL REPORT

HB 1822

BYRepresentative Nutley

Increasing penalties for the delinquent payment of real estate excise taxes.

House Committe on Housing

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (8).

      Signed by Representatives Nutley, Chair; Leonard, Vice Chair; Armstrong, Barnes Sanders, Todd, J. Williams and Wineberry.

House Staff:Charlie Gavigan (786-7340)

AS REPORTED BY COMMITTEE ON HOUSING FEBRUARY 4, 1988

BACKGROUND:

An excise tax is assessed on the sale of real property.  The tax must be paid within 30 days of the sale, or interest is charged at the rate of one percent of the tax owed per month. Sales are usually made through a mortgage, deed of trust, or real estate contract.  Before these documents are recorded, proof must be provided that the excise tax on the sale has been paid.

When a sale is made using a mortgage or deed of trust, the buyer acquires ownership of the property and the mortgage or deed of trust acts as a lien or security for the repayment of a loan made in conjunction with the sale.  These instruments are nearly always recorded at the time of the sale, and therefore the excise tax is paid immediately.

A sale by real estate contract leaves the ownership of the property in the name of the seller.  The buyer does not own the property until the last payment is made on the loan the seller makes to the buyer to purchase the property.  Since the seller does not have to record the real estate contract to protect his or her interest in the property, some real estate contracts are not recorded and some excise tax is not paid in a timely manner after the sale occurs.

The seller is responsible for paying the excise tax, although the tax owed and the one percent per month interest become a lien on the property sold.

SUMMARY:

SUBSTITUTE BILL:  In addition to the interest of one percent per month on excise tax due and not paid within thirty days of the sale of real property, penalties are provided for the late payment of this tax.  If the tax is not paid within thirty days of the sale, a penalty of five percent of the tax owed is assessed; if not paid within sixty days, the total penalty is ten percent; if not paid within ninety days, the total penalty is twenty percent.

These additional penalties must be collected from the seller and do not become a lien on the property sold.

The additional penalties collected are to be deposited in the Housing Trust Fund.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  Provisions are added to have penalties deposited in the Housing Trust Fund.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    None Presented.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    None Presented.

House Committee - Testimony Against:      None Presented.