You wanted a brief history of the real estate conveyance tax, including changes the legislature made to the tax rates.

SUMMARY

The real estate conveyance tax is a state and local tax on documents conveying real property valued over $ 2,000, but the legislature initially instituted it in 1967 as a purely local tax. The legislature did so to supplant a similar federal tax that was due to expire at the end of that year. It set the rate at 55 cents for each $ 500 of value. One legislator hoped towns would use the revenue to acquire land for parks and open spaces.

The legislature added the state tax in 1983 as part of a broader revenue-raising package. It set the state rate at 0. 5% of the purchase price and changed the local rate to $ 1. 10 for each $ 1,000. It has not subsequently change the local rate, but has varied the state rate based on the type of property being conveyed. It also increased the types of documents and conveyances exempted from the tax (see Attachment 1). The tax generated about $ 20 million for towns and about $ 110 million for the state in 2001, the Office of Fiscal Analysis estimates (see Attachment 2).

1967: LOCAL TAX

Structure

PA 693 (1967) established the conveyance tax as a purely local tax, all revenue remained with the towns. It based the tax on the value of the property being conveyed: 55 cents on amounts between $ 100 and $ 500 plus 55 cents for each additional $ 500 or fraction of $ 500. It allowed town clerks to keep $ 1 from each conveyance in those towns where clerks are paid fees.

The tax applied to any document used convey land except those used to convey land to specified parties (e. g. , government agencies or family members) or for specified purposes (e. g. , deeds releasing a property used to secure a loan). The act specified other administrative and procedural requirements towns had to follow in administering the tax. It took effect January 1, 1968.

Rationale

The legislature adopted the tax to supplant the federal Documentary Stamp Tax, which expired on December 31, 1967. It modeled the conveyance tax after the stamp tax, incorporating many of the federal law's provisions. In doing so, the legislature understood that the tax would cease if the federal government decided to reinstate the stamp tax.

The legislative record suggests several other reasons for the tax. During the House debate, Representative Weicker stated that the tax would "enable municipalities to have additional funds for whatever they see fit," but hoped they would use the revenue to acquire open spaces. "The problem of gaining land now so that we'll have it in the areas of open space and recreation is probably the most pressing problem with the state. With these funds in hand, it seems to me it offers a golden opportunity to the communities themselves to plow this back into the land for future generations" (House Proceedings, June 5, 1967, p. 4520).

During the public hearing on H. B. 2080, Meriden mayor William T. Shea stated the tax would help tax assessors do their jobs. Until then, assessors relied on the federal stamp tax to determine how much people paid for the properties. Without the stamp, assessors would have to "hire another clerk to start checking with everybody as to what they paid for property. " Substituting a conveyance tax for the soon-to-expire federal stamp tax is "a way that a practical imposition of the tax can also save each and every taxpayer ... some money" (Finance Committee, March 8, 1967, p. 172).

1983: STATE AND LOCAL TAX

Sixteen years later, the legislature added the state component of the conveyance tax and fixed the rate for the towns and the state. It set the municipal rate at $ 1. 10 for every $ 1,000 and the state rate at 0. 5% of the purchase price. It required town clerks to collect the state share and send it to the revenue services commissioner within 10 days of receiving it for deposit in the General Fund. The legislature did this as part of a larger revenue-raising package that included a tax on interest income and a surtax on inheritances (PA 83-1, June Special Session).

As Attachment 2 shows, the legislature changed the rate for the state tax several times since 1983. It also changed the types of documents (i. e. , the tax base) that are subject to the state and local tax.

Attachments

Attachment 1: 2000-01 Annual Report of the Department of Revenue Services, pp. 62-65.

Attachment 2: Connecticut Revenue and Budget Data Book, May 2001, Office of Fiscal Analysis, pp. 152-153.

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