There’s a real property transfer tax in Nevada. If ownership of a Clark County property is transferred from a bank to some other entity, for instance, the transfer tax is levied at a rate of $5.10 for each $500 in property value, with about half that tax going to the state – sometimes.
Not all of the time, mind you, because Nevada’s Department of Taxation doesn’t try to collect the tax when the party taking over a mortgage is a federal agency, such as Fannie Mae and Freddie Mac.
So state Treasurer Kate Marshall approached the state Tax Commission again this summer, urging that Nevada begin collecting the transfer taxes on mortgages guaranteed by Fannie Mae and Freddie Mac, which are now managed by the Federal Housing Finance Agency. The state could collect more than $24.5 million in transfer taxes from the past three years if it sued and won its case, Ms. Marshall said.
But on Monday, the Tax Commission declined. Commission Chairman Robert Barengo explained the “law is unsettled” on whether the federal lenders, who hold more than half of all mortgages, can be assessed the tax. He suggested the state await additional court decisions for clarification. A majority of the eight-member board backed his view, though two members dissented.
The Tax Commission is wise to hesitate in collecting a tax where the law is unclear. Governments find it famously difficult to refund tax collections that later are determined to have been improperly collected, once they’ve been gathered in and disbursed.
On the other hand, moves are afoot in Washington to wind down Fannie Mae and Freddie Mac without requiring them to reimburse the Treasury for all their losses. Ms. Marshall has a point: Expecting these actuarially bankrupt enterprises to pay up “later on,” especially when the state has only four years to collect, seems wildly optimistic.
Mr. Barengo and the Tax Commission should issue a more strongly worded request to Nevada lawmakers: To the extent necessary, state law should be clarified, and the attorney general instructed, to proceed with whatever actions are needed so this state tax can be expeditiously levied equally on all parties – including those with offices in Washington.