Thursday, March 15, 2007

Taxing Questions

Some folks in Annapolis say they want to close an interesting tax loophole: Some big companies avoid paying real estate fees when they sell property by structuring the deal so that they never exchange the deed to the land. Instead, they merely sell a controlling stake in the firm that owns the property. Since no deed changes hands there is no recordation or transfer fees to pay. In 2002, according to the Sun, Rouse Co. used this method to sell 11 shopping centers in Columbia to a New York firm, depriving Howard of about $2 million in tax revenues. Opponents of closing the loophole say it will hurt lots of real estate types who use these transactions in the normal course of developing subdivisions and such. Some company buys the land and then sells controlling interest to a builder to build the houses. If they had to pay a tax on each transaction, they would be paying transfer fees twice (on the purchase of the land and the transfer to the builder)--and passing the cost on to you-know-who. Or, the Sun implies, taking their development to West Virginia, where the business climate is more favorable.

There's lots of fodder for debate in this one. What could $2 million buy? Here's the superintendent's budget request this year for elementary school resource people....

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