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4 4 - <br /> FINANCE DEPARTMENT 17 > 52 <br /> ir.Fr <br /> '<<b <br /> ORANGE COUNTY <br /> GORDON R. BAKER <br /> DIRECTOR <br /> . MEMORANDUM • <br /> • To: County Manager <br /> From: Finance Director <br /> Subject: Land Transfer Tax Exemptions • <br /> Date: April 13, 1987 <br /> The Tax Supervisor and myself have had discussions related to the land transfer <br /> tax, especially related to the exemption -of the first $50,000 or $75,000 of value <br /> of any real estate conveyance. <br /> While we understand the concerns of the Commissioners regarding affordable housing <br /> in the County, we do not feel that a land transfer tax will necessarily have the <br /> effect of increasing the cost of housing in the County. Also, we feel that the <br /> exemption would make the transfer tax totally inequitable. <br /> While it is true that the transfer tax is basically a sales tax on real estate, <br /> it does not follow that this tax would necessarly be passed on to the consumer, <br /> as is the local option sales tax. The items taxed under the local option sales <br /> tax are, for the most part, homogeneous items with relatively small individual <br /> values. These items are available from many different suppliers at varying prices. <br /> These prices are generally set by the suppliers based on cost and generally are <br /> not negotiated prices. <br /> However, each piece of real estate is a unique item. Also, land is not reproducable. <br /> Real estate normally is transferred at market value. Market value is what a willing <br /> buyer and a willing seller determines it to be. Any tax on this transaction may or <br /> may not be a part of the negoation that takes place in determining the worth of the <br /> particular piece of real estate to the buyer and to the seller. <br /> The inequity in the exemption can be illustrated as follows. A large tract of land <br /> is purchased from a farmer by a real estate developer at market value. The transaction <br /> is for considerably more than the proposed transfer tax exemptions. The farmer will <br /> pay a land transfer tax on this conveyance. The developer subdivides this large tract <br /> into smaller lots. These lots have a market value of less than the exemptions. <br /> The subdivider can thus sell these individual lots without ever being subject to a <br /> transfer tax. It seems- inequitable to grant an exemption to the developers in the <br /> County. It seems that the real intent of the tax is to allow the County (and other <br /> jurisdictions) to reap some of the profits that these types of transactions are <br /> generating for the developers. These are the types of transactions that are having <br /> 106 EAST MARGARET LANE • HILLSBOROUGH, NORTH CAROLINA 27278 • 919/732-8181 <br />