SSB 1270

Description

Senate File 612 increases the annual $3.0 million cap placed on the transfer of the real estate transfer tax receipts to the Housing Trust Fund to $5.5 million, effective July 1, 2022.

Background

The real estate transfer tax is imposed on the transfer of real estate in the State. The tax is equal to $0.80 per $500 (or any fractional part of $500) of consideration paid as part of or a condition of the property transfer. As examples, the transfer of a $1,200 property would incur a tax of $2.40, while the transfer of a $1.0 million property would incur a tax of $1,600. The tax is paid to the county. Iowa Code section 428A.8 controls the division of the tax revenue. The county retains 17.25% of the tax revenue for deposit in the county general fund. The county remits the remaining 82.75% to the State. The State portion is deposited as follows:

• 30.0% to the Housing Trust Fund up to a limit of $3.0 million each fiscal year.
• 5.0% to the Shelter Assistance Fund.
• 65.0%, plus any Housing Trust Fund revenue in excess of $3.0 million, to the General Fund. The following table provides a history of real estate transfer tax deposits to State funds for the past four fiscal years.

Assumptions

Based on an average annual growth rate from FY 2007 to FY 2020 of 2.3%, the real estate transfer tax will produce $25.7 million in revenue in FY 2022, of which 30.0% (estimated at $7.7 million) will be deposited into the Housing Trust Fund.

Fiscal Impact

Increasing the Housing Trust Fund’s annual $3.0 million real estate tax revenue limit to $5.5 million is estimated to increase Housing Trust Fund revenue and reduce net General Fund revenue by $2.5 million annually beginning in FY 2022.Fund FY 2017 FY 2018 FY 2019 FY 2020 Housing Trust Fund 3.0$ 3.0$ 3.0$ 3.0$ Shelter Assistance Fund 1.1 1.2 1.2 1.2 State General Fund 18.6 19.2 19.1 20.3 Total 22.7$ 23.4$ 23.3$ 24.5$ Real Estate Transfer Tax Revenue, State Portion

In Millions

Sources

• Legislative Services Agency
• Iowa Department of Revenue