The efforts of Ohio’s real estate industry to combat Gov. Bob Taft’s plan to solve the state’s budget woes by taxing the American Dream proved successful as the General Assembly adopted a biennial budget that did not include a new, statewide transfer tax.

Additionally, the industry was successful in having an amendment included in the budget plan that prevents the double-taxing of real estate commissions.

“Because of the efforts of our 34,000 REALTOR® members, millions of property owners throughout Ohio have been saved from paying an onerous transfer tax,” said Don Freels, OAR’s chief executive officer. “This tax would have established a dangerous precedent…one that would have allowed the state to tap into real estate sales as a revenue source. The 1-mill tax today could have easily become 2, 3 or 10-mills down the road.”

OAR was one of the most vocal critics of Gov. Taft’s 2006-2007 budget plan when it was first introduced in February. The industry objected to three areas: a 1-mill transfer tax, immediate elimination of the 10 percent rollback on commercial property taxes and the application of a new commercial activity tax (CAT) that would double-tax real estate commissions.

The industry was able to solve its problems with the CAT by having an amendment included in the Ohio House version of the budget bill that prohibits the double taxation of real estate commissions. The House, however, did approve of the transfer tax and elimination of the rollback on commercial properties.

“We were pleased that the Ohio Senate agreed with the industry and removed the transfer tax from the budget,” Freels said. “Additionally, the Senate further modified the CAT by raising the minimum threshold…a savings for most of our members.”

The Senate’s action, passed by a 19-13 vote, increased the $40,000 threshold for paying the minimum $100 annual fee for the new CAT to $150,000, with an annual fee of $150. Thus, any taxpayer earning up to $149,999 in annual gross receipts will pay no CAT under this scenario.

“We believe this is a favorable development from the standpoint of our members, having previously calculated that about half of Ohio’s REALTORS® would have paid the $100 minimum CAT at the $40,000 level proposed by Gov. Taft,” Freels said. “Under this revised version, a very small percentage of members will pay the higher minimum.”
The threshold for payment of the 0.26 percent CAR remains at $1 million.

OAR was able to stave off a last minute effort by some legislators to reinsert the transfer tax into the budget during Conference Committee because they were opposed to a 70 cent hike in cigarette taxes. The positive outcome is the direct result of REALTORS® generating nearly 6,000 e-mail messages to lawmakers less than 10 hours after OAR issued a “call to action.”

The effort to retain the 10 percent rollback on commercial property taxes was unsuccessful.

“The $320 million price tag proved to be too much of a hurdle,” said Bob Fletcher, OAR’s senior vice president and chief lobbyist. “We floated a number of proposals to lessen the impact of the immediate elimination…but could not find a replacement revenue source suitable to lawmakers.”

OAR attempted to preserve the rollback on Class II rental residential real estate taxes.

“It was our contention that there is no logical reason to distinguish between family rental properties that are one to three units and rental residential properties of four units or more in terms of qualifying for the rollback,” Fletcher said. “We believe such a change would help low and moderate income Ohioans by keeping rental rates affordable.”

OAR will continue to work with members of the General Assembly to find agreement on reclassifying rental properties of four or more units.

Despite the setback on the 10 percent rollback, the industry fared well in the face of a difficult budget process that ended in late June, Freels noted.

“We scored two major victories—defeating the plan to impose a new, statewide transfer tax and obtaining favorable treatment in the application of the new commercial activity tax—that will serve the interests of real estate professionals and millions of Ohio property owners.

“Our members can take great pride in knowing that they made a positive difference in our ongoing fight to protect the American Dream,” Freels said.

Gov. Taft was expected to sign the budget bill prior to the June 30 deadline.

“It’s comforting to know that when we ask for help…REALTORS® always step up in a big, big way to make our message heard at the State House,” Fletcher noted. “This was not an easy task…but the letters, the phone calls, the e-mails and the personal visits to lawmakers made our objectives much more attainable.”

Courtesy of the Ohio Association of REALTORS®