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In addition to your annual property tax bill there is another tax assessed on property you are likely unaware of. When the legal ownership of a piece of real estate changes, by sale or by gift, a tax is imposed. Known as the “documentary stamp tax”, the County Register of Deeds affixes a stamp to each deed at the time of transfer that documents the tax has been paid.
The Doc Stamp Tax is assessed at a rate of $2.25 per $1,000 of value of the property. Unlike the theoretical value assigned for your annual property taxes, the valuation is determined by the actual amount paid for the property at time of transfer. If the transfer is the result of a gift, a market value is determined. To illustrate, upon the sale of a $100,000 home a tax of $225 is paid and the deed is stamped accordingly.
In the last fiscal year approximately $24.7 million was paid in Doc Stamp Taxes. The proceeds are divided five different ways. Of the $2.25 tax rate, $0.50 per $1,000 of values stays in the county in which the property is located, or about $5.4 million. Other four recipients of proceeds from this tax are two economic development funds, the Affordable Housing Trust Fund and the Site and Building Development Fund, and two human services funds, the Homeless Shelter Assistance Trust Fund and the Behavioral Health Services Fund.
The largest share of the Doc Stamp Tax, 42%, is directed to the Affordable Housing Trust Fund. The intent of the AHT is to provide financial assistance for affordable housing projects to address local needs. Communities can apply for loans, credits, subsidies, or grants to build affordable housing. Approximately $10 million on Doc Stamp Tax revenue goes into the fund each year.
Given the identified needs for affordable housing throughout the state, it would seem logical every dollar going into this fund would be utilized. That is not the case. A 2017 Legislative Performance Audit found several significant problems with the Affordable Housing Trust Fund, including an unobligated balance of over $11 million, insufficient tracking of trust fund money, incomplete reporting, and a failure to follow the law with required match levels. Last year $7.3 million of accumulated balance was swept from the trust to create a new program for workforce housing through LB 518. In essence, mismanaged taxes intended for affordable housing, which would be for workers, were reallocated into a new program for more expensive “workforce” housing. Had the AHT Fund been properly managed and funds used as the law intended, it would have gone a long way to addressing the housing concerns in many communities.
Another portion of the Doc Stamp Taxes is directed to a program to provide public subsidies for industrial site development. Approximately $2.5 million annually is generated to provide financial assistance for recruiting industrial business to Nebraska. Ironically, in both 2012 and 2013 money from the Affordable Housing Trust Fund was transferred to the Site and Building Development Fund, taking dollars intended to build housing for working Nebraskans and using it to subsidize expansion of private businesses.
The Homeless Shelter Assistance Fund has received $0.25 of the $2.25 per $1,000 valuation since 1992. Beginning in 2005, $0.30 of the $2.25 is directed to the Behavioral Health Services Fund, which funds the requirements of the Behavioral Health Services Act.
In 2005 $2 million was transferred from the Affordable Housing Trust Fund to the Behavioral Health Services Fund. You may note a common theme: tax money directed by statute to address the need for affordable housing across the state is not used as intended. As an unobligated balance accumulates due to poor management of the program, those funds are swept and redirected toward other projects, which may be unrelated to housing.
The Documentary Stamp Tax is another example of an obscure tax that most taxpayers don’t readily see. The proceeds are then used to fund specific projects. Those tax dollars, if not carefully managed and subject to strict oversight, can accumulate and then be used as a slush fund toward pet projects. It provides yet another example of non-transparent taxes collected outside of the General Fund that easily slip through the cracks of accountability.