MACo and county representatives testified this week in opposition to legislation that would reopen a loophole for the financing of commercial transactions through indemnity deeds of trust.  The bill would have an unfair,sweeping negative effect on local taxing authority and revenues.  Revenue generated by the closing of this loophole was used as an offset to the teacher pension shift. SB 436/HB 1209 would not only reopen the loophole, it would significantly expand the exemptions as they apply to these commercial transactions. From MACo’s testimony:

MACo has long supported the closing of the recordation tax loophole for indemnity deeds of trust (IDOTs). An IDOT is recorded to establish a lien on the property and it typically occurs when a business entity creates a LLC to purchase property and the original business entity serves as a third party guarantor. MACo has argued that these business relationships, and the artificial “distance” they create, are for the direct purpose of avoiding taxation that would otherwise apply. The General Assembly promoted tax fairness in 2012 when it closed this loophole, effectively saying that commercial transactions should be treated and taxed the same regardless of the structural arrangements used.