Compromise Reached on IDOT Legislation

Working with the bill’s proponents, MACo has reached a compromise on legislation that was introduced this session to reopen the indemnity deed of trust loophole that was closed during the May Special Session.

SB 436, and its House companion HB 1209, would have grandfathered all IDOTs indefinitely and imposed no limit on the successive refinancing.  The bill would have also increased the threshold for taxation.  Under current law, IDOTs of less than $1 million are not subject to the recordation tax.  The legislation would increase the threshold to $5 million.

As a part of the compromise, all parties agreed to the following:

  • An IDOT or a commercial deed of trust that is amended or refinanced would be subject to the recordation tax on any additional money borrowed over the unpaid principal balance at the time of the refinance. Currently, these transactions are taxed on the difference between the original loan and the new loan amount. These means that an entity could continue to refinance and take out additional money as long as they did not go over the original amount financed.
  • The same above criteria would apply to IDOTs recorded prior to July 1, 2012 effective date that are amended or refinanced.
  • IDOTs valued at up to $3 million would be exempt from the recordation tax.
  • Language has been added to the bill to ensure that commercial borrowers can’t record serial loans in amounts under the threshold to avoid paying the recordation tax.

HB 1209 has been voted favorable as amended by the House Ways and Means Revenue Subcommittee.  The Senate Budget and Taxation Committee plans to vote on the bill this morning.