Property Transfer Tax Returns

In response to issues that have been raised about the proposal, the Tax Department has prepared the following Q and A. There is another meeting next Monday so any comments would be appreciated. It would particularly helpful if you could think of all the situations where a short form could be used (easements would be the most common).
Thanks

Liam L. Murphy, Esq.

lmurphy@mskvt.com

Issues and Solutions for an On-line Property Transfer Tax System

Issue 1: The new 4 page form is too much paper and requires too much space for storage.

Solution: When we transition to the new on-line system it will be capable of printing out a one or two page document with all required information that could be similar to the old two page Property Transfer Tax Return (PTTR).

Issue 2: Many Town offices are not set up to store electronic information. Also there is a concern by attorneys about how the PTT form would be signed by buyers and sellers.

Solution: Seller’s attorney or closing agent would print a paper version of completed return to bring to the closing and then submit this electronic document to the Department via the on-line system. Buyer(s) and seller(s) would sign form as is presently done and original form would be sent to Town for recording along with Tax Department receipt and deed. Clerk would use this form for recording and municipal records but would fill-out an electronic acknowledgement that would be in that Town’s queue that can be brought up using the document number on the receipt. Clerk’s acknowledgement would use an electronic signature.

Issue 3: Use of the system should not be mandatory.

Solution: At least initially, the use of the system will not be mandatory for any parties until the system had been thoroughly tested including actual field experience. At some point, some requirements for use may be mandated though it is likely that a manual system will remain in place for non-professional preparers.

Issue 4: Use of the ACH credit and wire transfer payments will result in a transfer fee that will have to be borne by the parties to real estate transaction.

Solution: The Department was not proposing ACH Credit or Wire Transfer as payment options. ACH debit / electronic check payments which normally do not have payment fees associated with them is the proposed method of electronic payment. This is the same process as paying your State income tax using an electronic transfer, and there is no charge to the payer under that system as well.

Issue 5: The Department is saying that all fields on the form will be mandatory and a PTTR cannot be electronically submitted unless it is completed in full. This doesn’t make sense as not all the fields are necessarily applicable to some types of transactions so why/how are they to be filled out.

Solution: This may be true so the Department needs to work with preparers to identify the types of transactions where this is the case and identify the unnecessary fields. The system can be set up in a way that will allow a preparer to select a transaction type where selected fields need not be filled out.

Issue 6: While it occurs infrequently, what happens if after the closing the transaction is terminated and the property does not transfer. How does the buyer get the PTT payment back in a timely manner.


Solution: The ACH debit / electronic check would be transmitted to the system at the same time that the electronic form is submitted to the Department but the system will be set up to delay the actual transfer of the funds for PTT payment for 3 to 5 days. If the property does not transfer, the Department should be notified and the ACH debit process will be terminated or if the payment has been made, the Department will process a manual refund.

Issue 7: Will the use of the electronic submission of PTT information to the Department result in the information being immediately added to the Department’s PTT database.


Solution: When the PTT information is electronically submitted it will not immediately be incorporated into the Department’s PTT database. It will remain in a “pending” status until the Department has received the electronic acknowledgement from the appropriate Town clerk. Receipt of the acknowledgement is notice that the transfer has been recorded. At that time, the acknowledgement information will be added to the PTT information submitted earlier and the information will be electronically transferred to the Department’s database. The electronic “capture” of the PTT information will not only create efficiencies for the Department because it will eliminate the need to manually process the information but it will also eliminate data processing errors resulting in more accurate information regarding the transfer.

Issue 8: What happens if the on-line system is “down” and you cannot obtain a receipt.

Solution: Occasionally the system may require maintenance that will prevent people for using it but maintenance activity generally will be scheduled at times (nights and weekends) when there would typically be little activity and would be announced prior to shut-down so users can plan accordingly. There will be little chance that the system will not be available for unannounced, prolonged periods of time. In the event that this does happen, the Department would lift any mandatory use requirements, if any, and all preparers could use hardcopy forms.

Issue 9: If the Department has an electronic database with grand list information for nearly all properties in the State, why can’t some of the fields on the PTTR be automatically completed using the State’s grand list information.

Solution: In most cases, it can and it is our intent to design the system to accommodate this. If the preparer enters the right SPAN (School Property Account Number) associated with the property, the system should be able to pull information such as property location and acreage and complete these fields automatically. Of course, in situations such as subdivisions where no SPAN or grand list entry exists, the preparer would have to complete these fields manually.


Issue 10: If the Department can provide automatic data entry for completing some fields on the PTT form, why can’t the system to set up to do the same things for the acknowledgement section to help the Clerks.

Solution: It can and it is our intent to design the system to do this.

Issue 11: Does the Department intend to link the new PTT system to any other systems.

Solution: Yes. To both assist in correctly completing the PTT form as well as assist buyers of property enrolled in the current use program, we intend to link the Department’s current use database with the new PTT system. Once again, using the SPAN to identify the property, the system can be structured to identify instances where the appropriate current use enrollment designation on the PTT is checked for enrolled properties. This would greatly reduce the relatively frequent error that now occurs where the PTT form does not indicate the correct current use enrollment status. This will benefit not only the preparer but the new owner of a current use property as failure to correctly indicate this status can jeopardize the continued enrollment of the property. Further, the new system also can make available a printable document outlining the statutory current use requirements so that owners can maintain the eligibility of the newly purchased property after the transfer. This document could be given to the new owner as part of the closing process.

Issue 12: Since the form includes the seller’s and buyer’s SSNs, how will the confidentiality of this information be protected.


Solution: The on-line PTT system will offer more protection of confidential information like SSNs than the current system. When the preparer completes the electronic return they will need to provide SSNs for all sellers and buyers. This information will be part of the electronic transmission of information to the Department but when the preparer prints out the form to take to closing, the system will not include any SSN information on the hardcopy form that goes to the closing and then Town. Further, all communication between the user’s PC and PTT on-line system as well as the electronic transmission to the Department of the completed return will be over encrypted connections.