New Castle County Reinterprets the Realty Transfer Tax Statute

June 2012Articles In the Zone

New Castle County, Del. recently announced a change in its interpretation of the realty transfer tax statute. The county has determined that where either the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Company (Freddie Mac) is the seller or buyer, the transaction is ineligible for a governmental exemption from realty transfer tax. This change is effective June 14, 2012.

Until very recently, transactions involving Fannie Mae and Freddie Mac have been exempt from transfer tax in Del. This exemption includes the state and each of its counties. 30 Del. C. § 5401 lists the specific transactions that are exempt from the state transfer tax. The state collects one and a half percent of the purchase price or fair market value of the property, whichever is greater. Chapter 14, Article 10 of the New Castle County Code regulates the payment of the New Castle County transfer tax. The county also receives one and a half percent of the purchase price or fair market value of the property.

Traditionally, transactions involving the government have been exempt from transfer tax. This includes deeds to or from the government or any governmental entity. Obviously this is a very broad exemption.

As of now, it is unclear if the state’s two other counties will follow suit or if the state will take the same position, but we will keep you posted.