Three months after the state implemented a new tax on foreclosure sales of homes, Democratic and Republican lawmakers in Hartford hope to kill it before the session ends in early May.
"Somebody is at the worst time of their lives, they're losing their home, they have to relocate. If they have kids, it's another level of stress. Then you've got, on the way out the door, a tax bill," said state Sen. Bob Duff, D-Norwalk, co-chairman of the Banks Committee.
Duff and other lawmakers were surprised last September to learn the two-year budget Democrats passed early that month extended the conveyance tax charged on real estate transactions to foreclosures, beginning Jan. 1.
But the Legislature's Finance, Revenue and Bonding Committee recently approved a bill that again exempts foreclosure sales from the real estate conveyance tax.
Connecticut is facing historic budget deficits in the billions of dollars, and lawmakers had hoped the new tax would raise $8.5 million for the rest of this fiscal year and $16.2 million in the 2010-11 fiscal year beginning July 1.
A spokesman for the state Department of Revenue Services said there were no data on how much the state earned from the tax for January, February and March.
And Finance Committee Chairwoman Sen. Eileen Daily, D-Westbrook, who helped craft the two-year budget passed in September, acknowledged Monday that the conveyance tax on foreclosures was "hastily done."
"It never worked," Daily said. "To just exempt them is what makes the most sense."
"Part of the problem was we didn't know how to calculate the tax," Mintz said. "The Judicial Branch asked the Department of Revenue Services for an opinion on it, and we finally got it last week. The way I thought we had to calculate it was the way they said, so we were doing it right."
And Mintz confirmed that under certain circumstances, the tax, which legislators had hoped would be borne by banks, could be passed along, as Duff, Roraback and others feared, to the property owner.
Mintz said the tax could come out of any remaining equity a homeowner has after a foreclosure sale to a third party.
So if a $150,000 mortgage were sold for $200,000, then the tax would come out of the $50,000 in equity.
If the bank is the successful bidder, and the bid did not cover the homeowners' debt, Mintz said, "the property owner could still be held responsible for the difference," including the conveyance tax.
"It is tantamount to kicking delinquent homeowners when they're down," Roraback said.
It was unclear last September where the proposal to target foreclosure sales originated.
Some Democrats on the Finance Committee at the time said the idea came from Republican Gov. M. Jodi Rell's administration, but a Rell spokesman said he did not recall that being the case.
Earlier in 2009, two Republican state senators -- Len Fasano, R-North Haven, and Tony Guglielmo, R-Stafford Springs -- had suggested applying the real estate conveyance tax to foreclosures, but intended it be paid by the banks.
Fasano in September said he was as surprised as anyone to learn it had been embraced in the Democrats' budget.
"No one said, 'Hey Len, how will that work? Who pays it?' " Fasano said.
Staff writer Brian Lockhart can be reached at email@example.com