Real Estate Alert: Proposed Significant Change to NYS Real Estate Transfer Tax Law

By William H. Jennings  |  February 3, 2017

New York State Governor Andrew Cuomo recently released his FY 17-18 Executive Budget, which suggests a number of changes to the tax law. Among those changes is a proposal to greatly expand the reach of the New York State Real Estate Transfer Tax with respect to transfers of entities holding New York State real estate.

The aim of the legislation is to levy the Real Estate Transfer Tax on the transfer of a minority interest in an entity that owns real property located in New York State, if that property comprises 50% or more of the Fair Market Value (FMV) of the entity's assets. Under the current tax law, the Real Estate Transfer Tax applies - with respect to the transfer of interest in an entity - only to "controlling interests". A controlling interest is 50% or more of an interest in an entity holding real property.

The proposed legislation would revise the definition of a "conveyance" to include the transfer of an interest in a partnership, LLC, S corporation, or non-publicly traded C corporation (with fewer than 100 shareholders) that owns an interest in real property located in New York State with a FMV that equals or exceeds 50% of all the assets of the entity. For Real Estate Transfer Tax purposes the consideration in such cases will be the FMV of the entity's real property located in New York State, multiplied by the percentage of the entity that is transferred.

If enacted, this provision will place the New York State tax collector at the closing table for countless transfers of interest in entities holding New York realty.

We will keep you apprised of developments as they occur.

For more information

If you have questions about this alert, please contact William Jennings, Partner-in-Charge of the Real Estate Group, by phone at 212.503.8958 or by email at wjennings@markspaneth.com or any of our Real Estate professionals.

About William H. Jennings