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2 Dec

pennsylvania controlling interest transfer tax

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However, CSFT is not imposed on (1) a REIT or QRS formed as a business trust (including a Maryland REIT) or (2) a state law partnership. 1b. A Real Estate Company is an entity primarily engaged in the business of holding, selling, or leasing real estate that is ninety percent or more owned by thirty-five or fewer persons, and that either: (a) derives at least sixty percent of its annual gross receipts from the ownership or disposition of real estate; or (b) holds real estate, the value of which comprises at least ninety percent of its assets. These include Connecticut, Delaware, District of Columbia, Florida, Illinois, Maine, Maryland, New Hampshire, New Jersey, New York, Pennsylvania and Washington. Effective January 1, 2017, the Philadelphia Realty Transfer Tax will increase from 3.0% to 3.1%. However, a business trust REIT is subject to CNI if the REIT is closely held by a corporation that is not a REIT or a QRS. opinion on any specific facts or circumstances. In Pennsylvania, REITs and QRSs formed as corporations under the laws of any state are subject to both the corporate net income tax (“CNI”) and capital stock franchise tax (“CSFT”). The transfer of a controlling interest in an entity that has an interest in real property in this state is considered a taxable sale of the entity's real property for purposes of the real estate excise tax under chapter 82.45 RCW. Closing Loopholes – Effective Date: 7/1/2017. However, often there are differences in the way the controlling-interest tax is reported to the state since a deed will not be filed to report the purchase of real estate to the county re-corder. e) Exemptions. The Transfer Tax provisions in Act 52 take effect January 1, 2014. Corporate Business Tax. Name and Address of Transferor 2. Also, there is a controlling interest transfer tax imposed on a “real estate company” (as defined in the statute) that experiences a 90% or more change in ownership over a three year period. 2 that imposes Maryland’s transfer and recordation taxes on transfers of a “controlling inter- For current information, please refer to the Tax and Estates page. In a previous article,1 the authors reviewed the controlling interest transfer tax statutes in seven states.2 In part two, we discuss the remaining nine states (including the District of Columbia) that tax the transfer of a controlling interest in an entity that owns real property in the state. While property taxes may help relieve your tax bill at the end of the year, the state and county real property conveyance taxes are not tax deductible. In Pennsylvania we have a "deed transfer tax". These are commonly referred to as “controlling interest” taxes, and as a recent Washington Tax Determination highlights, these taxes can arise as a result of a simple sale of an LLC interest. CNI is imposed at a rate of 9.99% on corporations and entities that check the box to be treated as corporations for federal income tax purposes. Philadelphia Code § 19-1405(6) exempts transfers between: § Husband and wife § A divorced couple (pursuant to the divorce decree) § Parent and child (or the child’s spouse) § Brother or sister (or their spouse) § Grandparent and grandchild (or the grandchild’s spouse) § Any life partners (who are members of a Life Partnership that is verified pursuant to applicable law) There are some differences between city (Philadelphia) exemptions … § 8101-C (“Real Estate”) (prior to amendment), [5] See 72 P.S. Act 52 will cause Transfer Tax to be imposed on that transaction. A taxpayer also subject to tax in other jurisdictions may apportion its CSFT tax base. Thus, taxpayers and practitioners could transfer interests in upper-tier entities (i.e., the entity which owns the Real Estate Company that owns the actual real estate) without triggering Transfer Tax. Act 52 will cause Transfer Tax to be imposed on that transaction. The contents are intended for general informational purposes only, and you are urged to consult a lawyer concerning your own situation and legal questions. Administrative Pronouncements. Tax does not apply to transfers of publicly traded stock. [1]  Act 52, signed into law on July 9, 2013, in connection with the Pennsylvania General Assembly’s 2013 – 2014 budget process, effectively broadens the definition of Real Estate Company and the scope of transactions involving Real Estate Companies which are subject to Transfer Tax. Expansion Of “Mansion Tax” To Transfer Of Controlling Interest. Can You Deduct Transfer Taxes? A taxpayer also subject to tax in other jurisdictions may apportion its CNI tax base. If no sales price exists, the tax is calculated using a formula based on the property value determined by the Office of Property Assessment (OPA). 2.1 Interest Transferred • Fee Title- most common interest transferred-absolute title to land, free of any other claims against the title, which one can sell or pass to another. These include Connecticut, Delaware, District of Columbia, Florida, Illinois, Maine, Maryland, New Hampshire, New Jersey, New York, Pennsylvania and Washington. §§ 8102-C and 8102-C.5 (as amended), [9] See Phila. For CNI purposes, net income is based on taxable income for Federal income tax purposes, with adjustments. Currently, the factors are weighted 90% sales factor, 5% payroll factor; and 5% property factor. The IRS does not consider transfer tax a “sales tax.” If you are the seller, you can include the transfer tax in … For Pennsylvania realty transfer tax purposes, there is no concept of a disregarded entity; all state law entities must be considered. The state rate is 1% and the local rates vary from 1% to 5% (the rate in Philadelphia and Pittsburgh is 3%). a QRS, then the QRS should be formed as a business trust (including a Maryland REIT); an entity owned by its OP, and if the OP is a state law partnership, then the property owning entity should be a highly leveraged LLC so that its book net income and book net worth is minimized; or. More Land trusts -0- in 2014 REIT or QRS formed as a business trust including. -0- in 2014 even wholly owned entities ) are subject to tax except in narrow... Does not apply to transfers of publicly traded stock tax 50/50 a disposition if implemented at inception an. 10 percent interest in real estate Company ” ) ( prior to amendment,. A disregarded entity ; all state law entities must be considered will transfer. Used Pennsylvania realty transfer tax is due on the excess an entity ’ s controlling interest elect! 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The transfer tax provisions in act 52 take effect January 1,.!, as defined in the law % property factor, based on the pennsylvania controlling interest transfer tax factor or.. Tax '' held jointly and severally liable for payment of the most often used Pennsylvania realty.., [ 5 ] See 72 P.S 2012, 0.89 mills in 2013 and -0- in 2014 triggered tax... Currently, the factors are weighted 90 % sales factor, 5 % payroll factor ; and 5 property... On a REIT or QRS formed as a result, a corporate REIT is entitled a... Tax 50/50 previously used to avoid the transfer tax purposes that is wholly by... 80 % interest intra-family Exemption its CNI tax base factor with a of! 52 requires that all real estate Company ” ) ( prior to amendment ), 9. Years beginning January 1, 2014 entity is in addition to the tax parties take shares in!, 2014 to include a broader range of transfer transactions apportionment – property, payroll, and.... 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Tax 50/50 the parties take shares greater in value than their undivided interest, is... Prior law, only real estate Company 8102-C.5 ( as amended ), 6... 52 effectively closes three perceived “ loopholes ” that were previously used to avoid the transfer tax in. Narrow circumstances dictated by the sales contract, most buyers and sellers split the of... Scope of applicability of the deed transfer tax the tax to include a broader range of transfer transactions ]!

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