2016 -- S 2520

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LC004922

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2016

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A N   A C T

RELATING TO TAXATION -- REAL ESTATE CONVEYANCE TAX

     Introduced By: Senators Goldin, Goodwin, and Ruggerio

     Date Introduced: February 25, 2016

     Referred To: Senate Judiciary

     It is enacted by the General Assembly as follows:

     SECTION 1. Section 44-25-1 of the General Laws in Chapter 44-25 entitled "Real Estate

Conveyance Tax" is hereby amended to read as follows:

     44-25-1. Tax imposed -- Payment -- Burden. -- (a) There is imposed, on each deed,

instrument, or writing by which any lands, tenements, or other realty sold is granted, assigned,

transferred, or conveyed to, or vested in, the purchaser or purchasers, or any other person or

persons, by his or her or their direction, or on any grant, assignment, transfer, or conveyance or

such vesting, by such persons which has the effect of making any real estate company an acquired

real estate company, when the consideration paid exceeds one hundred dollars ($100), a tax at the

rate of two dollars and thirty cents ($2.30) for each five hundred dollars ($500) or fractional part

of it which is paid for the purchase of property or the interest in an acquired real estate company

(inclusive of the value of any lien or encumbrance remaining at the time of the sale, grant,

assignment, transfer or conveyance or vesting occurs, or in the case of an interest in an acquired

real estate company, a percentage of the value of such lien or encumbrance equivalent to the

percentage interest in the acquired real estate company being granted, assigned, transferred,

conveyed or vested),. Nothing in this subsection shall be construed to impose a real estate

conveyance tax upon any transfer of partnership interest, direct or indirect, among partners or

members in a business organization owning a housing development financed in whole or in part

with federal low income housing tax credits pursuant to Section 42 of the Internal Revenue Code,

which tax is payable at the time of making, the execution, delivery, acceptance or presentation for

recording of any instrument affecting such transfer grant, assignment, transfer, conveyance or

vesting. In the absence of an agreement to the contrary, the tax shall be paid by the grantor,

assignor, transferor or person making the conveyance or vesting.

      (b) In the event no consideration is actually paid for the lands, tenements, or realty, the

instrument or interest in an acquired real estate company of conveyance shall contain a statement

to the effect that the consideration is such that no documentary stamps are required.

      (c) The tax administrator shall contribute to the distressed community relief program the

sum of thirty cents ($.30) per two dollars and thirty cents ($2.30) of the face value of the stamps

to be distributed pursuant to § 45-13-12, and to the housing resources commission restricted

receipts account the sum of thirty cents ($.30) per two dollars and thirty cents ($2.30) of the face

value of the stamps. Funds will be administered by the office of housing and community

development, through the housing resources commission. The state shall retain sixty cents ($.60)

for state use. The balance of the tax shall be retained by the municipality collecting the tax.

Notwithstanding the above, in the case of the tax on the grant, transfer, assignment or conveyance

or vesting with respect to an acquired real estate company, the tax shall be collected by the tax

administrator and shall be distributed to the municipality where the real estate owned by the

acquired real estate company is located provided, however, in the case of any such tax collected

by the tax administrator, if the acquired real estate company owns property located in more than

one municipality, the proceeds of the tax shall be allocated amongst said municipalities in the

proportion the assessed value of said real estate in each such municipality bears to the total of the

assessed values of all of the real estate owned by the acquired real estate company in Rhode

Island. Provided, however, in fiscal years 2004 and 2005, from the proceeds of this tax, the tax

administrator shall deposit as general revenues the sum of ninety cents ($.90) per two dollars and

thirty cents ($2.30) of the face value of the stamps. The balance of the tax on the purchase of

property shall be retained by the municipality collecting the tax. The balance of the tax on the

transfer with respect to an acquired real estate company, shall be collected by the tax

administrator and shall be distributed to the municipality where the property for which interest is

sold is physically located. Provided, however, that in the case of any tax collected by the tax

administrator with respect to an acquired real estate company where the acquired real estate

company owns property located in more than one municipality, the proceeds of the tax shall be

allocated amongst the municipalities in proportion that the assessed value in any such

municipality bears to the assessed values of all of the real estate owned by the acquired real estate

company in Rhode Island.

      (d) For purposes of this Section, the term "acquired real estate company" means a real

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estate company that has undergone a change in ownership interest if (i) such change does not

affect the continuity of the operations of the company; and (ii) the change, whether alone or

together with prior changes has the effect of granting, transferring, assigning or conveying or

vesting, transferring directly or indirectly, 50% or more of the total ownership in the company

within a period of three (3) years. For purposes of the foregoing subsection (ii) hereof, a grant,

transfer, assignment or conveyance or vesting, shall be deemed to have occurred within a period

of three (3) years of another grant(s), transfer(s), assignment(s) or conveyance(s) or vesting(s) if

during the period the granting, transferring, assigning or conveying or party provides the

receiving party a legally binding document granting, transferring, assigning or conveying or

vesting said realty or a commitment or option enforceable at a future date to execute the grant,

transfer, assignment or conveyance or vesting.

      (e) A real estate company is a corporation, limited liability company, partnership or other

legal entity which meets any of the following:

      (i) Is primarily engaged in the business of holding, selling or leasing real estate, where

90% or more of the ownership of said real estate is held by 35 or fewer persons and which

company either (a) derives 60% or more of its annual gross receipts from the ownership or

disposition of real estate; or (b) owns real estate the value of which comprises 90% or more of the

value of the entity's entire tangible asset holdings exclusive of tangible assets which are fairly

transferrable and actively traded on an established market; or

      (ii) 90% or more of the ownership interest in such entity is held by 35 or fewer persons

and the entity owns as 90% or more of the fair market value of its assets a direct or indirect

interest in a real estate company. An indirect ownership interest is an interest in an entity 90% or

more of which is held by 35 or fewer persons and the purpose of the entity is the ownership of a

real estate company.

      (f) In the case of a grant, assignment, transfer or conveyance or vesting which results in a

real estate company becoming an acquired real estate company, the grantor, assignor, transferor,

or person making the conveyance or causing the vesting, shall file or cause to be filed with the

division of taxation, at least five (5) days prior to the grant, transfer, assignment or conveyance or

vesting, notification of the proposed grant, transfer, assignment, or conveyance or vesting, the

price, terms and conditions of thereof, and the character and location of all of the real estate assets

held by real estate company and shall remit the tax imposed and owed pursuant to subsection (a)

hereof. Any such grant, transfer, assignment or conveyance or vesting which results in a real

estate company becoming an acquired real estate company shall be fraudulent and void as against

the state unless the entity notifies the tax administrator in writing of the grant, transfer,

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assignment or conveyance or vesting as herein required in subsection (f) hereof and has paid the

tax as required in subsection (a) hereof. Upon the payment of the tax by the transferor, the tax

administrator shall issue a certificate of the payment of the tax which certificate shall be

recordable in the land evidence records in each municipality in which such real estate company

owns real estate. Where the real estate company has assets other than interests in real estate

located in Rhode Island, the tax shall be based upon the assessed value of each parcel of property

located in each municipality in the state of Rhode Island.

     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TAXATION -- REAL ESTATE CONVEYANCE TAX

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     This act would exclude the transfer of any interest, in housing development's financed in

whole or in part with federal low income housing tax credits, amongst partners or members of

certain business organizations, from real estate conveyance taxes.

     This act would take effect upon passage.

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