2019 -- S 0466

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LC001783

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2019

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A N   A C T

RELATING TO TAXATION –- REAL ESTATE CONVEYANCE TAX

     

     Introduced By: Senators Crowley, Quezada, Metts, Nesselbush, and Cano

     Date Introduced: February 27, 2019

     Referred To: Senate Judiciary

     It is enacted by the General Assembly as follows:

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

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Conveyance Tax" is hereby amended to read as follows:

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     44-25-1. Tax imposed -- Payment -- Burden.

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     (a) There is imposed,:

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     (1) on On each deed, instrument, or writing by which any lands, tenements, or other

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realty sold is granted, assigned, transferred, or conveyed to, or vested in, the purchaser or

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purchasers,; or

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     (2) any Any other person or persons, by his or her or their direction, or on any grant,

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assignment, transfer, or conveyance or such vesting, by such persons which has the effect of

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making any real estate company an acquired real estate company, when the consideration paid

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exceeds one hundred dollars ($100), a tax at the rate of two dollars and thirty cents ($2.30) for

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each five hundred dollars ($500) or fractional part of it which is paid for the purchase of property

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or the interest in an acquired real estate company (inclusive of the value of any lien or

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encumbrance remaining at the time of the sale, grant, assignment, transfer or conveyance or

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vesting occurs, or in the case of an interest in an acquired real estate company, a percentage of the

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value of such lien or encumbrance equivalent to the percentage interest in the acquired real estate

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company being granted, assigned, transferred, conveyed or vested), which tax is payable at the

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time of making, the execution, delivery, acceptance or presentation for recording of any

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instrument affecting such transfer grant, assignment, transfer, conveyance or vesting. In the

 

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absence of an agreement to the contrary, the tax shall be paid by the grantor, assignor, transferor

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or person making the conveyance or vesting.

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     (3) Nothing in this subsection shall be construed to impose a tax under subsection (a)(2)

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of this section:

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     (i) Upon any grant, assignment, transfer, conveyance or vesting of any interest, direct or

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indirect, by or among owners, members or partners in any real estate company that owns, either

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directly or indirectly through another real estate company, a housing development financed in

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whole or in part with federal low income tax credits pursuant to §42 of the Internal Revenue

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Code; or

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      (ii) Upon any grant, assignment, transfer, conveyance or vesting of any interest, direct or

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indirect, by or among owners, members or partners in any real estate company, in which at least

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one of the owners, members or partners is a Rhode Island nonprofit corporation or an entity

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exempt from tax under § 501(c)(3) of the Internal Revenue Code or is owned by a Rhode Island

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nonprofit corporation or an entity that is exempt from tax under § 501(c)(3) of the Internal

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Revenue Code, that owns, either directly or indirectly through another real estate company, a

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housing development that is subject to a recorded deed restriction or declaration of land use

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restrictive covenants in favor of the Rhode Island housing and mortgage finance corporation, the

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state of Rhode Island housing resources commission, the federal home loan bank or any of its

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members, or any other state or local government instrumentality under an affordable housing

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program. No such real estate company shall be an acquired real estate company under this

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section.

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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company in Rhode Island.

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     (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

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

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

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

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

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

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

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

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

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

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transfer, assignment or conveyance or vesting.

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

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legal entity which meets any of the following:

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

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

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

 

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

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

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transferrable and actively traded on an established market; or

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

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

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

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

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real estate company.

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

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

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

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

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

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

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

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

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

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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

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

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

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

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

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

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located in each municipality in the state of Rhode Island.

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     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 exempt a housing development financed in whole or in part with federal

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low income tax credits pursuant to § 42 of the Internal Revenue Code, as well as Rhode Island

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nonprofit corporations or entities which are tax exempt pursuant to § 501(c)(3) of the Internal

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Revenue Code and own real estate under an affordable housing program, from real estate

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conveyance tax.

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     This act would take effect upon passage.

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