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:

     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,:

     (1) on 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

     (2) any 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), 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.

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

of this section:

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

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

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

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

Code; or

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

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

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

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

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

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

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

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

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

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

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

section.

     (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

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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

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

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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,

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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LC001783

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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

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

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

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

conveyance tax.

     This act would take effect upon passage.

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LC001783

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