New York City and New York State each imposes a tax on transfers of real property located within their respective borders. The city tax (called the real property transfer tax) is generally imposed at a rate of 2.625 percent of the consideration for the transfer, while the state tax (called the real estate transfer tax) is generally imposed at a rate of 0.4 percent of the consideration for the transfer. There are a number of important differences between these two taxes that go beyond the name and the rate of the tax. For example, the grant of a new lease for a term of more than 49 years (or with an option) is subject to the state transfer tax but not the city transfer tax. A transfer made by or to a tax exempt entity is also subject to the state transfer tax but not the city transfer tax. However, the basic rules for the city and state transfer taxes share much in common. Among the similarities is that (i) a transfer of a controlling interest in an entity owning real property is subject to each transfer tax and (ii) both the city and state have an exception for a transfer that is a mere change in form.
In 2015, this column discussed a decision by a New York City administrative law judge (ALJ) in favor of the city in a case that dealt with the interaction between the rules governing a mere change in form and the transfer of a controlling interest in an entity owning real property. In an interesting turn of events, a recent decision by a New York State ALJ ruled in favor of the same taxpayer on the very same issue with respect to the state transfer tax.
