2021 -- S 0365 SUBSTITUTE A

========

LC001610/SUB A/2

========

     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2021

____________

A N   A C T

RELATING TO TAXATION -- REAL ESTATE CONVEYANCE TAX

     Introduced By: Senators Kallman, Murray, Goodwin, Cano, Ruggerio, Euer, Acosta,
Seveney, and Mack

     Date Introduced: February 25, 2021

     Referred To: Senate Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. Sections 44-25-1 and 44-25-2 of the General Laws in Chapter 44-25 entitled

"Real Estate Conveyance Tax" are 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, that 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. The 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 addition to the tax imposed by subsection (a) of this section, there is imposed, on

each deed, instrument, or writing by which any residential real property sold is granted, assigned,

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

his or her or their discretion, 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 eight hundred thousand dollars ($800,000), a tax at

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

part of it, of the consideration in excess of eight hundred thousand dollars ($800,000) that 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.) The tax

imposed by this subsection shall be paid at the same time and in the same manner as the tax imposed

by subsection (a) of this section.

     (b)(c) 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)(d) The tax administrator shall contribute The tax shall be distributed as follows:

     (i) With respect to the tax imposed by subsection (a) of this section, 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.

     (ii) With respect to the tax imposed by subsection (b) of this section, the tax administrator

shall contribute the entire tax to the housing production fund established pursuant to § 42-128-2.1.

     (iii) 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

LC001610/SUB A/2 - Page 2 of 5

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)(e)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)(f) 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

LC001610/SUB A/2 - Page 3 of 5

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)(g) 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) this subsection 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.

     44-25-2. Exemptions.

     (a) The tax imposed by this chapter does not apply to any instrument or writing given to

secure a debt.

     (b) The tax imposed by this chapter does not apply to any deed, instrument, or writing

wherein the United States, the state of Rhode Island, or its political subdivisions are designated the

grantor.

     (c) The tax imposed by this chapter does not apply to any deed, instrument, or writing that

has or shall be executed, delivered, accepted, or presented for recording in furtherance of, or

pursuant to, that certain master property conveyance contract dated December 29, 1982, and

recorded in the land evidence records of the city of Providence on January 27, 1983, at 1:30 p.m.

in book 1241 at page 849, and relating to the capital center project in the city of Providence.

     (d) The qualified sale of a mobile or manufactured home community to a resident-owned

organization as defined in § 31-44-1 is exempt from the real estate conveyance tax imposed under

LC001610/SUB A/2 - Page 4 of 5

this chapter.

     (e) No transfer tax or fee shall be imposed by a land trust or municipality upon the

acquisition of real estate by the state of Rhode Island or any of its political subdivisions.

     (f) Nothing in § 44-25-1(a) shall be construed to impose a tax upon any grant, assignment,

transfer, conveyance or vesting of any interest, direct or indirect, among owners, members or

partners in any real estate company with respect to an affordable housing development where:

     (i) The housing development has been financed in whole or in part with federal low-income

housing tax credits pursuant to §42 of the Internal Revenue Code; or

     (ii) At least one of the owners, members or partners of the company 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, and the housing development 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.

     SECTION 2. The provisions of section 44-25-1 of this act shall take effect on January 1,

2022 and the provisions of section 44-25-2 shall take effect upon passage.

========

LC001610/SUB A/2

========

LC001610/SUB A/2 - Page 5 of 5

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TAXATION -- REAL ESTATE CONVEYANCE TAX

***

     This act would provide that a portion of the real estate conveyance tax be apportioned to a

newly established restricted receipt account known as the housing production fund.

     The provisions of section 44-25-1 of this act would take effect on January 1, 2022 and the

provisions of section 44-25-2 would take effect upon passage.

========

LC001610/SUB A/2

========

LC001610/SUB A/2 - Page 6 of 5