2022 -- S 2759

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LC005036

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2022

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A N   A C T

RELATING TO TAXATION -- REAL ESTATE CONVEYANCE TAX

     

     Introduced By: Senators Mendes, and Calkin

     Date Introduced: March 24, 2022

     Referred To: Senate Finance

     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. [Effective January 1, 2022.]

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     (a) There is imposed, on each deed, instrument, or writing by which any lands, tenements,

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

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purchasers, or any other person or persons, by his, her, or their direction, or on any grant,

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

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any real estate company an acquired real estate company, when the consideration paid exceeds one

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

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dollars ($500), or fractional part of it, that is paid for the purchase of property or the interest in an

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acquired real estate company (inclusive of the value of any lien or encumbrance remaining at the

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time the sale, grant, assignment, transfer or conveyance or vesting occurs, or in the case of an

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interest in an acquired real estate company, a percentage of the value of such lien or encumbrance

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

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transferred, conveyed or vested). The tax is payable at the time of making, the execution, delivery,

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acceptance or presentation for recording of any instrument affecting such transfer grant,

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assignment, transfer, conveyance or vesting. In the absence of an agreement to the contrary, the tax

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shall be paid by the grantor, assignor, transferor or person making the conveyance or vesting;

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provided, however, the sale of homes not considered the primary residence to the seller shall be

 

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taxed pursuant to subsection (c) of this section.

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     (b) In addition to the tax imposed by subsection (a), there is imposed, on each deed,

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

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

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her, or their direction, or on any grant, assignment, transfer, or conveyance or such vesting, by such

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persons that has the effect of making any real estate company an acquired real estate company,

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when the consideration paid exceeds eight hundred thousand dollars ($800,000), a tax at the rate of

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

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the consideration in excess of eight hundred thousand dollars ($800,000) that is paid for the

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purchase of property or the interest in an acquired real estate company (inclusive of the value of

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

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

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

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estate company being granted, assigned, transferred, conveyed, or vested). The tax imposed by this

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

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(a).

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     (c) There is imposed, on each deed, instrument, or writing by which any residential real

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

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purchasers, or any person or persons, by his or her or their discretion, or on any grant, assignment,

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transfer, or conveyance or such vesting, by such persons which has the effect of making any real

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estate company an acquired real estate company, when the property subject to the sale is not a

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primary residence and assess at over two hundred thousand dollars ($200,000), a tax at the rate of

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five percent (5%) of the total assessed value of the property. The tax imposed by this subsection

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

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section.

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     (c)(d) 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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     (d)(e) The tax shall be distributed as follows:

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     (1) With respect to the tax imposed by subsection (a): the tax administrator shall contribute

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to the distressed community relief program the sum of thirty cents ($.30) per two dollars and thirty

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cents ($2.30) of the face value of the stamps to be distributed pursuant to § 45-13-12, and to the

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housing resources commission restricted receipts account the sum of thirty cents ($.30) per two

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dollars and thirty cents ($2.30) of the face value of the stamps. Funds will be administered by the

 

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office of housing and community development, through the housing resources commission. The

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state shall retain sixty cents ($.60) for state use. The balance of the tax shall be retained by the

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municipality collecting the tax.

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     (2) With respect to the tax imposed by subsection (b): the tax administrator shall contribute

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

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     (3) Notwithstanding the above, in the case of the tax on the grant, transfer, assignment or

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

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

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the 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 Island.

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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 administrator

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

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

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

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property located in more than one municipality, the proceeds of the tax shall be allocated amongst

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the municipalities in proportion that the assessed value in any such municipality bears to the

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

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     (e)(f) 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 (1) The change does not affect

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the continuity of the operations of the company; and (2) The change, whether alone or together

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

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

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period of three (3) years. For purposes of the foregoing subsection (e)(2), a grant, transfer,

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

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

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period the granting, transferring, assigning, or conveying party provides the receiving party a

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legally binding document granting, transferring, assigning, or conveying or vesting the realty or a

 

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commitment or option enforceable at a future date to execute the grant, transfer, assignment, or

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conveyance or vesting.

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     (f)(g) A real estate company is a corporation, limited liability company, partnership, or

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other legal entity that meets any of the following:

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     (1) 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 the real estate is held by 35 or fewer persons and which company

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either (i) derives 60% or more of its annual gross receipts from the ownership or disposition of real

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estate; or (ii) owns real estate the value of which comprises 90% or more of the value of the entity's

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entire tangible asset holdings exclusive of tangible assets that are fairly transferrable and actively

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traded on an established market; or

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     (2) Ninety percent or more of the ownership interest in such entity is held by 35 or fewer

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persons 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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     (g)(h) In the case of a grant, assignment, transfer or conveyance or vesting that results in a

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

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

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

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

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and conditions thereof, and the character and location of all of the real estate assets held by the real

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estate company and shall remit the tax imposed and owed pursuant to subsection (a). Any such

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grant, transfer, assignment, or conveyance or vesting which results in a real estate company

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

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the entity notifies the tax administrator in writing of the grant, transfer, assignment, or conveyance

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or vesting as herein required in subsection (g) and has paid the tax as required in subsection (a).

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Upon the payment of the tax by the transferor, the tax administrator shall issue a certificate of the

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payment of the tax which certificate shall be recordable in the land evidence records in each

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municipality in which such real estate company owns real estate. Where the real estate company

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has assets other than interests in real estate located in Rhode Island, the tax shall be based upon the

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assessed value of each parcel of property located in each municipality in the state of Rhode Island.

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Delayed Effective Date.

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      P.L. 2018, ch. 39, § 2, and P.L. 2018, ch. 45, § 2 enacted identical amendments to this

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section.

 

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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 tax property not considered a primary residence at a flat rate of five percent

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(5%) of the assess value.

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     This act would take effect upon passage.

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