2021 -- S 0365 SUBSTITUTE A

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2021

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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 (1) two dollars and thirty cents ($2.30) for each five

hundred dollars ($500) or fractional part of it of the first five hundred thousand dollars ($500,000)

of the consideration paid, and (2) at the rate of four dollars and sixty cents ($4.60) for each five

hundred dollars ($500), or fractional part of it, of the consideration paid in excess of five hundred

thousand dollars ($500,000) 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 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 The tax shall be distributed as follows:

     (i) With respect to the portion of the tax assessed against the first five hundred thousand

dollars ($500,000) of the consideration paid: 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 portion of the tax assessed against the consideration paid in excess

of five hundred thousand dollars ($500,000): the tax administrator shall contribute to the distressed

community relief program the sum of thirty cents ($.30) per four dollars and sixty cents ($4.60) of

the face value of the stamps to be distributed pursuant to § 45-13-12, to the housing resources

commission restricted receipt account the sum of thirty cents ($.30) per four dollars and sixty cents

($4.60) of the face value of the stamps, and to the housing production fund established pursuant to

§ 42-128-10(b) the sum of two dollars and thirty cents ($2.30) per four dollars and sixty cents

($4.60) of the face value of the stamps. The state shall retain sixty cents ($.60) for state use. The

balance of the tax shall be retained by the municipality collecting the tax.

     (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

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

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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.

With respect to the revenue collected by the division of taxation on behalf of each municipality in

this section, before distributing said revenue to the municipalities, a two percent (2%)

administrative fee shall be deducted therefrom and transferred to the general fund.

     (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 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

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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.

     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

this chapter.

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     (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

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. Section 42-128-10 of the General Laws in Chapter 42-128 entitled "Rhode

Island Housing Resources Act of 1998" is hereby amended to read as follows:

     42-128-10. Appropriations.

     (a) The general assembly shall annually appropriate any sums it may deem necessary to

enable the commission to carry out its assigned purposes; and the state controller is authorized and

directed to draw his or her orders upon the general treasurer for the payment of any sums

appropriated or so much as may be from time to time required, upon receipt by him or her of proper

vouchers approved by the chairperson or the executive director.

     (b) There is hereby established a restricted receipt account within the general fund of the

state, to be known as the “housing production fund”. Funds from this account shall be administered

by the Rhode Island housing and mortgage finance corporation, subject to all program and reporting

guidelines adopted by the housing resources commission, for housing production initiatives,

including financial assistance by loan, grant, or otherwise, for the planning, production, or

preservation of affordable housing in Rhode Island.

     (c) In administering the housing production fund, the Rhode Island housing and mortgage

finance corporation shall fund new housing construction projects for households earning not more

than eighty percent (80%) of area median income and Project-based rental assistance for

development projects that set aside apartments for households earning not more than fifty percent

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(50%) of area median income. Further, in administering the housing production fund, the Rhode

Island housing and mortgage finance corporation shall give priority to households either exiting

homelessness or earning not more than thirty percent (30%) of area median income.

     SECTION 3. 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 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.

     This act would take effect upon passage.

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