Real estate transfer taxes loophole to close
Pennsylvania lawmakers believe they have closed the final loopholes that allowed major corporations to avoid paying real estate transfer taxes on the purchase of major office buildings and other properties.
The state Senate on Wednesday approved two changes to the tax code that would eliminate the loopholes. The changes were the second in two years that addressed the nonpayment of transfer taxes for major transactions.
The legislation goes to the governor for his signature.
One change blocks corporations from skirting transfer taxes by structuring deals using holding companies.
A second change will permit the state Revenue Department to tax a transaction when 90 percent or more of a property is transferred, regardless of whether the sale has a definitive closing date. Currently, unless there is a date, no transfer tax is required.
Both changes become effective Jan. 1, once they are signed into law by Gov. Tom Corbett.
They follow the initial changes in the tax code, known as 89-11, which allowed buyers to avoid paying the tax by purchasing 89 percent of a building. After three years, the buyer could buy the remaining 11 percent.
State Sen. Jim Ferlo, D-Highland Park, a proponent of the changes, said that if the legislation had been in effect last year, for example, Highwood Properties of Raleigh would have paid several million dollars in its purchase of the 32-story EQT Plaza, Downtown.
In that sale Highwoods acquired 100 percent of the building owner, Liberty Avenue Mezzanine LLC, a Delaware holding company, for $99.2 million. No tax was paid because there was no deed required since the recorded owner of the building remained unchanged.
That meant a loss to the city of Pittsburgh of $1.98 million (2 percent of $99.2 million), and nearly an equal amount to the city school district. The state loss 1 percent of the sales price.
There were a number of sales similar to this prior to the end of 2012 since the change in the 89-11 did not go into effect until Jan. 1, 2013.
Another sale was the Equitable Resources building on the North Shore. It was acquired by IRA Realty Capital of Newport Beach, Calif., for a reported $37 million. No transfer tax was paid.
Ferlo hasn't been alone in fighting to get the tax code law change to require realty tax payments. Among others joining him have been City Controller Michael Lamb and Allegheny County attorney Ira Weiss.
“This (latest) effort was bipartisan in nature, and I am grateful to Revenue Secretary (Dan) Meuser, and the staffs of Sens. (Jake) Corman, (Joe) Scarnati and (Vincent) Hughes. This teamwork will achieve more equity in the tax code and help both state and local governments collect fair taxes,” Ferlo said.
Local officials believe because the changes don't go into effect until Jan. 1, 2014, there could be a number of office building sales prior to the end of the year.
Sam Spatter is a staff writer for Trib Total Media. He can be reached at 412-320-7843 or email@example.com.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Black Friday chaos dwindles thanks to earlier deals, online sales
- Nimble Regal ready for winter with all-wheel drive
- Fuel cell standoff slows car technology’s rise in popularity
- Employers cut back on holiday office parties
- Key gets stuck in ignition
- Stop neighbors from stealing your Internet
- Convinced Fed will raise rates in December, investors parse meaning of ‘gradual’ increase
- Stocks close quiet week with little change
- $170.4M AmEx charge yields whopping perk for Chinese billionaire
- Small stores take big gamble by not upgrading credit card readers
- GOP Senators Rubio, Cruz at odds on tougher surveillance law