NY Tax L § 1402 (2021)
2021 New York Laws TAX - Tax Article 31 - Real Estate Transfer Tax 1402 - Imposition of Tax.

§  1402.  Imposition  of  tax.  (a)  A tax is hereby imposed on each conveyance of real property or interest therein when  the  consideration exceeds  five  hundred dollars, at the rate of two dollars for each five hundred dollars or fractional part thereof; provided, however, that with respect to (A) a conveyance of a one, two or three-family house  and  an individual  residential  condominium unit, or interests therein; and (B) conveyances where the consideration is less than five  hundred  thousand dollars,  the  consideration for the interest conveyed shall exclude the value of any lien or  encumbrance  remaining  thereon  at  the  time  of conveyance. The rate of this tax shall be: (1) two dollars for each five hundred  dollars  or  fractional part thereof on all conveyances of real property or interest therein; plus (2)  an  additional  one  dollar  and twenty-five  cents  for  each  five  hundred  dollars or fractional part thereof of consideration on each conveyance of real property or interest therein within any city in this state having a population of one million or more  (i)  when  the  consideration  for  the  entire  conveyance  of residential  real  property  is  three million dollars or more, and (ii) when the consideration for the entire conveyance of any  other  property is   two  million  dollars  or  more.  For  purposes  of  this  section, residential real property shall include any premises that is or  may  be used  in  whole  or in part as a personal residence, and shall include a one, two, or three-family house, an individual condominium  unit,  or  a cooperative apartment unit.  (b)  (1)  Notwithstanding  the  provisions  of subdivision (a) of this section, in the case  of  any  real  estate  investment  trust  transfer occurring  on  or  after the effective date of this subdivision, the tax imposed under subdivision (a) of this section shall be  imposed  at  the rate  of  one  dollar  for  each five hundred dollars or fractional part thereof of consideration.  (2) (A) For purposes  of  this  subdivision,  the  term  "real  estate investment  trust"  (hereinafter referred to as a "REIT") shall have the same meaning as in section 856 of the internal revenue code.  (B)  For  purposes  of  this  subdivision,  the  phrase  "real  estate investment trust transfer" shall mean any conveyance of real property or an  interest  therein  to  a REIT, or to a partnership or corporation in which a REIT owns  a  controlling  interest  immediately  following  the conveyance,  which  conveyance (I) occurs in connection with the initial formation of the REIT, provided that the conditions set forth in clauses (i) and (ii) of this subparagraph are satisfied, or (II) in the case  of any  real  estate  investment  trust transfer occurring on or after July thirteenth, nineteen hundred ninety-six and before September first,  two thousand  twenty-three,  is  described  in  the  last  sentence  of this subparagraph.  (i) The value of  the  ownership  interests  in  the  REIT,  or  in  a partnership  or  corporation  in  which  the  REIT  owns  a  controlling interest, received by the grantor as consideration for  such  conveyance must  be  equal to an amount not less than forty percent of the value of the equity interest in the real property or interest therein conveyed by the grantor to the grantee and such ownership interests must be retained by the grantor or owners of the grantor for a period of  not  less  than two  years  following the date of conveyance; provided, however, that in the case of the death of the grantor or an owner of the  grantor  within such  two  year  period,  this  two  year retention requirement shall be deemed to be satisfied notwithstanding any conveyance of such  ownership interests  held  by such individual as a result of such death. The value of the equity interest in such real property or interest  therein  shall be  computed  by  subtracting  from the consideration for the conveyance (determined in accordance with paragraph three of this subdivision)  the  unpaid  balance  of any loans secured by mortgages or other encumbrances which are liens on the real property  or  interest  therein  immediately before  the conveyance. For purposes of this computation, in the case of a  conveyance of real property or interest therein other than a transfer or an acquisition of a controlling interest, the amount  of  the  unpaid balance  of  any  loans secured by mortgages or other encumbrances to be subtracted from consideration is determined  by  multiplying  the  total unpaid  balance  of any loans secured by mortgages or other encumbrances on the real property or  interest  therein  by  the  percentage  of  the ownership  interest  in  the  real  property  or  interest therein being conveyed to the grantee. In the case of a conveyance which is a transfer or  an  acquisition  of  a  controlling  interest,  such  amount  to  be subtracted  is  equal  to  the  sum  of  the  following  amounts:  (I) a reasonable apportionment to the interests in real property owned by  the entity  of  the  amount  of  any  loans  secured  by encumbrances on the ownership interests  in  the  entity  which  are  being  transferred  or acquired  and (II) the amount of any loans secured by mortgages or other encumbrances on the real  property  of  the  entity  multiplied  by  the percentage  interest  in  the  entity  which  is  being  transferred  or acquired. Provided, however that, for purposes of this computation,  any mortgages or other encumbrances on the real property or interest therein which  are created in contemplation of the initial formation of the REIT or in contemplation of the conveyance of such real property or  interest therein to the REIT or to a partnership or corporation in which the REIT owns  a  controlling interest immediately following the conveyance shall not be considered.  (ii) Seventy-five percent or more of the  cash  proceeds  received  by such  REIT  from  the  sale of ownership interests in such REIT upon its initial formation must be used: (I) to make payments on loans secured by any interest in real property (including an  ownership  interest  in  an entity  owning  real  property) which is owned directly or indirectly by such REIT; (II) to pay for capital improvements to real property or  any interest therein owned directly or indirectly by such REIT; (III) to pay costs,  fees,  and  expenses  (including brokerage fees and commissions, professional fees and payments to  or  on  behalf  of  a  tenant  as  an inducement  to  enter  into  a lease or sublease) incurred in connection with the creation of a leasehold or sublease pertaining to real property or any interest therein owned directly or indirectly by such REIT;  (IV) to  acquire  any  interest  in  real  property  (including  an ownership interest in any entity owning real property), apart from any acquisition to  which  a  reduced  rate  of  tax  is  applicable  pursuant  to  this subdivision  (without  regard  to  this  clause);  or  (V)  for reserves established for any of the purposes described in subclause (I), (II)  or (III)  of  this  clause.  For  purposes  of  this  clause, the term real property shall include real property wherever located.   If a conveyance otherwise described in this subparagraph occurs  other than  in  connection with the initial formation of a REIT, the condition set forth in clause (ii) of this subparagraph shall be  disregarded  and such  conveyance  shall  constitute  a  "real  estate  investment  trust transfer" if the condition set forth in clause (i) of this  subparagraph would  be  satisfied  if  "fifty  percent"  were  substituted for "forty percent" therein.  (3) For purposes of measuring consideration  under  this  subdivision, the  fair  market  value  of the real property or interest therein being conveyed shall be calculated by dividing (i)  the  net  cash  flow  from operations  with  respect  to  such  real  property for the twelve-month period ending on the last day of the second month preceding the date  of the  conveyance  by  (ii)  the  sum  of  (A)  the federal long-term rate  compounded  semi-annually  that  is  determined  by  the  United  States secretary  of the treasury under section 1274(d) of the internal revenue code in effect thirty days prior to the date of the conveyance  and  (B) two percentage points. Provided however, if the commissioner of taxation and  finance  determines  that  either  the amount in clause (i) of this paragraph or clause (ii)  of  this  paragraph  does  not  result  in  an accurate  representation  of the fair market value of such real property or interest therein as  such  value  is  to  be  determined  under  this paragraph,  the  commissioner may adjust either of such amounts. In lieu of utilizing the method prescribed in  this  paragraph  for  determining fair  market  value, the taxpayer may utilize any method for determining fair market value that the commissioner  of  taxation  and  finance  has prescribed in rules or regulations or otherwise.