Rhode Island 2023 Regular Session

Rhode Island Senate Bill S0788 Compare Versions

Only one version of the bill is available at this time.

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5	5	2023 -- S 0788
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7	7	LC002363
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9	9	S TATE OF RHODE IS LAND
10	10	IN GENERAL ASSEMBLY
11	11	JANUARY SESSION, A.D. 2023
12	12	____________
13	13
14	14	A N A C T
15	15	RELATING TO TAXATION -- REAL ESTATE CONVEYANCE TAX
16	16	Introduced By: Senators Gu, Kallman, Mack, Zurier, Acosta, Burke, Lauria, DiMario,
17	17	Miller, and Valverde
18	18	Date Introduced: March 23, 2023
19	19	Referred To: Senate Finance
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21	21
22	22	It is enacted by the General Assembly as follows:
23	23	SECTION 1. Section 44-25-1 of the General Laws in Chapter 44-25 entitled "Real Estate 1
24	24	Conveyance Tax" is hereby amended to read as follows: 2
25	25	44-25-1. Tax imposed — Payment — Burden. 3
26	26	(a) There is imposed, on each deed, instrument, or writing by which any lands, tenements, 4
27	27	or other realty sold is granted, assigned, transferred, or conveyed to, or vested in, the purchaser or 5
28	28	purchasers, or any other person or persons, by his, her, or their direction, or on any grant, 6
29	29	assignment, transfer, or conveyance or such vesting, by such persons that has the effect of making 7
30	30	any real estate company an acquired real estate company, when the consideration paid exceeds one 8
31	31	hundred dollars ($100), a tax at the rate of two dollars and thirty cents ($2.30) for each five hundred 9
32	32	dollars ($500), or fractional part of it, that is paid for the purchase of property or the interest in an 10
33	33	acquired real estate company (inclusive of the value of any lien or encumbrance remaining at the 11
34	34	time the sale, grant, assignment, transfer or conveyance or vesting occurs, or in the case of an 12
35	35	interest in an acquired real estate company, a percentage of the value of such lien or encumbrance 13
36	36	equivalent to the percentage interest in the acquired real estate company being granted, assigned, 14
37	37	transferred, conveyed or vested). The tax is payable at the time of making, the execution, delivery, 15
38	38	acceptance or presentation for recording of any instrument affecting such transfer grant, 16
39	39	assignment, transfer, conveyance or vesting. In the absence of an agreement to the contrary, the tax 17
40	40	shall be paid by the grantor, assignor, transferor or person making the conveyance or vesting. 18
41	41	(b) In addition to the tax imposed by subsection (a), there is imposed, on each deed, 19
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45	45	instrument, or writing by which any residential real property sold is granted, assigned, transferred, 1
46	46	or conveyed to, or vested in, the purchaser or purchasers, or any other person or persons, by his, 2
47	47	her, or their direction, or on any grant, assignment, transfer, or conveyance or such vesting, by such 3
48	48	persons that has the effect of making any real estate company an acquired real estate company, 4
49	49	when the consideration paid exceeds eight hundred thousand dollars ($800,000), a tax at the rate of 5
50	50	two dollars and thirty cents ($2.30) for each five hundred dollars ($500), or fractional part of it, of 6
51	51	the consideration in excess of eight hundred thousand dollars ($800,000) that is paid for the 7
52	52	purchase of property or the interest in an acquired real estate company (inclusive of the value of 8
53	53	any lien or encumbrance remaining at the time the sale, grant, assignment, transfer, or conveyance 9
54	54	or vesting occurs, or in the case of an interest in an acquired real estate company, a percentage of 10
55	55	the value of such lien or encumbrance equivalent to the percentage interest in the acquired real 11
56	56	estate company being granted, assigned, transferred, conveyed, or vested). The tax imposed by this 12
57	57	subsection shall be paid at the same time and in the same manner as the tax imposed by subsection 13
58	58	(a). 14
59	59	(c) In addition to the taxes imposed by subsections (a) and (b) of this section, upon 15
60	60	enactment of a local ordinance, a municipality may impose, on each deed, instrument, or writing 16
61	61	by which any sold residential real property located in that municipality is granted, assigned, 17
62	62	transferred, or conveyed to, or vested in, the purchaser or purchasers, or any other person or 18
63	63	persons, by his, her, or their direction, or on any grant, assignment, transfer, or conveyance or such 19
64	64	vesting, by such persons that has the effect of making any real estate company an acquired real 20
65	65	estate company, when the consideration paid exceeds eight hundred thousand dollars ($800,000), 21
66	66	a tax of not more than ten dollars ($10.00) for each five hundred dollars ($500), or fractional part 22
67	67	of it, of the consideration in excess of eight hundred thousand dollars ($800,000) that is paid for 23
68	68	the purchase of property or the interest in an acquired real estate company (inclusive of the value 24
69	69	of any lien or encumbrance remaining at the time the sale, grant, assignment, transfer, or 25
70	70	conveyance or vesting occurs, or in the case of an interest in an acquired real estate company, a 26
71	71	percentage of the value of such lien or encumbrance equivalent to the percentage interest in the 27
72	72	acquired real estate company being granted, assigned, transferred, conveyed, or vested). The tax 28
73	73	imposed by this subsection shall be paid at the same time and in the same manner as the tax imposed 29
74	74	by subsection (a) of this section. 30
75	75	(c)(d) In the event no consideration is actually paid for the lands, tenements, or realty, the 31
76	76	instrument or interest in an acquired real estate company of conveyance shall contain a statement 32
77	77	to the effect that the consideration is such that no documentary stamps are required. 33
78	78	(d)(e) The tax shall be distributed as follows: 34
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82	82	(1) With respect to the tax imposed by subsection (a): the tax administrator shall contribute 1
83	83	to the distressed community relief program the sum of thirty cents ($.30) per two dollars and thirty 2
84	84	cents ($2.30) of the face value of the stamps to be distributed pursuant to § 45-13-12, and to the 3
85	85	housing resources commission restricted receipts account the sum of thirty cents ($.30) per two 4
86	86	dollars and thirty cents ($2.30) of the face value of the stamps. Funds will be administered by the 5
87	87	office of housing and community development, through the housing resources commission. The 6
88	88	state shall retain sixty cents ($.60) for state use. The balance of the tax shall be retained by the 7
89	89	municipality collecting the tax. 8
90	90	(2) With respect to the tax imposed by subsection (b): the tax administrator shall contribute 9
91	91	the entire tax to the housing production fund established pursuant to § 42-128-2.1. 10
92	92	(3) With respect to the tax imposed by subsection (c) of this section, the municipality shall 11
93	93	retain the tax collected and deposit it into restricted accounts that shall be allocated and spent only 12
94	94	for the creation and development of affordable housing, as defined in § 42-128-8.1, within the 13
95	95	municipality serving individuals or families at or below eighty percent (80%) of the area median 14
96	96	income. The municipality shall maintain a local affordable housing board to oversee the funds in 15
97	97	the restricted accounts and shall allocate the funds within two (2) years. The municipality shall 16
98	98	include in the housing element of their local comprehensive plan, if applicable, the process it will 17
99	99	use to allocate the funds. 18
100	100	(4) As an alternative to the provisions of subsection (e)(3) of this section, the municipality 19
101	101	may elect to transfer tax collections promptly upon receipt or within the two year (2) period after 20
102	102	receipt to the housing resources commission, the Rhode Island department of housing, or Rhode 21
103	103	Island Housing, for the purpose of developing affordable housing within that community. 22
104	104	(3)(5) Notwithstanding the above, in the case of the tax on the grant, transfer, assignment 23
105	105	or conveyance or vesting with respect to an acquired real estate company, the tax shall be collected 24
106	106	by the tax administrator and shall be distributed to the municipality where the real estate owned by 25
107	107	the acquired real estate company is located; provided, however, in the case of any such tax collected 26
108	108	by the tax administrator, if the acquired real estate company owns property located in more than 27
109	109	one municipality, the proceeds of the tax shall be allocated amongst said municipalities in the 28
110	110	proportion the assessed value of said real estate in each such municipality bears to the total of the 29
111	111	assessed values of all of the real estate owned by the acquired real estate company in Rhode Island. 30
112	112	Provided, however, in fiscal years 2004 and 2005, from the proceeds of this tax, the tax 31
113	113	administrator shall deposit as general revenues the sum of ninety cents ($.90) per two dollars and 32
114	114	thirty cents ($2.30) of the face value of the stamps. The balance of the tax on the purchase of 33
115	115	property shall be retained by the municipality collecting the tax. The balance of the tax on the 34
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119	119	transfer with respect to an acquired real estate company, shall be collected by the tax administrator 1
120	120	and shall be distributed to the municipality where the property for which interest is sold is 2
121	121	physically located. Provided, however, that in the case of any tax collected by the tax administrator 3
122	122	with respect to an acquired real estate company where the acquired real estate company owns 4
123	123	property located in more than one municipality, the proceeds of the tax shall be allocated amongst 5
124	124	the municipalities in proportion that the assessed value in any such municipality bears to the 6
125	125	assessed values of all of the real estate owned by the acquired real estate company in Rhode Island. 7
126	126	(e)(f) For purposes of this section, the term “acquired real estate company” means a real 8
127	127	estate company that has undergone a change in ownership interest if (1) The change does not affect 9
128	128	the continuity of the operations of the company; and (2) The change, whether alone or together 10
129	129	with prior changes has the effect of granting, transferring, assigning, or conveying or vesting, 11
130	130	transferring directly or indirectly, 50% or more of the total ownership in the company within a 12
131	131	period of three (3) years. For purposes of the foregoing subsection (e)(2), a grant, transfer, 13
132	132	assignment, or conveyance or vesting, shall be deemed to have occurred within a period of three 14
133	133	(3) years of another grant(s), transfer(s), assignment(s), or conveyance(s) or vesting(s) if during the 15
134	134	period the granting, transferring, assigning, or conveying party provides the receiving party a 16
135	135	legally binding document granting, transferring, assigning, or conveying or vesting the realty or a 17
136	136	commitment or option enforceable at a future date to execute the grant, transfer, assignment, or 18
137	137	conveyance or vesting. 19
138	138	(f)(g) A real estate company is a corporation, limited liability company, partnership, or 20
139	139	other legal entity that meets any of the following: 21
140	140	(1) Is primarily engaged in the business of holding, selling, or leasing real estate, where 22
141	141	90% or more of the ownership of the real estate is held by 35 or fewer persons and which company 23
142	142	either (i) derives 60% or more of its annual gross receipts from the ownership or disposition of real 24
143	143	estate; or (ii) owns real estate the value of which comprises 90% or more of the value of the entity’s 25
144	144	entire tangible asset holdings exclusive of tangible assets that are fairly transferrable and actively 26
145	145	traded on an established market; or 27
146	146	(2) Ninety percent or more of the ownership interest in such entity is held by 35 or fewer 28
147	147	persons and the entity owns as 90% or more of the fair market value of its assets a direct or indirect 29
148	148	interest in a real estate company. An indirect ownership interest is an interest in an entity 90% or 30
149	149	more of which is held by 35 or fewer persons and the purpose of the entity is the ownership of a 31
150	150	real estate company. 32
151	151	(g)(h) In the case of a grant, assignment, transfer or conveyance or vesting that results in a 33
152	152	real estate company becoming an acquired real estate company, the grantor, assignor, transferor, or 34
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156	156	person making the conveyance or causing the vesting, shall file or cause to be filed with the division 1
157	157	of taxation, at least five (5) days prior to the grant, transfer, assignment, or conveyance or vesting, 2
158	158	notification of the proposed grant, transfer, assignment, or conveyance or vesting, the price, terms 3
159	159	and conditions thereof, and the character and location of all of the real estate assets held by the real 4
160	160	estate company and shall remit the tax imposed and owed pursuant to subsection (a). Any such 5
161	161	grant, transfer, assignment, or conveyance or vesting which results in a real estate company 6
162	162	becoming an acquired real estate company shall be fraudulent and void as against the state unless 7
163	163	the entity notifies the tax administrator in writing of the grant, transfer, assignment, or conveyance 8
164	164	or vesting as herein required in subsection (g) and has paid the tax as required in subsection (a). 9
165	165	Upon the payment of the tax by the transferor, the tax administrator shall issue a certificate of the 10
166	166	payment of the tax which certificate shall be recordable in the land evidence records in each 11
167	167	municipality in which such real estate company owns real estate. Where the real estate company 12
168	168	has assets other than interests in real estate located in Rhode Island, the tax shall be based upon the 13
169	169	assessed value of each parcel of property located in each municipality in the state of Rhode Island. 14
170	170	SECTION 2. This act shall take effect upon passage. 15
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177	177	EXPLANATION
178	178	BY THE LEGISLATIVE COUNCIL
179	179	OF
180	180	A N A C T
181	181	RELATING TO TAXATION -- REAL ESTATE CONVEYAN CE TAX
182	182	***
183	183	This act would allow a municipality to set an additional conveyance tax rate of not more 1
184	184	than ten dollars ($10.00) for each five hundred dollars ($500), or fractional part of that amount, of 2
185	185	the consideration in excess of eight hundred thousand dollars ($800,000). This act would also 3
186	186	require that the excess conveyance taxes collected alternatively be deposited in a restricted account 4
187	187	and distributed within two (2) years, to be used only for affordable housing for individuals or 5
188	188	families at or below eighty percent (80%) of the area median income or transferred to state housing 6
189	189	agencies for use in the community to develop affordable housing. 7
190	190	This act would take effect upon passage. 8
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