New Transfer Tax Requirements for LLC’s
NY State and NYC transfer tax laws were recently amended to require that transfer tax returns filed by limited liability companies (“LLC’s”) for the sale or purchase of residential real property include the names, addresses and taxpayer ID numbers of all of the individual members of both the LLC itself and of its non-natural members. This change in the law applies to LLCs whether they are selling or buying.
The new transfer tax forms now must be accompanied by a separate document listing the name, business address and taxpayer identification number of all members. In addition, if any member of the LLC is itself an LLC or other business entity, you must list the names and business addresses of all shareholders, directors, officers, members, managers, or partners of that entity. The filer must keep drilling down on membership until all natural persons with interests in the seller, purchaser or any of their members have been identified and the total membership interest adds up to 100%. If the transfer tax forms are received without the accompanying documentation establishing 100% of the beneficial ownership by natural persons, they will be rejected.
LLCs quite often use “authorized persons” to sign at the closings. Authorized persons are defined as “a person, whether or not a member, who is authorized by the operating agreement, or otherwise, to act on behalf of an LLC or foreign LLC”. The new law requires that the authorized person’s name, business address and taxpayer identification number also be included with the documentation. For example, if an attorney has signing authority at closing, their personal information would need to be included in the supporting documentation in order for the transfer tax forms to be accepted.
The new law complicates preparing the transfer tax forms for closings, especially if the members of an LLC are owned by multiple LLCs or foreign business entities. Therefore, attorneys should make sure that they can identify the full chain of ownership before their client signs a contract. Clients also need to be informed ahead of signing that they no longer can shield their identities from the transfer tax forms as was done in the past.
Although the State has not promulgated an official form, some title companies have prepared acceptable affidavits. Click here for one such form.