2012 New York Consolidated Laws
TAX - Tax
Article 31 - (1400 - 1421) 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.
    (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   fourteen,   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.