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Noonan’s Notes Blog is written by a team of Hodgson Russ tax attorneys led by the blog’s namesake, Tim Noonan. Noonan’s Notes Blog regularly provides analysis of and commentary on developments in the world of New York and multistate tax law. Noonan's Notes Blog is a winner of CreditDonkey's Best Tax Blogs Award 2017.

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Revised Property Transfer Tax Return Form Requests Additional Information About Hidden Buyers of New York City Real Estate

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In February, the New York Times published an 8,000-word investigation into wealthy foreigners buying New York City real estate and taking advantage of U.S. laws that allow them to set up shell companies in order to obscure their true identities. The article, entitled “Towers of Secrecy,” points to Russian mobsters, corrupt Colombian politicians, and polluting Indian mining magnates. This type of publicity doesn’t mean that every person who uses an LLC to purchase or sell a New York City apartment is an apparent Bond villain. But the Times piece does underscore a recent enhanced focus on LLCs’ role in New York City real estate, and anyone considering using an LLC to transfer property in the city should take special note of a recent change to the city’s recording procedures.  

New York City imposes a real property transfer tax on most property transfers that take place in the city. And even when no tax is due (e.g., when the consideration is $25,000 or less), an information return is still required. With the exception of properties located in Staten Island, taxpayers file these required tax forms, namely Form NYC-RPT, Real Property Transfer Tax Return, using the city’s Automated City Register Information System, also known as ACRIS.

Both Form NYC-RPT and ACRIS have historically required taxpayers to list information about the “grantor” and the “grantee” in a given transaction, including name, address, and Social Security number. But when it came to LLCs, only single member LLCs needed to previously disclose any information, and only the identity of the sole member was required. Effective May 18, 2015, this changed. Form NYC-RPT (and the corresponding ACRIS reporting system) now include both “single member LLCs” and “multiple member LLCs” as types of grantors and grantees required to submit information.

For any grantor or grantee that is a partnership or multiple member LLC, the revised form requires the name and Social Security number (SSN) or employee identification number (EIN) for each general partner or member. Taxpayers must provide the requested information for each general partner or member in a supporting document with a separate page for each partnership or LLC. And if an SSN or EIN is not provided, an affidavit must be attached to attest for the reasons the information is missing.

If you’re wondering about the policy underlying these changes, it’s our best guess that these enhanced forms could be used to assist with residency audits and other New York State/City tax matters. In fact, the Privacy Act Notification (which lets taxpayers know why their SSNs are required) found on Form NYC-RPT provides that “Social Security numbers…are requested for tax administration purposes and will be used to facilitate the processing of tax returns and to establish and maintain a uniform system for identifying taxpayers who are or may be subject to taxes administered and collected by the Department of Finance. Such numbers may also be disclosed as part of information contained in the taxpayer’s return to another department, person, agency or entity as may be required by law, or if the taxpayer gives written authorization to the Department of Finance.” So if Auric Goldfinger is considering hiding behind a shell corporation to protect his assets (presumably gold) from the consequences of a New York City residency audit, he may need to abandon his evil plan before reporting his next property transfer.

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