Pillsbury Winthrop Shaw Pittman

Transfer tax bill defining ‘realty sold’ to include proposition 13 transfers returns

By Matthew F Burke and Craig A Becker

Assembly Bill 561 (AB 561), which stalled in the California Legislature last year, is back for reconsideration, with amendments. The latest version broadens the definition of ‘realty sold’ to include Proposition 13 changes in ownership caused by transfers of interests in legal entities. This extension of the transfer tax to transfers of interests in legal entities, rather than just direct transfers of realty, would significantly expand the reach of the California transfer tax.

In 2013, Phil Ting, former San Francisco assessor and newly elected state assemblyman, introduced AB 561, which would amend certain provisions of the California Revenue and Taxation Code relating to documentary transfer taxes (‘transfer taxes’) on real estate. The bill is back for consideration in 2014.

Currently, the California Transfer Tax Act (R&TC §§ 11911 to 11930) (CTTA) requires that counties and general law (non-charter) cities conform their local transfer tax ordinances to the standard provisions in the CTTA, which allow for transfer taxes to be imposed on deeds, instruments or other writings that transfer any ‘lands, tenements or other realty sold’. The tax is based on the value of property, at a rate of 0.11 per cent for the county tax and up to one half that rate for a non-charter city tax, with a credit against the county portion for any city tax imposed…

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