What do one of the most popular cars ever made, the creator of the banner of the U.S.A. and the late, but finally enacted New York State Budget have in common. Nothing, other than that all three are notable for things that didn’t happen.
Urban legend has it that the Chevy Nova (or “no va” – which literally translates to “no go”) didn’t sell well in Spanish speaking countries because who would buy a car whose name has it failing the intended use before its very first drive. Similarly, while history certainly indicates Betsy Ross did in fact make American Flags, it is highly doubtful she made the first. Now while the New York State Budget did follow through on some of its intended threats (A Berdon Evisor expanding on the budget will be released shortly) the biggest bully of them all, the proposed changes to the New York State Real Estate Transfer Tax, apparently surrendered before the fight even really started.
While we have a broad industry base at Berdon, many of our clients are very active in the New York real estate market. The phone calls started even before the Governor released his budget proposals in January. “Wayne, is the transfer tax going to really apply even to minority interest transfers of an entity that owns real property in New York State?” It was difficult to say. There were many other controversial non-tax issues in this budget and a long fight was ahead on all of them.
At first, I didn’t think it was such a big deal. The State Transfer Tax is a meager 0.4% of the consideration paid for the real property. Now instead of only applying to interest transfers of 50% or more, the proposal would have applied the tax to virtually any property transfer in the State. Well, the proposal was quite a big deal for those with New York City property. The City Tax, similar in many respects to the State, imposes the tax at a rate as high as 2.625%. And while the Budget didn’t yet impact the City Tax, we all know as goes the State, so goes the City.
Nothing in Albany ever goes completely away, but let’s say this proposal is in remission for now. We need to watch it closely to keep it in check.
If you have questions about the budget and its implications, contact me at [email protected] or your Berdon advisor.
Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.