MEMO: New Tax Law Section 1409 – New Requirements for TP-584 and NYC RPT Forms

From Fidelity National  Title Company – 9/20/19

Last Friday, September 13, the governor signed legislation that changes the information that must be included on TP-584 and NYC RPT forms that accompany deeds that are being recorded, wherein a limited liability company (LLC) is the Grantor and/or the Grantee.

The legislation went into effect immediately, creating a new recording requirement for certain deeds.  The Legislation amends Tax Law § 1409 (requires filing TP584) and NYC Admin Code § 11-2105 (requires filing RPT form). The legislation applies to all such deeds that are recorded on or after this coming Monday, September 23.

What the legislation affects: Deeds conveying title to residential real property containing 1- to 4-family dwelling units wherein the Grantor and/or Grantee is an LLC.

What is required:  The TP584 and RPT form for the deed must now be accompanied by a document which lists the names and business addresses of all members, managers, and any other authorized persons of the Grantor and/or Grantee LLC. If any such member, manager, or authorized person of the LLC is a partnership or business entity, the document must also list the names and business addresses of all shareholders, directors, officers, members, managers, and partners of such partnership or business entity. If any of those parties is a business entity, again, it must list the names and business addresses of the interested parties of that partnership or business entity until full disclosure of ultimate ownership by natural persons is achieved.

What form must be used: No form has been officially promulgated yet. Until an official form is promulgated and distributed, we suggest that you have the attached form completed at or prior to closing.

Unanswered questions and potential problems:

(1)  The public has been given little lead time to comply with the statute. The statute directs that the disclosure document must be filed with the tax return, whether the return is filed with the State Tax Department or with the County recording office. There is no word yet if and when recording officers will reject recordings for failure to have the required information attached to the TP-584 or NYC RPT form.

(2)  The current TP-584 has a box to check for Type of Property Conveyed. It does not list a 1- to 4-family residential property as an alternative. It does have a box to check for a 1- to 3-family. Obviously, the disclosure applies if that box is checked. If “Other” is checked and the property is 4-family, the disclosure form must also be submitted.

(3)  The disclosure must continue down the chain of ownership until all natural persons who have an interest are disclosed. For example, if the Grantee is an LLC of which an LLC is a member, of which a corporation is the manager, then all natural persons who are shareholders of that corporation must be listed in the disclosure.

Further Information:

(1)  The text of the amended Statute and Administrative Code is attached. Should any customer have questions, please distribute the same to that customer.

(2)  The law only applies to deeds in which the Grantor and/or Grantee is a limited liability company (LLC). It does not apply if neither the Grantor nor Grantee is a corporation, partnership, or other legal entity. Other business entities are covered ONLY if they are members, managers, or authorized persons for the LLC grantor or LLC Grantee. Example: if Grantor is a corporation, no disclosure is required. If Grantee is an LLC of which Corporation is a Manager, then all shareholders of the corporation must be disclosed.

(3)  The law applies even if the deed is for no consideration. You must still file a TP-584 or NYC RPT even if there is no tax due. Therefore, if the deed conveys a 1- to 4-family residential property by or to an LLC, the disclosure must accompany the transfer tax form.

(4)  The law only applies to residential property containing 1- to 4-family dwelling units. There is no further definition of “residential property” within the new Tax Law Section 1409, nor in the definitions in Tax Law Section 1401. There is no further definition of “residential property” within the new Administrative Code Section 11-2105, nor in the definitions in Administrative Code Section 11-2101.

Sample Disclosure Attachment to RPT

Sample Disclosure Attachment to TP-584