GT Alert

New York Enacts Estimated Tax Payment Requirement for Sales of Real Estate by Non-Residents

August 2003
By David Bunning and Ivy J. Lapides, Greenberg Traurig, New York Office

  View or download the PDF version of this Alert here.

Overview

"New York personal income tax law has been amended to add a provision requiring nonresidents to pay estimated personal income tax on the gain, if any, from sales or transfers of New York real property."

The New York personal income tax law has been amended to add Tax Law Section 663, which requires nonresidents to pay estimated personal income tax on the gain, if any, from sales or transfers of real property located in New York State (the "Tax"). The New York State Department of Taxation and Finance (the "Department") has issued a memorandum explaining the requirements, TSB-M-03(2)R and TSB-M-03(4)I. In general, the Tax is imposed on transfers of real property by a nonresident individual, estate, or trust (collectively, "Nonresident Transferor") occurring on or after September 1, 2003. The Tax does not apply to transferors or sellers that are corporations, partnerships, or limited liability companies. Furthermore, the Tax does not apply unless the real property is a fee simple interest.

Exemptions

A Nonresident Transferor is exempt from the Tax if:

1. the real property being transferred or sold is the transferor’s principal residence, as defined in Section 121 of the Internal Revenue Code of 1986, as amended;
2. the seller or transferor is a mortgagor (borrower) conveying the mortgaged property to a mortgagee (lender) in foreclosure or in a transfer in lieu of foreclosure with no additional consideration; or
3. the transferor or transferee is an agency or authority of the United States of America, agency or authority of New York State, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Government National Mortgage Association, or a private mortgage insurance company.

Form IT-2663

As of September 1, 2003, unless the transfer of real property located in New York State is exempt from the Tax (see above), a Nonresident Transferor must file with the Department Form IT-2663 and pay the estimated tax due, if any. The amount of the estimated tax is determined by multiplying the gain by the highest applicable rate of the New York State personal income tax in effect for the taxable year (7.7% for 2003 through 2005).

Form IT-2663 must be filed regardless of whether a gain or loss is computed. Upon receipt of Form IT-2663 and the tax due, if any, the Department will return to the Nonresident Transferor a stamped certification indicating that the filing requirements have been satisfied. This certification must be submitted to the recording officer at the time the deed is recorded.

No deed may be recorded by any recording officer unless each Nonresident Transferor has received a certification from the Commissioner of Taxation and Finance that the estimated tax, if any, has been paid on such transfer, or has signed a certification on Form TP-584.

A Nonresident Transferor may take credit on his personal income tax return for the estimated tax paid. If the estimated tax paid exceeds the Nonresident Transferor’s actual tax liability for the year, a refund will be issued. Estimated tax payments made with Form IT-2663 cannot be refunded prior to the filing of a personal income tax return.

Form TP-584 (Revised)

If a Nonresident Transferor is subject to one of the exemptions (see above), the Nonresident Transferor must complete Schedule D on Form TP-584. This form must be presented to the recording officer at the time the deed is recorded.

New York State residents must also complete Schedule D on Form TP-584 to certify that they are not subject to the Tax.

Conclusion

In general, a Nonresident Transferor that transfers a fee simple interest in real property located in New York State must file Form IT-2663 and pay the estimated tax due, if any. As an exception to this general rule, if one of the exemptions to the Tax applies, a Nonresident Transferor must complete and file Schedule D of TP-584 instead of Form IT-2663. Furthermore, residents of New York State must complete Schedule D of TP-584 in order to certify that they are exempt from the Tax.

© 2003 Greenberg Traurig

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