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exemptions require the filing of a statement of value (the exemption affidavit) to obtain the exemption.
The “value” of the property, on which the transfer tax is based, is generally the cash consideration paid in an arms length transaction. There are alternate methods for calculating value, however, when fair market value is not paid or there is no cash consideration. In such instances, value is calculated as the product of the assessed value of the property and a multiplier assigned to the county in which the property is located.
A local transfer tax must also be paid. While most jurisdictions impose a 1% realty transfer tax, there are quite a few exceptions including Philadelphia (3%) and Pittsburgh (3%). Local transfer tax often mirrors the State transfer tax, but not always. Reference must always be made to the local ordinance to ascertain whether it differs from the State statute.
8. What state or local transfer, stamp or similar taxes are levied generally on sellers or buyers upon the transfer of interests in entities which own real estate?
The Pennsylvania Realty Transfer Tax statute generally imposes a transfer tax on “real estate companies” (a defined term based upon the percentage of an entity’s assets and/or income which is comprised of or generated by real estate) when ninety percent (90%) or more of the total ownership interests in the company are transferred within a period of three years. Companies (which include partnerships, corporations and limited liability companies) which become subject to realty transfer taxes on account of the transfer of their ownership interests are called “acquired companies” and are required to record a declaration of acquisition and pay the transfer tax. The amount of transfer tax on an acquired company is not tied to actual consideration paid but, instead, is based on an artificial number which is the product of the assessed value of the company’s real estate and a multiplier assigned to the county in which the real estate is located.
The local transfer taxes generally follow the same format as the State tax and require the transfer of a ninety percent (90%) transfer of interest within a rolling three year period. Specifics differ from municipality to municipality though and local ordinances must be consulted.
How significant is local regulation and taxation of real estate? How significant is the variation of real estate law among political subdivisions of this jurisdiction? Regulation and taxation of real estate does vary at the local level. Most properties are subjected to three types of real estate taxes: (a) school district tax; (b) county tax and
local municipality tax. Most (but not all) school district taxes are based on a fiscal year commencing on July 1st (Philadelphia’s school district tax is based on a January 1st fiscal year). Most county and local taxes are based on a calendar year. Tax bills are generally issued near the beginning of their fiscal years and are paid during the year (rather than in arrears as in some jurisdictions).