Bulletin: NY000211

Section 663 of the New York State Tax Law becomes effective September 1, 2003. Pursuant to the new law, non-resident taxpayers are required to pay estimated personal income tax on the gain, if any, from the sale or transfer of real property located inNew York.

The law shall not apply where the premises being sold or transferred is the principal residence of the transferor; the transferor is a mortgagor in a transfer in lieu of foreclosure or the transferor or transferee is the United States of America, the State of New York, Fannie Mae, Freddie Mac, Ginnie Mae or a private mortgage insurance company.

Most importantly from our perspective is that the law states that no deed shall be recorded by any recording officer absent payment of the estimated tax evidenced by a certification form the Commissioner of Taxation and Finance or a certification by the transferor that the law is inapplicable to the transfer.

Compliance with the new law enabling the recording of deeds on or after September 1 is accomplished as follows.

Where exemption from the law is appropriate, Schedule D has been added to Form TP-584. Part One of Schedule D is the certification of exemption by virtue of New York State residency of the transferor. Part Two of Schedule D is the certification of exemption (by a non-resident) by virtue of principal residence, transfer in lieu of foreclosure or transfer to a government agency or private mortgage insurer.

Where there is no exemption, the procedure is, not surprisingly, somewhat more complicated. In these circumstances, the non-resident taxpayer must complete Form IT-2663 (Application for Certification for Recording of Deed and Nonresident Estimated Income Tax Payment Voucher) and remit the estimated tax in advance of the closing. Upon receipt of payment, the Department of Taxation and Finance will return a certification to the transferor that the tax has been paid. That certification must be attached to the deed in order for the deed to be recorded. Needless to say, this requirement is rife with potential for delay in the closing process where insufficient lead-time has been established for the completion of the payment/certification process. Along those lines, it is suggested that each title report issued by your office contain the following notice:

NOTE: Effective September 1, 2003, Tax Law Section 663 requires that, under certain circumstances, non- residents of New York State pay estimated personal income tax liabilities resulting from the sale or transfer of New York real property as a condition precedent to the recording of the deed. Failure to comply with the requirements of the statute may result in delayed or adjourned closings. Please contact this office if you require further information.

The Department of Taxation and Finance advises that neither the Schedule D of Form TP-584 nor Form IT-2663 need be completed if the interest transferred is not a fee simple interest in real property (i.e. leasehold interests, co-op units) or if the real property is being transferred by anyone or any entity other than an individual, estate or trust

Both Forms TP-584 and IT-2663 and their respective instructions may be obtained at the Department of Taxation and Finance website at http://www.nystax.gov/ . Please note that the revised TP-584 must be used for deeds submitted on or after September 1, 2003 but may be used immediately.