Real Estate Conveyance Tax

Real Estate Conveyance Tax

A tax is imposed on each deed, instrument, or writing by which interests in real estate are conveyed to a purchaser when the consideration paid exceeds $100. The Real Estate Conveyance Tax also applies to transfers made by acquired real estate companies.

Real Estate Conveyance Frequently Asked Questions

The tax must be paid by the seller, grantor, assignor, transferor or person making the conveyance or vesting, unless there is an agreement with the purchaser, or person receiving the conveyance, to the contrary.

The tax is two dollars and thirty cents ($2.30) for each $500 (or fraction thereof), which is paid in consideration, including any liens or encumbrances remaining at the time of sale, for the conveyance of the property or the interest in an acquired real estate company.

For mobile or manufactured homes, tax is one dollar and forty cents ($1.40) per $500 (or fractional part thereof) paid for the mobile or manufactured home, including any liens or encumbrances remaining at the time of sale. This does not include modular homes outside of a mobile and/or manufactured home park. 

Beginning 01/01/2022:

There is an additional tax of two dollars and thirty cents ($2.30) for each $500 (or fraction thereof), for the amount of the consideration paid, including any liens or encumbrances remaining at the time of sale, greater than $800,000.

 

The tax is paid at the time of recording the deed, or other conveyance document, with the city or town where the property is located. Traditionally, the tax is paid by closing attorneys who hold the tax monies in escrow and remit to the city or town at the time of recording.  Payment of the tax is shown by the recorder affixing a stamp to the original instrument.  The city or town collecting the tax files a Real Estate Tax Return (CVYT-1) with the Division to remit the tax to be allocated in accordance with the statute. The CVYT-1 form is found on the on the Sales & Excise Forms page under Real Estate Conveyance.

Yes.  Any deed, instrument, or writing in which:

Also, no transfer tax or fee can be imposed by a land trust or municipality upon the acquisition of real estate by Rhode Island or any of its political subdivisions.

Acquired Real Estate Tax

A conveyance is the sale, grant, assignment, transfer or vesting in of any lands, tenements, or other realty to any person or persons, including a purchaser or purchasers, or the sale, grant, assignment, transfer or vesting in by any person or persons which has the effect of making any real estate company an acquired real estate company. The Real Estate Conveyance Tax is a tax imposed pursuant to R.I. Gen. Laws §44-25-1, et seq.

Acquired Real Estate Tax Frequently Asked Questions

The Real Estate Conveyance Tax is imposed on each deed, instrument, or writing effectuating a conveyance to any person or which has the effect of making a real estate company an acquired real estate company, when the consideration paid is greater than $100.

The grantor, assignor, transferor or person making the conveyance must pay the tax unless there is an agreement with the grantee, assignee, transferee or person receiving the conveyance to the contrary.

To determine if the Acquired Real Estate Tax is applicable, you must determine if the definition of Real Estate Company is met, and also if the definition of Acquired Real Estate Company is met.

A real estate company is a legal entity, including, but not limited to, a corporation, limited liability company, or partnership, where 90% or more of the ownership of the company is held by 35 or fewer persons, and that is either

 (1) engaged primarily in the business of holding, selling or leasing real estate and either
     (a) the company derives 60% or more of its annual gross receipts from the ownership or disposition of real estate or 
     (b) the company owns real estate that comprises 90% or more of the company’s entire tangible asset holdings exclusive of tangible assets that are fairly transferrable and actively traded on an established market

- or -

(2) the company owns a direct or indirect interest in a real estate company that comprises 90% or more of the fair market value of the company’s assets.
An indirect ownership interest is an interest in an entity 90% or more of which is held by 35 or fewer persons and the purpose of the entity is the ownership of a real estate company.

An acquired real estate company is a real estate company that has undergone a change in ownership interest where the change does not affect the continuity of the operations of the company and the change in any way has the effect of conveying, either directly or indirectly, 50% or more of the total ownership in the company within a period of 3 years.  Such a conveyance is within the 3-year period if during that period there is a legally binding document during that period that either provides for a conveyance or a commitment or option to convey at a future date.

The tax is $2.30 for each $500, or fractional part thereof, which is paid in consideration for the conveyance of the property or the interest in an acquired real estate company.

Consideration includes the amount listed in the deed, instrument, or writing as the purchase price paid and the value of any lien or encumbrance remaining at the time of the conveyance.  In the case of an acquired real estate company, consideration includes a percentage of the value of any lien or encumbrance remaining at the time of the conveyance equal to the percentage interest in the acquired real estate company being conveyed.  For example, regardless of the type of conveyance, consideration includes the pay off of any lien, encumbrance or mortgage at the time of the conveyance. 

The acquired real estate company must file and remit tax due directly with the Division’s Excise Tax section by filing the Acquired Real Estate Company Conveyance Tax Return Form (CVYT-2) found on the Sales & Excise Forms page under Real Estate Conveyance.

The tax must be paid either at the time of making, executing, delivering, or accepting the deed, instrument, or writing effectuating the conveyance or at the time such deed, instrument, or writing is presented for recording. 

A grantor, assignor, transferor, or person making the conveyance that results in a real estate company becoming an acquired real estate company must file notice of the price, terms, and conditions of the conveyance, along with the character and location of all of the real estate assets held by the real estate company, with the Division of Taxation 5 days prior to the conveyance and must remit the tax imposed as set forth above.  Failure to comply with the notice requirements results in the conveyance being fraudulent and void as against the State of Rhode Island.

Yes.  The exemptions to the Real Estate Conveyance Tax are set forth in R.I. Gen. Laws §44-25-2.  In  part, the tax does not apply to:

  1. Any instrument or writing given to secure a debt (e.g. a Mortgage)
  2. Any deed, instrument, or writing in which the grantor is the United States, Rhode Island, or its political subdivisions (e.g. Rhode Island Commerce Corporation)

Also exempt is the qualified sale of a mobile or manufactured home community to a resident-owned organization, defined in R.I. Gen. Laws §31-44-1, and no transfer tax or fee can be imposed by a land trust or municipality upon the acquisition of real estate by Rhode Island or any of its political subdivisions.

Yes.   A DIL is a loss mitigation option in which a mortgagor deeds the mortgaged property to the mortgagee, or the mortgagee’s subsidiary, in full satisfaction of the mortgage debt and in order to avoid foreclosure.  The DIL is a conveyance and the consideration for the conveyance is the forgiveness of the indebtedness secured by the mortgage in addition to any other value of assets given.  If the value of the consideration, measured by the amount forgiven on the mortgage debt, exceeds $100, then the Real Estate Conveyance Tax is due on the amount forgiven.

Yes.  A short sale is a sale of real estate evidenced by a deed conveying the real estate to a purchaser for consideration.  If the value of the consideration paid to purchase the real estate exceeds $100, then the Real Estate Conveyance Tax is due on the amount paid to purchase the property.

Yes.  A foreclosure sale results in the conveyance of real estate to a third party, either the foreclosing entity or its subsidiary or a third-party purchaser, for consideration in the form of a successful bid on the real estate. If the value of the consideration paid pursuant to the successful bid on the real estate exceeds $100, then the Real Estate Conveyance Tax is due on the amount paid pursuant to the successful bid.  Consideration includes the forgiveness of any indebtedness secured by the mortgage in addition to any other value of assets given.

When the real estate being conveyed is owned by a nonresident, the grantee, assignee, transferee or person receiving the conveyance must deduct and withhold 6% of the total payment to nonresident individuals, estates, partnerships or trusts and 9% of the total payment to nonresident corporations and this amount constitutes a lien upon the real estate until remitted.  The total payment is comprised of the net proceeds of the sale actually paid to the nonresident conveying the real estate including the fair market value of any property to be transferred to the nonresident. 

Yes.  Pursuant to R.I. Gen. Laws §§ 44-11-29 and 44-11-29.1, and 280-RICR-20-25-4, filing a Request for a Letter of Good Standing is the required method for complying with the obligation of an entity to notify the Division of Taxation regarding a conveyance in which the sale of assets results in a real estate company becoming an acquired real estate company.  Letters of Good Standing will issue within 10 business days of receipt of a complete, i.e. with all necessary information and documents, Request for Letter of Good Standing. [Needs review for accuracy and if there were other concerns expressed at the meeting]

If a trust is revocable during the lifetime of the settlor, then a release of the estate tax lien is required.  If a trust is irrevocable and was created within 3 years prior to the death of the settlor, then a release of the estate tax lien is required; however, if the irrevocable trust was created more than 3 years prior to the death of the settlor, then no release of the estate tax lien is required. 

Resources

Statute: R.I. Gen. Laws § 44-25

Contact Us

Excise Tax Section
Email:  Tax.Excise@tax.ri.gov
Phone:  401.574.8955
Fax:  401.574.8914