Nashua Business Planning Client Real Estate Transfer Tax Question

Nashua business planning client owning several rental properties has concerns regarding being caught in New Hampshire’s real estate transfer tax (RETT) net.

NH-real-estate-transfer-tax-modern apartment building with trees blue skyCan property be transferred from a joint tenancy with rights of survivorship to a newly created LLC for added liability protection and administrative ease? Can real estate held as “tenants in common” be transferred to a similar LLC?

The answers to these questions is beginning to become more clear. By way of background, New Hampshire imposes a 1.5% tax on every transfer of real estate, unless an exemption applies. Many clients balk at the idea of paying thousands of dollars in transfer tax on the transfer to the LLC (an effective rate of $15.00 per thousand unless exempt) so they either go without the protection of an LLC or other asset protecting entity.

On August 4, 2016 the NH Department of Revenue Administration provided guidance in the form of a published Technical Information Release (TIR 2016-005) for House Bill 1656 which was signed by Governor Hassan into law during the past New Hampshire Legislative Session. The newly enacted law, modified the law and created an exemption for certain “transfers” that are “coincidental” to a change in the transferor’s form of organization, provided that:

  1. No consideration is exchanged;
  2. The assets and liabilities of the transferor immediately preceding the transfer and the assets and liabilities of the transferee (i.e. the LLC) immediately following the transfer are the same; and
  3. The owner(s) of the transferor and transferee and their respective ownership percentages remain the same.

[Italics Added]

Under the newly enacted laws which apply to transfers occurring on or after June 21, 2016, together with the aforementioned TIR and several favorable New Hampshire Supreme Court cases the RETT rules will help practitioners and their clients determine with a greater degree of certainty whether the transfer tax applies. The short answer to this particular client is that provided the transfer is properly structured to comply with the aforementioned TIR and newly enacted laws there would be no RETT.

Author: Attorney John S. Polgrean

This blog is intended for informational use only. The information contained herein should not be construed as offering legal advice or a legal opinion. At Welts, White & Fontaine, P.C. our lawyers have experience with representing families, closely held businesses and trusts holding real estate. We can help you develop strategies for a successful navigation of New Hampshire’s business planning and real estate tax landscape. Please contact Attorney John Polgrean if you have questions or concerns about your business and estate planning endeavors involving commercial or residential real estate.

Welts, White & Fontaine, P.C.

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