Controlling-Interest Real Estate Transfer Taxes: The Potential State Tax Trap in Mergers and Acquisitions
by Michele Randall and Joseph Gurney, Deloitte Tax LLP
As merger and acquisition activity appears once again on the upswing in the U.S., the imposition of state and local real estate transfer taxes on these transactions remains a significant yet potentially overlooked cost. Because corporate mergers and acquisitions generally do not involve direct, deed-effected transfers of real property, there is often a misconception that real estate transfer taxes do not apply. However, depending on the law of the applicable taxing jurisdiction, a merger or other change in control of a legal entity can result in imposition of these taxes in the same way as the outright sale of a company’s real estate assets.
This article by Michele Randall and Joseph Gurney, directors with Deloitte Tax LLP Multistate Practice, provides an overview of the various state taxing regimes that impose controlling-interest transfer taxes, highlights some of the nuances of each state’s rules, provides some common pitfalls associated with such taxes, and describes emerging trends.