Bar News - February 15, 2017
Tax Law: Amended Last Year: A NH Real Estate Transfer Tax Primer
By: David Beliveau
The New Hampshire real estate transfer tax (NH RSA 78-B) – a tax on the transfer of New Hampshire real estate – is $0.75 per $100 of the full price of or consideration for the real estate for the purchaser and the seller (meaning half of the total tax is paid by the purchaser and half by the seller).
The tax, collected by the NH Department of Revenue Administration (DRA), requires filing DRA forms PA-34, Inventory of Property Transfer; CD-57-P, Declaration of Consideration Real Estate Purchaser (Grantee); and CD-57-S, Declaration of Consideration Real Estate Seller (Grantor). The law changed last year in the case of real estate transfers to revocable trusts and LLCs.
During a person’s life, he or she may establish a trust and transfer assets to it. As a result, such assets will avoid probate when the person dies. Real estate may be transferred to the trust.
Prior to last year, a transfer of New Hampshire real estate to a revocable trust was subject to a minimum $40 real estate transfer tax. In such case, the applicable deed language was something like: “This is a non-contractual conveyance for which no consideration is paid. Therefore, the minimum $40 State of New Hampshire real estate transfer tax liability is payable.” All three of the above-referenced DRA forms were required to be prepared and filed.
Now, such a transfer is no longer subject to the tax (See NH RSA 78-B:2 (XXII)). So, the applicable language to be included in a respective deed should be: “This is a transfer pursuant to New Hampshire Revised Statutes 78-B:2(XXII). Therefore, no State of New Hampshire real estate transfer tax liability is payable.” Only the PA-34 DRA form is required to be prepared and filed. On the form, “Step 5 – Transactional Detail” which asks, “Do you consider the selling price to be fair market value?” should be checked “No” and RSA 78-B:2 (XXII) should be noted.
Changes for LLCs
An owner of New Hampshire investment real estate may establish an LLC and then transfer the property to it, with the goal of asset protection in the event of a lawsuit.
Prior to the law change, a transfer of New Hampshire real estate to an LLC was subject to the New Hampshire real estate transfer tax. Where the LLC was established first and the real estate was subsequently transferred to it, the owner of the LLC would have to pay the real estate transfer tax twice – once upon initial purchase of the property, and again upon the transfer of the property to the LLC. All three of the above-referenced DRA forms were required to be prepared and filed.
However, two previous (2009) New Hampshire Superior Court cases held otherwise. One is ZBH Realty LLC, et al. v. C. Philip Blastsos. The other is First Berkshire Business Trust, et al. v. G. Philip Blatsos, et al. In those cases, the court held the New Hampshire real estate tax did not apply to transfers of real estate to the LLCs involved. (See Roy Tilsley’s article in NH Bar News, May 14, 2010).
Under the amended law, the transfer of New Hampshire real estate is treated consistently with the holdings of the above-referenced cases (See NH RSA 78-B:2 (XXII)). So, a transfer is no longer subject to the tax. The applicable language to be included in a respective deed should be the same as that used in the case of a transfer to a revocable trust. Only the PA-34 DRA form is required to be prepared and filed.
With the increasing popularity of using trusts for probate avoidance and LLCs for asset protection, the change last year to the New Hampshire real estate transfer tax law should be a welcome one. Particularly for LLCs, it will not be as costly for a resident to fund such entities with real estate.
David M. Beliveau
David M. Beliveau CPA is the founder of Beliveau Law Group, with offices in Florida, Massachusetts, and New Hampshire. He focuses his practice on elder law, estate planning, probate, small business and tax and is a member of the bars of Florida, Massachusetts, and New Hampshire.