California proposes that a legal entity ‘change in control’ would trigger real estate transfer tax

March 2013


Under proposed Assembly Bill 561, real property owned by an entity would be subject to a real estate transfer tax to the extent that a transfer of legal interests in the entity rises to the level of a ‘change in control’ of the entity, similar to the standard in place for real property taxation reassessment. The bill would also remove certain transfer tax exceptions relating to property held by partnerships. [A.B. 561, introduced 2/20/13]

This law change could impact companies that make any transfer of interests in legal entities that hold significant California real property. Business activities such as acquiring or disposing of legal entities, restructuring legal entity ownership, or other transactions modifying legal entity interests could have the unintended consequence of triggering real property transfer taxes. In addition, pending legislative changes to property taxes relating to 'change in ownership' rules creates a level of additional uncertainty in connection with the proposed real estate transfer tax changes in this bill.

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Peter Michalowski
National SALT Practice Leader
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