Bulletin: PA2008002

Dear Associates:

We have had numerous calls regarding the Transfer Tax Regulations on Assignments vis á vis Relocation Companies as the equitable owner/seller.

Last December, the Department of Revenue issued amendments to its regulations, 61 Pa. Code Chapter 91. The amendments did not change the regulationsbut made it clear that "The PA Realty Transfer Tax is imposed at the rate of 1 percent of the actual consideration paid, or to be paid, for the transfer of an interest in real estate." §91.170 was added to exemplify the relocation deed situation:

§91.170(b) Combining transactions. When a single document represents, in substance, two or more transfers of title to real estate, the document will be viewed as a series of separate transfers and documents.(1)The tax due on the single document will be the same as the sum of tax that would be due had each transfer been effectuated by a document. The tax liability for the single document will be allocated among the parties as if each transfer had been effectuated by a document.

The Department has informed us that they consider a bona fide sale to have taken place between a seller and a Relocation Company when:1) the Relocation Company has paid the seller in full for the transfer; 2) the seller has signed a deed; and 3) the seller is no longer responsible for the property, e.g. the seller has stopped the homeowner's hazard insurance on the property. When the Relocation Company sells the property to a third party for good and valuable consideration, there is another taxable transfer notwithstanding the fact that the deed from the original seller is the only deed to be recorded. In essence, the Department does not consider this situation to be an assignment of a sales contract but a double transfer situation effectuated by a single document and taxable under §91.170(b).

The State of Pennsylvania is actively auditing recorded deeds and demanding the full payment of transfer taxes on deeds from Relocation Companies. Even though the transfer tax lien would be a post-policy eventthat is not covered by the title policy, you, as the title professional, will be held responsible as the one who "should have known" of the tax and, therefore, should have collected the tax.