Requires certain joint tax returns pertaining to residential real estate cash purchases by limited liability companies to be accompanied by a document which identifies the source or sources of funds used for the purchase, including the type of funding used, the bank account information of any funds used in the purchase and the amount used by each source of funds.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A3448
SPONSOR: Zebrowski TITLE OF BILL:
An act to amend the tax law, in relation to requiring certain joint tax
returns pertaining to residential real estate cash purchases by limited
liability companies to disclose the source of funds used for the
purchase
PURPOSE OR GENERAL IDEA OF BILL:
This bill will require LLCs that are purchasing certain residential real
estate in cash to disclose information about the source of funds used in
the purchase as part of tax returns to the Department of Taxation and
Finance.
SUMMARY OF PROVISIONS:
Section one of the bill amends section 1409 of the tax law, as amended
by section 3 of part 0 of chapter 59 of the laws of 2021, to require
that LLCs purchasing residential real estate, with up to four dwelling
units, including condos and coops, and the purchase is not secured by a
mortgage, to provide the source of funds including the type of funding
used for the purchase, the bank account information of any funds used in
the purchase and the amount used by each source of funds. In addition,
any source of funds that originates from a foreign national would
require identifying the name and address of such person and any corpo-
rate entities they own.
Section two of the bill relates to the effective date.
JUSTIFICATION:
This new disclosure builds upon a law I sponsored (Chapter 297 of 2019)
which requires LLCs purchasing residential real estate to disclose the
natural persons who own such LLCs in an effort to increase transparency
of these transactions. All cash transactions through LLCs are able to
not only shield their identity but evade anti money laundering laws and
regulations. These shadow transactions allow money to flow towards the
purchase of residential real estate through anonymous means. This bill
would pull back the curtain on these transactions and require informa-
tion on the source of funds used to be reported to the Department of
Taxation and Finance.
This legislation is modeled off similar federal requirements for LLC all
cash purchases that is currently operating as a pilot program by the
Financial Crimes Enforcement Network (FinCEN) in 12 US cities including
New York City. The pilot program known, as Geographic Targeting Orders
(GTOs), was recently renewed and applies to residential transactions,
over $300,000. This legislation will apply to all residential trans-
actions not secured by a mortgage, regardless of the purchase price,
throughout the State. Given the recent scrutiny of Russian oligarch
purchases of real estate in New York and other US States, this gives the
State new tools to crack down on money laundering schemes.
PRIOR LEGISLATIVE HISTORY:
A.9838 of 2021-22.
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None.
EFFECTIVE DATE:
This act shall take effect immediately and shall apply to returns filled
on and after January 1, 2023.
STATE OF NEW YORK
________________________________________________________________________
3448
2023-2024 Regular Sessions
IN ASSEMBLY
February 3, 2023
___________
Introduced by M. of A. ZEBROWSKI, THIELE, EPSTEIN -- read once and
referred to the Committee on Ways and Means
AN ACT to amend the tax law, in relation to requiring certain joint tax
returns pertaining to residential real estate cash purchases by limit-
ed liability companies to disclose the source of funds used for the
purchase
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Paragraph 3 of subdivision (a) of section 1409 of the tax
2 law, as amended by section 3 of part O of chapter 59 of the laws of
3 2021, is amended to read as follows:
4 (3) In addition to the requirements in paragraph two of this subdivi-
5 sion, when the grantor or grantee of a deed for a building used as resi-
6 dential real property containing up to four family dwelling units,
7 including condominiums and cooperatives, is a limited liability company
8 and the purchase is not secured by a mortgage, the joint return shall
9 not be accepted for filing unless it is accompanied by a document which
10 identifies the source or sources of funds used for the purchase, includ-
11 ing the type of funding used, the bank account information of any funds
12 used in the purchase and the amount used by each source of funds. If
13 any source of funds for such purchase originated from a foreign national
14 as defined in section 30121 of title 52 of the United States code, the
15 document shall identify such foreign national including their name and
16 address and any corporate entity owned by such foreign national.
17 (4) The return shall be filed with the recording officer before the
18 instrument effecting the conveyance may be recorded. However, if the tax
19 is paid to the commissioner pursuant to section fourteen hundred ten of
20 this article, the return shall be filed with such commissioner at the
21 time the tax is paid. In that instance, a receipt evidencing the filing
22 of the return and the payment of tax shall be filed with the recording
23 officer before the instrument effecting the conveyance may be recorded.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD04703-01-3
A. 3448 2
1 The recording officer shall handle such receipt in the same manner as a
2 return filed with the recording officer.
3 § 2. This act shall take effect immediately and shall apply to returns
4 filed on and after January 1, 2024.
