2019 Realty transfer tax amendments

DEPARTMENT OF REVENUE

[61 PA. CODE CH. 91]

Realty Transfer Tax Amendments

[35 Pa.B. 6096]

   The Department of Revenue (Department), under authority in section 1107-C of the Tax Reform Code of 1971 (TRC) (72 P. S. § 8107-C), proposes to amend Chapter 91 (relating to Realty Transfer Tax) to read as set forth in Annex A.

Purpose of Proposed Rulemaking

   The amendments to Chapter 91 are made to address numerous legislative changes and to bring the regulatory provisions into conformity with Departmental policy.

Explanation of Regulatory Requirements

   Section 91.101 (relating to definitions) is amended by updating and adding several definitions in accordance with various legislative changes and court decisions. A summary of the amendments is as follows:

   ''Association'' is amended to address a 1994 statutory amendment to 1 Pa.C.S. § 1991 (relating to definitions) and a 1997 statutory amendment to section 1101-C of the TRC (72 P. S. § 8101-C).

   ''Child'' is added to address an issue raised in Steidle v. Commonwealth, 717 A.2d 1084 (Pa. Cmwlth. 1998).

   ''Conservancy'' is added to address a 1989 statutory amendment to section 1102-C.3(18) of the TRC (72 P. S. § 8102-C.3(18)).

   ''Corporation'' is added to address the 1994 statutory amendment to 15 Pa.C.S. § 8925 (relating to taxation of limited liability companies).

   ''Debt'' and ''financing transaction'' are added for use in the regulations.

   ''Living trust'' and ''ordinary trust'' are added to address the 1997 statutory amendment to section 1101-C of the TRC.

   ''Settlor'' and ''testamentary trust'' are added for use in the regulations.

   The Department is proposing numerous amendments to improve the clarity of various sections, including §§ 91.132, 91.135, 91.155, 91.162, 91.166 and 91.202.

   Section 91.113(b) (relating to imposition of tax on declarations of acquisition) is amended to address the family farm partnership language in section 1102-C.5(b.1) of the TRC (72 P. S. § 8102-C.5(b.1)).

   Section 91.115 (relating to publication of common level ratio factors) is added to codify the Department's existing practice of annually publishing applicable common level ratio factors for each fiscal year.

   Section 91.132 (relating to bona fide sale transactions) is subdivided and amended by adding subsection (c) to address the court decision in Allebach v. Commonwealth, 546 Pa. 146, 683 A.2d 625 (1996).

   Section 91.136 (relating to appraisal) is subdivided and amended by adding paragraph (1) to incorporate the court decision in Kennedy Boulevard Associates I, Limited Partnership v. Tax Review Board of Philadelphia, 751 A.2d 719 (Pa. Cmwlth. 2000).

   Additional guidance with regard to confirmatory deeds utilized in business mergers, consolidations and business form changes have been added to § 91.152 (relating to confirmatory deed).

   Language clarifying the taxation regarding conversion of real estate between business entities and their owners is added to § 91.154 (relating to documents involving corporations, partnerships, limited partnerships and other associations).

   Amendments have been made to § 91.155 (relating to timber and crops) to include natural resources, complete timber removal and products of the soil.

   Section 91.156 (relating to trusts) is substantially amended to address the trust provisions in section 1101-C of the TRC and section 1102-C of the TRC (72 P. S. § 8102-C) and the Pennsylvania Supreme Court holdings in Leigh v. Commonwealth, 541 Pa. 187, 661 A.2d 1374 (1995) and Holmes v. Commonwealth, 539 Pa. 477, 653 A.2d 615 (1995).

   Since its adoption in 1988, Table I in § 91.165 (relating to reservations or conveyances of life estates) has remained unchanged. In this proposed rulemaking, the Department is updating the table using factors based on the 2000 Federal census for a single life tenant, computed at 6% interest. In addition, to keep the table current, the Department is proposing in § 91.165(c) to update the table at least once every 5 years by published notice in the Pennsylvania Bulletin.

   New § 91.170 (relating to the rule in Baehr Bros. v. Commonwealth, 493 Pa. 417, 426 A.2d 1086 (1981)) sets forth rules to determine whether a document is excludible or subject to tax. New § 91.171 (relating to transfers by operation of law) describes when a transfer by operation of law is and is not subject to tax.

   Numerous amendments to § 91.193 (relating to excluded transactions) are proposed to bring the section into conformity with statutory changes from 1989-1997 to section 1102-C.3 of the TRC, as well as to clarify areas that have been the subject of taxpayer inquiry and to reflect the United States Bankruptcy Court holding in Baltimore County v. Hechinger Liquidation Trust (In re Hechinger Inv. Co. of Del., Inc.), 335 F.3d 243 (3d Cir. Del. 2003). In the past, the Department would allow a transfer to be exempt from Realty Transfer Tax as long as the parties involved in the transfer showed at the time of the transfer that a plan was agreed upon under Chapter 7 and 13 bankruptcies. However, the Hechinger decision now requires that bankruptcies under Chapter 7 and 13 be confirmed prior to changing the deed to be exempt from Realty Transfer Tax. Subsection (c) is added to promulgate the Department's policy that the list of excluded transactions in subsection (b) does not apply to acquisitions of real estate companies.

   Section 91.195 (relating to State-related universities and public charities) is added to explain the taxability of transfers involving State-related universities and public charities.

   Section 91.211 (relating to family farm corporation) is amended and §§ 91.221--91.223 (relating to partnerships) are added to address statutory changes to sections 1101-C, 1102-C.3 and 1102-C.5(b.1) of the TRC, regarding family farm partnerships.

Affected Parties

   Persons or entities transferring an interest in real property could be affected by the proposed rulemaking.

Fiscal Impact

   The Department has determined that the proposed rulemaking will have no significant fiscal impact on the Commonwealth. A relatively small revenue loss could result from the updating of the table concerning the reservations or conveyances of life estates in § 91.165. Conversely, a positive revenue gain may result from the change regarding the treatment of timber in § 91.155. However, there also might be some transactions that would be excluded that were not previously. Finally, the impact of the United States Bankruptcy Court holding in Baltimore County v. Hechinger Liquidation Trust (In re Hechinger Inv. Co. of Del., Inc.) results in a more strict standard than the Department was currently using. However, there is no reason to believe that any substantial revenue impact would result from this amendment.

Paperwork

   The proposed rulemaking will require no additional paperwork for the public or the Commonwealth.

Effectiveness/Sunset Date

   The regulations will become effective upon final-form publication in the Pennsylvania Bulletin. The regulations are scheduled for review within 5 years of final-form publication. No sunset date has been assigned.

Contact Person

   Interested persons are invited to submit in writing comments, suggestions or objections regarding the proposed rulemaking to Mary R. Sprunk, Office of Chief Counsel, Department of Revenue, Dept. 281061, Harrisburg, PA 17128-1061 within 30 days after the date of the publication of this proposed rulemaking in the Pennsylvania Bulletin.

Regulatory Review

   Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on October 21, 2005, the Department submitted a copy of this proposed rulemaking and a copy of a Regulatory Analysis Form to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the House Committee on Finance and the Senate Committee on Finance. A copy of this material is available to the public upon request.

   Under section 5(g) of the Regulatory Review Act, IRRC may convey any comments, recommendations or objections to the proposed rulemaking within 30 days of the close of the public comment period. The comments, recommendations or objections must specify the regulatory review criteria which have not been met. The Regulatory Review Act specifies detailed procedures for review, prior to final publication of the rulemaking, by the Department, the General Assembly and the Governor of comments, recommendations or objections raised.

GREGORY C. FAJT,   
Secretary

   Fiscal Note: 15-429. No fiscal impact; (8) recommends adoption.

Annex A

TITLE 61.  REVENUE

PART I.  DEPARTMENT OF REVENUE

Subpart B.  GENERAL FUND REVENUES

ARTICLE IV.  COUNTY COLLECTIONS

CHAPTER 91.  REALTY TRANSFER TAX.

Subchapter E.  GENERAL

§ 91.101. Definitions.

   The following words and terms, when used in this chapter, have the following meanings:

   Association--

   (i)  An unincorporated enterprise owned or conducted by two or more persons, including, but not limited to, a partnership, limited partnership, limited liability partnership, restricted professional company that is deemed to be a limited partnership under 15 Pa.C.S. § 8997 (relating to taxation of restricted professional companies) or joint venture.

   (ii)  The term does not include an ordinary or living trust, limited liability company, decedent's estate, tenancy in common, tenancy by the entireties or joint tenancy.

   Child--A son or daughter by either natural birth or adoption. The term does not include:

   (i)  A stepson or stepdaughter.

   (ii)  A son or daughter of an individual whose parental rights have been terminated.

   Conservancy--An entity which possesses a tax exempt status under section 501(c)(3) of the Internal Revenue Code (26 U.S.C.A. § 501(c)(3)) and which has as its primary purpose preservation of land for historic, recreational, scenic, agricultural or open space opportunities.

   Corporation--A corporation, joint-stock association, limited liability company, business trust or banking institution which is organized under the laws of the Commonwealth, the United States or any other state, territory or foreign country or dependency.

   Debt--A legally enforceable obligation arising out of a genuine debtor-creditor relationship to pay a fixed or determinable sum of money at a future date.

*      *      *      *      *

   Financing transaction--An arrangement in which the following apply:

*      *      *      *      *

   (iii)  The debtor retains possession and beneficial ownership of the [realty] real estate transferred before default.

   (iv)  The transferee obtains title or ownership to the real estate only so far as is necessary to render the instrument of transfer effective as security for the debt.

   (v)  The transferee or the transferee's successor is obligated to return the transferred real estate at no or only nominal consideration to the debtor upon payment of the debt before default.

   Living trust--An ordinary trust:

   (i)  Which, throughout the settlor's lifetime, is revocable by the settler without the consent of an adverse party.

   (ii)  Which vests no present interest in any of the trust assets in any person other than the settlor or trustee until the settlor dies.

   (iii)  All the corpus and income of which can be reached or materially affected by the settlor without revocation of the trust or the consent of an adverse party.

   (iv)  From which no transfer of property or money may be made by the trustee, at any time prior to the death of the settlor, to any person in the capacity of a beneficiary other than the settlor.

   (v)  Which the trustee or, if the settlor was the trustee, the successor trustee is required under the governing instrument to distribute the corpus and retained income upon the death of the settlor.

   Ordinary trust--

   (i)  A private trust which takes effect during the lifetime of the settlor of the trust and for which the trustees of the trust take title to property primarily for the purpose of protecting, managing or conserving trust assets, under the ordinary rules applied in the orphan's court division of the court of common pleas or in other chancery or probate courts, until distribution to the beneficiaries of the trust.

   (ii)  The term does not include:

   (A)  Business trusts organized under 15 Pa.C.S. (relating to Associations Code), Massachusetts business trusts or associations using the forms and methods of an ordinary trust which have either of the following features:

   (I)  The treatment of beneficiaries as associates.

   (II)  Beneficial interests in the trust estate or profits that are evidenced by transferable shares, similar to corporate shares, or are otherwise treated as personal property.

   (B)  Minors' estates.

   (C)  Incompetents' estates.

   (D)  A resulting or constructive trust created by operation of law.

   (E)  A testamentary trust.

   Settlor--One who creates and furnishes the consideration for the creation of a trust by the transfer of property to the trust.

   Testamentary trust--A private trust that is established by will or takes effect only at or after the death of the settlor.

Subchapter F. IMPOSITION OF TAX

§ 91.113. Imposition of tax on declarations of acquisition.

*      *      *      *      *

   (b)  A family farm corporation or family farm partnership is subject to pay a State tax at the rate of 1% of the value of the family farm [realty] real estate held by the family farm corporation or the family farm partnership when it becomes an acquired company under §§ 91.212 and 91.222 (relating to acquired family farm corporations; and acquired family farm partnership). The tax shall be paid within 30 days after the family farm corporation or the family farm partnership becomes acquired.

§ 91.115. Publication of common level ratio factors.

   The Department will publish the applicable common level ratio factors for each fiscal year beginning July 1 and ending June 30 and during the fiscal year, any changes thereto, in the Pennsylvania Bulletin.

Subchapter G. VALUATION

§ 91.132. Bona fide sale transactions.

   (a)  In a bona fide sale of [realty] real estate, the value of the [realty] real estate is the total agreed consideration for the sale which is paid or to be paid.

   (b)  This value includes liens existing before the transfer and not removed thereby--whether or not the underlying indebtedness is assumed--or a commensurate part of the liens, if they also encumber other [realty] real estate.

   (c)  This value does not include the value of consideration paid by a buyer's assignee, or a subsequent assignee thereof, for the right to have the seller convey the real estate to the assignee or subsequent assignee unless the seller is a party to the assignment and receives part or all of the consideration paid for the assignment. If the seller is a party to the assignment and receives part or all of the consideration paid for the assignment, the value shall include the value of the consideration that the seller receives.

*      *      *      *      *

§ 91.135. Judicial sales and other transactions.

   The value of [realty] real estate is its computed value where the [realty] real estate is transferred through any of the following:

   (1)  By execution upon a judgment or upon foreclosure of a mortgage or under a judicial sale or tax sale or a transfer to a transferee or assignee of a bid or other rights of a purchaser under a judicial or tax sale.

*      *      *      *      *

§ 91.136. Appraisal.

   The value of [realty] real estate shall be determined by appraisal only when [the realty] one of the following occurs:

   (1)  The real estate was transferred in lieu of foreclosure.

   (2)  The real estate is not the subject of a bona fide sale, cannot be valued under § 91.133 (relating to leases) and is not separately assessed for local real estate tax purposes.

Subchapter H. SPECIAL SITUATIONS

§ 91.152. Confirmatory deed.

   (a)  A deed made without consideration for the sole purpose of confirming a prior recorded document, including a deed that only asserts an existing survivorship interest, is not taxable. This [exclusion] subsection only applies if the following apply:

*      *      *      *      *

   (b)  A deed made without consideration for the sole purpose of confirming real estate ownership following a merger, consolidation or change in the form or identity of a corporation or an association. This subsection only applies if all of the following occur:

   (1)  Record title to the subject real estate is in the entity as opposed to its owners.

   (2)  Without the making of any document:

   (i)  The resultant entity is vested with all the property, real, personal and mixed, and franchises of, and the debts due, the original association or, in the case of a merger or consolidation, each party thereto.

   (ii)  The resultant entity is subject to all the obligations of the original association or, in the case of a merger or consolidation, the parties thereto.

   (iii)  Liens upon the property of the original association or, in the case of a merger or consolidation, any party thereto, are not impaired by the change in form.

   (iv)  Any claim existing or action or proceeding pending by or against the original association or, in the case of a merger or consolidation, any party thereto, may be prosecuted to judgment against the resultant entity.

   (3)  The original entity or, in the case of a merger or consolidation, any party thereto, is not required to wind up its affairs or pay its liabilities and distribute its assets either because there is no break in the continuity of its existence or because its separate existence ceases with the reformation.

   (4)  Considering all the ownership interests in the original entity or, in the case of a merger or consolidation, any party thereto, there is no change in proportionate ownership interests resulting from the change in form.

   (5)  Title to real estate would not revert or be in any way impaired by reason of the merger, consolidation or change.

Example 1.  A and B are equal partners in a general partnership known as AB, general partnership. One of the assets of the partnership is real estate. The real estate is titled in the names of A and B, individually, as co-tenants. A and B want to convert their general partnership to a limited partnership known as AB, LP. A and B set up an LLC to be the 1% general partner in the limited partnership. A and B will have a 99% limited partnership interest in the limited partnership (that is, A and B each have a 49.5% limited partnership interest). In order to effectuate the conversion, A and B merge the partnership into the limited partnership. The limited partnership is the surviving entity of the merger. The general partnership ceases to exist as a result of the conversion. After the conversion, A and B prepare a deed for the partnership real estate to confirm the partnership's change of form to the limited partnership. The deed is taxable because legal title to the real estate was in the name of A and B individually. Legal title was never transferred to the general partnership.

Example 2.  Assume the same facts as Example 1 except that general partnership AB purchased the real estate with partnership funds and titled the real estate in the name of the partnership. A and B have merely converted their form of organization from that of a general partnership to a limited partnership. It continues its same business and has all the same assets and liabilities as the general partnership. Further, ownership has not changed. A and B were equal partners in the general partnership and are equal general partners (through their equal ownership of the LLC) and limited partners. Because the general partnership held the real estate of record and there has only been a change in form of the business, the deed is not taxable.

Example 3.  Assume the same facts as Example 2, except that A becomes the general partner and B becomes the limited partner. Each holds a 50% interest in the partnership's income. Although A and B each have an equal income interest, A now has sole control over the partnership as the general partner and B has only an income interest as a limited partner. In the general partnership, A and B had equal management and income interests. Because there is a change in ownership interests, the deed is taxable.

   (c)  A deed made without consideration for the sole purpose of confirming a change in place of organization.

   (d)  Notwithstanding the provisions of § 91.154 (relating to documents involving corporations, partnerships, limited partnerships and other associations), when determining if there is a change in proportionate ownership interests, corporations and associations will not be considered to be entities separate from their members, partners, stockholders or shareholders; and when determining if there is a change in proportionate ownership interests resulting from the change to a limited partnership, the interests of the limited partners and general partners will both be considered.

   (e)  A deed made without consideration for the sole purpose of confirming that a prior recorded document was void ab initio and revesting record title in the grantor is not taxable.

§ 91.154. Documents involving corporations, partnerships, limited partnerships and other associations.

   (a)  Corporations, joint-stock associations, business trusts, banking institutions, partnerships, limited partnerships, joint ventures and associations are entities separate from their stockholders, shareholders, partners and members. Transfers between these entities and their stockholders, shareholders, partners and members, including transfers between a subsidiary and a parent corporation and transfers in consideration of the issuance or cancellation of stock, are fully taxable, unless the transaction is excluded under § 91.193(b)(12) or (13)(relating to excluded transactions) or subsection (b) or (c).

   (b)  There is no tax upon the conversion of real estate from the separate property of a stockholder, shareholder, partner or member to the property of a corporation, joint-stock association, business trust, banking institution, partnership, limited partnership, joint venture or association, provided the conversion is neither effectuated by deed nor memorialized by a writing satisfying the requirements of the Statute of Frauds. However, any writing confirming such a conversion will not be excludible under either § 91.151 or § 91.152 (relating to correctional deeds; and confirmatory deeds).

   (c)  There is no tax upon the conversion of real estate from the property of a corporation, joint-stock association, business trust, banking institution, partnership, limited partnership, joint venture or association to the separate property of a stockholder, shareholder, partner or member, provided the conversion is neither effectuated by deed nor memorialized by a writing satisfying the requirements of the Statute of Frauds. However, any writing confirming such a conversion will not be excludible under either § 91.151 or § 91.152.

   (d)  Examples are as follows:

Example 1.  A transfers real estate to A, B and C trading as XYZ Partnership or A, B and C, co-partners. The deed from A is fully taxable. Partnerships are separate entities from their partners.

Example 2.  Assume the same facts as Example 1, except that A merely converts the real estate to the partnership's use by oral agreement. There is no deed or other writing that satisfies the requirements of the Statute of Frauds. Because record title remains with A, no tax is due.

Example 3.  D, E and F are partners in both TUV and QRS partnerships. D, E and F, trading as TUV Partnership, transfer real estate to D, E and F trading as QRS Partnership. The deed is fully taxable because TUV Partnership and QRS Partnership are separate entities even though each has the same partners.

§ 91.155. Timber [and], crops and natural resources.

*      *      *      *      *

   (b)  Standing timber [and crops are] is considered nontaxable personal property if the instrument provides for severance and complete removal [within an immediate ascertainable date] at once or as soon as it can be reasonably done. A transfer of standing timber is taxable if the transferee has discretion as to the time of removal, the instrument is indefinite as to the time for removal or the instrument provides more time for the removal than is reasonably necessary, considering the nature and extent of the land and the number of feet of merchantable timber to be removed.

   (c)  Products of the soil are considered nontaxable personal property if one of the following apply:

   (1)  The products are planted annually and gathered during a single, annual season.

   (2)  The products are propagated for the purpose of being transplanted or grafted.

   (3)  The products require annual pruning, spraying or cultivation.

   (4)  The products are the annual products of shrubs, trees or annual or perennial plants.

§ 91.156. Trusts.

   (a)  Transfers to ordinary trusts. A transfer to an ordinary trust is fully taxable, [except if] unless the transfer of the same property would be wholly exempt if the transfer were made directly from the grantor to all of the possible beneficiaries who have a remainder interest or who are otherwise entitled to receive the property or the proceeds from the sale of the property as a beneficiary under the terms of the trust, whether or not the beneficiaries are contingent or specifically named.

   Example: G transfers property to a trust without consideration for the use of B, G's spouse, for life. Under the trust, the remainder interest is vested in G's church. As a direct transfer to the religious organization would be taxable, the transfer to the trust is fully taxable.

   (b)  Contingent beneficiaries. A trust provision which identifies a contingent beneficiary by reference to the heirs of the trust settlor as determined by the laws of intestate succession will by itself neither qualify nor disqualify a transfer from the exemption provided by subsection (a).

   (c)  Transfers to living trusts. A transfer for no or nominal actual consideration to a trustee of a living trust from the settlor of the living trust is exempt.

   (d)  Transfers from ordinary trusts. A transfer from [a] an ordinary trust is fully taxable except for a transfer for no or nominal actual consideration from the trustee to [a beneficiary specified in the original recorded trust agreement under which the property was initially conveyed into the trust] the person who has the vested remainder interest or who is otherwise entitled to receive the property or the proceeds from the sale of the property as a beneficiary under the terms of the trust.

   (e)  Inter vivos transfers from living trusts.

   (1)  A transfer for no or nominal consideration from the trustee of a living trust during the settlor's lifetime to a grantee other than the settlor will be treated as if the transfer were made directly from the settlor to the grantee.

   (2)  A transfer from the trustee of a living trust to its settlor is exempt if the settlor conveyed the property to the trust.

   (f)  Transfers from testamentary trusts and living trusts after the death of the settlor. A transfer of real estate from a testamentary trust or from a living trust after the death of its settlor is exempt from tax only if the transfer is made for no or nominal actual consideration and to the person who, under the governing instrument of the trust, has the vested remainder interest or who is otherwise entitled to receive the property or the proceeds from the sale of the property as a beneficiary under the terms of the trust.

   (g)  Requirement for exemption. An exemption will not be granted under this section unless the recorder of deeds is presented with a copy of the trust agreement.

§ 91.162. Turnkey projects.

   A transfer of [realty] real estate to a developer or contractor who is required by contract to reconvey the [realty] real estate to the grantor after making contracted-for improvements to the [realty] real estate is not taxable if no beneficial interest in the real estate is transferred to the developer or contractor. The reconveyance to the grantor is also not taxable.

§ 91.165. Reservations or conveyances of life estates.

   (a)  [Table I is used in computing the tax base of a life estate or remainder interest in realty. If the transferor has conveyed only a life estate in realty, while reserving the remainder to himself, the transaction is taxable. The tax base is computed by multiplying the value of the realty as determined under § 91.135 (relating to judicial sales and other transactions) by the life estate factor, based on the age of the life tenant, taken from Table I.

Example 1: L conveys a life estate to T in realty that is valued under § 91.135 at $100,000. T is 50 years old. Life estate factor is: .84743; Value = $100,000 × .84743 = $84,743.

   (b)  If the transferor of realty has reserved to himself a life estate, while conveying the remainder, the transaction is taxable. The tax base shall be computed by multiplying the value of the realty as determined under § 91.135 by the remainder factor, based on the age of the life tenant, taken from Table I.

Example 2: L conveys to T realty that is valued under § 91.135 at $100,000 but reserves a life estate for himself. L is 50 years old. Remainder factor is .15257; Value = $100,000 × .15257 = $15,257.

	TABLE I
1	2	3
Age	Life Estate	Remainder
0	.97188	.02812
1	.98988	.01012
2	.99017	.00983
3	.99008	.00992
4	.98981	.01019
5	.98938	.01062
6	.98884	.01116
7	.98822	.01178
8	.98748	.01252
9	.98663	.01337
10	.98565	.01435
11	.98453	.01547
12	.98329	.01671
13	.98198	.01802
14	.98066	.01934
15	.97937	.02063
16	.97815	.02185
17	.97700	.02300
18	.97590	.02410
19	.97480	.02520
20	.97365	.02635
21	.97245	.02755
22	.97120	.02880
23	.96986	.03014
24	.96841	.03159
25	.96678	.03322
26	.96495	.03505
27	.96290	.03710
28	.96062	.03938
29	.95813	.04187
30	.95543	.04457
31	.95254	.04746
32	.94942	.05058
33	.94608	.05392
34	.94250	.05750
35	.93868	.06132
36	.93460	.06540
37	.93026	.06974
38	.92567	.07433
39	.92083	.07917
40	.91571	.08429
41	.91030	.08970
42	.90457	.09543
43	.89855	.10145
44	.89221	.10779
45	.88558	.11442
46	.87863	.12137
47	.87137	.12863
48	.86374	.13626
49	.85578	.14422
50	.84743	.15257
51	.83874	.16126
52	.82969	.17031
53	.82028	.17972
54	.81054	.18946
55	.80046	.19954
56	.79006	.20994
57	.77931	.22069
58	.76822	.23178
59	.75675	.24325
60	.74491	.25509
61	.73267	.26733
62	.72002	.27998
63	.70696	.29304
64	.69352	.30648
65	.67970	.32030
66	.66551	.33449
67	.65098	.34902
68	.63610	.36390
69	.62086	.37914
70	.60522	.39478
71	.58914	.41086
72	.57261	.42739
73	.55571	.44429
74	.53862	.46138
75	.52149	.47851
76	.50441	.49559
77	.48742	.51258
78	.47049	.52951
79	.45357	.54643
80	.43659	.56341
81	.41967	.58033
82	.40295	.59705
83	.38642	.61358
84	.36998	.63002
85	.35359	.64641
86	.33764	.66236
87	.32262	.67738
88	.30859	.69141
89	.29526	.70474
90	.28221	.71779
91	.26955	.73045
92	.25771	.74229
93	.24692	.75308
94	.23728	.76272
95	.22887	.77113
96	.22181	.77819
97	.21550	.78450
98	.21000	.79000
99	.20486	.79514
100	.19975	.80025]

The value of a life estate or remainder interest in real estate will be the consideration paid or to be paid for the life estate or remainder interest.

   (b)  When no or nominal consideration or consideration less than actual monetary worth is paid for a life estate or remainder interest in real estate, the factors in Table I shall be multiplied by the real estate's computed value to calculate the value of a life estate or remainder interest.

Example 1: In an arm's length transaction for actual monetary worth, L conveys a life estate interest (or remainder interest, as the case may be) in real estate to T for $50,000. The taxable value of the life estate is the consideration paid, that is $50,000.

Example 2: L conveys a life estate interest in real estate to T for less than actual monetary worth. L reserves the remainder interest for himself. The computed value of the entire real estate is $100,000. T is 50 years old. The life estate factor for T's life is .84743. Therefore, the taxable value of T's life estate interest is the computed value of the entire real estate multiplied by T's life estate factor ($100,000 × .84743), or $84,743.

Example 3: L conveys a remainder interest in real estate to T for less than actual monetary worth. L retains a life estate interest in the real estate. The computed value of the entire real estate is $100,000. L is 50 years old. The life estate factor for L's life is .84743. The remainder factor for T's remainder interest is .15257. Therefore, the taxable value of T's remainder interest is the computed value of the entire real estate multiplied T's remainder factor ($100,000 × .15257), or $15,257.

	Table I*
Age	Life Estate	Remainder
	Factor	Factor
0	0.95309	0.04691
1	0.995997	0.04003
2	0.95868	0.04132
3	0.95709	0.04291
4	0.95531	0.04469
5	0.95338	0.04662
6	0.95131	0.04869
7	0.94911	0.05089
8	0.94679	0.05321
9	0.94433	0.05567
10	0.94171	0.05829
11	0.93896	0.06104
12	0.93606	0.06394
13	0.93307	0.06693
14	0.93003	0.06997
15	0.92697	0.07303
16	0.92392	0.07608
17	0.92084	0.07916
18	0.91773	0.08227
19	0.91452	0.08548
20	0.91119	0.08881
21	0.90772	0.09228
22	0.90412	0.09588
23	0.90036	0.09964
24	0.89643	0.10357
25	0.89232	0.10768
26	0.88801	0.11199
27	0.88348	0.11652
28	0.87876	0.12124
29	0.87383	0.12617
30	0.86871	0.13129
31	0.86339	0.13661
32	0.85786	0.14214
33	0.85210	0.14790
34	0.84612	0.15388
35	0.83989	0.16011
36	0.83342	0.16658
37	0.82669	0.17331
38	0.81969	0.18031
39	0.81241	0.18759
40	0.80484	0.19516
41	0.79695	0.20305
42	0.78875	0.21125
43	0.78023	0.21977
44	0.77140	0.22860
45	0.76228	0.23772
46	0.75286	0.24714
47	0.74318	0.25682
48	0.73322	0.26678
49	0.72298	0.27702
50	0.71244	0.28756
51	0.70162	0.29838
52	0.69054	0.30946
53	0.67922	0.32078
54	0.66766	0.33234
55	0.65587	0.34413
56	0.64383	0.35617
57	0.63156	0.36844
58	0.61911	0.38089
59	0.60650	0.39350
60	0.59376	0.40624
61	0.58086	0.41914
62	0.56777	0.43223
63	0.55450	0.44550
64	0.54105	0.45895
65	0.52745	0.47255
66	0.51366	0.48634
67	0.49966	0.50034
68	0.48548	0.51452
69	0.47115	0.52885
70	0.45675	0.54325
71	0.44233	0.55767
72	0.42794	0.57206
73	0.41360	0.58640
74	0.39927	0.60073
75	0.38490	0.61510
76	0.37046	0.62954
77	0.35596	0.64404
78	0.34142	0.65858
79	0.32692	0.67308
80	0.31260	0.68740
81	0.29853	0.70147
82	0.28478	0.71522
83	0.27136	0.72864
84	0.25817	0.74183
85	0.24513	0.75487
86	0.23236	0.76764
87	0.22002	0.77998
88	0.20812	0.79188
89	0.19665	0.80335
90	0.18563	0.81437
91	0.17521	0.82479
92	0.16559	0.83441
93	0.15674	0.84326
94	0.14851	0.85149
95	0.14072	0.85928
96	0.13341	0.86659
97	0.12665	0.87335
98	0.12032	0.87968
99	0.11415	0.88585
100	0.10817	0.89183
101	0.10228	0.89772
102	0.09650	0.90350
103	0.09078	0.90922
104	0.08468	0.91532
105	0.07873	0.92127
106	0.07111	0.92889
107	0.06192	0.93808
108	0.04776	0.95224
109	0.02381	0.97619

*Factors in Table I are based on the 2000 Federal census for a single life tenant, computed at 5% interest.

   (c)  The Department will update Table I at least once every 5 years by published notice in the Pennsylvania Bulletin.

§ 91.166. Life maintenance.

   [Conveyance] A transfer of [realty in] real estate as consideration [of] for life maintenance is a taxable transaction. [Tax shall] The tax base will be computed based on the value of the [interest in realty conveyed] real estate as determined under § 91.135 (relating to judicial sales and other transactions).

§ 91.170. The rule in Baehr Bros. v. Commonwealth, 493 Pa. 417, 426 A.2d 1086 (1981).

   (a)  A document will be excludible from tax if each of the following requirements is satisfied:

   (1)  The document stands in the place of two or more other writings.

   (2)  Each of the writings for which the document stands would be excludible from tax under this article and effective notwithstanding the insolvency, bankruptcy or other legal disability of the signatories thereto.

   (3)  Title to the affected real estate would not revert or be in any way impaired or encumbered by reason of the recordation of the writings described in paragraphs (1) and (2).

   (b)  Separate transfers of a greater estate and a lesser estate in real property will be taxed as a single transfer of both estates if the transactions are entered into in contemplation of a merger thereof.

   (c)  Separate transfers of an interest in timber, coal, oil, gas, or other appurtenance to real estate and the real estate to which the interest is appurtenant will be taxed as a single transfer of both interests if the transactions are entered into in contemplation of their coinciding and meeting in the same person.

§ 91.171. Transfers by operation of law.

   Except as provided in § 91.193(b)(1)(i), (7), (12) and (13) (relating to excluded transactions), any writing that satisfies the requirements of the Statute of Frauds and confirms or evidences a transfer that is accomplished by operation of law is taxable on the same basis as a document that effectuates a conveyance or transfer or vests title to real estate.

Subchapter I. EXCLUDED PARTIES AND TRANSACTIONS

§ 91.193. Excluded transactions.

*      *      *      *      *

   (b)  Additional exclusions. Other transactions which are excluded from tax include:

   (1)  A transfer to the United States or the Commonwealth or to an instrumentality, agency or governmental body of either if the transfer is:

   (i)  In lieu or confirmation of a taking by eminent domain. To qualify for the exclusion, the deed shall be made under a prior statute, ordinance, resolution, plan or order for the condemnation, appropriation or acquisition of the real estate transferred by condemnation or [by condemnation or purchase] in lieu thereof. The statement of value accompanying a document that effectuates such a transfer shall contain a specific reference to the ordinance, resolution or other official action by which the grantee was authorized to file a declaration of taking of the transferred real estate.

*      *      *      *      *

   (2)  A document which the Commonwealth is prohibited from taxing under the Constitution or statutes of the United States, including:

   (i)  A transfer under a bankruptcy plan confirmed under section 1129 of the act of November 6, 1978 (Pub. L. 95-598) (92 Stat. 2549), known as the Federal Bankruptcy Act (Bankruptcy Act) (11 U.S.C. § 1129) and exempt under section 1146(c) of [that act] the Bankruptcy Act (11 U.S.C. § 1146(c)). To claim this exclusion, a copy of the order [directing the transfer] and confirmed plan highlighting the specific provision in the plan authorizing the transaction and proof that the deed to be recorded was executed by the parties to the transaction subsequent to the plan confirmation shall accompany the statement of value. Transfers made prior to plan confirmation do not qualify for tax exemption. A transfer is made under a plan confirmed under section 1129 only when the transfer is authorized by the specific terms of a previously confirmed Chapter 11 plan.

   (ii)  [A transfer under section 1153(a)(1) of the Northeast Rail Service Act of 1981 (45 U.S.C.A. § 1106(a)(1)).] A transfer under a bankruptcy plan confirmed under section 1225 of the Bankruptcy Act (11 U.S.C. § 1225) and exempt under section 1231(c) of the Bankruptcy Act (11 U.S.C. § 1231(c)). To claim this exclusion, a copy of the order and confirmed plan highlighting the specific provision in the plan authorizing the transaction and proof that the deed to be recorded was executed by the parties to the transaction subsequent to the plan confirmation shall accompany the statement of value. Transfers made prior to plan confirmation do not qualify for tax exemption. A transfer is made under a plan confirmed under section 1225 of the Bankruptcy Act only when the transfer is authorized by the specific terms of previously confirmed Chapter 12 plan.

   (iii)  Transfers made under the authority of sections 363 or 365 of the Bankruptcy Act (11 U.S.C. §§ 363 or 365) and occurring before the confirmation of a plan will not qualify for exemption under this clause.

*      *      *      *      *

   (6)  Transfers between certain family members:

*      *      *      *      *

   (iii)  The estate of a deceased family member is not a family member for purposes of claiming the familial exemption under this paragraph.

*      *      *      *      *

   (8)  A transfer for no or nominal consideration to a trustee of an ordinary trust, where the transfer of the same property would be wholly excluded if the transfer were made directly by the grantor to all the possible beneficiaries who have remainder interests or are entitled to receive the property or the proceeds from the sale of the property as beneficiaries under the terms of the trust, whether or not the beneficiaries are contingent or specifically named. See § 91.156 (relating to trusts).

   (9)  A transfer for no or nominal actual consideration from a trustee [to a beneficiary to an ordinary trust] of an ordinary trust to a person who has the vested remainder interest or who is otherwise entitled to receive the property or the proceeds from the sale of the property as a beneficiary under the terms of the trust. See § 91.156.

*      *      *      *      *

   (18)  [A transfer to a conservancy which possesses a tax exempt status under section 501(c)(3) of the Internal Revenue Code (26 U.S.C.A. § 501(c)(3)) and which has as its primary purpose preservation of land for historic, recreational, scenic, agricultural or open space opportunities.] A transfer to a conservancy, a transfer from a conservancy to the United States, the Commonwealth or to any of their instrumentalities, agencies or political subdivisions, or a transfer from a conservancy if the real estate is encumbered by a perpetual agricultural conservation easement as defined by the Agricultural Area Security Law (3 P. S. §§ 901--915) and the conservancy has owned the real estate for at least 2 years immediately prior to the transfer.

*      *      *      *      *

   (26)  The rescission, cancellation or abandonment of an existing lease or contract for a deed for no or nominal consideration.

*      *      *      *      *

   (32)  Transfers for no or nominal actual consideration to the trustee of a living trust from the settlor of the living trust.

   (33)  Transfers for no or nominal actual consideration from the trustee of a living trust during the settlor's lifetime to the settlor of property conveyed to the trust by the settlor.

   (34)  Transfers for no or nominal actual consideration from the trustee of a testamentary trust or living trust after the death of the settlor to a person who has the vested remainder interest or who is otherwise entitled to receive the property or the proceeds from the sale of the property as a beneficiary under the terms of the trust.

   (c)  Documents that convey or evidence the transfer of real estate between the parties involved in the transactions enumerated in subsection (b) are excluded from tax. Subsection (b) has no application to acquisitions of real estate companies as provided in § 91.202.

§ 91.195. State-related universities and public charities.

   (a)  For purposes of §§ 91.192 and 91.193(a) (relating to excluded parties; and excluded transactions), institutions that are part of the State System of Higher Education constitute excluded parties. Transfers to those institutions by gift or dedication are excluded transactions.

   (b)  Other State-related universities, such as Lincoln University, the Pennsylvania State University and its affiliate, the Pennsylvania College of Technology, Temple University and its subsidiaries, Temple University Hospital, Inc., and Temple University Children's Medical Center, and the University of Pittsburgh do not constitute excluded parties.

   (c)  Transfers of property to an institution that is part of the State System of Higher Education other than gift or dedication and all transfers by those institutions are taxable upon the same basis as other transfers to or from excluded parties.

   (d)  Transfers by gift, dedication or otherwise to or from Lincoln University, the Pennsylvania State University or its affiliate, the Pennsylvania College of Technology, Temple University or its subsidiaries, Temple University Hospital, Inc., and Temple University Children's Hospital, Inc., the University of Pittsburgh or public charities are taxable upon the same basis as transfers between private parties.

Subchapter J. REAL ESTATE COMPANY

§ 91.202. Acquired real estate company.

*      *      *      *      *

   (c)  A transfer of ownership interest between members of the same family is not considered a change in ownership interest.

   Example: C and D each own [50 shares or 50%] all of the stock of a corporation in equal shares. C and D transfer their stock to E, C's son, over a 3-year period. As C and E are members of the same family, the transfer between C and E is not a change in ownership interest. Thus, the stock transfers have the effect of transferring only 50% of the total ownership interest in the corporation and the corporation is not acquired.

*      *      *      *      *

Subchapter K. FAMILY FARM CORPORATION AND FAMILY FARM PARTNERSHIP

CORPORATIONS

§ 91.211. Family farm corporation.

*      *      *      *      *

   (b)  To qualify as an asset devoted to the business of agriculture for the purpose of subsection (a), the assets shall be:

   (1)  Owned and either used directly by the corporation claiming the exemption or leased to, and used directly by, a member of the same family that owns at least 75% of each class of stock of the corporation claiming the exemption.

   (2)  Principally devoted by the corporation to the business of agriculture or used by the member for agricultural purposes.

   (3)  Property of the sort commonly used in the business of agriculture principally for agricultural purposes.

   (4)  [Set] Used by the member principally for agricultural purposes or set apart and directly used by the corporation primarily for commercial:

*      *      *      *      *

   (e)  For the purposes of this section, the business of agriculture includes a leasing of property to a member of the family having the ownership of a least 75% of each class of its stock if the property is used by the member directly and principally for an agricultural purpose.

PARTNERSHIP

§ 91.221. Family farm partnership.

   (a)  An entity constitutes a family farm partnership only for so long as the following requirements are satisfied:

   (1)  At least 75% of the shares of the profits and surplus of the partnership are continuously owned by members of the same family.

   (2)  In the aggregate, the book value of the partnership's assets that are primarily devoted to the business of agriculture continuously comprise at least 75% of the book value of all of the partnership's assets.

   (3)  The entity is a general or common law partnership.

   (b)  Whether an asset is devoted to the business of agriculture shall be determined using the same rules as apply to the assets of family farm corporations. See § 91.211(b) (relating to family farm corporation).

§ 91.222. Acquired family farm partnership.

   A family farm partnership becomes an acquired family farm when one of the following occur:

   (1)  Because of the acquisition or disposition of a partnership asset (including a transfer to a family member), the book value of the partnership's assets that are primarily devoted to the business of agriculture becomes less than 75% of the book value of all of the partnership's assets.

   (2)  Because of the assignment of an interest in profits or surplus or the death, retirement, bankruptcy, expulsion or addition of a partner, less than 75% of the shares of the profits and surplus of the entity is continuously owned by members of the same family.

   (3)  The partnership is voluntarily or involuntarily dissolved or otherwise ceases to operate in the form of a general partnership or common law partnership.

§ 91.223. Declaration of acquisition.

   A declaration of acquisition shall be filed in accordance with § 91.302 (relating to declaration of acquisition) with respect to family farm real estate held on the date the family farm partnership became acquired.

[Pa.B. Doc. No. 05-2019. Filed for public inspection November 4, 2005, 9:00 a.m.]