Court Upholds Realty Transfer Fee Exemption

Certain earlier articles in Real Estate New Jersey correctly decried the sudden change in position of the Division of Taxation in treatment of corporate transfers between commonly owned entities. The Division asserted a right to tax the transfer of real estate between commonly owned entities even if no mortgage was outstanding on the property. The articles suggested that a legislative change was appropriate, particularly given a seemingly contradictory stance in application of the new controlling interest transfer statute and its regulations codified at N.J.A.C. 18:16A-1 et seq.. A recent court decision has resolved the issue favorably to taxpayers.

On Oct. 30, 2009, the New Jersey Tax Court, in the matter of Mack-Cali Realty, LP, et al. vs. Clerk of Bergen County, et al., Tax Court of New Jersey Docket No. 000037-2008, granted summary judgment in favor of the plaintiffs seeking an exemption from payment of the Realty Transfer Fee. The plaintiffs were represented by Mark K. Follender, a partner with Scarinci Hollenbeck.

Contrary to the position urged by the Division of Taxation, the court held that the state could not impose a blanket exclusion of corporate transfers from the statutorily-permitted exemption for transfers involving less than $100. The result of the case avoided the payment of a deed recording fee of over $190,000.