New York Controlling Interest Transfer Tax: Rates and Exemptions

New York’s controlling interest transfer tax applies when someone acquires 50% or more of an entity that owns New York real estate, and it charges the state’s real estate transfer tax as if the property itself had been sold. The base rate is $2 per $500 of consideration (0.4%), calculated on the fair market value of the entity’s New York real property scaled to the ownership percentage transferred. Additional state surcharges and New York City’s own Real Property Transfer Tax can push the combined bite above 3% on high-value city deals.

What Triggers the Tax

The threshold is set by Tax Law Section 1401(b). For a corporation, a controlling interest is 50% or more of the total combined voting power of all classes of stock, or 50% or more of the capital, profits, or beneficial interest in the voting stock. For a partnership, LLC, association, trust, or other entity, it is 50% or more of the capital, profits, or beneficial interest.¹

One buyer doesn’t have to cross the line alone. A group acting together can trigger the tax if the combined acquisition meets the threshold, which is why coordinated purchases by multiple investors or family members need care.

The Three-Year Aggregation Rule

New York does not treat each purchase in isolation. Under 20 CRR-NY 575.6, transfers of interests in the same entity within a three-year window are added together to determine whether 50% has been crossed.² Buy 30% in year one and 25% in year three, and the state treats you as having acquired 55%.

The regulation also allows aggregation of transfers more than three years apart if they were timed as part of a plan to avoid the tax.² The Department looks at substance and timing, not just paperwork.

Which Entities and Properties Are Covered

Any entity holding a direct or indirect interest in New York real property is within scope: C-corporations, S-corporations, LLCs, general and limited partnerships. A Delaware entity is still subject to the tax if it owns New York real estate. The law looks through organizational layers to the underlying property.

“Real property” is defined broadly to cover every legal or equitable interest in land, buildings, and structures in New York.¹ Long-term leaseholds can also count, but only if the term (with renewals) exceeds 49 years, the tenant is making or may make substantial capital improvements, and the lease covers 90% or more of the rentable space.³ All three conditions must be met, so most ordinary leases are outside the tax.

How the Taxable Amount Is Calculated

This is where a controlling interest transfer differs from a plain deed transfer. Consideration equals the fair market value of the entity’s New York real property, scaled to the percentage of ownership transferred.⁴ Acquire 60% of an LLC that owns a $10 million building, and consideration starts at $6 million.

Tax Law Section 1402 allows a deduction from that figure for a proportional share of loans secured by mortgages on the real property, plus a reasonable portion of any loans secured by the ownership interests themselves.⁵ Continuing the example: if that $10 million building carries a $7 million mortgage, the 60% buyer’s proportional debt share is $4.2 million, dropping taxable consideration to $1.8 million.

Where the entity holds options or contracts to purchase real property rather than title, consideration is based on the fair market value of the option or contract, not the underlying property’s full value, and the same proportional allocation applies.⁴

Rates You’ll Actually Pay

The state base rate is $2 for every $500 of consideration, or 0.4%. A 1% “mansion tax” applies to residential property where consideration is $1 million or more.⁶

For property in New York City, additional state surcharges took effect July 1, 2019:

Residential property at $3 million or more: additional $1.25 per $500 of consideration.
Non-residential property at $2 million or more: additional $1.25 per $500 of consideration.
Residential property at $2 million or more: a supplemental tax at graduated rates from 0.25% to 2.9% depending on price.

These stack on top of the base rate.⁶

New York City’s Own Tax

NYC imposes a separate Real Property Transfer Tax that also applies to controlling interest transfers of entities holding city property:

Residential (1- to 3-family homes, condos, co-ops) at $500,000 or less: 1%.
Residential above $500,000: 1.425%.
All other property at $500,000 or less: 1.425%.
All other property above $500,000: 2.625%.

These are separate from and added to the state transfer tax.⁷ A controlling interest transfer involving a $5 million commercial building in New York City would owe both the 0.4% state base tax and the 2.625% city tax, before any additional state surcharges.

Who Owes the Tax

The grantor (the seller or transferor of the controlling interest) is legally responsible for paying. The obligation cannot be shifted to the grantee unless the parties agree to it by contract.⁸

If the grantor doesn’t pay on time or is exempt, liability shifts to the grantee, and the tax then becomes a joint and several liability of both. A grantee forced to pay can sue the grantor for the tax, interest, and penalties.⁸ In practice, purchase agreements usually address allocation directly.

When the Tax Doesn’t Apply

Tax Law Section 1405 lists exemptions. The ones that matter most for entity deals:

Mere change of identity or form: restructuring an entity’s ownership without changing the beneficial owners is not taxable. Convert an LLC to a corporation with the same people holding the same proportional interests, and the transfer is exempt.⁹
Transfers to secure debt: pledging an ownership interest as loan collateral is not a taxable conveyance.
Bona fide gifts made without consideration and outside a sale.
Conveyances under a confirmed Chapter 11 plan.
Transfers to or from the United States, New York State, or their political subdivisions and agencies.

The mere-change-of-identity exemption applies proportionally. If a controlling interest is transferred but 70% of the beneficial ownership stays the same, only the 30% change is taxable. The rate, however, is set using the full consideration before applying the exemption, so the exemption cannot be used to drop the transaction below a rate threshold.⁹¹⁰

REIT Transfers

Section 1402 provides a reduced-tax framework for transfers to a REIT or to an entity in which a REIT holds a controlling interest immediately after the transfer, subject to ongoing ownership conditions. The provision for REIT transfers occurring after initial formation is set to expire on September 1, 2026, which matters for timing.⁵

Foreclosure by a Lender Holding Pledged Interests

When a lender acquires a controlling interest through foreclosure on pledged ownership interests and later takes the property through mortgage foreclosure, the acquisition is treated as a mere change of identity to the extent of the lender’s ownership percentage in the entity.⁴

Filing, Deadline, and Penalties

The return is Form TP-584, the Combined Real Estate Transfer Tax Return, signed by both grantor and grantee. NYC deals use TP-584-NYC together with Form NYC-RPT for the city tax.¹¹ The return requires names, addresses, and taxpayer identification numbers for each party plus the tax map designation or deed reference for the underlying property.¹²

Under Tax Law Section 1410, the tax is due no later than the 15th day after the instrument effecting the conveyance is delivered from grantor to grantee. A recording officer cannot record the instrument until the return has been filed and any tax has been paid, or the filer produces a receipt from the Commissioner confirming the filing.¹³ The Commissioner can grant extensions of up to three months for cause shown.

For controlling interest deals, the return needs a documented consideration breakdown: fair market value of the entity’s real property, percentage transferred, and how encumbrances were allocated. Keep supporting appraisals and valuation analyses even if you don’t submit them, because the Department may request them on audit.

Missing the 15-day deadline triggers interest and civil penalties under Tax Law Section 1416. Late-filing penalties for transfer tax typically run from 5% to 25% of the tax due, depending on how late the payment is, with interest accruing separately at the Department’s rate. Section 1417 also carries criminal penalties for willful evasion, though these are rarely pursued for controlling interest matters. Because the combined state and city tax on a leveraged commercial deal can exceed 3%, even a short filing delay can produce meaningful penalty exposure, so build the 15-day window into the closing timeline.

1
New York State Senate. New York Tax Law TAX 1401 – Definitions
2
New York Codes, Rules and Regulations. 20 CRR-NY 575.6 – Controlling Interest
3
Cornell Law Institute. N.Y. Comp. Codes R. and Regs. Tit. 20 575.7 – Leases and Subleases
4
New York State Department of Taxation and Finance. Transfer or Acquisition of a Controlling Interest—Additional Guidance
5
New York State Senate. New York Tax Law 1402 – Imposition of Tax
6
New York State Department of Taxation and Finance. Real Estate Transfer Tax
7
NYC Department of Finance. Real Property Transfer Tax (RPTT)
8
New York State Senate. New York Tax Code 1404 – Liability for Tax
9
New York State Senate. New York Tax Law 1405 – Exemptions
10
NYC Department of Finance. Rules Relating to the Real Property Transfer Tax
11
New York State Department of Taxation and Finance. Real Estate Transfer and Mortgage Recording Tax Forms
12
New York State Department of Taxation and Finance. Instructions for Form TP-584
13
New York State Senate. New York Tax Law TAX 1410 – Payment