New Jersey’s Controlling Interest Transfer Tax applies when a seller transfers more than 50% ownership of an entity that holds Class 4A commercial real property in the state, and the deal exceeds $1 million. Since July 10, 2025, the rate runs on a graduated schedule from 1% to 3.5% based on the size of the transaction.1New Jersey Legislature. P.L. 2025, Chapter 69 The seller files the return and pays the tax by the last day of the month after the transfer closes.
When the Tax Applies
Three conditions all have to be present. Miss any one of them and the CITT does not apply.
The entity has to own, directly or indirectly, Class 4A commercial real property in New Jersey. That classification covers income-producing commercial real estate: office buildings, shopping centers, restaurants, and retail spaces. Industrial property (Class 4B), apartment buildings (Class 4C), and farmland (Class 3A) fall outside the statute’s definition of “classified real property,” even though some older guidance muddies this point.2Justia. New Jersey Revised Statutes Section 54:15C-1 – Tax on Transfer of Controlling Interest in Certain Commercial Property
The transfer has to convey a “controlling interest.” For corporations, that means more than 50% of the combined voting power of all classes of stock. For partnerships, LLCs, trusts, and similar entities, it means more than 50% of the beneficial ownership of the classified real property.2Justia. New Jersey Revised Statutes Section 54:15C-1 – Tax on Transfer of Controlling Interest in Certain Commercial Property
The consideration has to exceed $1 million. When the entity holds Class 4A property alongside other assets, the threshold is measured against the equalized assessed value of the classified real property itself, not the total deal price.2Justia. New Jersey Revised Statutes Section 54:15C-1 – Tax on Transfer of Controlling Interest in Certain Commercial Property
How Much You’ll Pay
P.L. 2025, c. 69 replaced the old flat 1% rate with a graduated schedule effective July 10, 2025. The applicable rate attaches to the full consideration (or full equalized assessed value), not just the portion above each bracket:1New Jersey Legislature. P.L. 2025, Chapter 69
- Over $1,000,000 up to $2,000,000: 1%
- Over $2,000,000 up to $2,500,000: 2%
- Over $2,500,000 up to $3,000,000: 2.5%
- Over $3,000,000 up to $3,500,000: 3%
- Over $3,500,000: 3.5%
A $2.1 million deal lands in the second tier and is taxed at 2% on the full $2.1 million, not just the slice above $2 million. The jump between brackets matters: a dollar of extra consideration can move an entire transaction into a higher rate.
Grandfather Window
Transfers completed on or before November 15, 2025 under a binding contract fully executed before July 10, 2025 remain subject to the old flat 1% rate. Deals closing after November 15, 2025, or signed under contracts dated July 10, 2025 or later, pay the graduated rates.1New Jersey Legislature. P.L. 2025, Chapter 69
What Counts as Consideration
Consideration under the CITT is broader than cash at closing. It includes money paid, the value of other property exchanged, assumed mortgage balances, cancelled debt, and other assumed liabilities.3State of New Jersey. CITT-1 Controlling Interest Transfer Tax Form Shifting value into non-cash components does not avoid the $1 million threshold.
When the entity owns both Class 4A property and other assets, the tax base can be the equalized assessed value of the real property rather than the full deal price. That calculation keeps non-real-estate value (goodwill, personal property, unrelated holdings) out of the tax base, and it also stops parties from allocating away from the real estate to shrink the bill.
Related Transfers Get Combined
Transfers occurring within six months of each other are presumed to be a single transaction unless the parties can prove otherwise to the Division of Taxation. The rule exists to stop a buyer from splitting a deal into pieces that each stay under 50%.2Justia. New Jersey Revised Statutes Section 54:15C-1 – Tax on Transfer of Controlling Interest in Certain Commercial Property
Buyers who are “related parties” under federal constructive ownership and controlled group rules (IRC §§ 318, 1504, 1563) have their acquisitions aggregated. If three related buyers each take 20% within a few months, the state treats that as a 60% transfer. Part 6 of Form CITT-1 requires disclosure of related transactions within the previous six months.3State of New Jersey. CITT-1 Controlling Interest Transfer Tax Form
Exemptions
Six categories of transfers escape the tax:2Justia. New Jersey Revised Statutes Section 54:15C-1 – Tax on Transfer of Controlling Interest in Certain Commercial Property
- Sales by or to the United States, the State of New Jersey, or their agencies and subdivisions.
- Transfers to a purchaser recognized as tax-exempt under IRC § 501(c)(3).
- Transfers that share the underlying characteristics of transactions already exempt from the New Jersey Realty Transfer Fee under N.J.S.A. 46:15-10, including transfers between spouses and transfers by will.
- Transactions already subject to the Realty Transfer Fee under N.J.S.A. 46:15-7.2, so the same event is not taxed twice.
- Corporate mergers or acquisitions in which the equalized assessed value of the Class 4A real property is less than 20% of the total value of all assets exchanged.
- Transfers between members of the same combined group as part of a unitary business, effective since January 1, 2021.
The 20% merger threshold trips up deals that look like they should qualify. Once goodwill and intangibles come out of the denominator, the assessed value of the commercial property often pushes past 20%, and what looked like an incidental real estate component becomes a taxable transfer.
Filing and Payment
The seller files Form CITT-1 with the New Jersey Division of Taxation by the last day of the month following the month the transfer closed. A March 12 closing is due April 30. Payment accompanies the return.3State of New Jersey. CITT-1 Controlling Interest Transfer Tax Form
The form requires legal names and addresses for both seller and buyer, the entity’s Federal Employer Identification Number, and the Block and Lot numbers for every parcel of classified real property the entity owns. Reported consideration must include cash, property exchanged, and assumed debt. A rider in Part 3 is required if the transfer was part of a series.3State of New Jersey. CITT-1 Controlling Interest Transfer Tax Form A copy of the filed return should also be attached to the seller’s New Jersey business tax return for that year.4Legal Information Institute. New Jersey Administrative Code 18:16A-1.4 – Filing and Recordkeeping
Penalties for Late Filing or Underpayment
A late return costs 5% of the tax due for each month or partial month it is late, capped at 25%. A separate 5% late payment penalty applies to any unpaid balance after the due date. Interest accrues on unpaid tax at the prime rate plus 3%.5Division of Taxation. NJ Division of Taxation – When to File and Pay
These penalties stack. A return filed three months late and fully paid still owes 15% in late filing penalty plus interest. A return filed on time but underpaid triggers the 5% late payment penalty and interest on the shortfall. On a multi-million-dollar commercial deal, those percentages add up fast.
Audit Window
The Division of Taxation has four years from the filing date to audit a CITT-1 and assess additional tax. That limit disappears if the seller never filed, filed a fraudulent return, or failed to report relevant changes. Auditors tend to look at whether the reported consideration reflects true deal value, whether aggregation rules should have combined related transfers, and whether a claimed exemption actually fits the facts. Keeping the appraisals, the consideration calculation, and the business rationale for the entity structure on file makes the audit go faster if one arrives.