If you recently transferred real property in Philadelphia between July 1, 2012 and January 5, 2013, you may be entitled to a refund in the amount of transfer tax paid. For clear cut real estate transaction where property is being conveyed by a deed at fair market value, the transfer tax is based upon the purchase price of the property. However, when the purchase price is not fair market value, or the deed recorded relates to a long term lease, for example, the common level ratio (CLR) comes into play.
Typically the CLR is updated each year, but due to Philadelphia's tax assessment issues, the State Tax Equalization Board (STEB) did not establish for Philadelphia County a CLR for the period July 1, 2012 to June 30, 2013. Since the ratio in effect for this period remained "to be determined", the CLR from the previous period remained in effect. This amount, 3.97, was used to determine a property's computed value until the updated CLR was published.
Recently, the CLR for July 1, 2012 through June 30, 2013 was determined to be 3.27. Since the new CLR is lower than the previous CLR (3.97), taxpayers are entitled to refunds for transfer taxes paid relating to real property transfers made after June 30, 2012 from both the Pennsylvania and Philadelphia revenue departments (if they used the 3.97 CLR).
This has the potential to amount to a significant refund. For example, if a property has an assessed value of $1,000,000, the computed value with the old CLR would be $3,970,000. The resulting realty transfer tax would then be $158,800. With the new CLR the realty transfer tax would $130,800, with a difference and refund of $28,000.
If you have any questions concerning your right to a potential transfer tax refund, or need assistance with how to properly file for a refund, please feel free to contact Douglas Leavitt at Danziger Shapiro & Leavitt.
This entry is presented for informational purposes only and is not intended to constitute legal advice.