Get Controlling Interest Transfer Taxes (Part Two) - Alston & Bird

Philadelphia's Transfer Tax is Among the Highest in Pennsylvania. The Commonwealth imposes a 1% transfer tax on the value of the real estate. However, Philadelphia imposes an additional 3.278% tax on the value of the deeded real estate for a combined rate of 4.278%.

Example of a Controlling Interest An investment group, XYZ Capital, decides to acquire a significant stake in Company ABC to gain control over its strategic direction and operations. XYZ Capital purchases 510,000 shares, representing 51% of Company ABC's outstanding shares.

The term controlling interest refers to a situation that arises when a shareholder or a group acting in kind holds the majority of a company's voting stock. Having a controlling interest gives the holding entity(s) significant influence over any corporate actions.

The CITT is a 1% fee on the transfer of a controlling interest in an entity that directly or indirectly owns certain real property. The CITT is only imposed if the real property is classified as "4A Commercial" and if the consideration or other valuation of the real property is greater than $1,000,000.

Generally, the laws state that a controlling interest transfer tax is imposed on a direct or indirect transfer or acquisition of a controlling interest in an entity with title to real estate in the state.

(a) "Controlling interest" means more than 80% of the total value of all classes of stock of a corporation; more than 80% of the total interest in capital and profits of a partnership, association, limited liability company, or other unincorporated form of doing business; or more than 80% of the beneficial interest in ...

Controlling interest - means 1) in the case of a corporation, either 50% or more of the total combined voting power of all classes of stock of the corporation, or 50% or more of the capital, profits, or beneficial interest in the voting stock of such corporation; and 2) in the case of a partnership, association, trust, ...

This is typically accomplished by apply- ing the tax to transfers of a controlling interest in a ''real estate entity. '' The concept of a ''real estate en- tity'' appears in the controlling-interest tax rules of Delaware, the District of Columbia, Illinois, Maryland, Michigan, New Hampshire, and Pennsylvania.