LLC Sellers and Buyers Beware: Unprecedented Reporting Requirements

*Update: On November 4, 2019, after coming under heavy fire from New York City’s real-estate industry, the State’s Department of Finance and Taxation issued a new guidance that notably no longer requires LLC sellers and buyers of residential condominium units to disclose the identities of their members.  Several sources following this development conclude this policy shift is specifically meant to eliminate the inclusion of New York City residential condominium units from the reach of Senate Bill S1730’s unprecedented LLC disclosure requirements.* 

Residential property sellers and buyers beware – New York has implemented unprecedented reporting requirements for the purchase or sale of residential one-to-four family units, including condominiums, [1] by LLCs. On September 13, 2019, Governor Andrew Cuomo signed into law Senate Bill S1730, a sweeping set of reporting regulations aimed at unmasking the otherwise undisclosed LLC buyers and sellers of New York real estate. Effective immediately, single-member and multiple-member LLCs must abide by the following requirements when submitting Real Property Transfer Tax documents:

• For property located outside of New York City: the grantor or grantee LLC must submit Form TP-584 with documentation identifying the (1) name, (2) business address, and (3) taxpayer identification number (SSN or EIN) for all members, managers, and other authorized persons of the LLC.
• For property located in New York City: a single-member LLC is required to provide the names and identification numbers of both the LLC and the single member on Form NYC-RPT. A multiple-member LLC must provide the name and identification numbers of each member on Form NYC-RPT. For both LLC types, if such information is not provided then an affidavit explaining the absence of such information must accompany the submitted form. Also, the LLC must submit Form TP-584-NYC with a separate member list identifying the (1) name, (2) business address, and (3) taxpayer identification number for all members, managers, and other authorized persons of the LLC.

Importantly, though LLCs in New York were previously required to disclose the above information, Senate Bill S1730 goes a step further as it requires any member of the LLC that is itself an LLC or other entity to provide the names and addresses of the shareholders, directors, officers, members, managers, and/or partners of that LLC or entity until ownership by an individual is evidenced. Additionally, 100% of the ownership of each entity must be reported.

Moreover, in line with Senate Bill S1730’s purposes, freedom-of-information (FOIL) requests may be used to obtain information on certain properties.  Specifically, for New York City properties, the names and addresses contained in the New York City specific forms will be subject to a FOIL Request except for social security numbers. In contrast, for properties outside of New York City, the information contained in New York State specific forms will not be subject to a FOIL request as such information is exempted from disclosure pursuant to New York Tax Law Section 1418 and Section 87(2)(a) of the New York State Public Officers Law.

As the New York City real estate market continues to feel the effects of the recently implemented reformed rent regulations, these wide-reaching reporting changes targeting LLC property purchasers and sellers may only further strangle the New York real estate market as mounting privacy concerns for high net-worth individuals may push such individuals to a different market. While significant discussions among key stakeholders continue to occur in the wake of Senate Bill S1730’s passage, it is likely that we have not seen the end of this unfolding story.

[1] There is no specific mention of residential condominiums in Senate Bill S1730. However, guidance issued by the State Department of Taxation and Finance specified that Senate Bill S1730 does apply to the purchase and sale of residential condominiums.