Crackdown aims at loopholes that allow developers to skirt Pittsburgh deed tax
“For years, buyers of some of the most prominent properties near and in Downtown have exploited loopholes in state law to avoid paying deed transfer tax. Now the city school district has found a way to fight back, at least in some cases.
The district is starting to require developers who receive tax abatements for their projects to sign agreements promising that if the property is sold, they will not structure the transaction in a way that avoids payment of deed transfer taxes.
“If you have the benefit of a tax subsidy, then you ought to have an obligation to pay those taxing bodies what they are rightly owed,” district solicitor Ira Weiss said.
At the urging of the district, the city’s Urban Redevelopment Authority expects to include similar language in deals involving the sale of property for redevelopment of the former Civic Arena site, where developers will be eligible for 10 years worth of tax abatements.
“We are investors on behalf of the public in these transformational projects, and we need to assure that our collective investment objective of rebuilding our tax base is structurally protected,” said Kevin Acklin, URA board chairman and Mayor Bill Peduto’s chief of staff.
In the city, the transfer tax, paid on all property sold, is 4 percent, with 2 percent going to the city, 1 percent to the school district, and 1 percent to the state.
The district’s stance is a direct result of several high-profile cases over the last four years in which buyers took advantage of loopholes to escape paying millions of dollars in deed transfer taxes.
Perhaps the most notable involved the sale of the U.S. Steel Tower for $250 million in 2011. The group led by Mark Karasick, a New York City real estate investor, that bought the real estate technically purchased the company that owned it, not the property itself. With no deed transferring, the city, district and state lost out on $10 million in transfer taxes.”
Belko, Mark. Post Gazzette 3 February 2015.