Since 2000, the Pennsylvania Department of Revenue ("DOR") has been working on a project to amend the realty transfer tax regulations. The Department previously issued drafts of amended regulations in 2000, 2005, and March of this year, and now has issued proposed final regulations. These October 2007 revisions will be reviewed for final adoption by the Independent Regulatory Review Commission ("IRRC"), which will hold a public meeting on them on November 1, 2007. The DOR ignored most of the comments to the earlier drafts of the regulations submitted by bar associations and other interested persons. As a result, in numerous instances these regulations will create significant problems.

For example, under the current draft regulations:

  • realty transfer tax would be imposed on the assignment of a contract to purchase real estate. Taxing this type of transaction is contrary to the law under the Pennsylvania Supreme Court's holding in the Allebach case;
  • like kind exchanges may well be subject to four transfer taxes because these regulations provide, contrary to the Federal law, that neither a "qualified intermediary" nor an "exchange accommodation title holder" are agents of the taxpayer. Pennsylvania would be the only state in the country where exchanges would be subject to such multiple realty transfer taxes; and
  • in contrast to the existing regulations, in a sale leaseback transaction, if the lease term (including most options to renew) is 30 years or more, both the sale and the lease will be subject to realty transfer tax unless the transaction is a financing, as narrowly defined by the DOR. It is the DOR's view that a transaction is not a financing unless the property will be returned to the seller at the end of the transaction for no or nominal consideration. Thus, many sale leaseback transactions will be subject to two realty transfer taxes on the initial sale and leaseback, and a third realty transfer tax if the property ultimately is conveyed back to the seller.

We suggest that interested parties contact IRRC to ask IRRC to reject these regulations, and contact the Governor's office to urge the Governor to ask the DOR to withdraw the current draft of these regulations and issue new draft regulations that are both consistent with the law and good public policy. These regulations are now on a very fast track and any efforts you make should begin before November 1. Please contact either Wendi Kotzen at 215.864.8305 or Phil Korb at 215.864.8709 if we can assist you in your efforts.

These regulations are proposed amendments to 61 Pa. Code, Chapter 91 (relating to realty transfer tax). Governor Rendell's chief of staff is Gregory C. Fajt at Governor Edward G. Rendell's office, 255 Main Capitol Building, Harrisburg, PA 17120 ( and IRRC's address is Mr. Kim Kaufman, Executive Director, Independent Regulatory Review Commission, 14th Floor, 333 Market Street, Harrisburg, PA 17101 (

Copyright © 2007 by Ballard Spahr Andrews & Ingersoll, LLP.

This newsletter is a periodic publication of Ballard Spahr Andrews & Ingersoll, LLP and is intended to alert the recipients to new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer concerning your situation and specific legal questions you have.