Assessor-Recorder Joaquín Torres Public Service Announcement: Revised Partial Transfer Tax Exemption for Rent-Restricted Affordable Housing Projects

For Immediate Release
Date: Wednesday, January 18, 2024
Contact: Abigail Fay, abigail.fay@sfgov.org

Assessor-Recorder Joaquín Torres Public Service Announcement: Revised Partial Transfer Tax Exemption for Transfers of Certain Rent-Restricted Affordable Housing

***Public Service Announcement***

San Francisco, CA – On December 15, 2023 a new local law passed that extends the existing transfer tax exemption to December 31, 2030, and expands the exemption to certain transfers of eligible affordable housing properties not covered by the original exemption. The changes to the law became effective January 15, 2024, and apply retroactively to transfers occurring on or after January 1, 2017. Transfers of eligible properties that qualify will pay a transfer tax rate of no more than $3.75 per $500 (0.75%), reduced from otherwise applicable transfer tax rates of up to $30 per $500 (6.0%).

“Applying this new legal exemption to those providing affordable housing will be a great benefit for our families, seniors, veterans, formerly unhoused communities and the non-profit organizations who make this work possible,” said Assessor-Recorder Joaquín Torres. “As this new law goes into effect, the Assessor-Recorder's office will be supporting the organizations that may be eligible for a Transfer Tax Exemption for Rent-Restricted Affordable Housing Projects and the potential partial refunds that may apply. We encourage anyone in need of clarification or assistance to reach out to our office.”

Transfer tax generally is imposed on the transfer of real property from one person or entity to another. The transfer tax rate is variable, depending on the consideration paid or the fair market value of the property transferred. Certain property transfers are exempt from transfer tax. Transfer tax exemptions are codified in Article 12-C of the San Francisco Business and Tax Regulations Code.

Since 2008, the transfer tax on the transfer of properties with a consideration or value of $5 million or more has increased from 0.75% to between 2.25% and 6.0% of consideration or value. Existing law exempts transfers of properties that provide and maintain certain rent-restricted affordable housing.

Transfers of affordable housing properties that were eligible for the partial transfer tax exemption under prior law (before amendment described above) included the following:

• Transfers under the Community Opportunity to Purchase Act (COPA), as it existed as of June 3, 2019;
• Transfers with certain specified recorded restrictions requiring that they be maintained as rent-restricted affordable housing for at least 55 years from the later of the date of the transfer or the date the property became available for residential use (“Restricted Properties”) that either:
  • Were granted the property tax welfare exemption for all residential units on the property;
  • Were vacant at the time of the transfer.

The amendment described above extended the partial exemption to certain transfers of Restricted Properties that:

• Were granted the property tax welfare exemption for at least 90% of all residential units on the property at the time of the transfer; or
• Were wholly-owned by qualified non-profit organizations prior to the transfer, where the transfer is to persons or entities that intend to hold at least 90% of the residential units on the property so that they would qualify for the property tax welfare exemption specific to rent-restricted affordable housing. But if the property is not granted the welfare exemption for at least 90% of the units within two years of the transfer (or three years if certain requirements are met), the exemption will be revoked and the tax must be repaid to the City, with penalties and interest.

The new law also changed the restrictions that must be recorded against Restricted Properties by requiring only that the restrictions have at least 35 years remaining from the date of transfer as long as the restrictions applied to the property for 55 years from the date the property first became available for residential use.

The changes to the law became effective January 15, 2024, and apply retroactively to transfers occurring on or after January 1, 2017. The law extends the partial exemption by six and half years through December 31, 2030.

Partial Transfer Tax Exemption for Transfers of Rent-Restricted Affordable Housing

• Transfer Tax Affidavit (complete Section 5); and
• Certification from the Mayor's Office of Housing and Community Development (MOHCD) that the deed, instrument, or writing effects a transfer of qualified Rent-Restricted Affordable Housing per Section 1108.6 of Article 12-C of the San Francisco Business and Tax Regulations Code.
  • The certification must also include the Recorded Restrictions as an exhibit.

Refund of Transfer Taxes Paid or Reduction of Deficiency Assessed

Transfers of qualified rent-restricted affordable housing that occurred between January 1, 2017, but prior to July 1, 2024, may be eligible for a partial refund of taxes paid or a reduction of a deficiency assessed if the taxpayer submits a request by December 31, 2024. The law also waives all penalties and interest related to deficiency determinations on transfers that occurred between January 1, 2017 and January 15, 2024 if the transfer qualifies for a refund or reduction of deficiency under this provision. This refund/deficiency reduction does not apply to transfers under COPA.

Requirements to Qualify for Refund/Reduction:

• Transfer occurred between January 1, 2017, but prior to July 1, 2024.
• Transfer taxes already paid at the full rate or Notice of Delinquent Real Property Transfer Taxes and Deficiency Determination recorded, but taxes not yet paid.
• Certification from Mayor’s Office of Housing and Community Development (MOHCD) that the deed, instrument, or writing effected a transfer of qualified Rent-Restricted Affordable Housing per Section 1108.6(c)(2) of the SF Business and Tax Regulations Code Article 12-C.
• Claim packet submitted on or before December 31, 2024.

Instructions to Submit Claim Packet for Refunds/Reductions:

1. Fill out the appropriate request form:
   
   1. “Request for Transfer Tax Refund for Rent-Restricted Affordable Housing Transfers.” Use this form when transfer taxes have already been paid at a higher transfer tax rate.
   2. “Request for Reduction in Transfer Tax Deficiency Assessed for Rent-Restricted Affordable Housing Transfers.” Use this form when transfer taxes have been assessed at the higher rate, but not yet paid.
2. Obtain from MOHCD certification confirming that the deed, instrument, or writing effected a transfer of qualified Rent-Restricted Affordable Housing. The certification must also include the Recorded Restrictions as an exhibit. For more information, contact MOHCD at sfhousinginfo@sfgov.org
3. Include proof of payment of taxes (cancelled check, ACH payment, etc.), if requesting a refund.
4. Include closing statement from title company (if deeded transfer).
5. Submit the packet on or before December 31, 2024 to: Office of the Assessor-Recorder, 1 Dr. Carlton B. Goodlett Place, Room 190, San Francisco, CA 94102-4698. ATTN: Recording and Transactions Manager
6. Forms may be reviewed and downloaded from the Office of the Assessor-Recorder website at: Transfer Tax | CCSF Office of Assessor-Recorder