Update on New Hampshire Real Estate Tax

Last June we penned an article in regards to the New Hampshire Department of Revenue Administration (DRA) and their application of the New Hampshire Real Estate Transfer Tax (RETT). That article can be found here (New Taxation Looms: NH Real Estate Transfer Tax and the Ground Lease). At the time we wanted to let our customers and clients know that their past experience on the taxation of real estate transfers may have changed as it relates to ground leases.

The RETT, as you know, in New Hampshire is 1.5% of the total value of the transaction customarily split equally by both parties. So if you sell a piece of land for a bank to building a branch, both parties would split the fee. Historically leased office, industrial, retail or land has not been taxed under the RETT, however last year the discussion was raised that some ground leases were being taxed. So if instead of a selling that land to the bank you lease it to them, there was discussion that you would have to pay a tax.

For the most part people believed that the threshold for no tax versus tax was 99 years of leasing. Because at 99 years, you basically are selling the asset. However the DRA in their interpretation of the rules, believed the cut off to be 30 years, and almost all ground leases are over 30 years.

Now in this legislative session a new bill has been proposed that would insert into law that only ground leases over 99 years would be subject to the tax. (http://www.gencourt.state.nh.us/legislation/2015/SB0232.html) For those landlord’s who have ground leases or those tenants who are around our state’s airports and for many other users of land, this is a large deal. As of the writing of this article we do not have a scheduled date for the hearing on the Bill.

Written by Chris Norwood, NAI Norwood Group, cnorwood@nainorwoodgroup.com.