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San Francisco Proposes Doubling Transfer Tax for Certain Real Estate Transactions

This November, the residents of the City of San Francisco will either approve or disapprove a ballot measure that will double city transfer taxes on residential and commercial sales over $10 million. Real estate investors need to be cognizant of this potential tax increase in drafting their purchase and sale agreements, leases, and other real estate documents. If it passes, the amended transfer tax ordinance will become operative on January 1, 2021.

The ballot measure was proposed by San Francisco Supervisor Dean Preston, with current support from five other members of the San Francisco Board of Supervisors. If passed, the measure will amend the San Francisco Business and Tax Regulations Code to increase the Real Property Transfer Tax rate from 2.75% to 5.5% on transfers of real property with a consideration or value of at least $10 million and less than $25 million, and from 3% to 6% on transfers of real property with a consideration or value of $25 million or greater. Unlike the documentary transfer tax authorized by the State of California, San Francisco’s transfer tax does not permit any lien or encumbrances remaining on the property at the time of transfer to reduce the amount of tax that is levied.

In a press release from the spring, Preston indicated that one of the reasons for the tax increase was to deter post-COVID-19 speculative buying by opportunistic investors and allow the city to capture revenue from such transactions to help pay for the city’s COVID-19 recovery efforts. It has been estimated that doubling the transfer tax rates will provide additional annual revenue of up to $150 million for the City of San Francisco.

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About this Author

William R. Ahern, Allen Matkins, Partnership Tax Planning Lawyer, Asset Transactions Attorney
Partner

William R. Ahern began his legal career at Allen Matkins in 1998. He is a partner in our Orange County office, where he practices in our firm's Business and Tax Planning Practice Group.

Bill's practice primarily focuses on the structuring, formation, syndication and taxation of partnerships and limited liability companies that are formed to engage in complex real estate transactions. Such entities range from single-purpose entities formed to acquire a single asset to programmatic ventures, as well as syndicated funds formed to invest in real...

(949) 851-5468
Jared C. Kassan Associate Tax group
Associate

Jared Kassan is an associate in the firm's Los Angeles office, practicing in the Tax group.

Jared advises clients on a broad range of federal, state, and local tax issues, including partnership taxation, 1031 exchanges, debt workouts, tenancies in common, California property tax, and California documentary transfer tax. He is often involved in transactions where tax planning and entity structuring are an important aspect of the deal. Jared has advised clients ranging from small developers to large multi-national corporations, crafting strategies and helping each meet their individualized business needs.

213-955-5596