State Preserves Veil of Secrecy for Wealthy Condo Buyers

Score a win for the 1 percent. Responding to concerns from the real-estate industry – and the people who buy New York’s most expensive real estate – the state Department of Taxation and Finance has reversed a two-month-old rule that required LLCs, or shell companies, to list the names and addresses of all individuals with ownership interests in condo deals, the Wall Street Journal reports. The rule was imposed in September to remove a veil of secrecy favored by billionaires and celebrities and, on occasion, people trying to launder ill-gotten gains in New York real estate. The rule grew out of a new state law signed by Gov. Andrew Cuomo that is designed to address complaints about building and zoning violations in suburban Rockland County. The law makes the names of owners public under the state’s Freedom of Information Law. 

The Department of Taxation and Finance has reversed itself with the new guidance. “The law is intended to apply to sales of a residential building with one to four dwellings, not the sale of individual condo units, and the guidance reflects that,” said James Gazzale, a state tax department spokesman. “The department’s initial understanding of the new law was generated based on the agency’s preliminary reading of the bill language. Since that time, the bill sponsors have clarified their intent.” 

The Real Estate Board of New York, which represents the industry, pressed the governor’s office to act. The industry was particularly concerned that the law would throw a wrench into condo-development projects, since it required the disclosure of all individuals behind all layers of corporate ownership. 

Stuart Saft, a partner at the law firm Holland & Knight, drafted a memo, outlining why the tax department’s initial interpretation was wrong and arguing that the language shouldn’t apply to condominiums. Saft said the new rule would “effectively kill real-estate finance.” In the end, the tax department agreed.