Laws, Regulations & Annotations

Property Taxes Law Guide – Revision 2016

Property Tax Annotations

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Annotation 220.0375.010

220.0375.010 Limited Liability Company. Real property is owned by LLC-1. LLC-1 has two individual members, A (0.95%) and B (0.05%) and an entity member, LLC-2 (99%), which in turn is wholly owned by A (95%) and B (5%). In the first scenario, LLC-2 is transferring its 99% interest in LLC-1 to A and B in the same percentages as the percentages of A and B's pre-transfer interests in both entities – 95% to 5%. After the transfer, A will directly own 95% of LLC-1 and B will directly own 5% of LLC-1. In the second scenario, LLC-2's 99% interest in LLC-1 is transferred to a new entity, LLC-3, in which A and B are the only members, retaining their same proportional interests. Transfers of interests in legal entities are excluded from change in ownership under Revenue and Taxation Code section 62(a)(2) as long as the interests transferred are in exactly the same proportion. (See Property Tax Rule 462.180(d)(4).)

Where the exclusion in section 62(a)(2) applies to a transfer that would otherwise trigger a Revenue and Taxation Code section 64(c) change in control, the section 62(a)(2) exclusion takes precedence because the transfers are proportional with the underlying ownership interests of the members or partners in the entity which owns the real property remaining the same. C 11/19/1999.