Example 1: An attorney conducts her law practice entirely out of one room of a house that she resides in. She conveys the house to a developer who will renovate it into a commercial office building. It is the use to which the property has been devoted by the grantor that determines the type of property being conveyed. The attorney has used the property for residential and nonresidential purposes; however, 2,000 square feet of the building were used for residential purposes and 400 square feet were used for nonresidential purposes. A preponderance of the square footage of the building has been used for residential purposes. The building is a single-family dwelling--not a multi-unit property--so a conveyance of a residential dwelling has been made. If the dwelling were conveyed for $1.2 million, then the State tax would apply at the rate of 0.5% to the first $800,000 of consideration and at the rate of 1.0% to the remaining $400,000 of consideration.

Example 2: A physician conducts his medical practice entirely out of a house that he resides in. He conveys the house to a developer who will raze it and build condominiums. It is the use to which the property has been devoted by the grantor that determines the type of property being conveyed. The physician has used the property for residential and nonresidential purposes; however, 1,200 square feet of the building were used for nonresidential purposes and 1,000 square feet were used for residential purposes. A preponderance of the square footage of the building has been used for nonresidential purposes. If the house were conveyed for $1.0 million, then the State tax would apply at the rate of 1.0% to the entire $1.0 million of consideration.

Several identical amendments were made to Conn. Gen. Stat. §12-494 by Public Acts 89-251 and 89-205. The rate of the Municipal real estate conveyance tax was changed from $1.10 per $1,000 (or fractional part thereof) to eleven one-hundredths of one per cent (0.11%). Consideration--rather than full purchase price--is made the measure of the State and Municipal real estate conveyance taxes. The legislative intent was to include in the measure of the taxes property other than money transferred to the grantor. See 32 H.R. Proc., pt._____, 1989 Sess., pp. 131-132 (Remarks of Rep. Cibes). (See also Part IV.)

Public Act 89-205 also amended Conn. Gen. Stat. §12-498, by replacing a provision that made any deed to which the United States is a party exempt from tax with a provision that, in effect, exempts only a deed on which the United States is the grantor. "[D]eeds which this State is prohibited from taxing under the Constitution or laws of the United States"; Conn. Gen. Stat. §12-498(a)(1); do not include deeds on which the United States is the grantee. "[U]nder current intergovernmental tax immunity doctrine the States can never tax the United States directly but can tax any private parties with whom it does business, even though the financial burden falls on the United States ...." South Carolina v. Baker, 485 U.S. 505, 523 (1988).

Language that was added to Conn. Gen. Stat. §12-494 by Public Act 85-480 was repealed, with the tax being imposed once again on deeds, instruments or writings conveying an interest in real property, rather than on the privilege of making a sale of an interest in real property.

Public Act 89-205 pertains to conveyances made on or after October 1, 1989.

III. CONVEYANCES BY A TRUSTEE IN A CASE UNDER CHAPTER 7

Chief Judge Robert L. Krechevsky, United States Bankruptcy Court (D. Conn.), concluded that conveyances made by a chapter 7 trustee liquidating a debtor's estate were subject to State and Municipal real estate conveyance taxes, construing the provisions of 28 U.S.C. §960 as applying to the activities of a liquidating trustee. Hoffman v. R & E Builders, Inc. (in re Woodland Builders, Inc. (Bankr. Case No. 2-87-00660)) (Bankr. Ct. D. Conn. July 1, 1988). On March 2, 1989, United States District Court Judge Alan H. Nevas affirmed the decision. In the recently decided Calif. St. Bd. of Equalization v. Sierra Summit, Inc., 490 U.S. ____, 104 L. Ed. 2d 910 (1989), the United States Supreme Court rejected an argument that a bankruptcy trustee was an arm of the government and interpreted the provisions of 28 U.S.C. §960 in the same manner as Judge Krechevsky had. Subsequently, the appeal to the United States Court of Appeals, Second Circuit, from Judge Nevas's decision by the trustee in Woodland Builders, Inc. was dismissed. Because the Department notified Town Clerks of Judge Krechevsky's decision on August 11,1988, the decision is applicable to conveyances made by trustees in cases under chapter 7 on or after that date.

The Department's position is that conveyances made by a debtor or trustee in a case under chapter 13 are subject to State and Municipal real estate conveyance taxes. (For conveyances made in certain cases under chapter 11, see Conn. Agencies Regs. §12-494-2(b)(2).)

IV. ATTORNEY GENERAL OPINION

The Commissioner requested an opinion from the Attorney General on the taxability of four types of conveyances. In an opinion issued August 15, 1989, the Attorney General has advised the Commissioner that, "[b]ecause the intent of Connecticut's real estate conveyance tax remains essentially the same as that of the repealed federal Documentary Stamp Tax, ... the approach taken by the federal regulations is of continuing validity and should be followed in administering the Connecticut act ... [T]he four categories of transactions ... are taxable to the same extent as provided in the federal regulations [26 C.F.R. §47.4361-1 et seq.]." Accordingly, the following types of conveyances are subject to State and Municipal real estate conveyance taxes: