Pity the poor wealthy people trying to buy high-end condos in New York City today. The world just keeps piling on.
First came targeted federal moves, beginning in New York and Miami, to prevent all-cash condo buyers from hiding behind the veil of limited liability companies, also known as LLCs or shell companies – an attempt to stop the laundering of international money from illegal sources. Then came the 2017 federal tax overhaul, which limited to a peevish $10,000 the deduction on state and local taxes. Then came 2019’s one-time “mansion tax” on the purchase of high-end homes in New York State. The Democrats now controlling the state Legislature recently revived the possibility of a yearly pied-a-terre tax on the luxury second homes of absentee owners. And finally, on Jan. 1, the U.S. Congress overrode a veto by President Trump for the first time and passed the National Defense Authorization Act, which includes a provision that empowers the Treasury Department to create and maintain a registry of the true owners of LLCs, Gothamist reports.
The information collected in Treasury’s new database will include the owner’s name, address, date of birth and a driver’s license or other government ID number. In a move that disappointed transparency advocates, Congress decided to make the information available to investigators and prosecutors, but not to the public.
“After the financial crisis (of 2008), investors were looking for higher returns, they wanted hard assets,” says Jonathan Miller, head of the appraisal firm Miller Samuel. “And that was the ‘go’ sign for a tremendous amount of development.” That development included the high-end real estate that sprouted on Billionaires’ Row, along the High Line in Chelsea and in numerous other locations in the city. The new federal law can be seen as yet another ‘stop’ sign.
It also comes with a startling irony – that a law stripping shell companies of their anonymity was passed in the last days of the Trump presidency, over a Trump veto. The irony is that Donald Trump was a major beneficiary of the secrecy provided by LLCs. Trump Tower was one of the first Manhattan buildings to sell large numbers of units to anonymous LLCs, and Buzzfeed reported in 2018 that more than 1,300 units in Trump buildings had been sold to unnamed buyers. That lucrative practice, like the Trump presidency, is now as good as gone.
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