Governor Murphy’s Mansion Tax Modification

New Jersey residents are familiar with the “Mansion Tax” and its companion, the “Controlling Interest Transfer Tax,” which were implemented in 2004 and 2006, respectively. The Mansion Tax requires purchasers of certain properties valued at $1 million or more to pay a 1% surcharge. The Controlling Interest Transfer Tax, or CITT, requires purchasers of a controlling interest in an entity that directly or indirectly owns “Class 4A” commercial property, valued at $1 million or more, to pay a 1% fee.

Earlier this week, Governor Murphy signed into law Assembly Bill 5804, sponsored by State Representative Verlina Reynold-Jackson and State Senator Benjie Wimberly. The Bill Amends both Section 8 of P.L.2004, c.66 (C.46:15-7.2) and Section 3 of P.L.2006, c.33 (C.54:15C-1) to, most notably:

1. shift the burden of paying the Mansion Tax and CITT from the purchaser to the seller, and
2. increase the amount of the Mansion Tax and CITT to be paid by the seller.

The Bill is effective immediately, and applicable to transactions occurring on or after July 10, 2025.  Transfers of commercial, residential, cooperative units, and certain farm properties, including non-deed transfers of controlling interests in entities that directly or indirectly own commercial property valued more than $1 million, will be subject to the following progressive rates, based on the purchase price or consideration:

• For transfers over $1 million but not more than $2 million: 1.0%
• For transfers over $2 million but not more than $2.5 million: 2.0%
• For transfers over $2.5 million but not more than $3 million: 2.5%
• For transfers over $3 million but not more than $3.5 million: 3.0%
• For transfers over $3.5 million: 3.5%

The new law allows sellers to apply to the Director of the Division of Taxation for a refund of any fee imposed in excess of 1% of the consideration for a transfer of real property made for consideration in excess of $1 million if the deed is recorded prior to November 15, 2025, pursuant to a contract fully executed before July 10, 2025.

If you are planning on selling your property in New Jersey, or have questions about the implications of this recently enacted change, Stark & Stark’s Commercial Real Estate Group can assist you.

Please visit www.stark-stark.com for more information.