A draft bill has been circulated in the Ohio General Assembly that if enacted into law would impose a county level tax on the indirect transfer of an interest in real property located in that county. Such a law would increase the current cost of transferring interests from seller to buyer in real property located in Ohio.
The effective tax rate varies by county in Ohio but the applicable rate is applied to the value of the real property being transferred. Exceptions to the tax under current law will continue to apply for certain transfers of indirect interests.
It is a common business practice for a legal entity such as an LLC to hold a deed to real property and when the real property is to be later sold for the owner of the legal entity to convey the ownership interest of the entity in lieu of transferring a deed to the real property. Under current Ohio law this is an effective means to defeat the imposition of a real property transfer tax. Under the proposed law the transfer of less than all of the interests in the legal entity will result in a transfer tax based on the percentage of ownership being transferred.
Legislation in Ohio is generally effective only on a delayed prospective basis from the date of enactment (when signed by the Governor).