Acquiring a NYC Residence
According to a recent report, Manhattan boasted the most expensive residential real estate market in the country last year. “Manhattan residents spend nearly five times the national average for housing.”[i]
That shouldn’t surprise anyone, considering what has been, at least up to this point, Manhattan’s status as the nation’s financial capital, its unmatched cultural offerings, its urban amenities and lifestyle, the high salaries that enable buyers to bid up prices, and the limited supply of housing.
All-Cash
What may be startling, however, is that “[i]n 2025, a higher percentage of Manhattan buyers paid cash for their apartments than in any previous year, according to a new report, which found that 64 percent of co-op and condo sales were made in cash. Almost 90 percent of Manhattan sales over $3 million were paid for in cash.”[ii]
Those figures are striking. Perhaps, even, impossible to ignore?
LLCs
That being said, it’s not just the prevalence of all-cash deals in Manhattan’s upscale residential market that is noteworthy.
The number of such transactions that are consummated through the use of LLCs is equally significant.
As stated by one report,[iii] while LLCs were involved in about 13 percent of all Manhattan residential purchases, that figure exceeded 50 percent in the borough’s upscale neighborhoods.
The LLC form of business entity has long been described as “opaque” by law enforcement agencies because the state laws under which they are formed generally do not require an LLC to disclose the individuals who are the entity’s ultimate beneficial owners.[iv]
Then there is the question of whether it is proper for an LLC to own a property that is not used in a business and is not held strictly for investment.[v] New York’s Limited Liability Company Law, for example, provides that an LLC may be formed “for any lawful business purpose.” Does the holding of real property for personal use fall within such a purpose? Or is the property being held primarily for investment, and is used only occasionally for personal purposes?[vi]
The Proposed Tax
All-cash purchases by LLCs of residences in certain cities have long been on the federal government’s radar, as we will see shortly.
New York has been thinking tagging such purchases for another reason – to raise revenue.
By now you’re aware of Albany’s proposal to impose a new 1 percent tax on any purchaser who pays more than $1 million to acquire a residence in New York City without the assistance of any financing; in other words, an all-cash deal.
Thus, someone who borrows funds from a commercial lender, for example, to purchase an otherwise “qualifying” residence, and who gives the lender a mortgage to secure the loan, would be exempt from the proposed tax.
Stated somewhat differently, when such a lender takes a security interest in the property and the mortgage recording tax is paid,[vii] the proposed tax would not apply. Hmm.[viii]
The proposal, however, says nothing about the nature of the lender or of the loan. Would an unsecured loan from a family member, bearing interest at the applicable federal rate,[ix] exempt the purchaser-borrower from the proposed tax? What if the purchaser borrows the necessary funds from a securities account, a retirement account, or the cash value of a permanent life insurance policy? What if the purchaser leveraged a second home that they kept as a rental property?
Lots of unanswered questions.
That being said, some media outlets claim to have received “reports” over the last few days, from unidentified individuals “in the know,” that the proposed tax may be doomed.[x]
Why Taxes?
Regardless of its ultimate fate, it is worth the effort to identify the policy that underlies the proposed New York levy.
Taxation is an obligation that the public, through the actions of its elected representatives,[xi] imposes upon itself for the principal purpose of funding the operations of government; i..e., to fund government spending.[xii]
Over time, as civil society – meaning, private individuals, their businesses, and the nonprofit organizations they have established for their mutual benefit – has confronted increasingly complex and progressively[xiii] frequent challenges, the role of government has evolved to respond to such challenges.[xiv] In many instances, the resulting expansion of the government’s responsibilities has necessarily been accompanied by increased, and often new forms of, taxation.
For example, government has imposed taxes, not only to raise revenue, but to protect certain industries,[xv] or to discourage certain behaviors that it has determined are harmful to the general public.[xvi]
Most significantly, over time government has assumed the greatest burden for what is generally known as social welfare, but which may be described more accurately as the collection of programs[xvii] through which the government seeks to provide a financial buffer for the more, let’s say, “vulnerable” members of society; i.e., those with the greatest exposure to financial hardship.
In the case of the federal government, these “economic security” programs – which are non-discretionary expenditures – now account for about 50 percent of its budget.[xviii]
The figures vary by state because not every state (or local) government offers the same “social safety net” to those who reside within its jurisdiction, aside from those programs or benefits that are federally-mandated and directed.[xix] In New York State, for example, about 50 percent of the state government’s spending is for economic security purposes.[xx]
These programs necessarily involve the redistribution of income and wealth to some degree. Thus, at the federal level, the top 50 percent of individual taxpayers (by adjusted gross income) are responsible for 97 percent of all individual income taxes collected;[xxi] in New York, the top 50 percent paid 99.8 percent of the personal income taxes collected.[xxii] In other words, these “upper tier” taxpayers are obligated to pay a disproportionately larger share of the costs of government for the benefit of their fellow residents (basically, the other 50%) who require some form of government assistance.
Of late, however, many politicians and members of the public have been asserting that some of these tax-paying taxpayers are not paying their “fair share” of tax; meaning, they can afford to pay more. The question, of course, is how much more?
According to these politicians, in order to keep economic inequality in check and to reduce poverty, the government must increase the income tax burden of their more affluent constituents and transfer the resulting proceeds to their less fortunate constituents.
Among the most vocal of these politicians in New York is the mayor and most of the New York Legislature.
Tax the Rich?
When the proposed tax on all-cash purchases of residences in the city was announced, the mayor touted the proposal as a way to tax “the rich”; he also indicated that this tax was just the beginning. The governor was more subdued.
Identifying Beneficial Owners
Which brings us back to LLCs.
Interestingly, there is a significant overlap between the purchases sought to be taxed by New York and the use of LLCs to consummate such purchases, to which this post referred earlier: more than 50 percent of residential purchases in Manhattan’s upscale neighborhoods involved LLCs, and more than 90 percent of Manhattan co-op and condo sales in excess of $3 million, presumably in the same neighborhoods, were paid for in cash.
The LLC entity denies the public the ability to identify the true owner of the property.
A purchaser’s ability to acquire such property for cash means there was no regulated lender (say, a commercial bank) involved that is subject to statutory and regulatory requirements for monitoring, detecting, and reporting suspicious activities, including transactions involving large amounts of cash.
FinCEN Real Estate Reports
You may have heard that, last month, FinCEN[xxiii] suspended enforcement of its Residential Real Estate Rule,[xxiv] pursuant to which certain real estate professionals involved in the settlement or closing process – such as closing or settlement agents, but not homebuyers – were required to file Real Estate Reports when the following conditions were satisfied:
- the property was residential real estate (including a building designed for occupancy by one to four families);[xxv]
- the property was purchased in an all-cash deal, without the extension of credit – secured by the transferred property – by a financial institution subject to anti-money laundering program requirements and suspicious activity reporting obligations; and
- the property was transferred to a qualifying legal entity, such as an LLC.[xxvi]
Information provided on the Real Estate Reports was meant to help combat and deter money laundering by increasing transparency in the residential real estate sector. Although FinCEN conceded there are many legitimate reasons to use legal entities, such as LLCs, to own residential real property, it also noted that illicit actors intent on laundering funds through residential real property often use such entities to disguise their identities and make the proceeds of crime more difficult to identify. The bureau also observed that illicit actors often favor “all-cash” sales and purchases of residential real estate to avoid scrutiny from financial institutions that are subject to the filing obligations described above.[xxvii]
The CTA
At one time, the suspension of FinCEN’s Residential Real Estate Rule would have been less impactful. Unfortunately, the regulations by which FinCEN sought to implement the requirement under the CTA,[xxviii] that “reporting companies” submit specified beneficial ownership information (“BOI”) to FinCEN,[xxix] was suspended in late 2024, following the Fifth Circuit’s injunction against the enforcement of the CTA.[xxx]
Then, shortly after the new Administration came into office, the Treasury Department announced that it would not enforce any penalties or fines associated with the CTA’s BOI reporting rule against U.S. citizens or U.S. reporting companies or their beneficial owners after the issuance of proposed rulemaking that would narrow the scope of the disclosure rule to foreign reporting companies only.[xxxi]
The Interim Final Rule
An interim final rule was then issued, in short order, that eliminated the requirement for U.S. companies and U.S. persons to report BOI to FinCEN under the CTA.[xxxii]
Specifically, FinCEN revised the definition of “reporting company” in its implementing regulations to mean only those entities that are formed under the law of a foreign country and that have registered to do business in the any U.S. State by the filing of a document with a secretary of state or similar office. FinCEN also exempted entities previously known as “domestic reporting companies” from BOI reporting requirements.
These foreign entities, however, were not be required to report any U.S. persons as beneficial owners, and U.S. persons were not required to report BOI with respect to any such entity in which they were a beneficial owner.[xxxiii]
NY’s RETT/NYC’s RPTT
In 2019, in response to the number of anonymous owners of high-end residences, the State Tax Law and the City Administrative Code were amended[xxxiv] to provide that, “[i]f the grantor or grantee is an LLC and the property being conveyed is a building containing up to four family dwelling units, Form TP-584 cannot be accepted for filing unless accompanied by documentation that identifies all members, managers, and other authorized persons of the LLC.”[xxxv] In general, if any such person was itself an LLC or other business entity, the amended laws required disclosure of such’s entity’s members, managers, and authorized persons until full disclosure of ownership by natural persons was achieved.[xxxvi]
Oddly, the sale or purchase of a condominium apartment or of co-op stock[xxxvii] by or to an LLC does not trigger the requirement to disclose the true owner of the property in question, unless the unit was in “a building containing up to four family dwelling units.”[xxxviii]
NY’s LLCTA
New York subsequently enacted a broader LLC disclosure rule. For the most part, New York’s LLCTA[xxxix] was based upon the federal CTA; for example, it defined the key terms “beneficial owner”[xl] and “reporting company” by reference to the CTA and its implementing regulations,[xli] though the New York statute does not reach beyond limited liability companies (“LLCs”).
However, the law’s coverage became somewhat uncertain following FinCEN’s issuance of the above “interim final rule,” which limited the definition of “reporting company” for purposes of the CTA to mean only entities that are formed under the law of a foreign country.[xlii] In the end, New York continued its “conformity” to the federal regulatory interpretation of the CTA, and limited the LLCTA’s coverage to non-U.S. entities authorized to do business in the State.[xliii]
Parting Thoughts
So where does this leave us?
A proposed 1 percent tax – which not make it off the ground – on all-cash purchases of NYC residences regardless of the buyer’s identity.
A transfer tax that reports beneficial ownership LLCS involved in the purchase or sale of a building containing up to four family dwelling units.
The CTA and LLCTA, which are limited to foreign entities.
FinCEN’s Residential Real Estate Rule, providing for the disclosure of beneficial ownership of LLCs that engage in all-cash deals is in limbo.[xliv]
Is there any way to salvage this situation? Perhaps.
From a revenue-raising perspective, why not provide greater certainty regarding the application of the proposed NYC tax by limiting its scope to purchases in which (i) no mortgage recording tax is owed, (ii) the purchase price exceeds a $3 million threshold,[xlv] and (iii) the soon-to-be-enacted pied-a-terre tax will not apply?
Insofar as disclosure of beneficial ownership in all-cash deals is concerned, why not expand the reach of New York’s real estate transfer tax rule to cover all LLC purchases of condominiums and co-ops?
Although the principal role of taxation is to raise revenue for government to spend – perhaps wisely? a forlorn hope? – the taxing power may also be used to dissuade certain behavior, especially when it is combined with a requirement to report information that a bad actor may be reluctant to disclose.
Stay tuned.
The opinions expressed herein are solely those of the author(s) and do not necessarily represent the views of the firm.
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[i] https://www.kiplinger.com/real-estate/603612/15-us-cities-with-the-highest-average-home-prices.
The price for Manhattan office space tops the list.
[ii] https://www.nytimes.com/2026/01/06/realestate/manhattan-cash-home-buyers.html
[iii] https://www.propertyshark.com/Real-Estate-Reports/2025/07/30/nyc-homebuyer-types-2025/
[iv] That being said, New York has taken steps to pierce the LLC veil, as we will see shortly.
[v] DE’s LLCA does not expressly state the same limitation.
[vi] NY LLCL Sec. 201.
[vii] New York State and NYC impose separate mortgage recording taxes (“for the privilege of recording a mortgage”) that are generally payable by the buyer. NY Tax Law Sec. 253; NYC Admin. Code Sec.11-2601. The devil will definitely be in the details on this one. Query whether a loan from a family member that would otherwise have been unsecured will now take a different turn.
[viii] Heads, I win; tails, you lose?
[ix] Assuming the property is for personal use, none of the interest on such an unsecured loan would be deductible.
[x] I’m waiting for the larger-bodied individual who was assigned the female gender at birth to sing. (Couldn’t help myself. “The devil made me do it.” Anyone remember Flip Wilson?)
[xi] Taxation with representation.
[xii] Members of a community will pay taxes “in exchange for” the services provided by the government having jurisdiction over that community – these taxes are the price one pays for the privilege of residing, owning property, or doing business in the community. Thus, depending upon the community, a member thereof may be required to pay income, sales, property, transfer, employment, and other taxes. A member of the community is required to pay these taxes without regard to whether the taxpayer can identify a specific instance in which they have directly benefited from a particular government activity or service.
[xiii] No pun intended.
[xiv] For an accessible discussion, see https://taxfoundation.org/taxedu/primers/primer-history-of-taxes/.
[xv] For example, a tariff.
[xvi] For a lighter take on this topic, see https://taxfoundation.org/taxedu/primers/primer-the-weird-way-taxes-impact-behavior/.
Some of these taxes more closely resemble a fine because they are intended to dissuade what society has determined are less than desirable behaviors. For example, so-called “sin taxes” are a form of excise tax that, at least in theory, seek to make a specific product, like alcohol or tobacco, so expensive that the consumer cannot afford it and consequently will forego its purchase and consumption. In turn, the revenue generated by a sin tax is often dedicated to a particular government program that is usually targeted at redressing the adverse consequences experienced both by individuals who previously engaged in the activity or used the product in question, as well as by those who continue to do so.
[xvii] Such as healthcare (e.g., Medicaid), childcare (such as CCAP), housing, food (e.g., SNAP), vocational training (Job Corp is one), protection against loss of income due to retirement, disability, death (Social Security) etc.
[xviii] https://www.taxslaw.com/2026/05/observations-on-the-wealthys-change-in-attitude-toward-taxes/#_edn17.
[xix] https://www.brookings.edu/articles/the-social-safety-net-looks-different-in-every-state/.
[xx] https://openbudget.ny.gov/overview.html.
[xxi] https://taxfoundation.org/data/all/federal/latest-federal-income-tax-data-2025/.
[xxii] https://www.tax.ny.gov/data/stats/taxfacts/personal-income-tax.htm.
[xxiii] Financial Crimes Enforcement Network, which is a bureau of the federal Treasury Dept.
[xxiv] The suspension was in response to a March 2026 opinion issued by the U.S. District Court for the Eastern District of Texas that vacated the Rule, less than two years after its issuance in 2024, on the grounds that the Rule exceeded FinCEN’s authority under the Bank Secrecy Act. FinCEN, in conjunction with the DOJ, has appealed the decision.
[xxv] Sound familiar? Yes, but don’t be fooled – FinCEN interprets this to include a condominium or co-op apartment. https://www.fincen.gov/rre-faqs#B_4.
[xxvi] In other words, there was no reporting requirement when the purchaser of the residential property was an individual or when the transfer was financed by a qualified lender.
[xxvii] The Real Estate Reports rule was intended to replace the Geographic Targeting Orders (GTOs) previously issued by FinCEN to require certain financial institutions to report information regarding all-cash luxury real estate purchases is various metropolitan areas, including New York City.
Query whether FinCEN will resume its use of GTOs, at least during the suspension of the Residential Real Estate Rule.
[xxviii] Published Document: 2022-21020 (87 FR 59498). As issued, the rules required (a) companies formed before January 1, 2024 to file a BOI report with FinCEN by December 31, 2024, and (b) companies created on or after the rule’s effective date (of January 1, 2024) and before January 1, 2025, to file within 30 calendar days of notice of their creation.
About one year later, the reporting rules were amended to provide an extended filing deadline of 90 calendar days for reporting companies created on or after January 1, 2024 and before January 1, 2025; entities created on or after January 1, 2025 would continue to have 30 calendar days from notice of their creation to file their BOI reports with FinCEN. Published Document: 2023-26399 (88 FR 83499).
[xxix] 31 U.S.C. 5336(b)(5).
[xxx] FinCEN issued an alert stating: “In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force.” See the Texas Top Cop Shop case.
[xxxi] https://home.treasury.gov/news/press-releases/sb0038#:~:text=The%20Treasury%20Department%20is%20announcing,January%202%2C%202026.
[xxxii] https://www.federalregister.gov/documents/2025/03/26/2025-05199/beneficial-ownership-information-reporting-requirement-revision-and-deadline-extension.
[xxxiii] FinCEN also issued some helpful questions and answers (Q&As) in anticipation of inquiries relating to the interim final rule. https://www.fincen.gov/boi/ifr-qa.
[xxxiv] NY Tax Law Sec. 1409 and NYC Admin Code Sec. 11-2105:
“When the grantor or grantee of a deed for a building used as residential real property containing up to four family dwelling units is a limited liability company, the joint return shall not be accepted for filing unless it is accompanied by a document which identifies the names and business addresses of all members, managers, and any other authorized persons, if any, of such limited liability company and the names and business addresses or, if none, the business addresses of all shareholders, directors, officers, members, managers and partners of any limited liability company or other business entity that are to be the members, managers or authorized persons, if any, of such limited liability company.”
[xxxv] See the instructions to New York Form TP-584-NYC, The Combined Real Estate Transfer Tax Return for the Conveyance of Real Property Located in New York City. The required documentation must include the name and address of the business or individual.
[xxxvi] For example, on September 16, 2025, RRP, LLC, a single-member LLC, is the grantor in a deed transfer of a two-family house to an individual. RRP-1-LLC’s single member is ABC Partnership. ABC Partnership has four individual partners and one partner, RRP-2-LLC, that is a multiple-member LLC. RRP-2-LLC has three individual members. Provide all required documentation for:: all managers and other authorized persons of RRP, LLC; ABC Partnership; ABC Partnership’s four individual partners; RRP2, LLC; RRP2, LLC’s three individual members; all officers and directors of ABC Partnership; and all officers, directors, and managers of RRP2, LLC.
[xxxvii] Together with a proprietary leasehold.
[xxxviii] Is there a good policy reason for this gap?
[xxxix] Limited Liability Company Transparency Act.
[xl] LLCL Sec. 1106(a):
“‘Beneficial owner’ shall have the same meaning as defined in 31 U.S.C. § 5336(a)(3), as amended, and any regulations promulgated thereunder.”
[xli] LLCL Sec. 1106(b):
“‘Reporting company’ shall have the same meaning as defined in 31 U.S.C. § 5336(a)(11), as amended, and any regulations promulgated thereunder, but shall only include limited liability companies formed or
authorized to do business in New York state.”
[xlii] In response to FinCEN’s interim final rule, and to ensure the LLCTA would continue to cover the beneficial owners of domestic business entities, the New York Legislature, in June 2025, passed amendments to the LLCTA that would have directly incorporated the CTA’s statutory definitions – including, for example, that for a reporting company – but without reference to any implementing federal regulations, in order to “inoculate the LLC Transparency Act from shifting federal guidelines or attempts to repeal the CTA.” See the Sponsor Memo to S8432. The governor vetoed the bill.
[xliii] Shortly thereafter, New York’s Department of State posted guidance on its website to assist foreign LLCs with reporting their beneficial ownership in accordance with the LLCTA. https://dos.ny.gov/beneficial-owner-disclosure.
[xliv] I assume GTOs are in the same boat.
[xlv] After all, almost 90 percent of Manhattan condominium and co-op sales over $3 million were paid for in cash, and more than half of these involved LLCs.