- December 29, 1992
- All Colorado Owned Offices and Agents
- House Bill 92-1270 - Non-Resident Real Estate Transfer Tax
As most of you are aware, House Bill 92-1270 (copy enclosed) was signed into law on June 3, 1992, requiring state income tax to be withheld on proceeds from transfers of real property situated in Colorado by a non-resident seller.
House Bill 92-1270 applies only to real estate transfers occurring on and after January 1, 1993. Under this new statute, "the title company or its authorized agent or any attorney, bank, savings and loan association, savings bank, corporation, partnership, association, joint stock company, trust, unincorporated organization or any combination thereof, acting separately or in concert, that provided closing and settlement services," must withhold an amount equal to (a) 2% of the sales price of the Colorado real property interest conveyed or (b) the net proceeds that would otherwise be due to the transferor as shown on the settlement statement, whichever is less. Failure to collect this withholding subjects the title agent providing the closing or settlement services to a penalty of no less than $500.00 and no more than $2,500.00.
There are four exceptions to this withholding. Withholdings shall not be made when:
- the selling price of the property is not more than $100,000.00;
- the transferor is an individual, estate, trust or partner and both the Form 1099S and the authorization for disbursement of funds (settlement statements) show a Colorado address for the transferor;
- the transferee is a bank or corporate beneficiary under a mortgage or beneficiary under deed of trust and the Colorado real property is acquired in judicial or non-judicial foreclosure or by deed in lieu of foreclose; or,
- the transferor is a corporation incorporated under Colorado law or currently registered with the Secretary of State's office as authorized to transact business in Colorado.
If any of these four exceptions to withholding are true in any transaction, no Form (DR1083) needs to be filled out.
Section 5 of the instructions for Form DR1083 provides that withholdings shall not be made when:
"5. The title insurance company or the person providing the closing and settlement services, in good faith, relies upon a written Affirmation executed by the transferor, certifying under penalty of perjury one of the following:
- that the transferor, if an individual, estate, trust or partner, is a resident of Colorado;
- that the transferor, if a corporation, has a permanent place of business in Colorado;
- that the Colorado real property being conveyed is the principal residence of the transferor which could qualify for the roll-over of gain provisions of Section 1034 of the Internal Revenue Code; or
- that the transferor will not owe Colorado Income Tax reasonably estimated to be due from the inclusion of the actual gain required to be recognized on the transaction in the gross income of the transferor."
If the seller signs one of these four affirmations you will need to fill out and submit Form DR1083.
In summary, the Forms (1083 and 1079) are to be used and withholding shall be made on all transactions on or after January 1, 1993, in which the seller is a non-resident of the State of Colorado unless one of the four exceptions to withholding stated above are appropriate in your transaction. If the seller signs one of the four affirmations certifying that their transaction is not subject to H.B. 92-1270, Form DR1083 must still be submitted even though no withholding is made.
There will, of course, be additional questions and issues which will come up as we begin to use these new forms. Therefore, please contact me as these situations arise or if you have questions now, please call me to discuss these matters more fully.
THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.