Department Bound by its Own Regulation [Bloomberg BNA]

Joseph Bright and Heidi Schwartz, members of Cozen O’Connor’s Tax Practice, discuss the Saturday Family L.P. v. Commonwealth case in Bloomberg BNA, in which the Commonwealth Court en banc held that Pennsylvania Realty Transfer Tax could not be imposed on a ground lease that contained an option for renewal at fair rental value that included an appraisal procedure. Under Pennsylvania law, Realty Transfer Tax generally applies to a lease that is for a term of 30 years or more. However, the Department’s regulations provide that an option to renew or extend the lease at fair rental value at the time of the renewal or extension will not count towards determining the lease term. This case involved a lease for a term under 30 years that contained such a provision, as well as a method for calculating fair rental value at the time of renewal through an appraisal process. The Department assessed Realty Transfer Tax on the grounds that the method for calculating fair rental value was a method for calculating rent, which would make the lease term over 30 years. The Court rejected the Department’s position on the grounds that fair market value is not a method to calculate rent at a fixed rental price, and that the Department’s position was inconsistent with its own regulations.

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Joseph C. Bright


(215) 665-2053

Heidi R. Schwartz


(215) 665-2799

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