E-Tax forms are changing closing procedures for the better

Real Estate Weekly, Sept 1, 2004 by Fern Epstein

In what is a dramatic change to the way closings are conducted in New York City, the Office of the New York City Register has implemented a new program that requires that certain tax forms submitted in connection with the transfer of an interest in real property in the Bronx, Brooklyn, Manhattan and Queens be completed online, using the Register's Internet-based Automated City Register Information System.

Prior to this recent change in the recording system for New York City, sellers' attorneys and our other client attorneys who do deed or co-op transfers have prepared the various transfer forms that accompany the deed and had their clients sign them at closing. The title agent would then send these forms to the City Register's Office along with the deed. The City Register now requires attorneys or closers to input this information directly into the ACRIS system, print the forms out and have them ready for the parties to sign at closing.

As with any new procedure, this recent change has caused some confusion and concern among real estate attorneys. To facilitate this change Horizon Land Services and other tide/abstract companies now provide this service for a fee upon request by the attorneys. The City has made provisions to accept hand-written tax forms after the new ACRIS procedures went into effect, provided the ACRIS E-Tax generated final forms are attached for proper recordation. Documents resulting from closings occurring before July 5th, 2004, but recorded after that date, will require E-Tax Forms to be completed. Members of the title industry are working closely with the City to sort out minor glitches, such as creating new fields on the E-Tax Forms to accommodate second Social Security numbers and other unique circumstances that may not have initially been addressed by the program's designers.

Despite this initial grace period, the change to the new system is inevitable. ACRIS E-Tax forms and the changes it will make to the closing process must be taken into account by all parties involved in the transaction. The seller's counsel will need to prepare the forms or arrange for their preparation by a qualified title insurance firm, such as Horizon Land Services, in consultation with counsel for the purchaser in advance of the closing. The lender's counsel might also be wise to make sure that high-speed access to the Internet is available at all closings to prevent unnecessary delay, or in the alternative, ask the title agent, such as Horizon, to act on his behalf.

The tax forms to be completed online include the New York City's Real Property Transfer Tax Return, the New York State Real Estate Transfer Tax Return (TP584), the New York City Real Property Transfer Report for New York City--Equalization Form (RP-5217NYC), the Affidavit of Compliance with Smoke Detector Requirement, the Customer Registration Form for Water and Sewer Billing and the Property Owner's Registration Form. Except for the Multiple Dwelling Registration/Affidavit of Non-Multiple Dwelling form, which is not an E-Tax form but remains a mandatory form that will be sent to the appropriate office, these documents will be printed from ACRIS, signed and submitted to the recording office with the closing instruments.

Transfers that have closed without the tax forms having been submitted to the City Register's Office before these new requirements took effect will also require completion of the tax forms in ACRIS. In such instances, the Register's Office advises that the signature pages affixed to the usual hard copy forms can be annexed to the ACRIS generated tax forms. There is a grace period up to July 30th, 2004 wherein the City Register will accept the signature pages of the original transfer tax documents with accompanying E-Tax Forms not necessarily dated as of the date of closing. However, as of August 2nd, 2004, the City Register will require all transfer tax documents to be generated on the ACRIS system and signed and dated on the date of closing.

Please note that cooperative apartment transfers and stock transfer transactions will require the E-Tax Forms prepared in ACRIS as of September 7th, 2004, prior to that date it is optional. In addition, the New York State Form IT2663 (Non Resident Real Property Estimated Income Tax Payment Form) will still be completed off line.

The City Register's Office anticipates that the tax forms will be completed online before a closing and that any change or addition to a tax form at the closing will be done in ACRIS at a computer terminal with Internet access. Only the ACRIS generated tax forms completed online will be accepted. Each page of every form will be imprinted with a tax transaction ID number to verify it was completed in ACRIS and to enable the user to retrieve the forms to make the necessary changes at the time of closing.

This new procedure may cause some confusion until users become familiar with the process. If, for example, the tax forms are not completed prior to closing, the ability to close will depend on the availability of Internet access at the time of closing. This may happen when, for example, the final amount of consideration is not determined or a party is reluctant to provide a tax identification number prior to closing. Hand written or typed tax forms, or tax forms completed or corrected outside of ACRIS to any extent, will not be accepted by the Register.