A Setback for Transaction Privacy in California

The New Documentary Transfer Tax Law Eliminates Separate Unrecorded Statements

California law (Revenue and Taxation Code Section 11932) has long required that the amount of the documentary transfer tax be displayed on the face of the recorded instrument. Since the documentary transfer tax is calculated based on the amount of the consideration, the general public can calculate the consideration if they know the amount of the documentary transfer tax actually paid (the State’s rate for that tax is $1.10 per $1,000.00 of value, exclusive of liens at the time of transfer, but a number of counties and cities have imposed higher rates). To avoid disclosure of the consideration paid, and thus keep the price private, it has become a common practice for parties to real property transactions in California to request that the tax amount be shown on a separate document that is not recorded.

As a result of AB1888, which become law on June 4, 2014, that “separate unrecorded document” practice will no longer be allowed. This change in law takes effect on January 1, 2015, so any document recorded on or after that date will be required to display the documentary transfer tax due on the face of the document.

A copy of AB 1888 can be found at:

http://leginfo.legislature.ca.gov/faces/billAnalysisClient.xhtml

For more information, please contact Tom Stewart.