Richards Layton & Finger
 

Changes to Tax Withholding Requirements

August 13, 2018

On July 25, 2018, Delaware Governor John Carney signed into law Senate Bill No. 175 (as amended), which amends the requirements for withholding income tax on the sale of real property by nonresidents, including nonresident pass-through entities, in circumstances involving foreclosure or deeds in lieu of foreclosure.

As of the July 1, 2018 effective date, the following transfers are exempt from the withholding requirements: (1) a transfer by the owner of the property to the mortgagee or other qualified persons in lieu of foreclosure; (2) a transfer by any of the foregoing transferees to a subsequent purchaser for value; (3) pursuant to the foreclosure of a mortgage, a transfer by the sheriff (or other authorized party) to the foreclosing mortgagee, the purchaser at the foreclosure, or other qualified persons; and (4) a transfer by any of the foregoing transferees to a subsequent purchaser for value. The form Declaration of Estimated Income Tax required to be filed with the Recorder of Deeds upon any transfer of real property is to be amended to provide for reporting such exempt status of a transfer.

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