Chapter 2.34 — REAL PROPERTY TRANSFER TAX

(a) This chapter shall be known as the "Real Property Transfer Tax Ordinance of the City of Palo Alto." It is adopted pursuant to the authority contained in Part 6.7 (commencing with Section 11901) of Division 2 of the Revenue and Taxation Code of the State of California. It is also enacted pursuant to the authority of Article II of the Charter of the city of Palo Alto and other authority held as a chartered city.

(b) The tax imposed under this chapter is solely for the purpose of raising revenues for the general governmental purposes of the city. All of the proceeds from the tax imposed by this chapter shall be placed in the city's general fund. This chapter is not enacted for regulatory purposes.

(Ord. 4073 § 2, 1992: Ord. 2398 § 1 (part), 1967)

(a) There is hereby imposed on each deed instrument or writing ("instrument") by which any lands, interests in lands, tenements or other realty ("realty") sold within the city of Palo Alto shall be granted, assigned, transferred or otherwise conveyed to, or vested in ("conveyed"), the purchaser or purchasers, or any other person or persons, by his, her, its or their direction, when the value of the consideration exceeds $100.00, a tax at the rate of $1.65 for each $500.00, or fractional part thereof, of the value of the consideration.

(b) As used herein, "value of the consideration" means:

(1) The total consideration, valued in money of the United States, paid or delivered or contracted to be paid or delivered in return for the grant, assignment, transfer, or conveyance ("conveyance") of realty, including the amount of any indebtedness, existing immediately prior to the conveyance which is secured by a lien, deed of trust or other encumbrance ("encumbrance") on the realty conveyed and which continues to be secured by such encumbrance after the conveyance and also including the amount of any indebtedness which is secured by an encumbrance given or placed upon the realty in connection with the conveyance to secure the payment of the purchase price of any part thereof which remains unpaid at the time of the conveyance; and

(2) The amount of any special assessment levied or imposed upon the realty by a public body, district or agency, where the special assessment is an encumbrance on the realty and the purchaser or transferee agrees to pay such special assessment or takes the realty subject to the encumbrance of such special assessment. The value of any encumbrance of a type other than those which are hereinabove specifically included, existing immediately prior to, and remaining after, the conveyance, shall not be included in determining the value of the consideration. If the value of the consideration cannot be definitely determined, or is left open to be fixed by future contingencies, "value of the consideration" shall be deemed to mean the fair market value of the realty at the time of conveyance after deducting the amount of any encumbrance, if any, of a type which would be excluded in determining the value of the consideration pursuant to the provisions of this Section 2.34.020.

(Ord. 4073 § 3, 1992: Ord. 2398 § 1 (part), 1967)

Any tax imposed pursuant to Section 2.34.020, shall be paid by any person who makes, signs or issues any instrument subject to the tax, or for whose use or benefit the same is made, signed or issued.

(Ord. 4073 § 4, 1992: Ord. 2398 § 1 (part), 1967)

Any tax imposed pursuant to this chapter shall not apply to any instrument given to secure an obligation or a debt. Nothing in this chapter shall be deemed to exclude the amount of any such indebtedness from being included in the "value of the consideration" in connection with any conveyance which is not made solely to secure an obligation or a debt.

(Ord. 4073 § 5, 1992: Ord. 2398 § 1 (part), 1967)

(a) Any tax imposed pursuant to this chapter shall not apply to the United States or any agency or instrumentality thereof, any state or territory, or political subdivision thereof, or the District of Columbia with respect to any instrument to which the exempt agency is a party, or when the exempt agency is accepting title, but the tax may be collected by assessment from any other party liable therefor.

(b) Any tax imposed pursuant to this chapter shall not apply with respect to any instrument by which realty is conveyed by the United States or any agency or instrumentality thereof, any state or territory, or political subdivision thereof, or the District of Columbia, pursuant to any agreement whereby the purchaser agrees to immediately reconvey the realty to the exempt agency.

(c) Any tax imposed pursuant to this chapter shall not apply with respect to any instrument by which the United States or any agency or instrumentality thereof, any state or territory, or political subdivision thereof, or the District of Columbia, conveys to a nonprofit corporation realty, the acquisition, construction, or improvement of which was financed or refinanced by obligations issued by the nonprofit corporation on behalf of a government agency, within the meaning of Section 1.103-1 (b) of Title 26 of the Code of Federal Regulations, as amended.

(Ord. 4073 § 6, 1992: Ord. 2398 § 1 (part), 1967)

(a) Any tax imposed pursuant to this chapter shall not apply to the making, delivery or filing of instruments of conveyance to make effective any plan of reorganization or adjustment:

(1) Continued under the Federal Bankruptcy Code, as amended;

(2) Approved in an equity receivership proceeding in a court involving a railroad corporation, as defined in subdivision (44) of Section 101 of Title 11 of the United States Code, as amended; or

(3) Effected through a mere change in identity, form or place of organization. Subdivisions (1) to (3), inclusive, of this subsection shall only apply if the making, delivery or filing of instruments of conveyance occurs within five years from the date of such confirmation, approval or change.

(Ord. 4073 § 7, 1992: Ord. 2398 § 1 (part), 1967)

(a) Any tax imposed pursuant to this chapter shall not apply to the making or delivery of conveyances to make effective any order of the Securities and Exchange Commission, as defined in subdivision (a) of Section 1083 of the Internal Revenue Code of 1986, as amended, but only if:

(1) The order of the Securities and Exchange Commission in obedience to which such instrument of conveyance is made recites that such conveyance is necessary or appropriate to effectuate the provisions of Section 79k of Title 15 of the United States Code, as amended, relating to the Public Utility Holding Company Act of 1935, as amended;

(2) Such order specifies the realty which is ordered to be conveyed; and

(3) Such conveyance is made in obedience to such order.

(Ord. 4073 § 8, 1992: Ord. 2398 § 1 (part), 1967)

(a) In the case of any realty held by a partnership, no tax shall be imposed pursuant to this chapter by reason of any conveyance of an interest in a partnership or otherwise, if:

(1) Such partnership (or another partnership) is considered a continuing partnership within the meaning of Section 708 of the Internal Revenue Code of 1986, as amended; and

(2) Such continuing partnership continues to hold the realty concerned.

(b) If there is a termination of any partnership within the meaning of Section 708 of the Internal Revenue Code of 1986, as amended, for purposes of this chapter, such partnership shall be treated as having executed an instrument whereby there was conveyed, for fair market value (exclusive of the value of any encumbrance remaining thereon), all realty held by such partnership at the time of such termination.

(c) Not more than one tax shall be imposed pursuant to this chapter by reason of a termination described in subsection (b), and any conveyance pursuant thereto, with respect to the realty held by such partnership at the time of such termination.

(Ord. 4073 § 9, 1992: Ord. 2398 § 1 (part), 1967)

Any tax imposed pursuant to this chapter shall not apply with respect to any instrument to a beneficiary or mortgagee, which is taken from the mortgagor or trustor as a result of or in lieu of foreclosure. Such tax shall apply to the extent that the value of the consideration exceeds the unpaid debt, including accrued interest and cost of foreclosure. The consideration, unpaid debt amount and identification of grantee as beneficiary or mortgagee shall be noted on the instrument or stated in an affidavit or declaration under penalty of perjury for tax purposes.

(Ord. 4073 § 10, 1992)

Any tax imposed pursuant to this chapter shall not apply to the making, delivery, or filing of an instrument by which a co-owner or the co-owners of real property release his or her or their ownership interest to the other co-owner or co-owners of the real property without receiving, directly or indirectly, any monetary or other valuable consideration, where the co-owners are co-borrowers under a loan to finance or refinance the acquisition of or the construction of improvements upon the real property.

(Ord. 4279 § 1, 1995)

(a) Any tax imposed pursuant to this chapter shall not apply with respect to any instrument which purports to convey, divide, or allocate community, quasi-community, or quasi-marital realty assets between spouses for the purpose of effecting a division of community, quasi- community, or quasi-marital realty which is required by a judgment decreeing a dissolution of the marriage or legal separation by a judgment of

nullity, or by any other judgment or order rendered pursuant to Part 5 (commencing with Section 4000) of Division 4 of the Civil Code of the State of California, as amended, or by a written agreement between the spouses, executed in contemplation of any such judgment or order, whether or not the written agreement is incorporated as part of any of those judgments or orders.

(b) Any tax imposed pursuant to this chapter shall not apply with respect to any instrument which purports to convey, divide, or allocate community, quasi-community, or quasi-marital realty assets or realty assets held in joint tenancy or tenancy in common between spouses, provided:

(1) The owner-spouses acquired their respective interests in the same transaction; and

(2) No consideration beyond a release from any indebtedness secured by the interest in realty conveyed is received by the transferor-spouse in effecting such conveyance.

This subsection (b) shall not extend to the conveyance of realty assets wholly owned by the transferor-spouse to a transferee-spouse.

(c) In order to qualify for the exemption provided in subsections (a) and (b), the instrument shall include a written recital, signed by either spouse, stating that the instrument is entitled to the exemption.

(Ord. 4073 § 11, 1992)

(a) The director of finance shall administer this chapter and shall collect the tax imposed under this chapter and shall otherwise administer this chapter. The director of finance may make such rules and regulations, not inconsistent with the chapter, as he or she may deem reasonably necessary or desirable to administer this chapter. In the administration of this chapter, the director of finance shall interpret its provisions consistently with those Documentary Stamp Tax Regulations adopted by the Internal Revenue Service of the United States Treasury Department which relate to the Tax on Conveyances and identified as Sections 47.4361-1, 47.4361-2 and 47.4362-1 of Part 47 of Title 26 of the Code of Federal Regulations, as the same existed on November 8, 1967, except that for the purposes of this chapter:

(1) The term "realty" as used in the Treasury Regulations, shall be deemed to mean "real property" as such term is defined by and under the laws of the state of California.

(2) Those provisions of the Treasury Regulations providing for deduction of the value of any encumbrance existing before the sale and not removed thereby shall not apply.

(3) Those provisions of the Treasury Regulations relating to the rate of the tax shall not apply.

(4) Those provisions of the Treasury Regulations which conflict with the provisions of this chapter shall not apply.

(Ord. 4073 § 12, 1992)

The tax imposed under this chapter is due and payable at the time the instrument effecting a conveyance subject to the tax is delivered, and is delinquent if unpaid at the time of recordation thereof. In the event that the tax is not paid prior to becoming delinquent, a delinquency penalty of ten percent of the amount of tax due shall accrue. In the event a portion of the tax is unpaid prior to becoming delinquent, the penalty shall only accrue as to the portion remaining unpaid. An additional penalty of ten percent shall accrue if the tax remains unpaid on the ninetieth day following the date of the original delinquency. Interest shall accrue at the rate of one percent a month, or fraction thereof, on the amount of tax, exclusive of penalties, from the date the tax becomes delinquent to the date of payment. Interest and penalty accrued shall become part of the tax.

(Ord. 4073 § 13, 1992)

(a) The tax imposed by this chapter shall be paid to the director of finance by the persons referred to in Section2.34.020. Payment shall be accompanied by a declaration of the amount of tax due signed by the person paying the tax or by his or her agent. The declaration shall include a statement that the value of the consideration on which the tax due was computed includes all indebtedness secured by encumbrances remaining or placed on the realty transferred at the time of transfer, and also includes all special assessments on the realty which the purchaser or transferee agrees to pay or which remain an encumbrance on the realty at the time of conveyance. The declaration shall identify the instrument effecting the conveyance for which the tax is being paid. The director of finance may require delivery to him or her of a copy of such instrument whenever he or she deems such to be reasonably necessary to adequately identify such writing or to administer the provisions of this chapter. The director of finance may rely on the declaration as to the amount of the tax due provided he or she has no reason to believe that the full amount of the tax due is not shown on the declaration.

(b) Whenever the director of finance has reason to believe that the full amount of tax due is not shown on the declaration or has not been paid, he or she may, by notice served upon any person liable for the tax, require him or her to furnish a true copy of his or her records relevant to the value of the consideration or fair market value of the realty conveyed. Such notice may be served at any time within three years after recordation of the instrument which conveys such realty.

(Ord. 4073 § 14, 1992)

(a) If on the basis of such information as the director of finance receives pursuant to subsection (b) of Section2.34.130 or on the basis of such other relevant information that comes into his or her possession, or both, he or she determines that the amount of tax due as set forth in the declaration, or as paid, is insufficient, he or she may recompute the tax due on the basis of such information.

(b) If the declaration required by Section 2.34.130 is not submitted, the director of finance may make an estimate of the value of the consideration for the realty conveyed and determine the amount of tax to be paid on the basis of any information in his or her possession or that may come into his or her possession.

(c) One or more deficiency determinations may be made of the amount due with respect to any conveyance.

(Ord. 4073 § 15, 1992)

The director of finance shall give notice to a person liable for payment of the tax imposed under this chapter of his or her determination made under Section 2.34.140. Such notice shall be given within three years after the recordation of the instrument effecting the conveyance on which the tax deficiency determination was made.

(Ord. 4073 § 16, 1992)

Any notice required to be given by the director of finance under this chapter may be served personally or by mail. If service is made by mail, it shall be made by depositing the notice in the United States mail in a sealed envelope with postage paid, addressed to the person on whom it is to be served at his or her address as it appears in the records of the city or as ascertained by the director of finance. The service is complete at the time of the deposit of the notice in the United States mail without extension of time for any reason.

(Ord. 4073 § 17, 1992)

Any person against whom a determination is made under this chapter or any person directly interested may petition for a redetermination within sixty days after service upon the person of notice thereof. If a petition for redetermination is not filed within the sixty day period, the determination becomes final at the expiration of the period.

(Ord. 4073 § 18, 1992)

If a petition for redetermination is filed within the sixty-day period, the director of finance shall reconsider the determination and, if the person has so requested in his or her petition, shall grant the person an oral hearing, and shall give him or her ten days' notice of the time and place of hearing. The director of finance may designate one or more deputies for the purpose of conducting hearings and may continue a hearing from time to time as may be necessary.

(Ord. 4073 § 19, 1992)

The director of finance may decrease or increase the amount of the determination before it becomes final, but the amount may be increased only if a claim for the increase is asserted by the director of finance at or before the hearing.

(Ord. 4073 § 20, 1992)

The order or decision of the director of finance upon a petition for redetermination becomes final thirty days after service upon the petitioner of notice thereof.

(Ord. 4073 § 21, 1992)

The amount of any tax, penalty, and interest imposed under the provisions of this chapter shall be deemed a debt to the city. Any person owing money to the city under the provisions of this chapter shall be liable to an action brought in the name of the city for the recovery of such amount.

(Ord. 4073 § 22, 1992)

Claim Required. Prior to seeking judicial relief with respect to a dispute regarding the amount of any tax, penalty, or interest collected or received by the city under this chapter, an aggrieved taxpayer, fee payer or any other person must comply with the provisions of section 2.28.230 of this code.

(Ord. 5078 § 4, 2010: Ord. 4073 § 23, 1992)

Each instrument by which realty sold is conveyed shall have noted upon it the tax roll parcel number. This number shall be used for administrative and procedural purposes only pursuant to this chapter, and will not be proof of title. In the event of any conflict between the stated legal description noted upon the document and the tax roll parcel number, the stated legal description noted thereupon shall govern.

(Ord. 4073 § 24, 1992)