General Rule

(a) Transfers Subject to Withholding. Except as otherwise provided in 830 CMR 62B.2.4, a Transfer is subject to withholding if the real property is located in whole or part in Massachusetts and the Gross Sales Price equals or exceeds the Withholding Threshold. The Withholding Agent is required to collect and remit withholding amounts due, if any, and submit a return to the Commissioner in accordance with the provisions in 830 CMR 62B.2.4(9). If the Transfer is otherwise subject to withholding, but all Transferors are exempt under 830 CMR 62B.2.4(4), the Withholding Agent must submit a return and, for each Transferor, a Transferor’s Certification. Withholding, returns, and all Transferor’s Certifications are due to the Commissioner within 10 days of the Closing, except as otherwise provided in 830 CMR 62B.2.4(6). For Transfers where there is no Withholding Agent, the Transferee is required to act as the Withholding Agent.

(b) Multiple Transferors; Multiple Transferees. If a Transferor owns the Real Estate with one or more other Transferors, the withholding treatment of each Transferor is determined separately; determination of whether the Withholding Threshold has been reached shall, however, be determined based on the entire transaction. If the Real Estate is transferred to two or more joint Transferees and there is no Withholding Agent, each Transferee must act as a Withholding Agent as set forth in 830 CMR 62B.2.4(3)(a) and is subject to the obligation to withhold on that Transferee’s proportionate share of the Gross Sales Price.

(d) Alternative Withholding Calculation . In lieu of the calculation set forth in 830 CMR 62B.2.4(3)(c), a Transferor may elect to have the amount withheld equal the Transferor’s Estimated Net Gain derived from the Transfer multiplied by the tax rate applicable to the Transferor. The Transferor’s Estimated Net Gain is determined by subtracting the Transferor’s Estimated Adjusted Basis in the Real Estate and any expenses directly related to the Settlement that are attributed to the Transferor from the Transferor’s share of the Gross Sales Price. The tax rate applicable to a Transferor subject to tax under M.G.L. c. 62 shall be the personal income tax rate under M.G.L. c. 62, § 4(b), regardless of the character of the Estimated Net Gain. If the Transferor’s Estimated Net Gain exceeds the taxable income threshold referenced in M.G.L. c. 62, § 4(d) and the Transferor is subject to tax under M.G.L. c. 62, then the tax rate applicable to the portion of such Estimated Net Gain exceeding the taxable income threshold shall be the applicable rate under M.G.L. c. 62, § 4(b), regardless of the character of the Estimated Net Gain, plus an additional 4%. The tax rate applicable to a Transferor subject to tax under M.G.L. c. 63 shall be the tax rate set forth in M.G.L. c. 63, § 39(a)(2).

To elect the alternative withholding calculation under 830 CMR 62B.2.4(3)(d), a Transferor must provide the Withholding Agent with a Transferor’s Certification that states the Transferor’s Estimated Net Gain and applicable tax rate. If the Transferor fails to provide a Transferor’s Certification with the aforementioned information at or prior to Closing, then the Withholding Agent shall withhold using the calculation set forth in 830 CMR 62B.2.4(3)(c).

(e) Example. Taxpayer A and Taxpayer B are individuals who own Real Estate. Taxpayer A owns a 20% share and Taxpayer B owns an 80% share of the Real Estate. Taxpayer A and Taxpayer B sell the Real Estate for a Gross Sales Price of $1,500,000. Taxpayer A’s share of the Gross Sales Price is $300,000 and Taxpayer B’s share of the Gross Sales Price is $1,200,000. Because the total Gross Sales Price exceeds the Withholding Threshold, the entire sale is subject to withholding even though Taxpayer A’s share of the Gross Sales Price is less than the Withholding Threshold.

Taxpayer A fails to provide the Withholding Agent with a Transferor’s Certification. The Withholding Agent must withhold $12,000 ($300,000 x .04) on behalf of Taxpayer A.

Taxpayer B provides the Withholding Agent with a Transferor’s Certification, on which Taxpayer B elects to use the alternative withholding calculation set forth in 830 62B.2.4(3)(d), and states that its Estimated Adjusted Basis in the Real Estate is $640,000 and that it has no expenses directly related to the Settlement. Taxpayer B’s Estimated Net Gain is $560,000 ($1,200,000 - $640,000). Because Taxpayer B is an individual, the applicable tax rate is the personal income tax rate under M.G.L. c. 62, § 4(b). Additionally, because Taxpayer B’s Estimated Net Gain is less than the taxable income threshold referenced in M.G.L. c. 62, § 4(d), the applicable tax rate is 5% and the additional 4% does not apply. The withholding amount for Taxpayer B is $28,000 ($560,000 x 0.05).