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BOSTON–Realtors, developers and real estate advocacy groups are joining forces to fight an expanded tax on transactions proposition that is set to go before the state Senate later this week. The proposal, which has already won House approval, would expand the state’s deed tax to include transactions not currently covered, generating an additional $20 million in revenue for the state.

“Every business that buys or sells [real estate] or takes in partners is going to be affected,” David Begelfer, chief executive officer with the local branch of the National Association of Industrial and Office Properties, tells GlobeSt.com. “If a partner buys out another partner, if there’s a merger or acquisition, there will be a deed stamp tax on it even though there may be no deed.”

Gregory Vasil, acting chief executive officer of the Greater Boston Real Estate Board, tells GlobeSt.com that his office is lobbying the Senate along with NAIOP, the state’s real estate bar association and the Chamber of Commerce, to block the measure from becoming law. The bill was initially proposed in March by Gov. Mitt Romney who later dropped his support of the measure but the proposal was later inserted by the House into in a package of bills designed to close the state’s tax loopholes. If the Senate approves, the proposal could become law as early as this month.

“That is pretty fast for legislation on Beacon Hill, especially when there has been no study as to how it will affect development,” Vasil says of the swiftness with which the bill has moved through the legislature. Representative J. James Marzilli Jr., who added the provision on the House floor, claims many investors are avoiding the deed tax by putting property in a limited liability company or a partnership and then selling an interest in the partnership, thereby avoiding the deed tax. The new measure, Marzilli contends, would prevent “aggressive tax evaders” from circumventing the deed tax.

But Begelfer and Vasil claim the new tax would strap development, making it more costly to build or conduct real estate transactions in the Bay State. “This would drive the cost of a project up because the tax will be assessed again and again,” notes Vasil, adding that the tax could be assessed when the land is purchased, when a partner is bought out and again when another buyer is brought into a partnership. “It would drive up development costs.”

But Begelfer says approval of the tax would have an even more chilling effect on the state’s economy. “It just shows Massachusetts is not aware that it is keenly competitive with other states and countries in keeping businesses. It shows the state to be business unfriendly.” That, Begelfer says, could cost the Bay State even more than the $20 million in revenue it expects to raise as developers, investors and companies bypass Massachusetts for more favorable tax climates.

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