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If an ERISA Title I-governed pension plan owns real estate, are laws/ordinances imposing real estate taxes preempted by ERISA? There is a New York State Court of Appeals case holding that a real estate transfer tax is preempted, but is the rationale of the decision in that case followed around the country in the context of real estate taxes? I have no experience with this issue, so I would like to know what happens in real life with ERISA plans that own real estate.

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Not aware of anything either. In the few plans that we have that invest directly in real estate the trust pays the taxes as a Plan expense. Though none of our plans that do this are located in New York.

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What's the citation to the case. I never heard of such a theory using preemption for a plan I know that CA has imposed state ubit tax on an ATT welfare benefit plan. The question is could the gov entity take title to the property owned by the plan for a failure to pay taxes.

mjb

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The NY case is Morgan Guaranty Trust Co. v. Tax Appeals Tribunal, 587 N.Y.S. 2d (Ct. App. 1992). As noted the case involved a real property tansfer gains tax, not what I'm talking about when I say "real estate taxes." Shortly after the decision the NY Atty General issued an opinion saying the Morgan Guaranty opinion shouldn't apply to such real estate taxes. However, that was only the opinion of a state agency, and moreover my interest goes beyond New York State. It appears that the more recent U.S. Supreme Ct. cases addressing the "relate to" language of Section 514 of ERISA might weaken a preemption argument in the case of real estate taxes, but I'm not just trying to find out what goes on in the real world. Are taxes being paid on real estate in ERISA plans because nobody has thought long and hard about this issue, or because there is some on point case law which I am missing?

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The NY case is Morgan Guaranty Trust Co. v. Tax Appeals Tribunal, 587 N.Y.S. 2d (Ct. App. 1992). As noted the case involved a real property tansfer gains tax, not what I'm talking about when I say "real estate taxes." Shortly after the decision the NY Atty General issued an opinion saying the Morgan Guaranty opinion shouldn't apply to such real estate taxes. However, that was only the opinion of a state agency, and moreover my interest goes beyond New York State. It appears that the more recent U.S. Supreme Ct. cases addressing the "relate to" language of Section 514 of ERISA might weaken a preemption argument in the case of real estate taxes, but I'm not just trying to find out what goes on in the real world. Are taxes being paid on real estate in ERISA plans because nobody has thought long and hard about this issue, or because there is some on point case law which I am missing?

Since the above case was decided fed courts have narrowed the application of preemption so as to exempt state laws of general application that do not single out retirement plans for state action. The CA case is Hattem v. Schwarzenegger (Yes Arnold), 449 F3d 423 (2nd circuit 2006) which rejected ERISA preemption as a basis to prevent collection of $6M in CA UBIT. If you google the citation you will get a number of articles on why ERISA does not preempt state tax laws of general application. There is a NY tax decision imposing NY UBIT tax on a retirement plan, In Re McKinsey Master Retirement trust, NY Tax Tribunal Dec 817551, 5/8/03.

mjb

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