Two Rulings Concerning New York’s Mortgage Recording Tax
Tax Analysts’ State Tax Today reports on two advisoryopinions involving nonprofits and New York’s mortgage recording tax.
In the first, a municipal urban renewal agency,also deemed a public benefit corporation by state law, contracted to sell realestate to a not-for-profit corporation and extend a purchase money loan to thebuyer to facilitate its acquisition of the property. The agency will also hold a purchase moneymortgage on the property. The generalstatute imposing a mortgage recording tax contains no exception expresslyexempting entities such as the agency. Nonetheless,New York State’s Department of Taxation and Finance ruled that, because (1) theGeneral Municipal Law provides that the property, income and operations of amunicipal urban renewal agency are exempt from taxation; (2) this statutoryexemption was enacted after the enactment of the general taxing statute; and (3)the exemption is specific as to municipal urban renewal agencies, the exemptionstatute takes precedence over the taxing statute. The ruling is available electronically at2013 STT 201-20.
The second advisory opinion involves morecomplicated facts, and is probably more surprising in view of the economicrealities of the series of contemplated transactions. Here, the issue was similar to that in thefirst opinion: whether a mortgage recorded by New York City Land DevelopmentCorporation (“LDC”), a not-for-profit local development corporation charteredunder New York law, is exempt from New York’s mortgage recording tax. The petitioner proposed to lease realproperty from the LDC and then develop it with funds borrowed from banks. The bank loans will be secured by mortgagesagainst petitioner’s leasehold interest. The LDC initially will be a named mortgagee and will record the mortgages,but all of the rights under the mortgages will inure to the benefit of the banks. After recording the mortgages, the LDC willassign to the banks all of its mortgage interests. The general statute imposing a mortgagerecording tax contains no exception expressly exempting entities such as theLDC. However, the New YorkNot-For-Profit Law exempts from taxation “[t]he income and operations” ofa corporation incorporated thereunder. The New York Department of Taxation and Finance concluded that theearlier-enacted provisions of the mortgage recording taxing statute “must yieldto the exemption provisions contained in the 1969 law creating not-for-profitlocal development corporations.” The tax,therefore, “does not apply where LDC as mortgagee records the LDC mortgage, nordoes it apply to the recording of the eventual assignment of the Mortgage byLDC to Lenders.” The ruling is availableelectronically at 2013 STT 201-21.
JRB