We're a section 1411 not-for-profit local development corporation administering a federally-seeded revolving loan fund for Albany County businesses. Are the mortgages we take as collateral on our loans exempt from New York's mortgage recording tax?

Plain-English summary

The Albany County Business Development Corporation is a not-for-profit local development corporation (LDC) incorporated under section 1411 of the Not-For-Profit Corporation Law. It administers the Al Tech Trust Fund, which traces back to a 1976 federal Economic Development Administration grant of $10 million to New York State to fund a loan to the Al Tech Specialty Steel Corporation for purchasing two steel manufacturing plants (one in Albany County, one in Chautauqua County). As Al Tech repaid the loan, the State was authorized to recycle the repayments into a revolving trust fund for economic development in those two counties. In 2006, the corporation was authorized to operate the Albany County portion as the "Albany County Al Tech Revolving Loan Fund Program," receiving the allocated fund assets, outstanding loans, and cash balances, and making loans to Albany County businesses to promote economic growth and job retention — with the loans collateralized by mortgages the corporation records.

Tax Law § 252 generally bars any mortgage recording tax exemption arising from "anything contained in any other statute." But Not-For-Profit Corporation Law § 1411(f) provides its own specific exemption: the "income and operations" of section 1411 corporations "shall be exempt from taxation." Following the established rule that a later, more specific statute governs an earlier, general one on the same subject (Williamsburg Power Plant Corp. v. City of New York; First National Bank and Trust Co. v. Village of Saltaire), and consistent with its own prior opinion reaching the same result for another section 1411 LDC (Greater Syracuse Business Development Corporation, TSB-A-95(16)R), the Department concluded that mortgages given to the Albany County Business Development Corporation to secure its Al Tech Trust Fund loans are exempt from mortgage recording tax.

What this means for you

Local development corporations administering federally-seeded revolving loan funds

The section 1411 mortgage recording tax exemption applies to mortgages securing loans made from a revolving fund program, not just to mortgages tied to your organization's original core mission — what matters is your section 1411 incorporation status, not the specific loan program's funding source or history.

Small businesses borrowing from a county-level LDC revolving loan fund

Expect your collateral mortgage to the LDC itself to be exempt from mortgage recording tax, which can meaningfully reduce closing costs compared to a conventional bank mortgage of the same size.

Common questions

Q: Does the federal origin of the loan fund (an EDA grant) matter to the exemption analysis?
A: No — the exemption traces entirely to the corporation's own incorporation under Not-For-Profit Corporation Law § 1411, not to how the underlying loan fund was originally capitalized.

Q: Is this the first time the Department reached this conclusion for a § 1411 LDC?
A: No — the opinion cites its own prior 1995 opinion for the Greater Syracuse Business Development Corporation reaching the identical result, and the Department reached the same conclusion again the following year for the Brooklyn Navy Yard Development Corporation (TSB-A-08(1)R).

Q: Can another LDC rely on this specific opinion?
A: No. It binds the Department only as to this petitioner and these facts, though the reasoning is the Department's established, consistently-applied position for section 1411 LDCs.

Citations and references

Statutes and regulations:

• Tax Law § 252 (no exemption by reason of any other statute, absent conflict resolution via later specific enactment)
• Not-For-Profit Corporation Law § 1411(f) ("income and operations" of section 1411 corporations exempt from taxation)

Case law and prior opinions cited:

• Williamsburg Power Plant Corp. v. City of New York, 255 App. Div. 214, aff'd 280 N.Y. 551 (later specific enactment governs earlier general enactment)
• First National Bank and Trust Co. v. Village of Saltaire, 256 App. Div. 156
• Greater Syracuse Business Development Corporation, TSB-A-95(16)R (December 22, 1995) (same exemption for another section 1411 LDC)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/mortgage_rec_ao_2007.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/mortgage/a07_3r.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Taxpayer Guidance Division

TSB-A-07(3)R
Mortgage Recording Tax
June 26, 2007

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M070329A

On March 29, 2007, the Department of Taxation and Finance received a Petition for
Advisory Opinion from the Albany County Business Development Corporation, 107 Washington
Avenue, Albany, New York 12210.
The issue raised by Petitioner, Albany County Business Development Corporation, is
whether mortgages recorded by a not-for-profit local development corporation incorporated or
reincorporated pursuant to section 1411 of the New York State Not-For-Profit Corporation Law
are exempt from the mortgage recording taxes imposed by Article 11 of the Tax Law.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner is a not-for-profit local development corporation incorporated under section
1411 of the New York State Not-For-Profit Corporation Law. Petitioner is the administrator of
the Al Tech Trust Fund whose operations involve making loans to businesses in Albany County
for the purpose of promoting economic growth and business retention in the county. These loans
are collateralized by mortgages that are recorded by Petitioner.
In 1976, the Economic Development Administration of the U.S. Department of
Commerce awarded a $10 million grant (the "Grant") under Title IV of the Public Works and
Economic Development Act to the New York State Department of Commerce (the "State"). The
purpose of the Grant was to make a loan to the Al Tech Specialty Steel Corporation to purchase
two steel manufacturing plants, one in Albany County and the other in Chautauqua County. The
State was authorized to use the loan repayments to establish the Al Tech Trust Fund (the "Fund")
to make loans for economic development in these two counties.
In 2006, Petitioner was authorized to operate the Albany County Al Tech Revolving
Loan Fund Program in accordance with the Al Tech Loan Fund's business plan ("Al Tech's
Business Plan"), and the portion of the Fund allocated to Albany County was transferred to
Petitioner, along with any loans outstanding, cash balances, and other assets. Petitioner is
required to hold, invest, and distribute Fund assets in accordance with the terms of the Grant and
Al Tech's Business Plan, which both contemplate Petitioner making loans to businesses in
Albany County for the purpose of promoting economic growth and business retention in the
county.
Applicable law and regulations
Section 252 of the Tax Law provides, with certain exceptions, that "No mortgage of real
property situated within this state shall be exempt, and no person or corporation owning any debt

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TSB-A-07(3)R
Mortgage Recording Tax
June 26, 2007

or obligation secured by mortgage of real property situated within this state shall be exempt,
from taxes imposed by this article by reason of anything contained in any other statute, . . ."
Section 1411(f) of the Not-For-Profit Corporation Law provides that "The income and
operations of corporations incorporated or reincorporated under this section shall be exempt from
taxation."
Opinion
Notwithstanding the language of section 252 of the Tax Law, the Tax Department has
considered claims for exemption from various public authorities in New York State based on tax
exemptions in their creating statutes and has ruled in certain cases that the recording of
mortgages issued by the authorities were exempt from the tax imposed by Article 11 of the Tax
Law. This position is consistent with the general rule that where a conflict or variance exists
between two enactments relating to the same general subject matter, a later special statute takes
precedence against a general statute, and the prior general statute must yield to the later specific
or special statute. (Williamsburg Power Plant Corp. v City of New York, 255 App Div 214, affd
280 NY 551; First National Bank and Trust Co. v Village of Saltaire, 256 App Div 156).
Therefore, in accordance with the rationale set forth in Williamsburg Power Plant Corp.
v City of New York, supra, and First National Bank and Trust Co. v Village of Saltaire, supra,
since Petitioner is incorporated under section 1411 of the Not-For-Profit Corporation Law, and
since section 1411(f) of the Not-For-Profit Corporation Law provides that the income and
operations of corporations incorporated or reincorporated under such section shall be exempt
from taxation, mortgages given to Petitioner are exempt from the mortgage recording taxes
imposed by Article 11 of the Tax Law. See Greater Syracuse Business Development
Corporation, Adv Op Comm T&F, December 22, 1995, TSB-A-95(16)R.

DATED: June 26, 2007

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Taxpayer Guidance Division

An Advisory Opinion is issued at the request of a person or entity.
It is limited to the facts set forth therein and is binding on the
Department only with respect to the person or entity to whom it is issued
and only if the person or entity fully and accurately describes all relevant
facts. An Advisory Opinion is based on the law, regulations, and
Department policies in effect as of the date the Opinion is issued or for the
specific time period at issue in the Opinion.