We're a public benefit corporation created by state law to build office facilities for the UN. Our enabling statute says our 'income and operations' are tax-exempt. If we record a mortgage to finance a new construction project, is that mortgage subject to mortgage recording tax?

Plain-English summary

The petitioner is a public benefit corporation organized under Chapter 345 of the Laws of 1968 for the public purpose of coordinating the development of office and other facilities near United Nations Headquarters in New York City, for use by the UN, UN missions, and related organizations. Its enabling statute declares that its creation and purposes are "for the benefit of the people of the city and state of New York," that it performs "an essential governmental function," and that its "income and operations... shall be exempt from taxation." The petitioner had already financed, built, and operated three office buildings near UN Headquarters (about 90% leased to the UN and its subordinate bodies), on land the City of New York owns or leases long-term to the petitioner.

In 2011, the enabling statute was amended (Chapter 137 of the Laws of 2011) to authorize the petitioner to finance and construct a new "UN Consolidation Project," subject to conditions including a signed Memorandum of Understanding between the Mayor and legislative leaders — which occurred on schedule. To finance the new project, the petitioner's financial advisors determined it would need to execute and record a mortgage on the new project as additional security for the bonds or other obligations issued.

New York's mortgage recording tax statute (Tax Law § 253) taxes recording of mortgages based on the debt secured, but the regulations (20 NYCRR § 644.1(a)(1)) exempt recording where the mortgagor or mortgagee is a state agency, instrumentality, or political subdivision, to the extent that entity is immune from taxation. The Department found the petitioner's own enabling statute settles the question: the Legislature made it "law" that the petitioner is a state instrumentality, and separately declared its operations tax-exempt. On that basis, mortgages the petitioner records to finance the new UN Consolidation Project are exempt from Article 11 mortgage recording tax. The opinion notes this conclusion is consistent with several prior Department opinions reaching the same result for other governmental instrumentalities (the NYS Energy Research and Development Authority, the Power Authority, and others).

What this means for you

Public benefit corporations and their bond counsel

If your enabling statute expressly declares your entity a state instrumentality performing an essential governmental function, with tax-exempt operations, that statutory language can be enough — on its own — to secure mortgage recording tax exemption on financing mortgages, without needing a separate common-law immunity analysis.

Lenders and financial advisors structuring public-benefit-corporation financings

Check the entity's enabling legislation for explicit tax-exemption and instrumentality language before assuming MRT applies; a clear statutory declaration can resolve the question directly, as it did here.

Common questions

Q: Does every public benefit corporation automatically get this exemption?
A: Not necessarily — this opinion turned on the specific enabling statute's explicit declarations that the entity is a state instrumentality performing an essential governmental function with tax-exempt operations. Read your own enabling act carefully.

Q: Did the Department need to look beyond the enabling statute?
A: No — the statute's own declaration of instrumentality status and tax-exempt operations was sufficient; the Department also noted the regulatory exemption (20 NYCRR § 644.1(a)(1)) and consistency with prior opinions for other instrumentalities.

Q: Can other public benefit corporations rely on this specific opinion?
A: No. It binds the Department only as to this petitioner and the facts and enabling statute described.

Citations and references

Statutes and regulations:

• Tax Law § 253 (mortgage recording tax on real property mortgages)
• Tax Law § 250.2 (increases in secured indebtedness deemed a taxable mortgage)
• 20 NYCRR § 644.1(a)(1) (exemption to the extent a NY State agency/instrumentality/political subdivision mortgagor or mortgagee is immune from taxation)
• Chapter 345 of the Laws of 1968, as amended by Chapter 137 of the Laws of 2011 (petitioner's enabling statute; Unconsolidated Laws §§ 9602-9613)

Prior opinions cited:

• TSB-A-94(1)R (NYS Energy Research and Development Authority exempt from MRT)
• TSB-A-11(1)R (Power Authority exempt from MRT)
• TSB-A-09(1)C, TSB-A-08(1)R, TSB-A-02(2)R, TSB-A-02(6)R (other recent opinions on governmental-instrumentality MRT exemption)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/mortgage_rec_ao_2012.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/mortgage/a12_3r.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-12(3)R
Mortgage RecordingTax
May 3, 2012

Office of Counsel
Advisory Opinion Unit

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M120203C

The Department of Taxation and Finance received a Petition for Advisory Opinion from
name and address redacted. Petitioner asks whether a mortgage recorded by or on behalf of
Petitioner is subject to mortgage recording taxes imposed by Article 11 of the Tax Law. We
believe that the recording of such a mortgage by Petitioner is exempt from mortgage recording
taxes.
Facts
The Petitioner submits the following statement of facts as the basis for the requested
advisory opinion:
Petitioner was organized under its enabling statute (Chapter 345 of the Laws of 1968,
hereinafter “Act”) for the public purpose of the coordinated development of office and other
facilities in an area contiguous to United Nations (UN) Headquarters in New York City for use
by the UN, missions to the UN and other UN related organizations and activities, thereby
materially assisting the effectuation of the purposes served by the UN and promoting the
interests of the State and City of New York and of the nation (§2.b and c of the Act; §9602.b and
c of the Unconsol. Laws). It is a "body corporate and politic constituting a public benefit
corporation" (§4.a of the Act; §9604.o of the Unconsol. Laws). The Legislature found and
declared that establishing UNDC "is in the public interest," that "it is necessary to grant to
[UNDC] the powers provided by [the Act]," and that "the exercise of the rights and powers
authorized [in the Act] will serve a public purpose" (§2.d of the Act; §9602d) of the Unconsol.
Laws).
Section 13 of the Act (§9613 of the Unconsol. Laws) provides:
"It is hereby found, determined and declared that the creation of the corporation
and the carrying out of its purposes is in all respects for the benefit of the people
of the city and state of New York and is a public purpose, and that the corporation
will be performing an essential governmental function in the exercise of the
powers conferred upon it by this chapter. The income and operations of the
corporation shall be exempt from taxation."
Pursuant to §5(3) of the Act (§9605(3) of the Unconsol. Laws), Petitioner has the power
to "make contracts, incur liabilities, borrow money at such rates of interest as the corporation
may determine, issue its notes, bonds and other obligations, and secure any of its obligations by

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TSB-A-12(3)R
Mortgage RecordingTax
May 3, 2012

mortgage or pledge of all or any of its real or personal property or any interest therein, wherever
situated." Further, pursuant to §5(6) of the Act (§9605(6) of the Unconsol. Laws), Petitioner has
the power to "mortgage or pledge, or create a security interest in, ... all or any of its real or
personal property, or any interest therein."
Pursuant to the Act, Petitioner has financed, constructed and operates three office
buildings on East 44th Street in Manhattan, New York City (the "existing buildings"), in close
proximity to the UN Headquarters. Approximately 90 percent of the office space in the existing
buildings is leased to and occupied by the UN and its subordinate bodies and agencies.
The City of New York has an ownership or a long-term leasehold interest in the existing
buildings, and in a portion of the land on which the existing buildings are located, in each case
subject to long-term leases between the City as landlord and Petitioner as tenant. The land
owned by the City and the office space in the existing buildings are exempt from real property
taxes. Petitioner pays no income taxes.
As provided in Chapter 137 of the Laws of 2011, the Act was amended as of July 15,
2011 to authorize Petitioner to finance and construct the UN Consolidation Project described in
Chapter 137, subject to specified conditions, including the signature of a Memorandum of
Understanding ("MOU") by the Mayor of New York City and the legislative leaders of the State
Legislature no later than October 10, 2011. The MOU, a copy of which is attached to the
Petition as Exhibit "B", was signed by the Mayor and the legislative leaders on October 5, 2011.
All conditions specified in Chapter 137 and in the MOU are expected to be satisfied at the same
time or before Petitioner issues its bonds or other obligations to finance its construction of the
UN Consolidation Project. All space in the new building will be leased by Petitioner to the UN.
The Petitioner has retained a team of financial advisors to advise them on the structure
and security needed for the financing of the new Project. The financial advisors have expressed
the view that Petitioner will be required to execute and deliver a mortgage on the new Project
and thereafter have the mortgage recorded to provide additional security for the bonds or other
obligations that Petitioner issues to finance the Project.
Analysis
Article 11 of the Tax Law imposes taxes on the recording of mortgages on real property,
based on the principal debt or obligation secured by the mortgage being recorded (Tax Law
§253). In addition, a contract or agreement by which the indebtedness secured by any mortgage
is increased is deemed a mortgage of real property and is taxable as such upon the amount of the
increase (Tax Law §250.2). The mortgage recording tax regulations state that where the
mortgagor or mortgagee is New York State or any of its agencies, instrumentalities, or political

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TSB-A-12(3)R
Mortgage RecordingTax
May 3, 2012

subdivisions, the recording of a mortgage is exempt to the extent the New York State entity is
immune from such taxation. See 20 NYCRR §644.1(a)(1).1
The provisions of the Petitioner’s enabling Statute make it law that Petitioner is an
instrumentality of the State of New York. Further, its operations are exempt from taxation by
law. Therefore, we advise that mortgages recorded by Petitioner are exempt from the mortgage
recording taxes imposed by Article 11 of the Tax Law.

DATED: May 3, 2012

NOTE:

1

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

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. The information provided in this document does
not cover every situation and is not intended to replace the law or change its meaning.

See TSB-A-94(1)R (Jan. 28, 1994) (NYS Energy Research and Development Authority exempt from mortgage
recording tax); TSB-A-11(1)R (Power Authority exempt from mortgage recording tax). For other recent Advisory
Opinions on this issue, see TSB-A-09(1)C, TSB-A-08(1)R, TSB-A-02(2)R and TSB-A-02(6)R.