We're a free association library, a 501(c)(3) nonprofit chartered by the state, exempt from real property tax and sales tax, and primarily funded by our school district's tax levy. We took out a construction loan to renovate our historic building. Does our public-service mission and public funding make our mortgage exempt from mortgage recording tax too?

Plain-English summary

The petitioner is a free association library chartered and registered by the New York State Education Department since 1957, originally created by a 1912 deed of trust to a board of trustees to found and maintain a public library for a village. It now serves all residents of a school district, holds 501(c)(3) nonprofit status, is exempt from federal unemployment tax, and is exempt from New York real property tax and sales tax. It is primarily funded through tax payments levied by the school district. In March 2012 the library closed a $9,987,500 building loan — authorized by a taxpayer-approved proposition — to renovate and restore its historic landmark building, which would trigger roughly $104,868.75 in mortgage recording tax absent an exemption.

Article 11 of the Tax Law (§ 253) taxes mortgage recording generally, and § 252 bars any exemption "by reason of anything contained in any other statute" unless the mortgage recording tax statute itself, or a later more-specific enactment, provides one. None of the enumerated statutory exemptions (§§ 252, 252-a, 253.3) applied. The library argued instead for common-law tax immunity — the doctrine that taxing a mortgage held by a state agency or instrumentality is effectively an unconstitutional tax on the agency itself (20 NYCRR § 644.1(a)(1) codifies this for state agencies, instrumentalities, and political subdivisions).

The Department rejected that argument. Education Law § 253(2) itself draws a sharp line: a true "public" library is established by official government action (a municipality, district, or the legislature) and belongs wholly to the public; an "association" library, by contrast, is established and controlled by a group of private individuals, a close corporation, or trustees under a will or deed — exactly how this library began in 1912. Case law (French v. Board of Education) and the State Education Department's own guidance confirm that a free association library, despite its valuable public service, is a PRIVATE corporation — not a public corporation, "subordinate governmental agency," or "political subdivision." The library does correctly have specific statutory exemptions from real property tax (RPL § 420-a) and sales tax (Tax Law § 1116(a)(4)) — but no comparable statute exempts free association libraries from mortgage recording tax specifically, and because the library isn't a government instrumentality, it can't claim the common-law immunity either. So its construction loan mortgage is fully subject to MRT.

What this means for you

Association libraries and similar nonprofit public-service organizations

Existing real property tax and sales tax exemptions do NOT automatically extend to mortgage recording tax. Each tax has its own exemption rules, and mortgage recording tax specifically requires either an enumerated statutory exemption or true governmental-instrumentality status — serving a public mission and receiving public funding isn't enough.

School districts and boards backing library or similar nonprofit construction financing

Budget for mortgage recording tax as a real transaction cost when a taxpayer-approved bond or proposition funds a loan to an association library, historical society, or similar chartered-but-private nonprofit — don't assume public funding source converts the borrower into a tax-immune public entity.

Contrast with true government instrumentalities

This ruling is a useful counterpoint to opinions finding MRT exemption for entities like the Port Authority, NYPA, or a statutorily-declared public benefit corporation (see TSB-A-11(1)R, TSB-A-12(3)R): the key distinguishing fact is whether the entity's OWN enabling law makes it a public corporation/instrumendality, not merely whether it serves a public purpose or receives public money.

Common questions

Q: Does receiving most of its funding from a school district's tax levy make the library a public entity?
A: No — the Department found this irrelevant to the library's private-corporation status under Education Law § 253(2) and case law.

Q: The library already has real property tax and sales tax exemptions — why not mortgage recording tax too?
A: Those exemptions come from their own specific statutes (RPL § 420-a; Tax Law § 1116(a)(4)). No comparable statute exempts association libraries from mortgage recording tax, and Tax Law § 252 bars borrowing an exemption from an unrelated statute.

Q: What would make a nonprofit library's mortgage exempt?
A: Only if it were a true "public" library established by official government action (belonging wholly to the public) or otherwise qualified as a state agency, instrumentality, or political subdivision — an association library, by its statutory definition, is neither.

Citations and references

Statutes and regulations:

• Tax Law § 253 (mortgage recording tax on real property mortgages)
• Tax Law § 252 (no exemption by reason of any other statute, absent specific provision or later specific enactment)
• Tax Law §§ 252, 252-a, 253.3 (enumerated statutory exemptions, none applicable)
• 20 NYCRR § 644.1(a)(1) (common-law state-agency/instrumentality/political-subdivision immunity codified)
• Real Property Tax Law § 420-a (free association library real property tax exemption)
• Tax Law § 1116(a)(4) (free association library sales tax exemption)
• Education Law § 253(2) (statutory definitions distinguishing "public" and "association" libraries)

Case law cited in the opinion:

• Williamsburgh Power Plant Corp. v. City of New York, 255 A.D. 214 (2d Dep't 1938), aff'd 280 N.Y. 551 (1939) (later specific enactment governs over Tax Law § 252)
• Hotel Waldorf Astoria Corp. v. State Tax Commission, 86 A.D.2d 330 (3d Dep't 1982); City of New York v. Tully, 88 A.D.2d 701 (3d Dep't 1982) (common-law state-agency immunity doctrine)
• French v. Board of Educ., 424 N.Y.S.2d 236 (2d Dep't 1980) (a free association library is a private corporation, not a public corporation or political subdivision)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/mortgage_rec_ao_2013.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/mortgage/a13_1r.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Counsel
Advisory Opinion Unit

TSB-A-13(1)R
Mortgage Recording Tax
February 14, 2013

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M120403C

The Department of Taxation and Finance received a Petition for Advisory Opinion from
the name redacted (Petitioner). Petitioner asks whether it is subject to mortgage recording taxes
imposed by Article 11 of the Law on a construction loan it procured from name of bank redacted
(Bank) which is secured by a mortgage. We conclude that the recording of such a mortgage by
Petitioner is not exempt from mortgage recording taxes.
Facts
The Petitioner submits the following statement of facts as the basis for the requested
advisory opinion:
Petitioner is a free association library, chartered and registered by the Education
Department of the State of New York since 1957. The library was deeded to the first board of
trustees to promote public welfare by founding and maintaining a public library for the village
name redacted (Village). This was done by a deed of trust on June 17, 1912. The library now
serves all residents of name of school district redacted (school district). Petitioner is a non-profit
organization that enjoys tax exempt status pursuant to section 501(c)3 of the Internal Revenue
Code. The library is not required to pay federal unemployment taxes. Petitioner is exempt from
real property taxes and sales tax in the State of New York. Petitioner is primarily supported
through tax payments from the school district.
On March 16, 2012 Petitioner closed a building loan transaction with the bank in the sum
of $9,987,500.00. This is the sum provided for in the proposition which authorized the debt to
be carried by the taxpayers. The loan was procured pursuant to the terms of the proposition. The
proceeds of such loan are to be used to complete a renovation and restoration of the library
building, a historic landmark, located within the village. As a result of the loan closing a sum of
$104,868.75 would be due in accordance of with Article 11 of the NYS Tax Law.
Analysis
Article 11 of the New York State Tax Law (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. See Tax Law § 253. Section 252 of the Tax Law provides that “No mortgage of
real property situated within this state shall be exempt, and no person or corporation owning any
debt or obligation secured by mortgage of real property situated within this state shall be exempt,
from the taxes imposed by this article by reason of anything contained in any other statute, . . ”

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TSB-A-13(1)R
Mortgage Recording Tax
February 14, 2013

Nevertheless, the mortgage recording tax statute does enumerate certain exemptions. See
Tax Law §§ 252, 252-a, 253.3. None of the enumerated exemptions are applicable here.
Other exemptions arise under the common law, and still others apply by reason of
statutory provisions outside of the mortgage recording tax statutes. Specifically, in cases where a
conflict exists between section 252 of the Tax Law and a specific enactment relating to the same
subject matter, the later specific enactment governs. Williamsburgh Power Plant Corp. v. City of
New York, 255 A.D. 214 (2nd Dept. 1938), aff’d 280 N.Y. 551 (1939). The Petitioner correctly
notes that free association libraries are exempt from real property taxes and the New York State
and local sales tax. However, specific statutory provisions exist for these exemptions. See, Real
Property Tax Law §420-A; Tax Law §116(a)(4). Conversely, no specific statutory provisions
exempt free library associations from the mortgage recording taxes.
Finally, it is well established that State agencies enjoy immunity from taxation,
independent of the statutory exemptions, for property used in the public interest, on the theory
that imposition of a tax upon a mortgage held by a State agency is tantamount to a tax upon the
agency itself in violation of its immunity from taxation. Hotel Waldorf Astoria Corp. v. State
Tax Commission, 86 A.D.2d 330, 334 (3rd Dep’t 1982); City of New York v. Tully, 88 A.D.2d 701
(3rd Dep’t 1982). This principle was adopted into the mortgage recording tax regulations which
provide that the recording of mortgages where the mortgagor or mortgagee is New York or any
of its agencies, instrumentalities, or political subdivisions, is exempt from taxation to the extent
the New York State entity is immune from such taxation. See, 20 NYCRR §644.1(a)(1).
Petitioner contends that it serves a public purpose and it should enjoy exemption status as
it relates to the mortgage tax and asserts that it acts as a public corporation and as such exists for
the public benefit and no other. Petitioner further contends that as a public body it should be
entitled to the same exemption as municipal and state agencies. Petitioner maintains that
inasmuch as the taxpayers of the school district are paying for the construction loan the
exemption would directly benefit the taxpayers.
Thus the issue presented is whether free association libraries are agencies,
instrumentalities or political subdivisions of New York State such that they are immune from
taxation.
Education Law section 253(2), defines libraries as follows:
“The term ‘public’ library as used in this chapter shall be construed to mean a
library, other than professional, technical or public school library, established for free
public purposes by official action of a municipality or district or the legislature, where the
whole interests belong to the public; the term ‘association’ library shall be construed to
mean a library established and controlled, in whole or in part, by a group of private
individuals operating as an association, close corporation or as trustees under the
provisions of a will or deed; and the term ‘free’ as applied to a library shall be construed

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TSB-A-13(1)R
Mortgage Recording Tax
February 14, 2013

to mean a library maintained for the benefit and free use on equal terms of all the people
of a community in which the library is located.”
The Appellate Division has stated that “[i]n view of the definition of a free association
library contained in section 253 of the Education Law, it is clear that although such a library
performs a valuable public service, it is nevertheless a private organization, and not a public
corporation. (See, 6 Opns. St Comp, 1950, p 253.) Nor can it be described as a “subordinate
governmental agency” or a “political subdivision” (See, 1 Opns St Comp, 1945, p 487.) It is a
private corporation, chartered by the Board of Regents. (See 1961 Opns Atty Gen 105.).”
French v. Board of Educ., 424 N.Y.S. 2d 236 (2d Dep’t 1980)). In addition, the New York State
Education Department’s website also repeatedly notes that an association library is an
independent, “private” organization chartered by the New York State Board of Regents that is
not part of a municipality or a school district. The website goes on to state that because free
association libraries are not public entities, they are not subject to the civil service or municipal
finance laws (See, What is a Public Library District?, at http://www.nysl .nysed.
gov/libdev/libs/pldtools/guide/1what.htm.).
Accordingly, Petitioner is not exempt from the mortgage recording tax imposed under
Article 11 of the Tax Law because it does not fall within the enumerated mortgage recording tax
statutory exemptions, there is no statutory exemption outside of the mortgage recording tax that
specifically exempts free association libraries from the tax and free association libraries are not
an agency, instrumentality or political subdivision of New York State.

DATED: February 14, 2013

NOTE:

/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.