As the New York State Teachers' Retirement System, I invest a significant portion of my pension funds in first mortgages on New York real property. Are those mortgages exempt from New York's mortgage recording tax based on my status as a state agency, even though I'm not listed among the specific statutory exemptions in Tax Law §§ 252 and 252-a?

Plain-English summary

This opinion is filed in New York's Real Property Transfer Gains Tax advisory-opinion series and its PDF header says "Real Property Transfer Gains Tax," but its actual question and holding are entirely about a DIFFERENT, still-active tax: the Mortgage Recording Tax (Tax Law Article 11). This appears to be a Department numbering/filing artifact from the era, not a substantive gains-tax ruling -- the analysis below covers what the opinion actually decides.

The New York State Teachers' Retirement System is a public pension fund created under Education Law Article 11, providing retirement benefits to roughly 240,000 teachers, administrators, and related school-system employees outside New York City. It's governed by a ten-member Retirement Board (with seats for the Board of Regents, the State Education Commissioner, the State Comptroller, and elected teacher representatives), its funds are held by the state Division of the Treasury, it's supervised by the State Insurance Department, and its records are subject to the Freedom of Information Law. As part of investing its funds for members' benefit, the System invests significant amounts in first mortgages on real property, including in New York State, and asked whether mortgages granted to it are exempt from the mortgage recording tax.

Tax Law §§ 252 and 252-a list specific statutory mortgage-recording-tax exemptions, and the Retirement System isn't named among them. But the Department relied on a broader, independent principle: state agencies enjoy tax immunity apart from the statutory exemption list, for property used in the public interest (citing Waldorf-Astoria v. State Tax Commission). The Retirement System had already been recognized, in prior rulings and case law, as a state agency or instrumentality for multiple other tax purposes -- exempt from federal income tax (per a 1945 IRS opinion), state and local sales/use tax, stock transfer tax, motor fuel tax, and real property tax (per New York State Teachers' Retirement System v. Srogi). The Department also rejected the idea that lending the funds out to private mortgagors defeats that immunity, since the underlying purpose -- funding public retirement benefits -- remains a public one even though the specific asset (a mortgage) involves a private borrower. Based on all of that, the Department ruled the Retirement System's New York mortgages exempt from the mortgage recording tax.

What this means for you

Public pension funds and other state instrumentalities holding real estate mortgages

Even without being specifically named in Tax Law §§ 252/252-a's exemption list, a body that's independently established as a state agency or instrumentality (through its governance structure, funding source, and prior recognition in other tax contexts) can claim mortgage-recording-tax immunity on that separate, non-statutory basis.

Lenders and borrowers dealing with government pension funds

If your mortgage lender is a state pension system or similar public instrumentality, don't assume mortgage recording tax automatically applies just because the lender isn't on the Tax Law §§ 252/252-a exemption list -- check whether the lender has established, or can establish, general state-agency tax immunity.

Accountants and attorneys handling multi-tax-type government-instrumentality questions

This opinion illustrates how the Department builds a state-instrumentality-immunity case by stacking prior recognitions across UNRELATED tax types (federal income tax, sales tax, stock transfer tax, motor fuel tax, real property tax) rather than requiring a fresh, tax-specific finding each time.

Common questions

Q: Is the New York State Teachers' Retirement System exempt from ALL New York taxes?
A: This opinion addresses mortgage recording tax specifically, but cites the System's established immunity across several other tax types as supporting evidence -- the underlying legal theory (independent state-agency tax immunity for property used in the public interest) is a general one, not limited to any single tax.

Q: Does lending mortgage money to private individuals or companies undercut the "public interest" rationale?
A: No, according to this opinion -- the Department found that the funds remain "primarily maintained for a public purpose" (funding pension benefits) even though the specific investment vehicle (a mortgage) involves a private borrower.

Q: Why is a mortgage-recording-tax opinion filed under the gains-tax index?
A: That appears to be a Department filing/numbering artifact rather than a substantive connection between the two taxes -- the opinion's actual text and holding concern only the Mortgage Recording Tax under Tax Law Article 11.

Q: Can another pension fund or state entity rely on this exact ruling?
A: No. An Advisory Opinion binds the Department only as to the petitioner and facts presented, though a similarly situated state agency could make an analogous independent-immunity argument on its own facts.

Citations and references

Statutes, regulations, and cases:

• Tax Law Article 11, §§ 252, 252-a (statutory mortgage recording tax exemptions -- the Retirement System is not listed here, but claimed immunity independent of this list)
• Education Law Article 11 and § 504 (creation and governance of the Teachers' Retirement System)
• Waldorf-Astoria v. State Tax Commission, 86 A.D.2d 330 (1982) (state agencies enjoy tax immunity independent of statutory exemptions for property used in the public interest; lending funds to a private party doesn't negate immunity if maintained for a public purpose)
• New York State Teachers' Retirement System v. Srogi, 84 A.D.2d 912 (1981), aff'd 56 N.Y.2d 690 (1982) (Retirement System is a state agency, exempt from real property taxation)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/real_prop_tran_ao_1987.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/real_property/a87_3r.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-87 (3) R
Real Property Transfer
Gains Tax
April 7, 1987

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. M870225B

On February 25, 1987, a Petition for Advisory Opinion was received on behalf of New York
State Teachers' Retirement System located at 10 Corporate Woods Drive, Albany, N.Y. 12211.
The issue raised is whether mortgages granted to the New York State Teachers' Retirement
System on real property located in New York State and recorded in New York State are exempt from
the mortgage recording taxes imposed by Article 11 of the Tax Law.
Petitioner states that the pertinent facts are as follows:
Petitioner is a public retirement system, created and existing by virtue of Article 11 of the
Education Law. It is one of the principal public retirement systems of New York State and, like the
New York State Employees' Retirement System, is a defined benefit public pension plan which is
statutorily charged with providing and administering retirement benefits for approximately 240,000
retirees and active members. Its membership consists of school teachers and administrators of the
public school districts in the State of New York outside of New York City, teachers in the
community colleges, colleges and university centers of the State University of New York, and certain
employees of the State Education Department. Petitioner is funded by monies it receives (1) from
the withholding of state aid otherwise payable to the various public school districts throughout the
state, (2) from direct payments from participating public employers in New York State, and (3) from
income derived from its investments.
The general administration and responsibility for Petitioner's operation is, by virtue of 504
of the Education Law, vested in a retirement board consisting of ten members. Three of the
retirement board members are elected by the Board of Regents of the University of the State of New
York. Two administrative officers of the state school system are appointed by the State
Commissioner of Education. The Comptroller of New York State or his appointee serves as a
member, and one board member, who must be a retired teacher, is appointed by the retirement board.
The remaining three members are elected by the members of Petitioner.
The head of the Division of the Treasury in the Department of Taxation and Finance is the
statutory custodian of Petitioner's funds. The operation of Petitioner is subject to the supervision of
the State Insurance Department. The records of Petitioner are available for public inspection in
accordance with the Freedom of Information Law.

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

FRANK J. PUCCIA, DIRECTOR

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER

-2­
TSB-A-87 (3) R
Real Property Transfer
Gains Tax
April 7, 1987

Petitioner is statutorily charged with the duty of investing its funds for the benefit of its
members. Petitioner has invested, and expects to continue to invest, a significant portion of its funds
in first mortgages on real property located in New York State, as well as elsewhere. The
documentation and structure of Petitioner-owned mortgages is similar to that of other governmental
investors. All income and benefit derived from Petitioner-owned mortgages inures to the benefit of
its members and retirees. In short, Petitioner's mortgage lending activities in New York State are
a significant and necessary aspect of its statutory duty to provide retirement benefits for its members
and retirees.
It is Petitioner's contention that it is an instrumentality or agency of the State of New York
and is, therefore, exempt from the imposition of the mortgage recording taxes imposed by Article
11 of the Tax Law.
Petitioner supports its contention by stating that a clear policy has emerged in New York
State exempting Petitioner from state and local taxation of all kinds by virtue of its status as an
agency of the State of New York. In addition, Petitioner states that in an opinion of the Internal
Revenue Service dated November 19, 1945, the System was held to be an instrumentality of New
York State engaged in an essential governmental function and, as such, exempt from federal income
taxation. In accordance with the above-mentioned policy, Petitioner is exempt from the payment of
state and municipal income taxes.
Petitioner also cites three opinions of the Tax Commission dated August 4, 1971, December
19, 1979, and January 11, 1980, respectively, in which Petitioner was held to be a state agency and,
therefore, exempt from sales and use taxes (8/4/71 opinion), stock transfer tax (12/19/79 opinion)
and motor fuel tax (1/11/80 opinion). Also cited by Petitioner is the Appellate Division decision,
New York Teachers' Retirement System v. Srogi, 84 A.D.2d 912(1981), aff'd 56 N.Y.2d 690 (1982),
in which it was held that Petitioner, because it is a state agency, is exempt from real property taxation
in New York State.
Sections 252 and 252-a of the Tax Law set forth various exemptions from the mortgage
recording taxes imposed under Article 11 of the Tax Law. Petitioner is not included among those
exempt by virtue of sections 252 and 252-a. However, it is well established that state agencies enjoy
an immunity from taxation independent of the statutory exemptions listed in section 252 of the Tax
Law for property utilized in the public interest. Waldorf-Astoria v. State Tax Commission 86 AD2d
330 (1982). It is also well established that Petitioner, like the New York State Employees'
Retirement System, is an agency or instrumentality of the state. Furthermore, the fact that
Petitioner's property consists of funds loaned to a private party does not negate immunity from
taxation since Petitioner's funds are primarily maintained for a public purpose. Waldorf-Astoria v.
State Tax Commission, supra.

-3­
TSB-A-87 (3) R
Real Property Transfer
Gains Tax
April 7, 1987

Accordingly, mortgages granted to the New York State Teachers' Retirement System on real
property located in New York State and recorded in New York State are exempt from the mortgage
recording taxes imposed by Article 11 of the Tax Law.

DATED: April 7, 1987

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.