We're restructuring NBC's occupancy of Rockefeller Center through a complex package: assigning an old RCA lease to NBC (its GE sibling), amending and consolidating existing leases, creating a brand-new 37-year Tower Lease, a separate Studio-RCA West Lease with an eventual purchase option, additional-space leasing rights, and an Industrial Development Agency sale-leaseback for tax benefits. Which pieces of this multi-part transaction trigger New York's Real Property Transfer Gains Tax?

Plain-English summary

This tax no longer exists. New York's Real Property Transfer Gains Tax (former Article 31-B of the Tax Law) was a 10% tax on the GAIN from transferring New York real property where consideration was $1 million or more. It was repealed for any transfer occurring on or after June 15, 1996. This 1988 opinion is preserved here for historical and research value, not as current law.

RCP Associates and Rockefeller Center Properties, both controlled by The Rockefeller Group, Inc. (RGI), proposed a sweeping restructuring of NBC's long-term occupancy at Rockefeller Center, which then held (together with sibling company RCA) about 19% of the Center's rentable space. RCA and NBC, both wholly-owned by General Electric, were consolidating: RCA had just liquidated into GE, with GE about to assign RCA's lease to NBC. Beyond that assignment, the proposal included: exercising all currently-available lease renewal options; consolidating and restating the existing leases with various incidental amendments; a brand-new 37-year Tower Lease starting in 2015 when the current leases expire; a separate Studio-RCA West Lease (also starting 2015, running through 2022) that would come with a future, no-separate-payment option letting NBC buy that specific space at its 2022 fair market value; rights to lease additional space in the building; and an elaborate Industrial Development Agency (IDA) sale-leaseback structure -- condominiumizing part of the Center, deeding those units to the IDA, and leasing them back to RGI (with NBC as a subtenant) -- designed purely to unlock IDA tax benefits for NBC.

The Department analyzed each component separately. The RCA-to-NBC lease assignment qualified as an exempt "mere change of identity," since transfers between a corporation's wholly-owned subsidiaries (here, both GE subsidiaries) fall within that exemption. Renewing existing options and making incidental lease amendments (adding definitions for the new condominium structure, consolidating ancillary agreements for convenience, adjusting subletting rights and the rent-escalation formula) were found NOT substantial enough to create a new, separately-taxed lease. The 37-year Tower Lease, even counting all its renewal periods, simply never crossed the 49-year threshold that triggers gains tax on an ordinary leasehold -- so it wasn't taxable at all, full stop. Leases for the Additional Space and First Offer Space also escaped tax because they lacked any purchase option and didn't cover substantially all the Center's premises. The entire IDA sale-leaseback sequence -- despite its complexity (condominium creation, deeds to a government agency, an overlease, a subtenancy, and eventual reversion) -- didn't amount to a taxable transfer either. The one exception: the Studio-RCA West Lease, BECAUSE it came bundled with NBC's future purchase option, was taxable regardless of its own term -- a leasehold coupled with a purchase option is always taxable under the statute. The Department fixed the taxable consideration at the present value of the net rental payments running from the lease's 2015 start date through October 1, 2022 (the last date the option could be exercised), with the tax becoming due once the lease actually commenced in 2015.

What this means for you

Large commercial landlords restructuring multi-tenant, multi-decade leasing arrangements

Under this now-repealed tax, a complex package deal wasn't taxed as one lump transaction -- each COMPONENT (assignment, renewal, new lease, purchase option, sale-leaseback) got its own independent gains-tax analysis, and even a purchase option granted "without separate consideration" was enough to make an otherwise-exempt lease taxable.

Corporate real estate departments consolidating leases held by sibling subsidiaries

This opinion confirms the wholly-owned-subsidiary exemption (former 20 NYCRR § 590.50.4) reaches a lease ASSIGNMENT between two subsidiaries of the same parent, not just a direct transfer from parent to subsidiary -- useful in corporate reorganizations involving multiple commonly-controlled entities.

Real estate attorneys structuring a purchase option deep into a future lease term

The Studio-RCA West Lease's tax treatment here -- present-value rent through the LAST exercise date of the option, not the full lease term -- is a clean template for calculating consideration on a lease-plus-future-option structure, especially one where the option doesn't vest until decades after the lease begins.

Common questions

Q: Does this multi-part transaction analysis still matter today?
A: Not under this specific tax -- it was repealed for transfers on or after June 15, 1996. Current New York real estate taxes have their own separate rules for lease restructurings and purchase options.

Q: Why was the Tower Lease exempt but the nearly-identical Studio-RCA West Lease taxable?
A: The Tower Lease had NO purchase option, so it was tested only against the 49-year threshold (which it didn't cross, even with renewals). The Studio-RCA West Lease DID come with a future purchase option -- and a lease coupled with a purchase option is taxable regardless of its own term length.

Q: Why wasn't the option itself separately priced?
A: The Proposal granted NBC the purchase-option right "without any separate consideration" -- but that didn't matter to the tax analysis; the statute cares about the PRESENT VALUE OF RENT during the period the option remains exercisable, not a separately stated option price.

Q: Can another large landlord doing a similar multi-part lease restructuring rely on this exact ruling?
A: No, apart from the repeal -- an Advisory Opinion binds the Department only as to the petitioner and facts presented, and this opinion's own follow-up (TSB-A-88(3)R) shows the Department reconfirmed its analysis only once it reviewed the actual FINAL signed documents.

Citations and references

Statutes and regulations:

• former Tax Law § 1440.7 (a leasehold is a taxable transfer only if combined term/renewals exceed 49 years, substantial capital improvements are made, and it covers substantially all the premises; a leasehold coupled with a purchase option is taxable regardless of term)
• former Tax Law § 1440.1(b) (consideration for a lease-plus-option transfer is the present value of net rental payments plus any separate consideration paid for the option)
• former Tax Law § 1443.5 (exemption for a transfer that is a mere change of identity or form of ownership, with no change in beneficial interest)
• former 20 NYCRR § 590.50.4 (a transfer by a corporation to its wholly-owned subsidiary is exempt as a mere change of identity)
• former 20 NYCRR § 590.26, § 590.27 (methodology for calculating the present value of net rental payments for a taxable lease-plus-option transfer)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/real_prop_tran_ao_1988.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/real_property/a88_1r.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-88 (1) R
Real Property Transfer
Gains Tax
March 25, 1988

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M880202A

On February 2, 1988, a Petition of Advisory Opinion was received on behalf of RCP
Associates and Rockefeller Center Properties located at 1230 Avenue of the Americas, New York,
New York 10020.
The issues raised concern the application of the Real Property Transfer Gains Tax imposed
by Article 31-B of the Tax Law (hereinafter the "gains tax") to the following factual situation.
RCP Associates (hereinafter "RCPA"), a limited partnership owns the bulk of the land and
buildings at Rockefeller Center (hereinafter the "Center"). RCPA in turn leases the Center to
Rockefeller Center Properties (hereinafter "RCP"), a general partnership. The partners of RCPA and
RCP are The Rockefeller Group, Inc., (hereinafter "RGI"), and other entities owned directly and
indirectly by RGI.
At some time in the future, the fee and leasehold interests held by RCP and RCPA may be
combined into a single owner (e.g., by merging RCP and RCPA), but the timing, method and other
details of the merger remain unresolved.
References to RGI in this Petition are intended to encompass both RGI and the appropriate
RGI - controlled entity (i.e., RGI, RCP or RCPA, as the case may be) .
Ail the real estate interests owned by RCP and RCPA, including the leasehold, are
encumbered by a $1.3 billion mortgage securing a loan of the same amount from Rockefeller Center
Properties, Inc. to both RCP and RCPA.
RGI has negotiated with the National Broadcasting Company (hereinafter "NBC") a proposal
with regard to the occupancy by NBC of the Center. The Center consists of a number of
interconnected buildings, including the buildings at 30 Rockefeller Plaza. Most of the buildings,
including all of 30 Rockefeller Plaza, lie between 48th Street, 51st Street, 5th Avenue and Avenue
of the Americas in the City of New York. Ail of these buildings are operated as a single economic
unit under common management.
Most of the documents relating to the proposal have not yet been drafted, but the basic terms
of the contemplated agreements are set forth in a letter agreement between RGI and NBC
(hereinafter the "Letter Agreement") and accompanying "Proposal to National Broadcasting
Company for NBC's Occupancy of Space in Rockefeller Center" (hereinafter the "Proposal").
Under an existing lease (hereinafter the "NBC Lease"), NBC presently occupies space in the
buildings comprising 30 Rockefeller Plaza. The space subject to the NBC Lease constitutes 16% of
the total rentable area in the Center.

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

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

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Real Property Transfer
Gains Tax
March 25, 1988

Under a separate agreement (hereinafter the "RCA Lease") the RCA Corporation (hereinafter
"RCA") leased space in 30 Rockefeller Plaza equal to 3% of the total rentable area of the Center.
Together, the premises leased by NBC and RCA in 30 Rockefeller Plaza constitute the "Existing
Space." For purposes of this Petition, the Existing Space will be divided into three categories, (1)
Tower Space, (2) Studio Space and (3) RCA West Space. The space that was leased to RCA is
occupied entirely by NBC.
RCA and NBC are both directly or indirectly wholly - owned subsidiaries of General Electric
Corporation (hereinafter "GE"). On December 31, 1987, RCA was liquidated into GE. At that time,
GE succeeded to RCA's position under the RCA Lease. It is anticipated that GE will assign the RCA
Lease to NBC in the near future.
Both the NBC and RCA Leases commenced on October 1, 1982 and run through September
20, 1994, with options to renew through September 30, 2015.
The New York City Industrial Development Agency (hereinafter "IDA") has agreed to
participate in this transaction as described herein. IDA's participation may result in a number of
benefits to NBC (hereinafter the "IDA Benefits").
Under the Proposal, RGI will grant NBC several separate and distinct rights with respect to
the Existing Space and certain other space in 30 Rockefeller Plaza now occupied by tenants other
than NBC. These rights are as follows:
(1)

RGI will now grant NBC a new lease with respect to the Tower Space (hereinafter
the "Tower Lease"), commencing in the year 2015, upon the expiration of the NBC
and RCA Leases. Its initial term will be 7 years at a specified rent. There will be three
successive 10 year renewal periods, at a rent to be determined by a formula contained
in the Tower Lease.

(2)

RGI will now grant NBC a separate lease covering the Studio and RCA West Spaces
(the "Studio-RCA West Lease"). Like the Tower Lease, the Studio - RCA West
Lease will not commence until 2015 and will run until 2022 with three additional l0
year renewal periods. RGI will also insist, as part of the final set of agreements with
NBC, that the terms of the Tower Lease and the Studio-RCA West Lease be
coterminous, unless NBC exercises the Purchase Option as defined below.

(3)

Without any separate consideration, RGI will grant NBC the right to purchase on
October l, 2022, at its then fair market value, the space then leased by NBC in the
Studio and RCA West Spaces (hereinafter the "Purchase Option"). The Purchase
Option is exercisable only if the Tower Lease is renewed concurrently. Once the
Purchase Option is exercised, NBC becomes obligated to purchase all the space then
leased by NBC in the Studio and RCA West Spaces, and cannot opt to buy a lesser
amount. After NBC's purchase of the Studio and RCA West Spaces, RGI will have
the option to reacquire from NBC the Studio and RCA West Spaces at fair market
value upon, inter alia, NBC's decision to resell the Studio or RCA West Spaces or to

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March 25, 1988

use the Studio and RCA West Spaces in ways other than those specified in the
Proposal (the "Repurchase Option").
(4)

RGI will also grant NBC an option to lease (the "Option to Lease") up to an
additional 387,000 square feet of space in 30 Rockefeller Plaza (hereinafter
"Additional Space") in 1994 or any earlier date the Additional Space becomes
available. NBC will also receive a right of first offer (the "Right of First Offer") to
lease another 523,000 square feet in addition to any of the Additional Space as to
which NBC has not exercised its Option to Lease in 30 Rockefeller Plaza (the "First
Offer Space"). If NBC avails itself of the Additional Space, the terms of the
associated leases will be coordinated with those of the RCA and NBC Leases. The
terms of the leases covering the First Offer Space would probably not be identical
with those of the RCA and NBC Leases.

(5)

NBC will exercise all options (all of which are currently exercisable) to renew the
NBC and RCA Leases. At this time, RGI will also consent (pursuant to the terms of
the NBC and RCA Leases) to certain renovations NBC desires to make to the
Existing Space. The renewal options as set forth in the current NBC and RCA Leases
provide for rents to be reset at fair market value (as of given dates in the future) and
to refer any dispute about that amount to arbitration. The parties have negotiated the
exact amount of that rental, which reflects, among other things, certain improvements
to be made under the NBC Lease and the IDA Benefits. The parties also are making
certain incidental amendments to the RCA and NBC Leases, such as: (1) the addition
of several definitions to take into account the creation of the condominium units in
the IDA Sale-Leaseback (2) for the sake of corporate administration convenience,
incorporating within the NBC Lease the terms of certain ancillary agreements
between RGI and NBC, (3) changes in certain NBC rights with respect to subletting
and assignment and the sharing of subletting profits and (4) changes in the rent
escalation clause.

(6)

Strictly as an accommodation to NBC, RGI will grant NBC the right to require that
RGI enter into a sale-leaseback transaction (analogous to a financing arrangement)
with the IDA, exercisable any time after notice of exercise of the renewal options
under the RCA and NBC Leases. Expectations are that NBC will exercise this right
in tandem with its entering into the Tower and Studio-RCA West Leases. It is
contemplated that, by placing record title to the Existing Space in the IDA, NBC will
be able to secure the IDA Benefits. For purposes of this Petition all steps
contemplated by this paragraph will be referred to as the IDA Sale-Leaseback.

To accomplish the securement of IDA Benefits, RGI would submit a portion of the Center
to condominium units corresponding to the Existing Space (subject to the RCA, NBC, Tower and
Studio-RCA West Leases). Immediately thereafter, the IDA would lease the condominium units back

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Real Property Transfer
Gains Tax
March 25, 1988

to RGI for a term coextensive with the duration of the IDA Benefits (a period of approximately 35
years) at a nominal rent. Under the RCA and NBC Leases, NBC would then become a subtenant of
RGI. Each deed to the IDA would provide that title to the Existing Space would revert to RGI upon
the earlier of the expiration or termination of NBC's subtenancy or the expiration of the IDA
Benefits. In lieu of this reverter mechanism, the final set of documents may use a purchase option
for a nominal amount (e.g, $10) to put record title to the portions of the Center conveyed to the IDA
back into the hands of RGI.
As an administrative convenience, the RCA and NBC Leases, together with certain currently
existing ancillary agreements, may be consolidated and restated as a single document. This step
would occur contemporaneously with entering into the agreements described. Under no
circumstances would the terms of the Proposal result in NBC's leasing as much as 90% of the total
rentable space in either 30 Rockefeller Plaza or the entire Center, even if all options and renewals
(including any rights to the First Offer and Additional Spaces) were to be exercised by NBC. The
petitioners contend the following with respect to the foregoing pertinent facts:
(1)

Both the assignment of the RCA Lease by GE to NBC and the subsequent
consolidation and restatement of the RCA and NBC Leases are exempt from the
gains tax.

(2)

NBC's immediate exercise of all renewal options under the RCA and NBC Leases,
along with certain amendments to the RCA and NBC Leases, does not subject the
RCA and NBC Leases to any gains tax.

(3)

The creation of the Tower Lease is not a taxable event for purposes of the gains tax.

(4)

The creation of the Studio-RCA West Lease is taxable only to the extent that the
present value, on the date the lease commences, of the net rents under the StudioRCA West Lease from that commencement date through October 1, 2022, the last
exercise date, exceeds RGI's original purchase price in the Center properly allocable
to the Studio and RCA West Spaces. The tax will be due on October 1, 2015 when
the Studio-RCA West Lease commences.

(5)

The creation of leases covering the Additional or First Offer Spaces, pursuant to
either the Right of First Offer or Option to Lease, are not taxable events for purposes
of the Gains Tax.

(6)

All aspects of the IDA Sale-Leaseback (including, but not limited to, the conveyance,
reconveyance (or reversion, as the case may be), lease and sublease) with regard to
the Existing, First Offer and Additional Spaces fail to constitute taxable transfers for
purposes of the Gains Tax.

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TSB-A-88 (1) R
Real Property Transfer
Gains Tax
March 25, 1988

Section 1443.5 of the Tax Law provides an exemption from the gains tax to the extent that
a transfer of real property, however effected, consists of a mere change of identity or form of
ownership or organization, where there is no change in beneficial interest. Also, gains tax regulations
section 590.50.4 provides that transfers by a corporation to its wholly owned subsidiary are transfers
which would be exempt from the gains tax within the meaning and intent of section 1443.5 of the
Tax Law. Since NBC is a wholly owned subsidiary of GE, the assignment of the RCA Lease by GE
to NBC would be exempt from the gains tax.
Where an existing lease is modified, such modifications will result in the creation of a new
lease for gains tax purposes if the modifications are determined to be substantial in nature. The
determination of what constitutes substantial modifications to an existing lease must be made on a
case by case basis. If the modifications made to an existing lease are determined to be substantial in
nature, a new lease is deemed to be created for gains tax purposes, the term of which would start on
the effective date of such modifications. Changing the date on which the options to renew the RCA
Lease and the NBC Lease may be exercised, coupled with actually exercising such options and
making the amendments to the RCA and NBC Leases as set forth in the facts presented in the
Petition, do not constitute substantial modifications to such Leases. Therefore, a new lease or leases
are not created for purposes of the gains tax as a result of such changes and amendments.
Based on the aforementioned, the consolidation and restatement of the RCA and NBC Leases
would not, in and of itself result in the imposition of the gains tax.
The sum of the term of the Tower Lease, including options to renew, is thirty-seven years.
Accordingly, the creation of the Tower Lease would not be a transfer of real property as defined at
section 1440.7 of the Tax Law, and would not be subject to the gains tax.
The creation of a lease for a term of less than forty-nine years which contains an option to
purchase the real property is subject to the gains tax. The consideration for such a transfer is the
present value of the net rental payments under the lease plus the consideration paid for the option
to purchase (Tax Law section 1440.1(b)). Rental payments for periods that occur after an option is
no longer exercisable are not included in the calculation of the present value of the rental payments.
If the sum of the present value of the net rental payments and the price paid for the option is one
million dollars or more the transfer is subject to the tax. (Tax Law section 1440.1) The present value
of the net rental payments should be determined as set forth in section 590.26. (Section 590.27 of
Gains Tax Regulations)
Based on the foregoing, the creation of the Studio-RCA West Lease coupled with the
granting of the option to purchase is a taxable transfer of real property effective upon the
commencement of such lease (October 1, 2015). The consideration for purposes of the gains tax will
be equal to the present value of the net rental payments that occur between October 1, 2015 and
October 1, 2022, which is the last date that the option to purchase is exercisable.

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TSB-A-88 (1) R
Real Property Transfer
Gains Tax
March 25, 1988

The leases created pursuant to the Right of First Offer or Option to Lease will not include an
option to purchase and will not be for substantially all the premises constituting the real property.
Therefore, based on the provisions of section 1440.7 of the Tax Law, the creation of such leases
would not be transfers of real property for purposes of the gains tax.
All aspects of the IDA Sale-Leaseback with regard to the Existing, First Offer and Additional
Spaces as described in the Petition will not result in the gains tax being imposed.

DATED: March 25, 1988

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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