We're the public benefit corporation that manages Roosevelt Island. On a mixed-use development (the Octagon Project), we'll be named mortgagee on financing that's really funded by a private lender, and later assign our interest to that lender. Is that mortgage -- and any later assignments, supplements, or modifications of it -- exempt from mortgage recording tax as long as it's really us presenting it for recording?

Plain-English summary

Roosevelt Island's development has been carried out under a 99-year lease with the City of New York, originally through the New York State Urban Development Corporation (UDC, now Empire State Development Corporation), following a master plan by Philip Johnson and John Burgee. In 1984, the state Legislature created the Roosevelt Island Operating Corporation (RIOC) as a public benefit corporation and political subdivision, transferring UDC's rights and responsibilities for the island's development to RIOC. The island's General Development Plan was amended in 2003 to include restoring the historic Octagon Tower and constructing about 500 dwelling units nearby (the "Octagon Project"). A private developer, MEPT, funded over $10 million to fully restore the Octagon Tower's exterior under a lease with RIOC, then sub-leased and contracted with other entities to construct and operate the project.

MEPT now needs outside financing, secured by mortgages on its sub-leasehold interests (subordinated to both RIOC's leasehold and the underlying City lease). Under the arrangement, RIOC will initially be named mortgagee — alone or jointly with the lender — and will record the mortgage(s), even though all economic rights under the mortgage will actually belong to the lender; RIOC will then assign its recorded interest to the lender. In exchange for this exemption benefit, MEPT is obligated to pay RIOC the amount that mortgage recording tax would have cost, funds RIOC can use to improve and maintain Roosevelt Island facilities generally.

Article 11 of the Tax Law (§ 253) taxes mortgage recording, and none of its enumerated exemptions applied. But RIOC's 1984 enabling statute expressly declares that "creation of the corporation and the carrying out of its purposes is in all respects for the benefit of the people of the state," that RIOC performs "an essential governmental function," and that RIOC's "operations, property and moneys shall be free and exempt from taxation of every kind." The Act also empowers RIOC to acquire property and subject it to liens or security interests in connection with development — implying authority to record mortgages as part of exercising that power. Tax Law § 252 generally forbids MRT exemptions arising from other statutes, but where two enactments on the same subject conflict, the later, more specific one governs (Williamsburgh Power Plant Corp. v. City of New York) — and the 1984 RIOC Act postdates the 1909 mortgage recording tax provisions. So mortgage recording tax does not apply where RIOC records mortgages exercising its statutory powers, mirroring the Department's prior opinion on RIOC's earlier Southtown Project (TSB-A-01(5)R), whose facts were nearly identical.

The exemption extends forward: assignments, supplements, modifications, or amendments of such a mortgage remain exempt as long as they continue to secure the SAME principal debt (either because they don't create a new taxable mortgage under § 253, or because they qualify as a "supplemental mortgage" under § 255). If new or further indebtedness is added at any point, MRT applies only to that increase, and only if MRT would otherwise have been due on a mortgage securing that new debt.

What this means for you

Public benefit corporations financing development projects through private lenders

If your enabling statute contains a clear, later-in-time tax exemption and lien/mortgage powers, being named a "pass-through" mortgagee for a private lender's financing — with the intent to later assign your interest — can qualify for MRT exemption, provided the arrangement genuinely furthers your statutory development purpose.

Private developers and lenders on public-authority-adjacent projects

Structuring financing so the public benefit corporation is initially the named mortgagee (even though you're the true economic party) can save mortgage recording tax — but expect to compensate the authority for the tax savings, since that's typically how these arrangements are structured (as here, where MEPT pays RIOC the equivalent MRT amount).

Common questions

Q: Does the exemption survive if the mortgage is later assigned, supplemented, or amended?
A: Yes, as long as it continues to secure the same principal debt — no new taxable mortgage is created, and it may separately qualify as an exempt "supplemental mortgage" under Tax Law § 255.

Q: What if the debt increases later?
A: MRT would then apply, but only to the amount of the increase, and only if MRT would otherwise have been due on a mortgage for that additional debt.

Q: Can other Roosevelt Island projects or other public authorities rely on this specific opinion?
A: No. It binds the Department only as to this petitioner and these facts, though the Department notes the facts here are "nearly identical" to its prior Southtown Project opinion (TSB-A-01(5)R).

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)
• Tax Law §§ 252, 252-a, 253.3 (enumerated statutory exemptions, none applicable)
• Tax Law § 255 (supplemental mortgage treatment; no new tax if debt not increased)
• Unconsolidated Laws § 6395(2) (RIOC Act tax exemption for operations, property, and moneys)
• Unconsolidated Laws § 6388(5) (RIOC Act power to subject property to liens/security interests)
• Unconsolidated Laws § 6387(2) (DHCR Commissioner as RIOC Chair)

Case law and prior opinions cited:

• 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 earlier general enactment)
• City of New York v. State Tax Commission, 130 A.D.2d 890 (1987) (supplemental mortgage treatment under § 255)
• TSB-A-01(5)R (RIOC Southtown Project — same exemption, nearly identical facts)
• Hotel Waldorf-Astoria Corp. v. State Tax Commission, 86 A.D.2d 330; City of New York v. Tully, 88 A.D.2d 701; TSB-A-94(1)R (NYS Energy Research and Development Authority) — common-law state-agency immunity background

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/mortgage_rec_ao_2009.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/mortgage/a09_1r.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Counsel
Advisory Opinion Unit

TSB-A-09(1)R
Mortgage RecordingTax
March 17, 2009

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M090210A

On February 10, 2009, a Petition for Advisory Opinion was received from name and address redacted.
The Petitioner, name redacted, raises two issues:
Issue (1) Is the tax imposed by Article 11 of the New York State Tax Law and Chapter 26 of the
New York Administrative Code (collectively, the “mortgage recording tax”) due upon the recording of any
mortgage of property that is part of the Octagon Project on Roosevelt Island (the “Octagon Project”) where
(a) Petitioner is either the sole named mortgagee (whether as trustee, agent, nominee or otherwise) or a comortgagee (whether or not a private entity is the other co-mortgagee(s)); (b) Petitioner records the mortgage;
(c) the loan funds secured by the mortgage are provided by one or more persons or entities other than
Petitioner; and (d) at such times as mortgage recording taxes would be due and payable but for Petitioner’s
exemption, the mortgagor is obligated to pay Petitioner an amount equal to the mortgage recording taxes that
otherwise would have been payable, with all such amounts to be available to Petitioner to further develop
and maintain projects on Roosevelt Island.
Issue (2) Is mortgage recording tax due (upon the recording of the applicable instrument or
otherwise) if the mortgage referred to in Issue (1) is assigned, supplemented, modified or amended, or if any
mortgage so assigned, supplemented1, modified or amended is thereafter from time to time assigned,
supplemented, modified or amended to the extent that the then outstanding principal indebtedness secured by
the mortgage is not increased (or, if increased, whether mortgage recording tax is to be imposed only with
respect to any increase in the amount of secured indebtedness, and then only if mortgage recording tax would
otherwise have been required to be paid on such additional indebtedness).
Facts
The development of Roosevelt Island is a project of the New York State Urban Development
Corporation (now known as the Empire State Development Corporation, and referred to herein as "UDC"),
pursuant to a 99-year lease with the City of New York.
In 1969, the City of New York (the “City”) requested UDC, pursuant to a lease between the City and
UDC as amended (the “City Lease”), to use its statutory powers under the New York State Urban
Development Act (the UDC Act)2 to carry out the development program for Roosevelt Island as a UDC
Project, envisioned by a master plan originally developed by Philip Johnson and John Burgee (the “Master
Plan”). The elements of the Master Plan became the General Development Plan (“the GDP”) that was
attached as a Schedule to the City Lease.

1

“Supplemented” and “supplement”, as used herein, include, without limitation, any spreader, consolidation, substitution,
severance, restatement and/or extension.
2
McKinney’s Unconsolidated Laws, §§ 6251-6287.

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TSB-A-09(1)R
Mortgage Recording Tax
March 17, 2009

In 1981, the New York State Division of Housing and Community Renewal (“DHCR”) assumed the
administration of the Island pursuant to an agreement with UDC. In 1984, the New York State Legislature
created Petitioner as a body corporate and politic constituting a public benefit corporation and a political
subdivision of the State of New York. UDC’s rights and obligations were transferred to Petitioner, as
successor in interest, with respect to the development, operation and supervision of both the existing and
proposed development on Roosevelt Island under the supervision of DHCR, with certain statutory assurances
that Petitioner would repay to UDC all of its investment in Roosevelt Island from the revenues generated by
the UDC projects. The Commissioner of DHCR will serve as Chair of Petitioner.3 In 1988, in accordance
with the RIOC Act, the City Lease was assigned by UDC to Petitioner and accordingly, the existing and
proposed developments continue to be UDC Projects under the UDC Act4, subject to the provisions of the City
Lease.
The GDP provided for development of a portion of Roosevelt Island called Southtown, calling for the
19.3 acre site to be developed in phases, with approximately 2,000 residential units of low-income, moderate
income and conventional housing, retail space, a soccer/baseball field, and a commons (or Town Square). To date,
four buildings have been completed as part of the Southtown project, and two more buildings are under
construction.
In addition to contemplating the construction of new housing units with public facilities and “Open Space
Areas,” the GDP also calls for the rehabilitation of the historic landmarks on Roosevelt Island, including the
Octagon Tower. The GDP was further amended and restated in 2003 to provide for the construction of
approximately 500 dwelling units in buildings attached or adjacent to the Octagon Tower, together with parking and
an ecological park. At a cost of more than $10 million, which was funded by MEPT Octagon LLC (“MEPT”),
the historic Octagon Tower was fully restored to its former exterior appearance, and the surrounding area
cleared and opened to the public.
The Octagon Project was implemented by an Agreement of Lease dated as of November 3, 2004
between Petitioner and MEPT (the “MEPT Lease”). MEPT in turn entered into a sublease with Octagon,
L.P., (the “Octagon Sub-Sublease”) and Development Agreements with Octagon Development LLC, and a
construction management agreement with Gotham Construction Company, LLC, to construct and operate the
Octagon Project.
If MEPT obtains a mortgage on its leasehold interest, which is exempt from the imposition of
mortgage recording tax as a result of Petitioner’s being named as a co-lender on the mortgage, it is obligated
to pay to Petitioner the amount of the mortgage recording taxes which would have been payable but for the
exemption. Petitioner will have use of the funds to improve and maintain facilities benefiting all residents of
Roosevelt Island.
MEPT initially funded the development costs itself. Under the contemplated financing arrangements,
MEPT now intends to borrow funds from a lender (the “Lender”) other than Petitioner. The borrowing will
be secured by one or more mortgages against MEPT’s sublease-hold interests in the MEPT Lease and the
Octagon Sub-Sublease, and subordinated to both Petitioner’s leasehold interest and the City Lease. Neither
the City Lease nor Petitioner’s leasehold interest will be encumbered by the mortgage(s). Petitioner initially
will be a named mortgagee, either alone or with the other Lender, and will record the mortgage(s). Although
3
4

§6387(2) of the RIOC Act.
McKinney’s Unconsolidated Laws §6253(6).

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TSB-A-09(1)R
Mortgage Recording Tax
March 17, 2009

Petitioner will be named as a mortgagee, all of the rights under the mortgages(s) will inure to the benefit of
the Lender, who will for all purposes be the beneficial owner of the mortgage(s). Upon recording the
mortgage(s), Petitioner will assign to the Lender all of Petitioner’s right, title and interest in and to the
mortgage(s). After assigning its interest to the Lender, Petitioner will continue to hold title to its leasehold
interest and will have enforcement rights under the MEPT Lease.
After Petitioner initially records the mortgage(s) and assigns its interest to the Lenders, the
mortgage(s) may from time to time be further assigned, supplemented, modified or amended and, in any such
event, appropriate instruments reflecting such assignment, supplement, modification or amendment will be
recorded. Loans may be refinanced or assigned by one lender to another. The identity of the mortgagor may
also change either by reason of the assignment of the lessee/mortgagor’s interest to an affiliate or to an
unrelated person.
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. 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 statute enumerates certain exemptions (Tax Law §§252, 252-a, 253.3), none of which
is applicable here, but some other exemptions arise under the common law, and still others apply by reason of
statutory provisions outside of the mortgage recording tax statutes.
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.5 This principle has been applied in exempting from the mortgage recording tax the recording of
mortgages on property for which the legal title is held by an industrial development agency and the beneficial
ownership is held by a non-exempt private party. See 1982 Opinion of the State Comptroller No. 82-188, p

240. In Hotel Waldorf-Astoria Corp. v. State Tax Commission6, acknowledging that a $45 million mortgage
     secured by the Waldorf-Astoria hotel was exempt from the mortgage recording tax because the mortgagee
     (the New York State Employees’ Retirement System) was a New York State agency, the court stated: “as a
     State agency, the Retirement System enjoys an immunity from taxation independent of the statutory
     exemptions listed in Section 252 of the Tax Law.”
     In the case of Petitioner, a clear statutory exemption from taxes has been provided by the State
     Legislature. The RIOC Act provides in part:
     [T]he creation of [RIOC] and the carrying out of its purposes is in all respects for the
     benefit of the people of the state and is a public purpose, and that [RIOC] will be performing an
     essential governmental function in the exercise of the powers conferred upon it by this act. [RIOC]
     5

See also, City of New York v. Tully, 88 A.D.2d 701, 451 N.Y.S.2d 265 (3d Dept. 1982) (companion case to Hotel Waldorf
Astoria Corp. supra), TSB-A-94(1)R (Jan. 28, 1994) (NYS Energy Research and Development Authority exempt from mortgage
recording tax); the Exchanges Advisory Opinion (ESDC exempt from mortgage recording tax); the 42nd Street Advisory Opinion
(ESDC exempt from mortgage recording tax).
6

86 A.D.2d 330, 334; 451 N.Y.S.2d 261 (1982).

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TSB-A-09(1)R
Mortgage Recording Tax
March 17, 2009

and its operations, property and moneys shall be free and exempt from taxation of every kind by the
city and the state and any subdivision thereof. Except as hereinabove provided and except as may
otherwise specifically be provided, nothing contained in this act shall confer exemption from any
tax, assessment or fee upon any person, firm, corporation or other entity, or upon the obligations of
any of them.7 (Emphasis added.)
The RIOC Act also gives Petitioner the power to subject its property to a purchase money or other
lien or security interest in connection with the acquisition and development of its property. Section 6388(5)
of the Act provides, in part, that in carrying out the development, management and operation, the corporation
shall have the power to:
(5) Acquire in the name of the corporation by purchase, grant or gift, or by the
exercise of the power of eminent domain pursuant to the eminent domain procedure law, or
otherwise, real or personal property, or any interest therein deemed necessary or desirable for
the development, management or operation of Roosevelt Island, including, without limitation,
leasehold interest, air and subsurface rights, easements and lands under water at the site of
Roosevelt Island or in the general vicinity thereof, and to subject such property or interest
therein to a purchase money or other lien or security interest in connection with the
acquisition and development thereof….
Having this power implies that Petitioner may also perform the activity of recording mortgages.
This creates an inconsistency between the RIOC Act and the provision in §252 of the Tax Law that
states that no mortgage of real property in New York and no person or corporation owning any debt
secured by a mortgage on real property situated in New York is exempt from the taxes imposed by Article
11 of the Tax Law by reason of anything contained in any other statute. Where a conflict exists between
two enactments relating to the same subject matter, the later specific enactment governs the earlier general
enactment. Williamsburgh Power Plant Corp. v. City of New York.8 Since the pertinent provisions of the
mortgage recording tax were enacted in 1909, they must yield to the exemption provisions contained in the
1984 law creating Petitioner. Thus, the mortgage recording tax does not apply where Petitioner records
mortgages in the exercise of its statutory powers, and this position has been adopted by both the courts and
by this Department.
In an Advisory Opinion about the Southtown Project on Roosevelt Island, this Department affirmed
Petitioner’s exemption from State and New York City mortgage recording taxes. TSB-A-01(5)R. The facts
in this petition concerning the Octagon project are nearly identical to those in the Southtown Project petition.
In light of the above, it is concluded that the mortgage recording tax is not due upon the recording of any
mortgage recorded in connection with the Octagon Project, if Petitioner is named mortgagee (whether as
trustee, agent, nominee or otherwise) and Petitioner presents the mortgage for recording.
To the extent that the mortgage continues to secure the same principal debt or obligation, the
recording of any assignment, supplement, modification, or amendment of a mortgage described in the
preceding paragraph is exempt from the mortgage recording tax, either because such action does not create
7
8

§6395(2) of the RIOC Act.
255 A.D. 214, 7 N.Y.S.2d 326 (2nd Dept. 1938), aff’d 280 NY 551 (1939).

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TSB-A-09(1)R
Mortgage Recording Tax
March 17, 2009

a new mortgage subject to tax under section 253 of the Tax Law, or because the instrument constitutes a
“supplemental mortgage” under Section 255 of the Tax Law. City of New York v. State Tax
Commission,9 To the extent that a new or further indebtedness is secured in conjunction with the
recording of any assignment, supplement, modification, or amendment of such a mortgage, mortgage
recording tax would be imposed only with respect to any new or further indebtedness, and then only if
mortgage recording tax would otherwise have been required to be paid on the recording of a mortgage that
secures the new or further indebtedness.

DATED: March 17, 2009

NOTE:

9

/S/
Jonathan Pessen
Director of Advisory Opinions
Office of 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.

130 A.D.2d 890, 891, 516 N.Y.S.2d 132 (1987).