Someone pledges their house as collateral for a bail bond, signing a contingent mortgage that only becomes payable if the bond is forfeited. Is recording that contingent mortgage subject to New York's mortgage recording tax even though no money changes hands unless forfeiture happens?

Plain-English summary

A person retains a New York bail bond insurance company or agency to post a bail bond in a New York court, securing a criminal defendant's release. As collateral, the person (the mortgagor) pledges real property they own and signs a contingent mortgage and note — due and payable only if the bail bond is forfeited. If forfeiture occurs, the bond company pays the forfeiture amount to the State, then seeks reimbursement from the mortgagor under the contingent mortgage; if forfeiture never happens, no money ever becomes due to anyone.

Tax Law § 253 taxes the recording of a mortgage measured by the principal debt or obligation that IS OR MAY BE secured by it — the "may be" language means a merely contingent obligation still counts. Tax Law § 250 and 20 NYCRR § 641.6(a) define a mortgage broadly as a written instrument imposing a lien on real property used as security for payment of money or performance of an obligation. The bail bond collateral mortgage fits that definition exactly: it's a written instrument, it imposes a lien on real property, and that property secures a payment obligation (even a contingent one). No statutory exemption under Tax Law § 252 or elsewhere applies. So the recording of the mortgage is taxable, and the fact that the mortgagor never directly receives the bond proceeds — or that any eventual payment flows to the State via the bond company — doesn't change that conclusion.

What this means for you

Individuals pledging property to secure a bail bond

Expect to pay mortgage recording tax when you sign a contingent mortgage as bail bond collateral, even though the debt may never actually come due. The tax attaches at recording, based on the mortgage's face amount, regardless of whether forfeiture ever happens.

Bail bond insurance companies and agencies

Structuring the collateral as a contingent mortgage doesn't avoid MRT. Factor the recording tax into the cost of securing a bond with real property collateral, and don't advise clients that a "contingent" or "conditional" mortgage escapes the tax.

Common questions

Q: Does it matter that the mortgagor might never actually owe or pay anything?
A: No. The tax attaches based on the debt that "may be" secured, not only debt that's certain to become due.

Q: Does it matter that any eventual payment goes to the State, not to the mortgagor?
A: No. The Department specifically noted that where mortgage proceeds are ultimately transmitted to another party isn't relevant to whether recording tax is owed.

Q: Is there any exemption for bail bond collateral specifically?
A: No — the opinion found no statutory exemption under Tax Law § 252 or elsewhere covering this situation.

Citations and references

Statutes and regulations:

• Tax Law § 253 (mortgage recording tax measured by principal debt or obligation that is or may be secured)
• Tax Law § 250 (definition of mortgage)
• Tax Law § 252 (no exemption without a specific statutory provision)
• 20 NYCRR § 641.6(a) (regulatory definition of mortgage)

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_2r.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Counsel
Advisory Opinion Unit

TSB-A-12(2)R
Mortgage Recording Tax
March 6, 2012

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M120103A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
name and address redacted. Petitioner asks whether the mortgage recording tax is due upon the
recording of a bail bond mortgage. We answer in the affirmative.
Facts
The Petitioner submits the following statement of facts as the basis for the requested
advisory opinion. A person retains the services of a New York State bail bond insurance
company/agency to post a bail bond in a New York State Court to secure the release of a
criminal defendant. As collateral for the bail bond, the person (mortgagor) pledges real property
they own in the State and executes a contingent mortgage and note which is due and payable
only in the event of a forfeiture of the bail bond. It is assumed that the mortgage is for a definite
amount of money. However, the forfeiture is payable to the People of the State of New York by
the bail bond insurance company/agency (mortgagee). The mortgagor never receives any money
from the mortgagee. The bond insurance company/agency seeks reimbursement from the
mortgagor pursuant to the contingency mortgage to collect the forfeiture money that was paid to
the State to satisfy the forfeiture. If forfeiture never occurs, no money ever becomes due and
payable to the State or the mortgagee.
Analysis
Tax Law §253 imposes taxes due upon the recordation of a mortgage, measured by the
principal debt or obligation which is or may be secured thereby. A mortgage is defined as an
instrument in writing which imposes a lien on or affects the title to real property or both real and
personal property with such property being used as a security for the payment of money or the
performance of an obligation …” (Tax Law §250, 20 NYCRR section 641.6(a)). The mortgage
recorded by the mortgagor here neatly fits this statutory definition, as the mortgage
described here is a written instrument imposing a lien on real property with such property
being used as a security for the payment of money. The recording of the mortgage
is not exempt from taxation under Tax Law §252 or any other New York statutory
provision.

-2-

TSB-A-12(2)R
Mortgage Recording Tax
March 6, 2012

Therefore, the recording of the mortgage is subject to mortgage recording tax. The fact that
proceeds of the mortgage may be transmitted to another party is not relevant to the determination
of tax liability here.

DATED: March 6, 2012

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.