We're a nonprofit that runs an intermediate care facility for people with developmental disabilities, and we just recorded a mortgage to build it. Do we qualify for either of the mortgage recording tax's nonprofit exemptions -- as a 'voluntary nonprofit hospital corporation' or as a 'community mental health service company'?

Plain-English summary

United Cerebral Palsy and Handicapped Children's Association of Chemung County, Inc. executed a $2,436,800 mortgage in December 1982 to finance construction of an intermediate care facility for people with developmental disabilities, certified under the Mental Hygiene Law (§§ 31.02(a)(1), 31.05) and 14 NYCRR 681.13. It asked the Department to exempt the mortgage recording from tax under either of two nonprofit theories.

Theory 1 — "voluntary nonprofit hospital corporation" (Tax Law § 253(3)). The Tax Law itself doesn't define this phrase, so the Department borrowed the definition of "hospital" from Public Health Law § 2801(1). That definition is broad on its face, but it carves out facilities "engaged principally in providing services for the prevention, diagnosis or treatment of mental disability" that are subject to the Department of Mental Hygiene's oversight -- unless a distinct part of the facility provides genuine hospital service. Petitioner's intermediate care facility was principally a mental-disability-services facility under Mental Hygiene jurisdiction, and nothing in the record showed any distinct hospital-service component. So even though the facility delivered substantial health-related care, it didn't meet the statutory definition of "hospital," and the Department held expanding that definition to cover it -- however sympathetic the facts -- would contradict the Legislature's intent.

Theory 2 — "community mental health service company" (Mental Hygiene Law § 75.17(c)). This exemption is tied to a specific corporate form: entities actually incorporated under Article 75 of the Mental Hygiene Law, a special class the Legislature created with its own particular powers and limitations (mortgage-tax exemption being one of those special characteristics). Petitioner was not incorporated under Article 75. Despite similarities between its activities and what Article 75 encourages, the Department held the label -- and its tax benefit -- is unavailable to any entity not actually formed under that Article.

The Department was direct about the underlying policy: the legislative history behind these exemptions shows lawmakers knew that other deserving institutions would fall outside them, and chose not to broaden the categories anyway. Fiscal relief was targeted narrowly, not extended case-by-case to anyone doing similar work.

What this means for you

Nonprofits operating care facilities

Doing genuinely valuable health-adjacent work, or even work very similar to an exempt category, doesn't get you the exemption -- New York's mortgage recording tax nonprofit exemptions are keyed to specific statutory definitions and corporate forms, not to a facility's mission or the quality of care it provides. Check your actual entity type and the precise regulatory definition before assuming an exemption applies.

Developmental-disability and mental-health service providers

If you want the Mental Hygiene Law § 75.17(c) exemption, incorporation under Article 75 specifically is a prerequisite -- being licensed or certified to provide similar services under a different statutory scheme (as this petitioner was, under Mental Hygiene Law §§ 31.02, 31.05) is not enough.

Accountants and real estate attorneys structuring nonprofit financings

Before assuming a "hospital" exemption applies, check whether the facility falls into Public Health Law § 2801(1)'s built-in exclusion for mental-disability facilities under Mental Hygiene Department oversight -- that exclusion applies "unless a distinct part" of the facility furnishes genuine hospital services, a narrow carve-back worth documenting carefully if it's your best argument.

Common questions

Q: Why didn't the facility count as a "hospital" even though it provides health-related services?
A: Public Health Law § 2801(1)'s definition of "hospital" specifically excludes facilities principally engaged in mental-disability services under the Department of Mental Hygiene's jurisdiction, unless a distinct hospital-service component exists -- and none was shown here.

Q: Could the facility have qualified as a "community mental health service company" instead?
A: Only by being incorporated under Article 75 of the Mental Hygiene Law. This petitioner wasn't, so the similarity of its mission and activities to what Article 75 covers didn't matter.

Q: Does this ruling mean no nonprofit facility serving people with disabilities can ever get an MRT exemption?
A: No -- it means the specific exemptions claimed here require specific statutory triggers (the Public Health Law "hospital" definition or actual Article 75 incorporation). A facility structured to meet one of those definitions could reach a different result.

Q: Can another nonprofit rely on this ruling?
A: No. It binds the Department only as to this petitioner and these facts; another taxpayer with even very similar facts would need its own ruling.

Citations and references

Statutes:

• Tax Law § 253 (mortgage recording tax); § 253(3) (voluntary nonprofit hospital corporation exemption)
• Public Health Law § 2801(1) (definition of "hospital," including the mental-disability-facility exclusion)
• Mental Hygiene Law § 75.17(c) (Article 75 community mental health service company exemption)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/mortgage_rec_ao_1985.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/mortgage/a85_1m.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-85 (1) M
Mortgage Tax
July 3, 1985

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. M830425A

On April 25, 1983, a Petition for Advisory Opinion was received from United Cerebral Palsy
and Handicapped Children's Association of Chemung County, Inc., 318 Madison Avenue, Elmira,
New York 14901.
The issues raised are, for purposes of exemption from the mortgage recording tax imposed
under Article 11 of the Tax Law, (1) whether Petitioner may be considered a "voluntary nonprofit
hospital corporation" or (2) whether Petitioner may be considered a "community mental health
service company".
On December 17, 1982, Petitioner executed a mortgage of $2,436,800. The purpose of the
mortgage was to construct an intermediate care facility certified by the office of Mental Retardation
and Development Disabilities pursuant to the Mental Hygiene Law, Sections 31.02(a)(1) and 31.05
and 14 NYCRR 681.13.
Issue (1)
Section 253 of the Tax Law imposes a mortgage recording tax on mortgages recorded in this
state. Claim for exemption is made under section 253(3) which states,
"Notwithstanding any other provision of law to the contrary, the mortgage
recording tax shall not be imposed upon any mortgage executed by a voluntary
nonprofit hospital corporation."
Since the Tax Law lacks a definition of a "voluntary nonprofit hospital corporation," recourse
must be had to other statutory definitions.
Petitioner is incorporated pursuant to the Not-for-Profit Corporation Law of this state.
"Voluntary" is generally interpreted as a repetition of "nonprofit." Thus, Petitioner is at least a
"voluntary nonprofit corporation."
A "hospital" is defined as:
"a facility or institution engaged principally in providing services by or under the supervision
of a physician or, in the case of a dental clinic or dental dispensary, of a dentist, for the prevention,
diagnosis or treatment of human disease, pain, injury, deformity or physical condition, including, but
not limited to, a general hospital, public health center, diagnostic center, treatment center, dental
clinic, dental dispensary, rehabilitation center other than a facility used solely for vocational
rehabilitation, nursing home, tuberculosis hospital, chronic disease hospital, maternity hospital,
lying-in-asylum, out-patient department, out-patient lodge, dispensary and a laboratory or central
service facility serving one or more institutions. "Public Health Law §2801(1)

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

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

-2­
TSB-A-85 (1) M
Mortgage Tax
July 3, 1985

Although Petitioner's activities might meet this definition, the same section expressly
provides that the term "hospital" does not include:
"an institution, sanitarium or other facility engaged principally in providing
services for the prevention, diagnosis or treatment of mental disability and which is
subject to the powers of visitation, examination, inspection and investigation of the
department of mental hygiene except for those distinct parts of such a facility which
provide hospital service." Public Health Law § 2801(1)
Petitioner argues that its Intermediate Care Facility should be considered a hospital
corporation because it is required to provide substantial amounts of health-related services. This
argument ignores the fact that the Intermediate Care Facility is principally engaged in providing
mental disability services and falls under the jurisdiction of the Department of Mental Hygiene.
Since nothing indicates that this facility provides distinct hospital service, the facility cannot be
called a hospital.
The legislative history of the exemption indicates that it was intended to benefit communities
by providing a measure of fiscal relief to voluntary nonprofit hospitals. There was an awareness that
other institutions, however deserving, would not qualify for the exemption. Although there may be
public benefits in expanding the definition of voluntary nonprofit hospital corporations, such an
action would be contrary to the intention of the Legislature.
Accordingly, Petitioner is not exempt from the mortgage recording tax imposed under Article
11 of the Tax Law because it is not a voluntary nonprofit hospital corporation as provided in section
253(3) of the Tax Law.
Issue (2)
Exemptions from the mortgage recording tax are available to some mental health facilities.
Section 75.17(c) of the Mental Hygiene Law provides that community mental health service
companies "shall be exempt from the mortgage recording taxes."
This exemption, however, only applies to companies incorporated under Article 75 of the
Mental Hygiene Law which creates a special class of community facilities. The Legislature intended
that Article 75 companies have specific powers and limitations. Among the special characteristics
was the exemption from the mortgage recording tax.
The facts show that Petitioner was not formed under Article 75 of the Mental Hygiene Law.
Despite the similarities between Petitioner's activities and those encouraged by Article 75, Petitioner
cannot be called a community mental health service company unless formed under Article 75 of the
Mental Hygiene Law.

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TSB-A-85 (1) M
Mortgage Tax
July 3, 1985

Accordingly, Petitioner is not exempt from the mortgage recording tax imposed under Article
11 of the Tax Law because it is not a community mental health service company as provided in
Section 75.17(c) of the Mental Hygiene Law.

DATED: July 3, 1985

s/ANDREW F. MARCHESE
Chief of Advisory Opinions

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