We're a federal government-chartered corporation that buys and resells mortgages nationwide. When mortgagors on our New York mortgages default and we foreclose or take a deed in lieu of foreclosure, are we exempt from New York's Real Property Transfer Gains Tax and Real Estate Transfer Tax as the transferee, and later as the transferor when we resell the foreclosed property? And do we still have to file the tax return paperwork even if we're exempt?

Plain-English summary

The Federal Home Loan Mortgage Corporation (Freddie Mac) -- a corporate instrumentality of the United States created by the Federal Home Loan Mortgage Corporation Act to stabilize the secondary market for home mortgages -- held numerous mortgages secured by New York real property. Amid a severe real estate downturn, many mortgagors defaulted; Freddie Mac responded by either foreclosing or negotiating deeds in lieu of foreclosure, taking title to the properties with no intent to hold them, planning to resell as soon as practicable.

Freddie Mac asked the Department to confirm four things, and got favorable answers on all of them:

1. Federal statutory exemption applies. 12 U.S.C. § 1452(e) exempts Freddie Mac -- its franchise, activities, capital, reserves, surplus, and income (though not its real property from local property tax) -- from state and local taxation, and § 1452(f) deems it a federal agency. New York's own statutes independently exempt federal instrumentalities: § 1443(3)(b) from gains tax as a transferor, and §§ 1405(a)(2)/1405(b)(1) from transfer tax as either grantor or grantee.
2. Foreclosures and deeds in lieu count as taxable "transfers" that the exemption then excuses. Both the gains tax (§ 1440.7) and transfer tax (§ 1401(e)) statutory definitions of a taxable transfer/conveyance expressly include mortgage foreclosures and transfers in lieu of foreclosure -- so without the federal exemption, these would be taxable events. The exemption is what excuses Freddie Mac specifically, not a general foreclosure carve-out.
3. Recording/filing formalities still apply, with one built-in exception. Ordinarily a county clerk can't record a conveyance without a gains-tax tentative-assessment statement (or a no-tax-due statement/affidavit) -- but § 590.59(b) of the Gains Tax Regulations specifically exempts deeds taken through an actual foreclosure ACTION from that pre-recording paperwork, since the successful bidder/transferee isn't personally liable for the defaulting mortgagor's gains tax. A joint transfer tax return (Form TP-584) is still required for every conveyance, whether or not tax is actually due.
4. The exemption doesn't excuse a grantEE from liability. Even though conveyances TO Freddie Mac are transfer-tax exempt, the statute is clear that a federal instrumentality's own exemption "shall not...relieve a grantee from...liability for the tax" if the OTHER party to a conveyance isn't itself exempt -- so the analysis has to be checked from both sides of any transaction involving Freddie Mac.

What this means for you

Federally chartered mortgage entities (Freddie Mac, Fannie Mae, and similar GSEs) foreclosing on New York properties

Foreclosure-related conveyances -- both taking title via foreclosure/deed-in-lieu and later reselling -- are exempt from gains tax and transfer tax based on your entity's own federal tax-immunity statute, not a general real-estate-foreclosure exemption. Confirm your specific enabling statute grants the same 12 U.S.C. § 1452(e)-style state-tax immunity Freddie Mac has.

Title companies and county clerks processing foreclosure deeds

A deed taken through an actual foreclosure ACTION (not a private deed-in-lieu workout) can be recorded without the usual gains-tax tentative-assessment paperwork under § 590.59(b) -- but the transfer-tax joint return (Form TP-584) is still required regardless of exemption status.

Accountants and tax professionals

The Real Property Transfer Gains Tax analysis here no longer applies (repealed for transfers on/after June 15, 1996), but the Real Estate Transfer Tax federal-instrumentality exemptions and the filing-formality analysis remain fully current.

Common questions

Q: Is a GSE like Freddie Mac exempt from New York transfer tax when it forecloses on and resells property?
A: Yes, based on its federal chartering statute's tax-immunity provision, matched to New York's own federal-instrumentality exemptions in the transfer tax and (formerly) gains tax statutes.

Q: Does exemption from the tax also mean no paperwork is required?
A: No. A joint transfer tax return must still be filed for every conveyance regardless of exemption status, though foreclosure-action deeds get a narrower exception from the gains-tax pre-recording tentative-assessment statement.

Q: Is the Real Property Transfer Gains Tax analysis in this ruling still relevant?
A: No, it was repealed for transfers on or after June 15, 1996. The transfer tax analysis remains current.

Q: Can I rely on this ruling for my own entity's foreclosure transactions?
A: No. This advisory opinion binds the Department only as to the petitioner and the specific facts described -- confirm your own entity's federal tax-immunity statute independently.

Citations and references

Statutes:

• Section 1443(3)(b) of the Tax Law (gains tax exemption where the transferor is a U.S. agency/instrumentality)
• Section 1405(a)(2) of the Tax Law (transfer tax exemption for U.S. agencies/instrumentalities)
• Section 1405(b)(1) of the Tax Law (transfer tax exemption for conveyances TO U.S. agencies/instrumentalities)
• Section 1440.7 of the Tax Law (gains tax definition of "transfer of real property," including foreclosure)
• Section 1447(1)(f)(1) of the Tax Law (recording requirements)
• Section 590.59(b) of the Gains Tax Regulations (foreclosure-action deed recording exception)
• Section 1409(a) of the Tax Law (joint transfer tax return requirement)
• 12 U.S.C. § 1452(e), (f) (Freddie Mac Act state-tax exemption and federal-agency status)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/real_estate_tran_ao_1991.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/multitax/a91_9r.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-91 (9) R
Real Property
Transfer Gains Tax
Real Estate Transfer Tax
September 16, 1991

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M901026A

On October 20, 1990, a Petition for Advisory Opinion was received from Federal Home Loan
Mortgage Corporation, 1759 Business Center Drive, PO Box 4115, Reston, VA 22090.
The issues raised by Petitioner, Federal Home Loan Mortgage Corporation, are:
1.

Whether the federal statutory exemption under 12 USC Section 1452(e) exempts
Petitioner from the Real Property Transfer Gains Tax (the "Gains Tax") as a
transferor and from the Real Estate Transfer Tax (the "Transfer Tax") as a grantor or
a grantee.

2.

Whether Petitioner is required to meet the criteria of Section 1447(1)(f)(1) of the Tax
Law to record instruments which effectuate the transfer of real property if it is
deemed that Petitioner is exempt from the gains tax as a transferor and the transfer
tax as a grantor or a grantee.

3.

Whether the exemption from gains tax afforded by Section 1443(3)(b) of the Tax
Law and the exemption from transfer tax afforded by Sections 1405(a)(2) and
1405(b)(1) of the Tax Law for instrumentalities of the United States applies to
Petitioner.

4.

Whether a conveyance of real property in which Petitioner is the grantor is exempt
from the transfer tax.

Petitioner is a corporate instrumentality of the United States created pursuant to the Federal
Home Loan Mortgage Corporation Act (Title III of the Emergency Home Finance Act of 1970, as
amended, 12 USC sections 1451-1459, the "Freddie Mac Act").
The stated statutory purposes of Petitioner are to provide stability in the secondary market
for home mortgages, respond appropriately to the private capital market, and to assist the secondary
market for home and multifamily mortgages on an ongoing basis by increasing the liquidity of
mortgage investments and improving the distribution of investment capital available for home
mortgage financing. Toward this end, Petitioner purchases first lien, conventional, residential
mortgages and participation interests in such mortgages from mortgage lending institutions and
resells the whole loans and participations so purchased in the form of guaranteed mortgage
securities. Petitioner generally matches its purchases of mortgages with sales of guaranteed mortgage
securities. Mortgages retained by Petitioner are financed with short and long term debt and equity
capital.
TP-9 (9/88)

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TSB-A-91 (9) R
Real Property
Transfer Gains Tax
Real Estate Transfer Tax
September 16, 1991
Petitioner currently holds mortgages which are secured by real property located in New York
State (hereinafter the "New York State Mortgages"). As a result of the severe downturn in the real
estate market, a number of mortgagors have defaulted on the loans that are secured by the New York
State Mortgages, and Petitioner anticipates that more defaults will occur. Where defaults have
occurred, Petitioner either has initiated a foreclosure action against the defaulting mortgagors, or has
negotiated settlements with the defaulting mortgagors such as transfers in lieu of a foreclosure sale.
Title obtained through such foreclosure sales or transfers in lieu of foreclosure will be held by
Petitioner. Petitioner does not intend to hold any of the real property it has acquired or will acquire
through such foreclosure proceedings, and intends to sell such properties as soon as practicable.
Pursuant to Sections 1441 and 1443.1 of the Tax Law and Section 590.1 of the Gains Tax
Regulations the gains tax is a ten percent tax on the gain derived from the transfer of real property,
which includes the acquisition or transfer of a controlling interest in any entity with an interest in real
property, where the property is located in New York State and where the consideration for the
transfer is one million dollars or more.
Section 1440.7 of the Gains Tax Law provides, in pertinent part, that a "transfer of real
property" means the transfer or transfers of any interest in real property by any method, including
but not limited to sale. . .mortgage foreclosure, transfer in lieu of foreclosure. . .
Further, Section 1443.3(b) of the Gains Tax Law provides, an exemption from the gains tax
in the following case:

3. If the transferor is one of the following:
   *
   *
   *
   (b) The United Nations or any other international organization
   of which the United States is a member, the United States of America
   or any of its agencies or instrumentalities. (emphasis added)
   Section 1447.1 of the Gains Tax Law provides, in pertinent part, that:
   (f)(1) A county clerk or register of a county shall not record
   or accept for record any conveyance, other than a conveyance by a
   court of appropriate jurisdiction, or an officer thereof, resulting from
   an action to foreclose a mortgage, of real property in New York State,
   unless accompanied by:
   (i) the statement of tentative assessment of the amount of tax
   or statement that no tax is due provided pursuant to subdivision two
   of this section, together with the payment of the tentative assessment
   of the amount of tax, if any, or

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TSB-A-91 (9) R
Real Property
Transfer Gains Tax
Real Estate Transfer Tax
September 16, 1991
(ii) an affidavit, or other form prescribed by the state tax
commissioner. . .(emphasis added)
Further, Section 590.59(b) of the Gains Tax Regulations which is concerned with mortgage
foreclosures provides as follows:
Question: Is the transferee (the successful bidder) subject to any personal
liability for taxes determined to be due from the defaulting mortgagor?
Answer: No. Section 1447(3)(b) of the Tax Law specifically exempts the
transferee from personal liability and does not forbid the transferee from transferring
the consideration to the referee. The county clerk may record a conveyance resulting
from an action to foreclose a mortgage without a statement of tentative assessment,
statement of no tax due, or affidavit. (emphasis added)
In accordance with Section 1402 of the Tax Law, a transfer tax is imposed on each
conveyance of real property or interest therein at the time that the instrument effecting the
conveyance is delivered by a grantor to a grantee when the consideration for the conveyance exceeds
five hundred dollars. In addition, in accordance with Section 1402-a of the Tax Law an additional
transfer tax is imposed upon the transfer of residential real property where the consideration exceeds
one million dollars.
Section 1401(e) of the Transfer Tax Law provides, in pertinent part, that a "conveyance"
means the transfer or transfers of any interest in real property by any method, including but not
limited to sale...mortgage foreclosure, transfer in lieu of foreclosure...
Section 1405 of the Transfer Tax Law provides, in pertinent part, as follows:
Exemptions.--(a) The following shall be exempt from
payment of the real estate transfer tax:
*
*
*

2. The United Nations, the United States of America and any
   of its agencies and instrumentalties.
   The exemption of such governmental bodies or persons shall
   not, however, relieve a grantee from them (sic) of liability for the tax.
   (b) The tax shall not apply to the following conveyances:
3. Conveyances to the United Nations, the United States of
   America, the State of New York, or any of their instrumentalities,
   agencies or political subdivisions (or any public corporation,

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TSB-A-91 (9) R
Real Property
Transfer Gains Tax
Real Estate Transfer Tax
September 16, 1991
including a public corporation created pursuant to agreement or
compact with another state or the Dominion of Canada); (emphasis
added)
Further, Section 1409(a) of the Transfer Tax Law provides, in part, as follows:
A joint return shall be filed by both the grantor and the grantee for
each conveyance whether or not a tax is due thereon. The return shall
be filed with the recording officer before the instrument effecting the
conveyance may be recorded. . .(emphasis added)
Furthermore, Title 12 USC Section 1452(e), concerning exemption from taxation of the Petitioner
provides that:
(e) Exemption from taxation. The Corporation, including its
franchise, activities, capital, reserves, surplus, and income, shall be
exempt from all taxation now or hereafter imposed by any territory,
dependency, or possession of the United States or by any State,
county, municipality, or local taxing authority, except that any real
property of the Corporation shall be subject to State, territorial,
county, municipal, or local taxation to the same extent according to
its value as other real property is taxes.
Also, Title 12 USG Section 1452(f) provides that Petitioner is deemed to be an agency of the
Federal government for purposes of Title 28 USG Sections 1345 and 1442. Moreover, in Rocap v
Indick (1976) 176 App DC 172, the court held that Petitioner is a federal agency within the scope
of "government controlled corporation" term of Title 5 USC Section 552(e), and thus is an "agency"
for purposes of the Freedom of Information Act (5 VSCS §552).
Pursuant to Section 1440.7 of the Tax Law, the term "transfer of real property" includes a
transfer as a result of a mortgage foreclosure or a transfer in lieu of foreclosure. However, Section
1443.3(b) of the Tax Law provides exemption from gains tax where the transferor of real property
is the United States of America or any of its agencies or instrumentalities. Therefore, Petitioner is
exempt from the payment of gains tax when it is the transferor of real property pursuant to Section
1443.3(b) of the Tax Law since Petitioner is an agency of the United States of America as set forth
in Title 12 USC Section 1452(f) and is exempt from taxation pursuant to Title 12 USC Section
1452(e).
Under sections 1447(1)(f)(1)(i) and (ii) of the Tax Law, a county clerk or register is not
permitted to record or accept for recording any conveyance unless the deed is accompanied by either:
(i) a statement of tentative assessment of the amount of tax due together with the payment of such
assessed amount, or a statement of no tax due or (ii) the filing of appropriate affidavits or forms
claiming an exemption from the imposition of the gains tax. The recording requirements do not
apply with respect to a deed which is conveyed to a transferee in a foreclosure sale, since in that case

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Real Property
Transfer Gains Tax
Real Estate Transfer Tax
September 16, 1991
the transferee is released from personal liability with respect to any potential gains tax liability of
the defaulting mortgagor.
Pursuant to Section 590.59(b) of the Gains Tax Regulations in satisfaction of the gains tax
filing requirements a deed taken in a mortgage foreclosure, may be recorded without a statement of
tentative assessment, statement of no tax due or affidavit.
Pursuant to Section 1401(B) of the Tax Law, the term "conveyance" includes a transfer as
a result of a mortgage foreclosure or a transfer in lieu of foreclosure. Pursuant to Section 1405(a)(2)
of the Tax Law Petitioner is exempt from the payment of transfer tax imposed under section 1402
of the Tax Law since it is an agency of the United States of America in accordance with Title 12
USO Section 1452(f); and exempt from taxation pursuant to Title 12 USC Section 1452(e).
However, the exemption afforded to Petitioner does not relieve a grantee from the liability for the
tax. In addition, a grantee may be liable for the additional transfer tax imposed under Section 1402-a
of the Tax Law. However, conveyances to Petitioner would be entirely exempt from transfer tax
pursuant to Section 1405(b)(1) of the Tax Law since Petitioner is an agency of the United States of
America exempt from taxation pursuant to the above Sections of the United States Code.
For purposes of the transfer tax, pursuant to Section 1409(a) of the Tax Law, a joint return
(Form TP-584, Combined Real Property Transfer Gains Tax Affidavit, Real Estate Transfer Tax
Return, Credit Line Mortgage Certificate, Schedule C) must be filed, whether or not a tax is due,
with the recording officer before the instrument effecting the conveyance may be recorded.

DATED: September 16, 1991

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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