We're a nonprofit local development corporation that makes business loans secured by mortgages, and we record those mortgages ourselves. Is that exempt from New York's mortgage recording tax, whether we're the one giving the mortgage or the one receiving it?

Plain-English summary

Empire State Certified Development Corporation, operating through the New York Business Development Corporation in Albany, is a Not-For-Profit Local Development Corporation reincorporated under Not-For-Profit Corporation Law § 1411. Its core business is making loans to businesses secured by mortgages, and as part of that lending operation, it records the mortgages it holds. The Corporation asked the Department to confirm, in general terms, that mortgages recorded by a § 1411 local development corporation are exempt from New York's mortgage recording tax.

The Department confirmed a broad exemption. Although Tax Law § 252 generally provides that no exemption arises from any statute other than the mortgage recording tax article itself, N-PCL § 1411(f) declares that "the income and operations" of corporations incorporated or reincorporated under § 1411 "shall be exempt from taxation" — a later, more specific 1971-era enactment that, under the well-established "later specific statute governs" rule (Williamsburg Power Plant Corp. v. City of New York; First National Bank and Trust Co. v. Village of Saltaire), overrides § 252's general bar. Because the Corporation is reincorporated under § 1411 and § 1411(f) exempts its income and operations from taxation generally, the Department held that "mortgages given to or by Petitioner are exempt from the mortgage recording taxes imposed by Article 11 of the Tax Law" — explicitly covering both directions: mortgages the Corporation RECEIVES as security for its loans (as mortgagee), and mortgages the Corporation itself GIVES (as mortgagor), such as on its own real property.

What this means for you

Local development corporations reincorporated under N-PCL § 1411

Your mortgage recording tax exemption under § 1411(f) isn't limited to one side of a transaction — it covers mortgages you record as the lender taking security AND mortgages you record as a borrower giving security on your own property.

Small business borrowers working with § 1411 local development corporations

The lender's tax-exempt status is generally a benefit that flows through the financing structure (often reflected in lower closing costs), rather than something the borrower needs to separately establish.

Accountants advising nonprofit development corporations

This is the general-purpose precedent underlying more specific later rulings on individual § 1411 corporations' financing structures — for example, the Greater Syracuse Business Development Corporation's SBA 504 Loan Program rulings (TSB-A-95(16)R and TSB-A-97(54)S,(7)R) and the Albany County/Brooklyn Navy Yard local development corporation line. Cite this ruling for the basic § 1411(f) exemption before getting into project-specific mechanics.

Common questions

Q: Does the exemption cover mortgages the corporation gives on its own property, or only mortgages it takes as security for loans it makes?
A: Both. The Department's holding explicitly covers "mortgages given to or by Petitioner."

Q: Does a § 1411 corporation need to apply for or certify its exempt status for mortgage recording tax purposes, the way it might for sales tax exemption?
A: This ruling doesn't describe any application process for the mortgage recording tax exemption -- it flows automatically from being reincorporated under § 1411, per N-PCL § 1411(f)'s "income and operations... shall be exempt from taxation" language. (Contrast with sales tax exemption under Tax Law § 1116(a)(4), which does require an application -- see TSB-A-97(54)S,(7)R.)

Q: Can another local development corporation rely on this specific ruling?
A: No. It binds the Department only as to this petitioner, though the underlying § 1411(f) exemption is generally available to similarly organized § 1411 local development corporations, and the Department has applied it consistently across many later rulings.

Citations and references

Statutes:

• Tax Law § 252 (general rule against MRT exemptions arising from other statutes)
• Not-For-Profit Corporation Law § 1411(f) (income and operations of § 1411 corporations exempt from taxation)

Case law cited:

• Williamsburg Power Plant Corp. v. City of New York, 255 A.D. 214, aff'd 280 N.Y. 551 (later specific enactment governs earlier general enactment)
• First National Bank and Trust Co. v. Village of Saltaire, 256 A.D. 156

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/mortgage_rec_ao_1993.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/mortgage/a93_13r.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-93 (13) R
Mortgage
Recording Taxes
June 29, 1993

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M930401B

On April 1, 1993, a Petition for Advisory Opinion was received from Empire State Certified
Development Corporation, c/o New York Business Development Corporation, 41 State Street,
Albany, New York 12207.
The issue raised by Petitioner, Empire State Certified Development Corporation, is whether
mortgages recorded by a Not-For-Profit Local Development Corporation, incorporated or
reincorporated pursuant to Section 1411 of the New York State Not-For-Profit Corporation Law are
exempt from the mortgage recording taxes imposed by Article 11 of the Tax Law, Tax on
Mortgages.
Petitioner is a Not-For-Profit Local Development Corporation reincorporated under Section
1411 of the New York State Not-For-Profit Corporation Law. Petitioner's operations involve making
loans to businesses which are collateralized by mortgages. In furtherance of its operations, Petitioner
records the mortgages it holds.
Section 252 of the Tax Law provides, with certain exceptions, that "no mortgage of real
property situated within this state shall be exempt, and no person or corporation owning any debt or
obligation secured by mortgage of real property situated within this state shall be exempt, from taxes
imposed by this article by reason of anything contained in any other statute..."
Section 1411(f) of the Not-For-Profit Corporation Law provides that "[t]he income and
operations of corporations incorporated and reincorporated under this section shall be exempt from
taxation."
Notwithstanding the language of Section 252 of the Tax Law, this Department has considered
claims for exemption from various public authorities in New York State based on tax exemptions
in their creating statutes and has ruled in certain cases that the recording of the mortgages the
authorities issued were exempt from the tax imposed by Article 11 of the Tax Law, despite the fact
that Section 252 on its face makes no provision for such an exemption. This position is consistent
with the general rule that where a conflict or variance exists between two enactments relating to the
same general subject matter, a later special statute takes precedence against a general statute and the
prior general statute must yield to the later specific or special statute. (Williamsburg Power Plant
Corp. v. City of New York, 255 App Div 214, affd 280 NY 551; First National Bank and Trust Co.
v. Village of Saltaire, 256App Div 156).
Therefore, in accordance with the rationale set forth in Williamsburg Power Plant Corp. v.
City of New York, supra, and First National Bank and Trust Co. v. Village of Saltaire, supra, since
Petitioner is reincorporated under Section 1411 of the Not-For-Profit Corporation Law, and Section
1411(f) of the Not-For-Profit Corporation Law provides that the income and operations of

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TSB-A-93 (13) R
Mortgage
Recording Taxes
June 29, 1993
corporations incorporated or reincorporated under such section shall be exempt from taxation,
mortgages given to or by Petitioner are exempt from the mortgage recording taxes imposed by
Article 11 of the Tax Law.

DATED: June 29, 1993

/s/
PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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