We're lending over $50 million to a borrower under a revolving credit facility secured by warehouses in multiple states, including one in New York. The New York mortgage caps its own secured amount at a fixed dollar figure well below the total loan, and says all daily readvances and repayments get applied to the OTHER states' collateral first, with the New York amount reduced only by the truly final repayment. Will we only pay New York mortgage recording tax once, on that fixed cap?

Plain-English summary

This is the origin ruling establishing the "last-dollar" allocation technique for multi-state revolving credit facilities, later cited and applied in the Department's 1995 ruling on Fifth Win, Inc.'s more complex guaranty-tracing situation (TSB-A-95(13)R). BT Commercial Corporation entered into a loan agreement providing a borrower with a "revolver" loan exceeding $50 million, secured by liens on most of the borrower's assets — including a mortgage on a New York warehouse plus mortgages on other warehouses located outside New York. Even though the overall loan balance would fluctuate daily as the borrower collected receivables and paid bills (and was unlikely to ever drop below $25 million), the New York mortgage was drafted to secure only a fixed $1,400,000 "New York Term Loan" — approximately the value of the New York collateral itself, far less than the total loan.

The mortgage's own terms did the real work: as long as the overall loan balance stayed at or above $1,400,000, the amount secured by the New York mortgage would remain fixed at that cap; that cap would be reduced ONLY by the borrower's very last and final repayment of the entire loan, never by any intervening repayment; and all intervening repayments and re-advances during the loan's life would instead be deemed applied against — and would reduce only — the mortgages on the OTHER states' collateral. BT Commercial asked whether it would only owe a one-time New York mortgage recording tax on that $1,400,000 cap, rather than tax being recomputed every time funds revolved.

The Department agreed. Tax Law § 256 governs "indefinite" mortgages (where the true total obligation isn't fixed, as with a revolver) by taxing the maximum amount the mortgage itself expresses as secured — here, the properly capped $1,400,000. Because the mortgage's own drafting clearly limited its secured amount to that fixed figure regardless of the overall loan's daily fluctuation, mortgage recording tax was assessed once, at recording, on $1,400,000. The Department also confirmed a broader principle: it will RESPECT a loan agreement's own contractual formula for allocating readvances and repayments across multi-state collateral, rather than independently recalculating how much of the revolving activity "really" touches the New York property. The one caveat: if the New York-secured amount is ever actually reduced below its cap (meaning the last-dollar protection has been used up) and a later instrument evidences a further advance or re-advance, that further advance is separately taxable at that time.

What this means for you

Lenders financing multi-state revolving credit facilities

You can cap a New York mortgage's secured amount at a fixed dollar figure — even on a much larger multi-state revolving loan — and pay mortgage recording tax just once on that cap, as long as the mortgage's own terms clearly establish the cap and specify that repayments are allocated to reduce OTHER states' collateral first (the "last-dollar" technique), leaving the New York cap untouched until the very final repayment of the whole facility.

Borrowers and their counsel structuring multi-state collateral pools

Careful, explicit drafting in the mortgage itself is what makes this work — the Department isn't independently investigating which dollars "really" flow through New York; it defers to the mortgage's own stated allocation mechanics. Vague or ambiguous allocation language could leave you unable to establish the cap.

Accountants and title insurance professionals

This is the foundational precedent for last-dollar / capped-collateral mortgage recording tax planning on multi-state loans; Fifth Win, Inc.'s 1995 ruling (TSB-A-95(13)R) shows this same principle applied to a more complex scenario involving both an entity's own note and a separately capped guaranty obligation.

Common questions

Q: Does a revolving loan's daily fluctuation require recomputing mortgage recording tax repeatedly?
A: No, as long as the New York mortgage expresses a fixed maximum secured amount under Tax Law § 256 — tax is assessed once, on that stated cap, regardless of how much the overall loan balance fluctuates.

Q: What happens if the New York-secured cap is ever actually used up (reduced)?
A: If a later instrument then evidences a further advance or re-advance, that advance is separately subject to mortgage recording tax at that time.

Q: Does the Department independently verify how loan proceeds are actually allocated across states?
A: No — it respects the loan agreement's and mortgage's own contractual allocation formula for readvances and repayments, as expressed in the documents.

Q: Can another multi-state lender rely on this specific ruling?
A: No. It binds the Department only as to this petitioner and these facts, though the last-dollar allocation technique it validates is a generally applicable structuring approach for similarly drafted multi-state revolving facilities.

Citations and references

Statutes:

• Tax Law §§ 253(1), (1-a), (2) (mortgage recording tax imposition, measured by principal debt secured)
• Tax Law § 253-a (New York City mortgage recording tax -- same analysis applies)
• Tax Law § 256 (mortgages for indefinite amounts or contract obligations -- taxed on the maximum amount expressed in the mortgage)

Prior opinions cited:

• 1953 Op. Atty. Gen. 198 (further advances/re-advances after a secured amount is reduced are separately taxable)

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_15r.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-93 (15) R
Mortgage
Recording Taxes
September 3, 1993

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M930430C

On April 30, 1993, a Petition for Advisory Opinion was received from BT Commercial
Corporation, 14 Wall Street, Third Floor, New York, New York 10005.
The issues raised by Petitioner, BT Commercial Corporation, is whether Petitioner will only
have to pay a "one-time" mortgage recording tax on the recording of the designated "term" portion
of a loan secured by a New York mortgage, where all readvances and repayments of the loan are
allocated to non-New York real property.
On November 16, 1992, Petitioner entered into a loan agreement with NCC L. P. (the
"Borrower") by which Petitioner agreed to provide Borrower with a loan (the "Overall Loan") in an
amount exceeding $50,000,000. The Overall Loan is designated a "revolver" in its entirety although
the balance is highly unlikely to fall below $25,000,000 at any time. The Overall Loan balance will
revolve daily as the Borrower collects its receivables and pays its bills.
The Overall Loan is intended to be secured by liens on most or all assets of the Borrower,
including a mortgage encumbering a warehouse in New York (the "New York Mortgage") and
mortgages on other warehouses of Petitioner located outside the State of New York. As of the date
hereof, the New York Mortgage has not been recorded.
Although the Overall Loan is a "revolver", whereby sums will be readvanced and paid down
on a daily basis throughout the term of the loan, the New York Mortgage provides that only
$1,400,000 of the Overall Loan is secured by the New York Mortgage (the "New York Term Loan").
The stated amount of the New York Term Loan approximates the value of the New York collateral.
The New York Mortgage also states that the deemed balance of the New York Term Loan
(a portion of the Overall Loan) secured by the New York Mortgage will not fluctuate as long as the
balance of the Overall Loan never drops below $1,400,000; the Overall Loan itself will fluctuate
daily.
The New York Mortgage provides that the maximum aggregate principal amount of
indebtedness that is or under any contingency may be secured by the New York Mortgage is the New
York Term Loan in the amount of $1,400,000, plus the expenses associated with the mortgaged
property, including taxes assessed against the property, premiums on insurance policies on the
property, and the costs incurred in upholding the lien of the mortgage (collectively, the "New York
Secured Amount").

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Mortgage
Recording Taxes
September 3, 1993
The New York Mortgage provides that so long as the balance of the Overall Loan exceeds
the amount of the New York Term Loan at all times, the amount of the Overall Loan secured by the
New York Mortgage shall equal only the New York Term Loan, and the New York Term Loan shall
be reduced only by the Borrower's last and final repayment of the Overall Loan.
The relevant provisions of the New York Mortgage are as follows:
17.5 MAXIMUM AMOUNT OF INDEBTEDNESS. Notwithstanding
anything to the contrary in this Mortgage, the maximum aggregate principal amount
of indebtedness that is, or under any contingency may be, secured by this Mortgage
(including Borrower's obligation to reimburse advances made by Lender), either at
execution or at any time thereafter (the "Secured Amount"), is $1,400,000, plus
amounts that Lender expends after a declaration of default under this Mortgage to the
extent that any such amounts shall constitute payment of (i) taxes, charges or
assessments that may be imposed by law upon any Mortgaged Property; (ii)
premiums on insurance policies covering any Mortgaged Property; (iii) expenses
incurred in upholding the lien of this Mortgage, including the expenses of any
litigation to prosecute or defend the rights and lien created by this Mortgage; or (iv)
any amount, cost or change to which Lender becomes subrogated, upon payment,
whether under recognized principles of law or equity, or under express statutory
authority; then, and in each such event, such amounts or costs, together with interest
thereon, shall be added to the indebtedness secured hereby and shall be secured by
this Mortgage.
17.6 TREATMENT OF BORROWINGS AND REPAYMENTS. Pursuant
to the credit Agreement, the amount of the Secured Obligations may increase and
decrease from time to time as Lender advances, Borrower repays, and Lender
readvances sums on account of the Loan, all as more fully described in the Credit
Agreement. For purposes of this Mortgage, so long as the balance of the Loan equals
or exceeds the Secured Amount, the amount of the Loan secured by this Mortgage
shall at all times equal only the Secured Amount as more fully described in Section
17.5 hereof. Such Secured Amount represents only a portion of the first sums
advanced by Lender with respect to the Loan.
17.7 REDUCTION OF SECURED AMOUNT. The Secured Amount shall
be reduced only by the last and final sums that Borrower repays with respect to the
Loan and shall not be reduced by any intervening repayments of the Loan by
Borrower. As of the Closing Date, the total amount of the Loan exceeds the Secured
Amount, so that the Secured Amount represents only a portion of the Secured
Obligations actually outstanding.
17.8 APPLICATION OF PAYMENTS AND REPAYMENTS. So long as
the balance of the Loan exceeds the Secured Amount, any payments and repayments
of the Loan by Borrower shall not be deemed to be applied against, or to reduce, the
portion of the Secured Obligations secured by this Mortgage, as more fully described
in Section 17.5 hereof. Such payments shall instead be deemed to reduce only such

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September 3, 1993
portions of the Secured Obligations as are secured by mortgages encumbering real
property located outside the State of New York, which mortgages secure the entire
Secured Obligations (except to the extent, if any, that specific mortgages in such
states contain specific limitations on the amount secured).
Subdivisions 1, 1-a and 2 of Section 253 of the Tax Law impose taxes on the recording of
a mortgage of real property in the State measured by the principal debt or obligation, which is, or
under any contingency, may be secured at the date of the execution thereof or at any time thereafter.
The tax imposed pursuant to the authority of Section 253-a of the Tax Law in New York City is not
different for purposes of this opinion.
Section 256 of the Tax Law provides, in pertinent part, as follows:
Sec. 256. Mortgages for indefinite amounts or for contract obligations.-- If
the principal indebtedness secured or which by any contingency may be secured by
a mortgage is not determinable from the terms of the mortgage, or if a mortgage is
given to secure the performance by the mortgagor or any other person of a contract
obligation other than the payment of a specific sum of money and the maximum
amount secured or which by any contingency may be secured by the mortgage is not
expressed therein, such mortgage shall be taxable under section two hundred and
fifty-three of this chapter upon the value of the property covered by the mortgage, ...
*

*

*

If such maximum amount is expressed in the mortgage or in a sworn statement filed
as required by this section, such amount shall be the basis for assessing the tax
imposed by this article.
Although the "revolver" characteristic of the Overall Loan results in the New York Mortgage
being a mortgage for an indefinite amount, Petitioner, consistent with Sections 253 and 256 of the
Tax Law has properly capped the maximum amount secured at $1,400,000. Accordingly, upon
recordation of the New York Mortgage the mortgage recording taxes will be computed on
s$1,400,000, which is the amount stated to be secured by such mortgage.
Further, all repayments and readvances of the Overall Loan can be allocated to non-New
York real property security as set forth in the New York Mortgage, and such allocation will be
respected and honored by the Department for purposes of computing the mortgage recording taxes
due.

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September 3, 1993
It is noted, however, that in the event the amount secured by the New York Mortgage is
reduced below $1,400,000, and subsequently an additional instrument is recorded in New York State
which evidences a further advance or re-advance under such mortgage, further mortgage recording
taxes will be imposed, and computed on the amount of such advance or re-advance. See: 1953 Op
Atty Gen 198.

DATED: September 3, 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.