Our state agency is developing a new headquarters building for several commodity exchanges. Private lenders will finance construction, with us named as mortgagee even though we have no beneficial interest in the loans. Is recording those mortgages -- and any later increases in the secured debt while we remain mortgagee -- exempt from mortgage recording tax?

Plain-English summary

This is one of the foundational rulings behind the entire UDC/Empire State Development Corporation mortgage recording tax exemption doctrine — cited directly by both the Queens West Waterfront project's origin opinion (TSB-A-95(15)R) and the 42nd Street/Times Square redevelopment opinion (TSB-A-97(5)R) as "New York State Urban Development Corporation, TSB-A-93(4)-R," the ruling each later opinion extends. In April 1991, UDC and what's now the NYC Economic Development Corporation entered a Letter of Intent with four commodity exchanges — the Coffee, Sugar and Cocoa Exchanges, the Commodity Exchange, the New York Cotton Exchange, and the New York Mercantile Exchange (NYMEX) — for a new headquarters at Site 5B in the Washington Street Urban Renewal Area in lower Manhattan, replacing their cramped, outdated space at Four World Trade Center. NYMEX withdrew from this joint project in January 1992 (it would go on to negotiate its own separate deal at Battery Park City instead, the subject of TSB-A-95(1)R two years later); by December 1992, UDC signed a revised Letter of Intent for a reduced project with the remaining three exchanges.

Under UDC's General Project Plan, UDC would acquire fee title to the site, lease it to the exchanges, and be named mortgagee on construction financing mortgages ("Recognized Mortgages") whose loan funds and proceeds actually came from — and were used for — private lenders, immediately assigning its interest to those lenders after recording. UDC's fee interest itself would never be encumbered. UDC asked three related questions: is the initial recording exempt; does a later assignment/supplement/modification stay exempt if the secured debt doesn't increase; and — going further than earlier UDC rulings had addressed — does a later increase in secured debt stay exempt too, as long as UDC continues to be the named mortgagee on the instrument evidencing that increase?

The Department answered yes to all three. UDC's own 1968 enabling statute (Unconsolidated Laws § 6272) exempts UDC and its subsidiaries from taxation "of every kind," a later, more specific 1968 enactment that overrides Tax Law § 252's general 1909/1966 rule against exemptions from other statutes (Williamsburgh Power Plant Corp. v. City of New York) — the same reasoning the Department had already applied to industrial development agencies and the NYS Employees' Retirement System (Hotel Waldorf-Astoria Corp. v. State Tax Commission). On the third question — increases in secured debt — the Department reached a notably broader conclusion than the ordinary § 255 supplemental mortgage rule (which only protects UNCHANGED principal): because § 6272 exempts UDC "of every kind" without a dollar limit, an INCREASE in secured debt stays fully exempt too, as long as UDC remains the named mortgagee on the instrument recording that increase — a stronger protection than instrumentalities whose exemption rests purely on § 255's "no new indebtedness" limitation.

What this means for you

Public benefit corporations with a broad "exempt from taxation of every kind" enabling statute

If your creating statute (like UDC's) exempts you from taxation without limitation, and doesn't just protect against creating NEW debt like the ordinary § 255 supplemental mortgage rule does, a later increase in the secured debt on a mortgage you remain party to as mortgagee can stay fully exempt too — not just refinancings and modifications that leave the principal unchanged.

Private developers and lenders financing exchange, headquarters, or similar public-private projects through UDC/ESDC

This is the doctrinal bedrock for the whole family of UDC pass-through-mortgagee rulings — cite it as the origin case establishing UDC's own mortgage recording tax immunity, before getting into project-specific rulings like Queens West or 42nd Street.

Accountants and real estate attorneys tracking the NYMEX/Exchanges history

Note the historical thread: NYMEX was originally part of THIS joint "Exchanges" project at Site 5B, withdrew in January 1992, and two years later negotiated its own separate Battery Park City deal (TSB-A-95(1)R) instead — useful context if you encounter references to either project in other UDC/BPCA-era rulings.

Common questions

Q: Does this exemption require the secured debt to stay unchanged, like the ordinary supplemental mortgage rule?
A: No, and this is the notable feature of this ruling — because UDC's own exemption statute (§ 6272) has no dollar limitation, even an INCREASE in secured debt stays exempt, as long as UDC remains the named mortgagee on the instrument recording that increase.

Q: What if UDC assigns its interest and is no longer the mortgagee when the debt later increases?
A: The ruling's broader "increase stays exempt" holding is specifically conditioned on UDC continuing to be named mortgagee on that increase; assignments/supplements/modifications with NO increase in secured debt are separately covered under the ordinary § 255 rule regardless of who currently holds the mortgage.

Q: Can another UDC project, or an unrelated developer, rely on this specific ruling?
A: No. It binds the Department only as to UDC and this project's facts, though the reasoning is the same doctrine the Department applied to UDC's other projects, including Queens West and 42nd Street/Times Square.

Citations and references

Statutes:

• Tax Law § 252 (general rule against MRT exemptions arising from other statutes)
• Tax Law § 253 (mortgage recording tax imposition, measured by principal debt secured)
• Tax Law § 255 (supplemental mortgage treatment -- no new tax if secured debt isn't increased)
• Tax Law § 250 (increase in mortgage indebtedness taxable as a new mortgage)
• Unconsolidated Laws § 6272 (UDC and its subsidiaries free from taxation of every kind)
• Unconsolidated Laws § 6283 (UDC Act controls over inconsistent statutes)
• Unconsolidated Laws § 6284 (liberal construction mandate)

Case law and prior opinions cited:

• Matter of Hamilton, 148 N.Y. 310 (state/municipal property held for public purposes isn't a practical subject of taxation)
• Williamsburgh 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)
• Hotel Waldorf-Astoria Corp. v. State Tax Commission, 86 A.D.2d 330 (state agency mortgagee immunity independent of Tax Law § 252)
• Matter of City of New York v. Tully, 88 A.D.2d 701 (state agency tax immunity)
• One Park Place Associates, TSB-A-82(1)M (Industrial Development Agency mortgage exemption line)
• Franklin Society for Home Building and Savings v. Bennett, 282 N.Y. 79; Matter of Silberblatt, Inc. v. Tax Comm., 5 N.Y.2d 635 (mortgage recording tax taxes the recording privilege, not the mortgage as property)
• New York State Urban Development Corporation, TSB-A-89(2)R (May 5, 1989) (prior UDC mortgage recording tax precedent)
• City of New York v. State Tax Commission, 130 A.D.2d 890 (supplemental mortgage treatment under § 255)
• Matter of Rednow Realty Corp. v. Tully, 72 A.D.2d 621; Matter of Park and 46th St. Corp. v. State Tax Commission, 295 N.Y. 173; Matter of Bay View Towers Apts., Inc. v. State Tax Commission, 48 A.D.2d 86, aff'd 40 N.Y.2d 856 (supplemental mortgage / increased-indebtedness case law)

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_4r.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-93 (4)R
Mortgage
Recording Taxes
March 10, 1993

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M930119A

On January 19, 1993, a Petition for Advisory Opinion was received from the New York State
Urban Development Corp., 1515 Broadway, New York, New York 10036.
The issues raised by Petitioner, New York State Urban Development Corp., on behalf of
itself and its wholly owned subsidiaries, are:
1.

Whether the taxes imposed by Article 11 of the Tax Law (the "mortgage recording
tax") are due upon the recording of any mortgage of property that is part of
Petitioner's New York Exchanges Headquarters Land Use Improvement Project (the
"Project") where (i) Petitioner is named mortgagee, (ii) the loan funds secured by the
mortgage are provided by one or more persons or entities other than Petitioner, and
(iii) the proceeds of the mortgage loans are used for Project development costs.

2.

Whether a mortgage recording tax is due upon the recording of the applicable
instrument or otherwise to the extent that the principal amount of secured
indebtedness is increased if a mortgage referred to in issue "1" is assigned,
supplemented, modified, or amended, or if any mortgage so assigned, supplemented,
modified, or amended is thereafter from time to time assigned, supplemented,
modified or amended.

3.

Whether mortgage recording tax is due upon the recording of the applicable
instrument or otherwise with respect to an increase in the principal amount of secured
indebtedness, to the extent Petitioner continues to be named mortgagee with respect
to any such increases if a mortgage referred to in issue "1" is assigned, supplemented,
modified or amended, or if any mortgage so assigned, supplemented, modified or
amended is thereafter from time to time assigned, supplemented, modified, or
amended.

Petitioner and the New York City Public Development Corporation (now known as the New
York City Economic Development Corporation ("EDC")) entered into a Letter of Intent dated as of
April 30, 1991 with the Coffee, Sugar and Cocoa Exchanges, Inc., the Commodity Exchange Inc.,
the New York Cotton Exchange and the New York Mercantile Exchange (collectively, the "Four
Exchanges") for the development of a new state-of-the-art headquarters on Site 5B of the
Washington Street Urban Renewal Area in lower Manhattan (the "Project Site"). In January 1992,
the New York Mercantile Exchange ("NYMEX") withdrew from the Project. In December 1992, a
new Letter of Intent, outlining the parameters of a reduced project, was entered into by Petitioner,
EDC, the Coffee, Sugar and Cocoa Exchanges, Inc., the Commodity Exchange Inc., the New York
Cotton Exchange and the New York Futures Exchange, Inc. (collectively, the "Exchanges"). A new
facility is needed to replace the Exchanges' severely overcrowded and outmoded facilities in Four
World Trade Center and in other buildings in lower Manhattan with expanded modern space for their
trading activities and offices.

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Mortgage
Recording Taxes
March 10, 1993
Pursuant to Petitioner's General Project Plan, Petitioner is to acquire fee title from the City
to the Project Site. Petitioner will enter into three leases (collectively, the "Lease") with the
Exchanges for the Project Site. Except for reimbursement of certain Petitioner expenses, all
payments under the Lease will inure to the benefit of the City. Upon termination of the Lease,
ownership of all buildings and improvements will revert to the landlord and simultaneously to the
City. However, the Exchanges will have an option to purchase the fee interest beginning thirty years
after completion.
The contemplated financing arrangements for the Project are as follows:

1. Petitioner, as mortgagee, will be obligated to record each of the Project
   mortgages securing loans whose proceeds are used for Project development costs
   ("Recognized Mortgages"). The loans that are secured by the mortgages will be
   provided by lenders other than Petitioner ("Lenders") and the Recognized Mortgages
   will be executed by the Exchanges in favor of Petitioner. Petitioner's fee interest will
   not be encumbered by the Recognized Mortgages.
2. Petitioner will undertake the obligation to record the Recognized
   Mortgages.
3. Upon the recording of the Recognized Mortgages, Petitioner will assign
   to the Lenders all of its right, title, and interest in and to the Recognized Mortgages.
4. Petitioner will be the named mortgagee in connection with certain
   refinancings, provided any such refinancings do not exceed the Project development
   costs less the funds provided by the public sector. In that case, Petitioner will record
   and assign any such mortgage to the lender(s) Who provided the loan funds.
5. It is anticipated that the Recognized Mortgages will obligate the
   Exchanges to perform their obligations under the other documents relating to the
   construction and operation of the Project (the "Project documents"), so that a default
   under the Lease or other Project document would constitute a default under the
   Recognized Mortgages. Although, after recording the Recognized Mortgages,
   Petitioner will assign them to the respective Lenders, Petitioner will continue to hold
   fee title to the property and will fully retain its enforcement rights under the Lease
   and the other Project documents.
   In addition to the contemplated assignments of the Recognized Mortgages to Lenders as
   noted above, Petitioner anticipates that the Recognized Mortgages may, from time to time (after
   Petitioner has assigned all of its interest in the Recognized Mortgages), be further assigned,
   supplemented, modified or amended and that the applicable instruments reflecting such assignment,
   supplement, modification or amendment will be recorded. Thus, for example, in accord with
   customary mortgage financing practices, it is expected that mortgages securing construction

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Mortgage
Recording Taxes
March 10, 1993
financing will be assigned, supplemented and modified and converted to permanent financing upon
the completion of construction or upon expiration of the term of the initial loans.
The Exchanges also may "take out" equity dollars used for Project development costs in a
subsequent refinancing thereby increasing the mortgage indebtedness. Further, from time to time,
the Recognized Mortgages may be assigned from one lender to another, or the loans may be
refinanced. It is also possible that the identity of the mortgagors will change by reason of the
assignment of the lessee's interest either to an affiliate or to an unrelated person. Finally, if and when
the Exchanges exercise the purchase option contained in the Lease, the leasehold mortgage may be
converted into a mortgage secured by a fee interest.
With respect to issue "1", Article 11 of the Tax Law imposes taxes on the recording of
mortgages of real property measured by the principal debt or obligation secured by such mortgage.
Section 252 of Article 11 of the Tax Law, applicable to exemptions from the mortgage recording tax,
provides, with certain exceptions not relevant herein, that "[n]o 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 the taxes imposed by
this article by reason of anything contained in any other statute."
Even though section 252 of the Tax Law does not provide a specific exemption from the
operations of UDC, it is well established that State agencies enjoy an immunity from taxation
independent of the statutory exemptions listed in section 252 of the Tax Law for property utilized
in the public interest.
In a March 29, 1913 opinion, the Attorney General opined that no mortgage recording tax
was due when New York State acted as mortgagor and quoted the following passage from Matter
of Hamilton, 148 NY 310, 313-314:
The property held by the state, or by any of its municipal divisions, for public
purposes, is not, and never has been, subject to taxation ... The end and object of all
taxation is to raise revenue for the purpose of defraying the expenses of government,
and since no revenue could be raised by imposing taxes on property owned by the
state itself, or by any of its political divisions, such property is in no just or practical
sense the subject of taxation.
This principle has been applied to exempt from the mortgage recording tax mortgages on
property when legal title is held by a New York State industrial development agency even though
beneficial ownership of such property is held by private interest. (See 1982 Opns St Comp No. 82­
188, p 240; One Park Place Associates, Adv Op St Tx Comm, May 24, 1982, TSB-A-82(1)M).
Also, in Hotel Waldorf-Astoria Corp. v. State Tax Commission, 86 AD2d 330, 334, in
acknowledging that a $45 million mortgage secured by the Waldorf-Astoria hotel was exempt from
the mortgage recording tax because the mortgagee (the New York State Employees' Retirement
System) was a New York State agency, the court stated: "as a State agency, the Retirement System

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Mortgage
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enjoys an immunity from taxation independent of the statutory exemptions listed in Section 252 of
the Tax Law .... "The court reasoned that imposition of a tax upon a mortgage held by a New York
State agency was tantamount to tax upon the agency itself. The court, thus, concluded that the tax,
on the recording of the mortgage securing the loan, in this case amounted to an unlawful assessment
of the agency's property in violation of its general immunity from taxation. (See also, Matter of City
of New York v. Tully, 88 AD2d 701).
The UDC, therefore, is exempt from the mortgage recording taxes imposed by Article 11 of
the Tax Law by virtue of it being a New York State agency constituting a political subdivision and
public benefit corporation.
Furthermore, Section 6272 of the UDC Act provides, in pertinent part, that:
it]he exercise of the powers granted by this act will be in all respects
for the benefit of the people of this state ... and will constitute the
performance of an essential function ... [UDC] and its subsidiaries
shall not be required to pay any taxes, other than assessments for
local improvements, upon or in respect of a project or of any property
or moneys of [UDC] or any of its subsidiaries, levied by any
municipality or political subdivision of the state, nor shall [UDC] or
its subsidiaries be required to pay state taxes of any kind, and [UDC],
its subsidiaries, projects, property and moneys ... shall at all times be
free from taxation of every kind by the state and by the municipalities
and all other political subdivisions of the state.
Moreover, section 6283 of the UDC Act states: "[i]nsofar as the provisions of this act are
inconsistent with the provisions of any other law, general, special or local, the provisions of this act
shall be controlling.'
Therefore, an apparent inconsistency exists between the Tax Law and the b'DC Act. Where
a conflict exists between two enactments relating to the same subject matter, the latter specific
enactment governs the earlier general enactment. Wlliamsburgh Power Plant Corp, v City of New
York, 255 App Div 214, affd 280 NY 551.
Inasmuch as section 252 of the Tax Law was enacted in 1909, and last amended in 1966, it
must yield to the exemption provisions contained in the law creating UDC which were enacted in
1968. Therefore, if the provisions of the UDC Act exempt from the recording tax the mortgages
created pursuant to the Project, such exemption provisions will prevail.
The UDC Act gives Petitioner the power to execute mortgages. Having such power implies
that Petitioner may also perform the activity of recording mortgages. It is to be noted that the taxes
imposed under section 253 of the Tax Law are not imposed on the mortgages themselves, as
property, but on the taking of an action, that is, on the exercise of the privilege of recording a
mortgage.

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Franklin Society for Home Building and Savings v Bennett, 282 NY 79; Matter of Silberblatt, Inc.
v Tax Comm, 5 NY2d 635; One Park Place Associates, Adv Op St Tx Comm, May 24, 1982, TSBA-82(1)M.
An informal opinion of the Attorney General, dated March 7, 1956, states that
[i]t should be noted that section 257 of Article 11 of the New York
State Tax Law is silent as to which party to the mortgage shall pay
the tax. Under its terms the taxes shall be payable on the recording of
each loan subject to tax so that the party who records is the one upon
whom the tax is imposed .... 1956 Atty Gen [Inf Opns] 27, at 28.
Since Petitioner is the mortgagee and will record the Recognized Mortgages, in view of the
Attorney General's opinion, Petitioner would be the party required to pay the taxes imposed by
Article 11, if such taxes are due.
However, Section 6272 of the UDC Act, specifically provides that Petitioner or its
subsidiaries shall not be "required to pay state taxes of any kind" and Petitioner, its subsidiaries,
projects, property and moneys "shall at all times be free from taxation of every kind by the state and
by the municipalities and all other political subdivisions of the state." In addition, Section 6284 of
the UDC Act provides that the UDC Act "shall be liberally construed so as to effectuate its
purposes."
In view of the provisions contained in section 6284 of the UDC Act providing that the UDC
Act be liberally construed and section 6272 exempting UDC, its subsidiaries, projects, property and
moneys from state taxation of every kind, and the fact that New York State agencies are immune
from taxation, it is concluded that Petitioner can record Recognized Mortgages without payment of
the mortgage recording taxes imposed under section 253 of Article 11 of the Tax Law. New York
State Urban Development Corporation, Adv 0p Comm of T & F, May 5, 1989, TSB-A-89(2)R.
Concerning issue "2", Section 255 of the Tax Law contains the supplemental mortgage
provisions and provides, in pertinent part, that:
[i]f subsequent to the recording of a mortgage on which all taxes, if
any, accrued under this article have been paid, a supplemental
instrument or mortgage is recorded for the purpose of correcting or
perfecting any recorded mortgage, or pursuant to some provision or
covenant therein, or an additional mortgage is recorded imposing the
lien thereof upon property not originally covered by or not described
in such recorded primary mortgage for the purpose of securing the
principal indebtedness which is or under any contingency may be
secured by such recorded primary mortgage, such additional
instrument or mortgage shall not be subject to taxation under this
article, unless it creates or secures a new or further indebtedness or
obligation other than the principal indebtedness or obligation secured

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Recording Taxes
March 10, 1993
by or which under any contingency may be secured by the recorded
primary mortgage ....
Section 250 of the Tax Law provides that "[a] contract or agreement by which the
indebtedness secured by any mortgage is increased or added to, shall be deemed a mortgage of real
property for the purpose of this article, and shall be taxable as such upon the amount of such increase
or addition."
Once a mortgage has been given and recorded, the recorded primary mortgage may be
changed by a supplemental mortgage and, under the provisions noted above, no additional recording
tax will be due as long as the amount secured remains the same. City of New York v State Tax
Commission, 130 AD2d 890, 891. Of course, were the indebtedness secured by the lien to be
reduced or the lien terminated for any reason, tax would be due on any increase on the new
obligation. (See Matter of Rednow Realty Corp. v. Tully, 72 AD2d 621, 622.)
Both sections 253 and 255 of the Tax Law require that only a mortgage on the principal debt
or obligation, or a new or further indebtedness other than the principal obligation should be subject
to the recording tax. (Matter of Park and 46th St. Corp. v. State Tax Commission, 295 NY 173, 178­
179.) Matter of Bay View Towers Apts., Inc. v. State Tax Commission, 48 AD2d 86, 89, affd 40
NY2d 856 (emphasis added).
Accordingly, for purposes of issue "2", to the extent that the principal amount of secured
indebtedness is not increased, the recording of any assignment, supplement, modification or
amendment of any Recognized Mortgage is exempt from the mortgage recording tax, under current
law, either because such action does not create a new mortgage subject to tax under section 253 of
the Tax Law, or because such action constitutes a "supplemental mortgage" under section 255 of the
Tax Law. Where the principal amount of secured indebtedness of a Recognized Mortgage is
increased, the mortgage recording tax is due only with respect to the amount of the increase, supra.
QAs for issue "3", pursuant to Section 6272 of the UDC Act, supra, Petitioner, its subsidiaries,
projects, property and moneys are exempt from State taxation of every kind. Therefore, the
recording of an instrument in which Petitioner is named mortgagee to increase the principal amount

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of indebtedness secured by a Recognized Mortgage will not be subject to the mortgage recording
taxes imposed by Article 11 of the Tax Law.

DATED: March 10, 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.