Our state agency's subsidiary is redeveloping a 94-acre Queens waterfront site. A private developer will build the first residential parcel, financed by outside lenders, with our subsidiary named as the initial mortgagee even though it has no beneficial interest in the loan. Is recording that mortgage -- and its later assignment to the real lender -- exempt from mortgage recording tax?

Plain-English summary

This is the origin ruling for one of Queens' largest waterfront redevelopment projects. In 1989, UDC (now Empire State Development Corporation), the New York City Public Development Corporation, the City of New York, and the Port Authority agreed to jointly redevelop roughly 94 acres of land along the East River in the Hunters Point section of Long Island City, Queens — envisioning millions of square feet of housing, office/hotel space, retail, and public waterfront access. UDC created a subsidiary, Queens West Development Corporation (QWDC), to implement the plan (UDC as majority shareholder; the City's economic development arm and the Port Authority as minority shareholders). By 1995, Stage I of the project was underway: QWDC had built the Hunters Point Community Park and conditionally designated a developer for the first residential parcel.

Under that first-parcel deal, the developer would convey title to QWDC, which would lease the site back — with the developer building the residential tower under UDC's design guidelines and making lease payments (and payments in lieu of sales and real estate taxes) that would benefit QWDC and the project sponsors. The developer's construction financing would come from outside lenders (partly guaranteed by HUD/FHA), secured by a mortgage on the developer's leasehold interest. QWDC would initially be named mortgagee and record the mortgage, even though all rights under it would really belong to the lenders — QWDC would then assign its interest to them. UDC asked whether recording that mortgage, and any later assignment, supplement, modification, or amendment of it, was exempt from mortgage recording tax.

The Department said yes. It had already established in TSB-A-93(4)-R that UDC itself enjoys mortgage recording tax immunity independent of Tax Law § 252's general "no exemption from other statutes" rule, based on the 1968 UDC Act's broad tax exemption (Unconsolidated Laws § 6272, declaring UDC "free from taxation of every kind") — a later, more specific enactment that overrides the 1909 general mortgage recording tax statute (Williamsburgh Power Plant Corp. v. City of New York). Here, the Department extended that immunity to QWDC as UDC's subsidiary: Unconsolidated Laws § 6262(2) expressly gives a UDC subsidiary "all the privileges, immunities, tax exemptions and other exemptions" of UDC itself. Since the UDC Act gives UDC (and by extension QWDC) the power to make and record mortgages, and the Act's exemption provisions are to be liberally construed to serve UDC's blight-removal mission (Wein v. Beame), the mortgage recording tax doesn't apply while UDC or QWDC is the named mortgagee and presents the mortgage for recording. That exemption carries forward to later assignments, supplements, modifications, or amendments as long as the secured principal debt isn't increased (Tax Law § 255).

What this means for you

Public authority subsidiaries running large redevelopment projects

A subsidiary created specifically to implement a public authority's project doesn't need its own separate statutory tax exemption — Unconsolidated Laws § 6262(2) (and similar "successor in interest" provisions in other authorities' enabling acts) can pass the parent's exemptions straight through, as confirmed here for QWDC.

Private developers and construction lenders on Queens West-adjacent sites

This is the doctrinal starting point for the whole Queens West pass-through-mortgagee financing pattern; later Queens West-specific rulings (TSB-A-00(3)R covering a later Stage I closing, and TSB-A-02(6)R covering Stage III) apply this same 1995 framework. If you're financing a later phase of Queens West, this ruling establishes why the "QWDC as pass-through mortgagee" structure works.

Accountants and real estate attorneys

Note the chronology: this 1995 opinion is QWDC's foundational ruling, predating both the 42nd Street/Times Square UDC ruling (TSB-A-97(5)R) and the later Queens West phase rulings — cite it as the origin case for the UDC/QWDC branch of the broader governmental-instrumentality "pass-through mortgagee" doctrine.

Common questions

Q: Does a UDC subsidiary need its own separate tax-exemption statute to get this treatment?
A: No. Unconsolidated Laws § 6262(2) automatically extends UDC's own privileges, immunities, and tax exemptions to any subsidiary UDC creates to carry out a project, as long as doing so isn't inconsistent with the subsidiary's own incorporating statute.

Q: What happens if the developer later assigns its leasehold, or the loan is refinanced?
A: The exemption still applies to later assignments, supplements, modifications, or amendments of the mortgage, as long as the secured principal debt isn't increased — consistent with Tax Law § 255's supplemental mortgage rule.

Q: Can a different Queens West developer or a different QWDC parcel rely on this specific opinion?
A: No. It binds the Department only as to this petitioner and this Stage I parcel's facts, though the Department applied the identical reasoning to later Queens West phases in TSB-A-00(3)R and TSB-A-02(6)R.

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)
• McKinney's Unconsolidated Laws § 6254(1) (UDC as a corporate governmental agency and public benefit corporation)
• Unconsolidated Laws § 6262(2) (UDC subsidiaries inherit UDC's privileges, immunities, and tax exemptions)
• Unconsolidated Laws § 6272 (UDC and its subsidiaries free from taxation of every kind)
• Unconsolidated Laws §§ 6283, 6284 (UDC Act controls over inconsistent statutes; 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)
• Wein v. Beame, 43 N.Y.2d 326 (liberal construction of UDC's tax exemption; rejecting "straw man" argument)
• New York State Urban Development Corp., TSB-A-93(4)-R (Mar. 10, 1993) (UDC's own mortgage recording tax immunity -- the ruling this opinion extends to QWDC)
• City of New York v. State Tax Commission, 130 A.D.2d 890 (supplemental mortgage treatment under § 255)
• 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)
• One Park Place Associates, TSB-A-82(1)(M) (Industrial Development Agency mortgage exemption line)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/mortgage_rec_ao_1995.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/mortgage/a95_15r.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-95 (15) - R
Mortgage Recording Taxes
December 18, 1995

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M950814A

On August 14, 1995, a Petition for Advisory Opinion was received from New York State
Urban Development Corporation d/b/a Empire State Development Corp., 1515 Broadway, New
York, New York 10036.
The issues raised by Petitioner, the New York State Urban Development Corporation
("UDC") are whether:
(1) the taxes imposed by Article 11 of the New York State Tax Law and Chapter 26
of the New York Administrative Code (collectively, the "mortgage recording tax")
are due upon the recording of any mortgage of property that is part of UDC's Hunters
Point (Queens West) Waterfront Development Use Improvement Project (the
"Project") where (i) UDC is named mortgagee (whether as trustee, agent, nominee
or otherwise) and the UDC records the mortgage, (ii) the loan funds secured by the
mortgage are provided by one or more persons or entities other than UDC and (iii)
the proceeds of the mortgage loans are used for Project development costs.
(2) whether the taxes are due upon the recording of the applicable instrument or
otherwise if the mortgage is assigned, supplemented, modified or amended, or if the
mortgage so assigned, supplemented, modified or amended is thereafter from time
to time assigned, supplemented, modified or amended to the extent that the then
outstanding principal indebtedness secured by the mortgage is not increased.
Unless the context otherwise requires, as used in this opinion the term "UDC" includes both
UDC and its subsidiaries, including the Queens West Development Corporation. "Development
costs" as used in this opinion, include, without limitation, all "hard" and "soft" costs in respect of
acquisition and construction, all carrying costs, loan fees, acquisition and construction period
interest, start-up expenses, and all related costs and fees. "Supplemented" and "supplement" as used
in this opinion, include, without limitation, any spreader, consolidation, substitution, severance,
restatement and/or extension.
In 1989, a Memorandum of Understanding was entered into among UDC, the New York City
Public Development Corporation (now the New York City Economic Development Corporation)
("EDC"), the City of New York (the "City") and the Port Authority of New York & New Jersey (the
"PA") (collectively, UDC, EDC, the City and the PA, being referred to as the "Public Sponsors").
The Memorandum of Understanding provided for the comprehensive redevelopment of an
approximately 94-acre tract of land (including lands under water) along the East River in the Hunters

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Point section of Queens County, New York (the "Project site"). The Project site is generally bounded
as follows: (a) on the north by the Anable Basin; (b) on the west by the U.S. pierhead line: (c) on the
south by Newtown Creek; and (d) on the east by 5th Street from the Anable Basin to 49th Avenue,
then by a line near the western end of the block between 49th and 50th Avenues, then by 2nd Street
between 50th Avenue and Newtown Creek. The Project site also includes a strip of land from 5th
to 21st Streets comprising 48th Avenue plus unused railroad cut on a portion of which has been
constructed the Hunters Point Community Park. In 199091, the UDC adopted a General Project Plan
for the Project. The Plan includes approximately 6.4 million sq. ft. of residential space, 2.4 million
sq. ft. of office/hotel space, 225,000 sq. ft. of retail space and 115,000 sq. ft. of public facilities. In
1992, UDC, with the agreement of the City, EDC and the PA, created a UDC subsidiary, called the
Queens West Development Corporation ("QWDC"), for the purpose of implementing the Project.
UDC is the majority shareholder in QWDC and EDC and the PA are minority shareholders.
The principal goal of the Project is to remove the substandard and unsanitary conditions that
currently impede effective and economic use of the Project site and to replace these conditions with
a viable development consisting of residential, commercial, cultural and recreational facilities and
providing public access to the waterfront. The Project also seeks to implement a range of public
policy objectives including:
1.

The expansion and reinforcement of the boroughs of New York City outside of
Manhattan as feasible alternate locations to Manhattan for development.

2.

The creation of commercial sites with large floor plates for businesses which, but for
the availability of such sites, would leave the City or State of New York for other
locations.

3.

The recognition of historical prominence of the Project site as the symbolic
"gateway" to Queens and creation of a new image for and access to the water's edge
for use by residents, employees and visitors.

4.

The creation of a new mixed-use neighborhood, including a significant expansion of
the City's housing stock.

5.

The expansion of the City's tax base by opening underdeveloped areas, generating
new employment and business opportunities, and increasing potential revenue
generation.

6.

The creation of a significant public open space that opens the Queens waterfront to
passive recreational uses for the use of all people, through the provision of a
continuous publicly accessible waterfront esplanade.

The Project is intended to be implemented in four stages. The Stage I and II development
areas comprise the northern end of the Project site and will be developed primarily for residential
use. A portion of these residential units will be set aside for low, moderate, and middle-income
households, the elderly and residents of local community board districts. The Stage III area is located

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at the southern end of the Project site and also will be developed primarily for residential use. The
Stage IV development area, located in the southern central portion of the Project site, will form a
commercial core. All four development areas will include open space for public recreational and/or
community uses.
Stage I development commenced with the construction by QWDC of the Hunters Point
Community Park, which is close to completion. In addition, QWDC has entered into a letter
agreement conditionally designating a developer for the first parcel in the Stage I area and setting
forth the parameters for negotiation of definitive documents governing the development of the
parcel.
Under terms of the conditional designation, the developer will convey title to the
development site to QWDC and QWDC will lease the site back to the developer. The developer will
construct a residential building on the site in accordance with UDC's General Project Plan and design
guidelines. Payments under the lease inure to the benefit of QWDC (and through QWDC to the
Public Sponsors).
The conditional designation also provides for an exemption from sales taxes on construction
materials purchased during the initial construction phase, from real estate taxes and from any
mortgage recording tax. The developer is required, however, to make payments to QWDC in lieu
of sales and real estate taxes. Some or all of the payments in lieu of sales taxes will be used to defray
the cost of constructing certain publicly accessible space on the leased premises. The payments in
lieu of real estate taxes will inure generally to the benefit of the QWDC or the Public Sponsors. The
savings provided by the mortgage recording tax exemption would reduce the total cost of the
development of the parcel. QWDC and the Public Sponsors consider this saving to be necessary to
make the development of this parcel, in accordance with the General Project Plan and the design
guidelines and under current market conditions, economically feasible.
Under the contemplated financing arrangements, the developer will borrow funds from
sources (the "Lenders",) other than UDC, QWDC or the Public Sponsors. These funds will be used
for Project development costs. This borrowing will be secured by one or more mortgages against the
developer's leasehold interest. QWDC's fee interest will not be encumbered by the mortgage(s). It
is anticipated that the obligations under the mortgage(s) will be guaranteed in part by the United
States Department of Housing and Urban Development/Federal Housing Administration. QWDC
initially will be named mortgagee and will record the mortgage(s). Although QWDC will be named
as mortgagee, all of the rights under the mortgages(s) will inure to the benefits of the Lenders who
will for all purposes be the beneficial owners of the mortgages. Upon recording the mortgage(s),
QWDC will assign to the Lenders all of QWDC's right, title and interest in and to the mortgage(s).
After assigning its interest to the Lenders, QWDC will continue to hold fee title, and will have
enforcement rights under the lease.
After QWDC initially records the mortgage(s) and assigns its interest to the Lenders, the
mortgage(s) may from time to time be further assigned, supplemented, modified or amended and,
in this event, appropriate instruments reflecting the assignment, supplement, modification or
amendment will be recorded. For example, in accordance with customary mortgage financing
practices, mortgages securing construction financing may be assigned, supplemented, modified and
converted to permanent financing upon completion of construction or the expiration of the term of

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the initial loans. Permanent loans may be refinanced or assigned by one lender to another. The
identity of the mortgagor may also change either by reason of the assignment of the
lessee/mortgagor's interest to an affiliate or to an unrelated person. The developer may, for example,
assign the leasehold to a cooperative corporation, subject to the mortgage.
Article 11 of the Tax Law imposes taxes on the recording of mortgages of real property
measured by the principal debt or obligation secured or which under any contingency may be secured
by the mortgage. Section 252 of Article 11 of the Tax Law, which sets forth the preponderance of
the exemptions from the mortgage recording tax, provides, with certain exceptions not relevant here,
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 for the
operations of UDC, it is well established that State agencies enjoy an immunity from taxation
independent of the statutory exemptions listed is section 252 of the Tax Law for property utilized
in the public interest. New York State Urban Development Corp., Adv Op Comm T&F, March
10, 1993, TSB-A-93(4)-R.
Subdivision (1) of section 6254 of the New York State Urban Development Act (the UDC
act) states in pertinent part as follows:
[t]here is hereby created the New York State urban development corporation. The
corporation shall be a corporate governmental agency of the state, constituting a
political subdivision and public benefit corporation.
In addition, subdivision (2) of section 6262 of the UDC Act states:
It]he corporation may transfer to any subsidiary corporation any moneys, real or
personal or mixed property or any project in order to carry out the purposes of this
act. Each such subsidiary corporation shall have all the privileges, immunities, tax
exemptions and other exemptions of the corporation to the extent the same are not
inconsistent with the statute or statutes pursuant to which such subsidiary was
incorporated.
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.

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This principle has been applied in exempting from the mortgage recording tax the recording
of mortgages on property the legal title of which is held by an industrial development agency and
the beneficial ownership of which is held by a non-exempt private party. (See 1982 0pns St Comp
No. 82-188, p 240; One Park Place Associates, Adv Op St Tx Comm, May 24 1982, TSB-A­
82(1)(M) and New York State Urban Development Corp. supra.)
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
enjoys an immunity from taxation independent of the statutory exemptions listed in Section 252 of
the Tax Law ..."
Furthermore, Section 6272 of the UDC Act provides, in pertinent part, that:
[t]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.
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."
Also, Section 6284 of the UDC Act provides: "[t]his act, being necessary for the welfare of
the state and its inhabitants, shall be liberally construed so as to effectuate its purposes."
Consistent with the legislative mandate of the UDC Act, courts have given liberal
interpretation to its tax exemption provisions. For example, in Wein v. Beame, 43 N.Y.2d 326, the
New York Court of Appeals upheld an exemption from real property taxes as applied to the
Commodore Hotel property in Manhattan. The hotel had been sold to UDC for one dollar, then
leased back to the seller for 99 years. Arguments that UDC had no real interest in the property, and
was a "straw man" brought into the project solely to provide a tax exemption, were rejected. The
court stated,:
It is not for us to speculate as to the motive for UDC'S participation, nor to delineate
the amount of active participation which is necessary to denominate a particular
project a UDC project. Here, UDC will be the owner of the building, and it is enough

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that UDC has to combat otherwise inevitable urban blight, and which is thus clearly
in accordance with the benign purposes of the Legislature in creating UDC. (Id. at
331)
An apparent inconsistency exists between the Tax Law and the UDC Act. Where a conflict
exists between two enactments relating to the same subject matter, the latter specific enactment
governs the earlier general enactment. Williamsburgh Power Plant Corp. V City of New York, 255
App Div 214, affd 280 NY551 and New York State Urban Development Corp. supra.
As the pertinent provisions of section 252 of the Tax Law as cited previously in this opinion
were enacted in 1909, they must yield to the exemption provisions contained in the law creating
UDC which were enacted in 1968.
Furthermore, the UDC Act gives Petitioner the power to make mortgage loans, secured by
first mortgage liens. Having this power implies that Petitioner may also perform the activity of
recording mortgages. Section 253 of the Tax Law imposes the mortgage recording tax on the
exercise of the privilege of recording a mortgage not on the mortgage itself, as property. Franklin
Society for Home Building and Savings v Bennett, 282 NY 79; Matter of Silberblatt, Inc. v Tax
Comm, 5 NY2d 635; and One Park Place Associates, and New York State Urban Development
Corp. supra.
Also, in an informal opinion of the Attorney General, dated March 7, 1956, it was stated 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.
Furthermore, Section 6272 of the UDC Act, specifically provides that Petitioner or its
subsidiaries shall not be "required to pay taxes of any kind" and Petitioner, its subsidiaries, projects,
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."
Also, Section 255 of the Tax Law provides, in pertinent part, as follows:
[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

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obligation other than the principal indebtedness or obligation secured
by or which under any contingency may be secured by the recorded
primary mortgage . . .
Also, 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 additions."
In 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 and New York State Urban Development Corp. supra.
Based on the foregoing, it is concluded that the mortgage recording tax is not due upon the
recording of any mortgage recorded in connection with the Project, if UDC or QWDC is named
mortgagee (whether as trustee, agent, nominee or otherwise) and UDC or QWDC presents the
mortgage for recording.
Also, to the extent that the principal amount of secured indebtedness is not increased, the
recording of any assignment, supplement, modification or amendment of a mortgage described in
the preceding paragraph is exempt from the mortgage recording tax, either because such action does
not create a new mortgage subject to tax under section 253 of the Tax Law, or because the
instrument constitutes a "supplemental mortgage" under Section 255 of the Tax Law. New York
State Urban Development Corp. supra.

DATED: December 18, 1995

/s/
DORIS S. BAUMAN
Director
Technical Services Bureau

NOT E: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.