December 5, 2016
Advantage Title: Industry Bulletin 2016-06
Elimination of Industrial Development Agency Exemption from Payment of the Additional Mortgage Tax
Effective September 30, 2016, Chapter 394 of the Laws of 2016 amended, amongst other sections of the laws of New York, Sections 252 and 253 of the Tax Law (collectively, the “Legislation”). The Legislation eliminates the exemption from the additional mortgage recording tax of $0.25 per $100.00 of mortgage debt (or $0.30 per $100.00, for those counties within the Metropolitan Commuter Transportation District) applied in mortgage transactions involving an Industrial Development Agency (“IDA”) and other agencies or organizations created under the General Municipal Law or Public Authorities Law. A link to the Legislation is provided here: http://www.advantagetitle.com/bulletins/assets/2016-06-section-252-253.pdf.
Mortgage Recording Tax (“MRT”) is comprised of the Basic Tax of $0.50 for each $100.00 of mortgage debt, the Special Additional Tax (a.k.a. “the ¼ point”) of $0.25 for each $100.00 of mortgage debt, both of which apply in all counties, and in a number of counties, the Additional Tax (“AT”) of $0.25 per $100.00 of mortgage debt (or $0.30 per $100, for those counties within the Metropolitan Commuter Transportation District). Local mortgage recording taxes are also charged on recording a mortgage in New York City and other counties.
New York law allocates AT to New York transportation companies as a source of revenue to fund operations and capital expenses. A significant loss of the revenue previously generated by payment of the AT resulted from the proliferation of IDA transactions throughout the State. In an effort to restore the needed source of funding, the Tax Law was amended to eliminate the AT exemption in counties located within the Metropolitan Commuter Transportation District, the Niagara Frontier and Rochester-Genesee Transportation Districts, the Capital District Transportation District, and the Central New York Regional Transportation District (collectively, the “Districts”). For a list of counties contained within the Districts, please see Technical Memorandum TSB-M-16(1)R issued by the New York State Department of Taxation and Finance (the “Department”) on November 2, 2016 a link to which is provided here: https://www.tax.ny.gov/pdf/memos/mortgage/m16_1r.pdf.
THE LEGISLATION AND SUBSEQUENT DEVELOPMENTS
Although the Governor in his Approval Memorandum noted that the legislature had agreed to extend the effective date of the Legislation to July 1, 2017, such change would need to be approved by a chapter amendment (“Chapter Amendment”) to the Legislation. As of this date, the Company has not received any timetable for the Chapter Amendment. As a result, the AT must be collected on all mortgages when an IDA is a party to a mortgage covering real property located in a county within the Districts.
For those IDA transactions that close between September 30, 2016 and the date of enactment of the anticipated Chapter Amendment and upon which the AT was paid, an application for refund of the payment of the AT can be made to the Department. For more information on an application for refund of MRT, a link to Form MT-15.1 is provided here:
Please note, a previously MRT exempt mortgage can still be assigned to a new lender and subsequently amended and restated in the usual way producing normal MRT savings. The Legislation does not impact this long standing position of the Department.
The Company will advise of any developments concerning the Legislation.
Please contact Drew Steigler, Chief Underwriting Counsel, at
631.424.6100 or firstname.lastname@example.org
with any questions concerning this Bulletin.
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