December 1, 2016
In 1969, New York State enacted the New York State Industrial Development Agency Act which created industrial development agencies (“IDAs”). New York State created IDAs to promote the economic welfare, recreation opportunities and prosperity of the inhabitants of New York State. IDAs have traditionally provided financial assistance by offering exemptions from sales and use taxes, mortgage recording tax, and real property taxes. Mortgages executed by IDAs have been exempt from the payment of all mortgage recording taxes, including (1) the Basic Tax of 0.50% of the amount of the mortgage, (2) the Special Additional Tax of 0.25% of the amount of the mortgage, (3) the Additional Tax of 0.25% of the amount of the mortgage for mortgages recorded in counties located within the Central New York Regional Transportation District and certain other transportation districts and 0.30% of the amount of the mortgage for counties located within the downstate Metropolitan Commuter Transportation District, and (4) any local mortgage recording tax imposed by some cities and counties.
Chapter 394 of the Laws of 2016 amended various sections of the New York General Municipal Law, Public Authorities Law, and Tax Law concerning the mortgage recording tax exemption for IDAs. Under the new law, a mortgage of real property executed, given, made, transferred, or assigned by or to an IDA, an agent of an IDA, or an entity receiving financial assistance from an IDA, is not exempt from the Additional Tax imposed by New York Tax Law Section 253(2) when the real property that is subject to the mortgage is located in a county that is part of a transportation district. The Central New York Regional Transportation District includes the counties of Cayuga, Oneida, Onondaga, and Oswego. Consequently, instead of being entirely exempt from mortgage recording tax, mortgages to which an IDA is a party in the counties of Cayuga, Oneida, Onondaga, and Oswego will be subject to a mortgage recording tax of 0.25% of the amount of the mortgage. The effective date of this new legislation is July 1, 2017.
The New York State Assembly stated the following in its Memorandum in Support of the legislation: “New York law gives 0.25% of the mortgage recording tax for each transaction to our regional transportation companies. The goal was to provide our transportation authorities with a reliable recurring source of revenue to fund operations and capital expenses. However in recent years, IDAs have begun providing many economic development projects and business exemptions to the mortgage recording tax. This deprives our transportation authorities of needed revenue at a time when they are experiencing great fiscal stress.”