A co-op loan tax could bring city $50M a year
February 03, 2010 01:00PMWithin Governor David Paterson's proposed budget is a new co-op mortgage recording tax that could mean an additional $50 million per year in revenue for the city, the Observer reported. Co-op loans have long been free from taxes, while mortgages for their condo and house counterparts are slapped with tax rates of between 2.05 and 2.175 percent. "Ultimately, this is an issue of equity and tax fairness," said Matt Anderson, a spokesperson for the state's Division of the Budget. "Financing statements for co-ops are functionally equivalent to traditional residential mortgages, but because of a loophole in the current system, they are not subject to mortgage recording taxes." That so-called loophole currently exists because co-op purchasers are technically buying shares of the corporation that owns the building, rather than a piece of real estate. Therefore, co-op buyers don't get mortgages -- they get loans backed by building shares. "In effect, [the proposed tax] reduces the value of every co-op in New York City," said Arthur Weinstein, a co-op attorney and the vice chairman of the Council of New York Cooperatives and Condominiums. Roughly 43 percent of the city's non-rental housing is co-op. Most of the revenues from a new tax on those loans would benefit the city, which would also see state aid cut by $1.3 billion under Paterson's budget. If approved by the State Legislature, a spokesperson for Mayor Bloomberg said the city would seek to implement the tax. [NYO]
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Comments
Anonymous
They should lower the rate for condos and raise the rate for co-ops - they shouldn't see this as a way to raise $50M so they can give out more free medical coverage to illegal aliens - this $50M should be used to reduce the tax revenue from condo mortgage-recording taxes.
Comment #1 Posted By: Anonymous 02/03/10
Anonymous
way to go Patterson, hurt the real estate industry, after all the so-called "FIRE" industries only supply 75% of the states tax revenues, you really have to go Dave
Comment #2 Posted By: Anonymous 02/03/10
Chris
I love the way they call it a "loophole". It is not a loophole. The law provides for a tax on mortgages. There is no law that taxes loans secured by a UCC filing. This would not be closing a loophole, it would be creating a new law and a new tax where there was none. If they impose this tax, it may also affect businesses that take out loans secured by a UCC filing. This is ridiculous!
Comment #3 Posted By: Chris 02/03/10
Don DeBar
Chris has it right. Does anyone know if this is still being considered?
Comment #4 Posted By: Don DeBar 07/23/10