BILL NUMBER:  S8088

 TITLE OF BILL :  An act to amend the administrative code of the city
of New York, in relation to the taxation of the transfer of real
property

 SUMMARY OF PROVISIONS :

Section one of the bill would amend Section 11-2106 of the
Administrative Code of the City of New York (the "Code") by adding a
new paragraph 9 to subdivision (b). The new paragraph would provide a
real property transfer tax exemption (an "RPTT exemption") for a
qualifying deed, instrument or transaction conveying or transferring
real property or an economic interest therein (each, a "Transfer") by
or to any housing development fund company ("HDFC") organized pursuant
to Article 11 of the Private Housing Finance Law or to an entity the
controlling interest of which is held by an HDFC. To qualify, a
regulatory agreement must restrict more than 50% of the floor area to
residential real property and at least two-thirds of the residential
real property to use by persons of low income and families of low
income, within the meaning of Section 2 of Article 1 of the Private
Housing Finance Law (collectively, "Persons of Low Income"), for a
term of 30 years or more. The regulatory agreement must be with the
state of New York or a municipal corporation or any other public
corporation created by or pursuant to any law of the state of New
York, and must require mutual consent for revocation or amendment. If
              

the regulatory agreement restricts less than 100% of the current or
future floor area to Persons of Low Income, then the Transfer would be
taxable in proportion to the floor area that is not so restricted.

If the regulatory agreement is not in place at the time of the
Transfer, tax must be calculated and paid without application of this
RPTT exemption. However, if the property is made subject to a
qualifying regulatory agreement within 2 years of the Transfer, the
Commissioner of Finance may subsequently issue a refund, determined as
if the qualifying regulatory agreement were in place at the time of
Transfer. The application for this refund must be made within 12
months of the qualifying regulatory agreement's effective date.

Section two would make the bill effective immediately and would apply
the new paragraph retroactively to all transfers occurring on or after
January 1, 2010.

 REASONS FOR SUPPORT :

Under current law, section 11-2106(b)(2) of the Code permits an RPTT
exemption for Transfers to or from entities that are organized and
operated for charitable purposes, and that do not operate primarily to
carry on a trade or business for profit. A Transfer to or from an HDFC
may accordingly qualify for an RPTT exemption under section
11-2106(b)(2) when the HDFC itself meets the organizational and
operational tests for exemption, and does not otherwise operate for
the primary purpose of carrying on a trade or business for profit.

The bill would supplement Code Section 11-2106(b)(2) for other
Transfers that are subject to regulation under Article 11 of the
Private Housing Finance Law. Section 577 of Article 11 of the Private
Housing Finance Law explicitly exempts HDFCs from mortgage recording
tax and authorizes a real property tax exemption for property they
own, but it does not specifically exempt them from real property
transfer tax. This bill would accordingly provide an RPTT exemption
for transfers to or from HDFCs or to entities in which HDFCs hold
controlling interests that are subject to regulatory agreements that
bind the underlying property in whole or in part to purchase, lease,
license or other use by Persons of Low Income for a 30-year term. If a
qualifying regulatory agreement does not encumber the property at the
time of Transfer, a 2 year window would be available to obtain such
regulatory agreement, at which point the Commissioner of Finance would
be authorized to issue a refund as if it were in place at the time of
Transfer. The period for requesting this refund would be 1 year from
the effective date of the qualifying regulatory agreement.

Expertise and equity investment from private interests are necessary
to provide housing for Persons of Low Income on a large scale, and
they serve a vital government purpose in that role. Over time, private
interests have partnered with HDFCs to provide this housing, and HDFCs
have, in turn, developed ownership and financing structures for
private interests that reflect their participation and compensate them
for their expertise and investment. New York state and local
government agencies regulate these collaborations and oversee the
housing that they provide. The bill would therefore provide an RPTT
exemption for Transfers to and from HDFCs that engage with private
interests to provide housing to Persons of Low Income pursuant to a
qualifying regulatory agreement. The new RPTT exemption would also
account for joint ventures formed by HDFCs and private interests and
include Transfers to entities in which HDFCs hold controlling
interests. Because housing for Persons of Low Income is often mixed
with housing for other persons, the bill would limit the new RPTT
exemption in proportion to the floor area actually devoted to Persons
of Low Income. To account for instances in which a property may be
acquired prior to having an affordable housing plan in place, the bill
provides a 2 year window for an HDFC or an entity in which an HDFCs
holds a controlling interests to obtain a qualifying regulatory
agreement and then request a refund.

The bill would update the RPTT to account for the collaboration
between public and private interests to deliver housing to Persons of
Low Income.

The bill would be effective immediately and would apply retroactively
to all transfers occurring on or after January 1, 2010. This would
allow the City to apply the exemption to transfers that are currently
under audit, or that may be selected for audit, and will promote
affordable housing. If enacted, open audits that are entitled to this
exemption would be settled by applying it. This bill is revenue
neutral for the City.

 EFFECTIVE DATE :
Section two would make the bill effective immediately and would apply
the new paragraph retroactively to all transfers occurring on or after
January 1, 2010.