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The Secured Debts Tax Law



of the State of New York
AND



The Mortgage Tax Law

of the State of New York

(As Amended in 1916)



Guaranty Trust Company
of New York



The Secured Debts Tax Law



of the State of New York

and



The Mortgage Tax Law



of the State of New York



Guaranty Trust Company
of New York

140 Broadway-
Fifth Avenue Office London Office
Fifth Ave. & 43d Street 33 Lombard St., E. C.



««n



01



V



Copyright, 1916
Guaranty Trust Company of New York



FOREWORD. .... .

The Secured Debts Tax Law, 'as enacted April 30,
1915 and constituting Article 15, of the Tax Law, was
re-enacted in substantially the same form by Chapter
261 of the Laws of 1916, in effect April 21, 1916.

(1) Definition of " Secured Debt."

(a) Any bond, note or debt secured by mortgage
of real property situated wholly without the
State of New York.

(b) A proportion of the value of a bond, note or
debt when the security is real property situated
both within and without the State of New
York.

(c) Any bond or note forming part of a similar
series, secured by mortgage or deed of trust
of real or personal property, or both, which
mortgage or deed of trust is not recorded in
the State of New York but in some other
place.

(d) Any bond or note forming part of a similar
series secured by the deposit of valuable se-
curities as collateral whether such collateral
is within or without the State of New York.

(e) Bonds, debentures or notes forming part of
a similar series, which by their terms are not
payable within one year from their date of is-
sue, and which are not secured by deposit or
pledge of any collateral security. (Sec. 330,
Page 16.)



342347



These definitions inch,de publie bonds of States other
than New York, and obligations of foreign countries
and their political sub-divisions. Ordinary promissory
notes can not be made exempt.

(2) What the tax is. A special tax at a fixed rate
payable at the option of the holder in respect to a
"secured debt," which exempts the "secured debt" for
a limited period from the annual personal property tax.

(3) The rate of tax. 75c. per each $100. or frac-
tion thereof of the face value of the "secured debt."
(Sec. 331. Page 17.)

(4) Period of exemption secured. Five years
from the date of the payment of the tax (Sec. 331.
Page 17.)

(5) To obtain exemption for the year 1916.

To obtain exemption from the personal property tax
for the year 1916 in New York City, the tax must be
paid before assessment day, which is October 1st.

(6) When the tax may be paid. Any time prior
to January 1, 1917. After this date "secured debts"
may not be made tax exempt without further action by
the Legislature. (Sec. 331. Page 17.)

(7) How exemption is secured. By payment of
the tax to the Comptroller of the State of New York



at his office in Albany, or at his branch office in the
Woolworth Building, New York City. Payment of the
tax is evidenced by stamps affixed to the "secured debt/'
and cancelled. (Sec. 331, 332, 333. Pages 17-18.)

(8) The secured debt, itself, must be presented
and stamped. The Laws of 1911 and 1915 permitted
a description of the secured debt to be presented and
the tax paid thereon. (Sec. 331, 332, 333. Pages

17-18.)

(9) Secured debts may be registered no matter
what the denomination. This continues the provi-
sion of the Law of 1915. Under the Law of 1911 they
could not be registered if in denominations exceeding
$1,000.

(10) Offset of debts. A person holding a secured
debt as an investment, on which the tax has not been
paid, may not deduct his just debts against the assessed
value of such secured debts.

Persons holding secured debts, not as investments, but
temporarily in their possession for sale, and actually
engaged in the purchase and sale of such securities as
a business, and maintaining an office or place of business
in this State for carrying on an actual bona fide business
of purchasing and selling such securities, as distin-
guished from their purchase for investment, shall be al-
lowed to deduct their just debts from the tax against the



5



assessed value of such secured debts, provided that the
secured debts have not been owned and held for a longer
period than eight months. (Sec. 336. Page 20.)

(11) Exemption of secured debts upon which
tax has previously been paid.

(a) Where the tax has been paid upon a secured
debt under the Law enacted September 1,
1911, and prior to the first day of May, 1915,
such secured debt is stated to be exempt from
personal property tax until maturity. (Sec.
338. Page 21.)

(b) Where the tax has been paid upon secured
debts under the Law effective April 30, 1915,
and between the first day of May, 1915, and
November 1, 1915, such secured debt remains
exempt from personal property tax for a pe-
riod of Five Years from the date of the pay-
ment of the tax. (Sec. 339. Page 21.)



Note — Section 6 of Article 1 of the Tax Law provides that
all personal property subject to taxation shall be assessed at
its full value, but the owner of personal property shall be
allowed a deduction from the full value of his taxable per-
sonal property to the extent of the "just debts" owing by
him. The "just debts" which may be deducted have been
denned in the circular published by the Department of Taxes
and Assessments of the City of New York as —

"1 — Amount owing on bond and mortgage, on which the
person claiming the offset is liable, while he remains
the owner.
2 — Amount owing on promissory notes.
3 — Amount owing on book debits or contracts.

Just debts do not include contingent liabilities as
guarantor or endorser, unless such liabilities have be-
come fixed, or debts incurred for the purpose of evading
taxation."



(12) History. The so-called Secured Debts Tax
Law was first enacted September 1, 1911, as an addition
to Chapter 62 of the Laws of 1909, entitled : "An Act
in Relation to Taxation, Constituting Chapter 60 of
the Consolidated Laws."

Its first enactment provided for a tax at the rate of
one-half of one per cent, on the secured debt, which
thereafter was exempt from the personal property tax
for an unlimited period. The operation of the Law was
suspended by Chapter 169 of the Laws of 1915, effec-
tive April 1, 1915, which provided that secured debts
might be registered and the tax paid after the first day
of May, 1915, and which, therefore, suspended the op-
eration of the Act between April 1st and the first day
of May. Chapter 465 of the Laws of 1915 radically
amended the Law of 1911, changing the rate of the tax
from one-half of one per cent, to three-quarters of one
per cent, and limited the time during which the bonds
could be exempted to the period between May 1, 1915,
and November 1, 1915, providing that the exemption
should be only for five years from the date of payment
of the tax.

The present "Secured Debts Tax Law," in all its es-
sential features, is the same as the Law of 1915.

The relation of the secured debts tax law to

the mortgage tax law.

The mortgage tax law was designed as a specific
tax on mortgages, recorded in the State of New York



and secured by real property therein. Such mortgages
are, generally speaking, of two kinds:

(a) Mortgages given by a corporation or an indi-
vidual where there is only one bond or obli-
gation, running either to a corporation or an
individual.

(b) Mortgages which are made by corporations,
and in certain instances by an individual or
individuals, to Trustees under which a series
of bonds or obligations are issued which are
held by various persons.

The Law provides that a tax of one-half of one per
cent, shall be paid upon all mortgages recorded subse-
quent to July 1, 1906. If, at the time the obligation
was recorded, the entire amount of the mortgage was
not advanced, the tax was to be paid upon the amount
then advanced, and upon subsequent advances as they
were made. Upon payment of the tax, the obligation
or obligations issued thereunder are exempt from per-
sonal property tax for life of the obligation.

In the case of a mortgage recorded prior to July 1,
1906, under which the entire advances had not been
made, the tax was required to be paid upon the advances
made subsequent to July 1, 1906, and the obligations
evidencing such advances, and such only, were tax ex-
empt.

The holder of a mortgage recorded prior to July 1,
1906, or the owner of a serial bond issued and outstand-
ing under a mortgage recorded prior to July 1, 1906,

8



could mate the mortgage or bond tax exempt by pre-
senting it to the recording officer of the county where
the mortgage was first presented for record and option-
ally subject it to the mortgage tax on the payment of
which the security was exempt from the personal prop-
erty tax.

The secured debts tax law was designed to provide
a method of exempting from the personal property tax,
mortgages upon property lying without the State of
New York and recorded without this State, and any
other bonds or notes forming part of a series of similar
bonds, notes or obligations issued under a deed of trust,
irrespective of whether such bonds or notes were secured
by a mortgage upon real property. It also applies to
public bonds of States other than New York, to foreign
countries tnd their political sub-divisions.

The primary purpose of the mortgage tax law

was to provide a specific tax, with the accompanying ex-
emption from the general property tax, for mortgages
recorded in the State of New York

The primary purpose of the secured debts tax law

was to provide a specific tax, with the exemption from
the general property tax, for mortgages, and bonds
secured by mortgages which were recorded without the
State of New York, and for other serial obligations.



9



A mortgage secured by real property both within
and without the State of New York may be affected

• by both laws. Property, both within and without the
State of New York, in many instances, was covered by
corporate mortgages. In such an instance, the mort-
gagor company was required to have a determination
made of the proportion which the value of the mortgaged
property situated within the State of New York bore
to the value of the entire mortgaged property or prop-
erties. The recording tax could only be paid by the
mortgagor company in respect to that determined pro-
portion and the serial bonds issued thereunder could

be made tax exempt under the Mortgage Tax Law, only
in that proportion. This left, in many instances, a cer-
tain proportion of a bond, in the hand of the owner,
which was not tax exempt but was subject to the general
property tax.

To cure this situtation, the Secured Debts Tax Law of

• 1915 and 1916 provided that the owner of such a bond
could exempt such proportion of his bond as was not al-
ready exempt under the Mortgage Tax Law by paying
seventy-five cents per $100., or fraction thereof, upon
such unexempt proportion. (Sec. 330. Page 15, Sec.
340. Page 22.) Thereupon, a proportion of his bond
was exempt for an unlimited period, under the Mortgage
Tax Law, and a proportion exempt for a period of Five
Years under the Secured Debts Tax Law. To remedy
this situation, two amendments to the Mortgage Tax
Law, viz: Chapters 335 and 337 of the Laws of 1916,

10



constituting Sees. 260, 264 of the Mortgage Tax Law,
Pages 38, 48 were enacted. These provide, in effect, that
the mortgagor company, at the time when the mortgage
is recorded, may waive the determination of the propor-
tion of the value lying within and without the State of
New York and may pay the entire tax as if the proper-
ties lay wholly within the State of New York and that,
thereupon, the bonds should be exempt from the personal
property tax. If, however, the mortgagor company does
not elect to waive such determination and pays the tax
only upon the proportion of the value of the mortgaged
properties within the State of New York, the holder of
such a bond may, at its option, present the bond to the
recording officer of the county where the mortgage,
under which the bond was issued, was first recorded and
himself pay the tax upon the proportion which has not
been previously exempted, thereby making his entire
bond exempt from the personal property tax. It will
thus be seen that the proportion of a bond not exempted
by the mortgagor company may be made exempt either
under the provisions of the Secured Debts Tax Law by
payment of seventy-five cents per $100., or fraction
thereof, in respect to such proportion, whereupon the ex-
emption runs for only five years from the date of pay-
ment of the tax, or, under the Mortgage Tax Law, such
proportion may be made exempt for the life of the obli-
gation by payment of one-half of one per cent, on such
proportion.



11



It is clearly to the advantage of the holder of
such a security to take advantage of the provi-
sions of the Mortgage Tax Law, thereby securing a
lower rate of tax and exemption for the life of the
obligation.

For the convenience of the reader, we have appended
to the Secured Debts Tax Law the text of the Mortgage
Tax Law, containing the amendments thereto, enacted at
the last session of the Legislature.



12



The Tax on Secured Debts

Being Chapter 802 of the Laws of 1911, in effect
September 1, 1911, as amended by Chapter 465
of the Laws of 1915, in effect April 30, 1915,
and Chapter 261 of the Laws of 1916, in effect
April 21, 1916.



ARTICLE 15
Tax on Secured Debts

Section 330. Definitions.

331. Payment of tax on secured debt.

332. Stamps; how prepared and used.

333. No exemption unless stamps are affixed and can-

celed.

334. Contracts for dies; New York City office; ex-

penses, how paid.

335. Illegal use of stamps; penalty.

336. No deduction of debts against taxable secured

debt.

337. Application of taxes.

338. Exemption where tax has been paid on secured

debts before May 1, 1915.

339. Exemption where tax has been paid on secured

debts between May 1, 1915, and November
1, 1915.

340. Apportionment of value of secured debt secured

by mortgage of property situated partly
within and partly without the state.

Sec. 330. Definitions. The words "secured debts",
as used in this article, shall include :

(1). Any bond, note or debt secured by mortgage of
real property situated wholly without the state of
New York.

(2). Such proportion of a bond, note or debt, in-
cluding a bond, note or printed obligation forming part
of a series of similar bonds, notes or obligations, se-
cured by mortgage or deed of trust recorded in the
state of New York of property or properties situated
partly within and partly without the state of New
York as the value of that part of the mortgaged prop-



Note. Important new matter which has been inserted in the law will be found
i n italics.

15



erty or properties situated without the state of New
York shall bear to the value of the entire mortgaged
property or properties.

(3). Any and all bonds, notes or written or printed
obligations, forming part of a series of similar bonds,
notes or obligations, the payment of which is secured
by a mortgage or deed of trust of real or personal prop-
erty, or both, which mortgage or deed of trust is
recorded in some place outside of the state of New
York and not recorded in the state of New York.

(4). Any and all bonds, notes or written or printed
obligations, forming part of a series of similar bonds,
notes or obligations, which are secured by the deposit
of any valuable securities, as collateral security for the
payment of such bonds, notes or obligations, under a
deed of trust or collateral agreement held by a trus-
tee.

(5). Any bonds, debentures or notes, forming part
of a series of similar bonds, debentures or notes, which
by their terms are not payable within one year from
their date of issue, and the payment of which is not
secured by the deposit or pledge of any collateral
security. The term "secured debts" as used in this
article shall not include securities held as collateral to
secure the payment of bonds taxable under this article
or under article eleven of this chapter.

* Sec. 331. Payment of tax on secured debt.

'After this article takes effect and before the first

16



day of January, nineteen hundred and seventeen,
any person may take or send to the office of the comp-
troller of this state any secured debt, and may pay to
the state a tax at the rate of seventy-five cents on each
one hundred dollars or fraction thereof of the face value
of such secured debt, under such regulations as the
comptroller may prescribe, and the comptroller shall
thereupon affix secured debt stamps hereinafter pro-
vided for, to such secured debt, which stamps shall be
duly signed by the comptroller or his duly authorized
representative and dated as of the date of the payment
of such tax. The comptroller shall keep a record of
such secured debt together with the name and address
of the person presenting the same and the date of regis-
tration. All such secured debts shall thereafter be ex-
empt from all taxation in the state or any of the mu-
nicipalities or local divisions of the state except as pro-
vided in sections twenty-four, one hundred and eighty-
seven, one hundred and eighty-eight and one hundred
and eighty-nine of this chapter, and in articles ten and
twelve of this chapter, for the period of five years from
the payment of such tax.

Sec. 332. Stamps, how prepared and used.

Adhesive stamps for the purpose of indicating the
payment of the tax provided for by this article shall
be prepared by the comptroller, in such form, and
of such denominations and in such quantities as he may
from time to time prescribe. Upon the payment of the

17



tax provided by this article upon any secured debt the
comptroller shall affix stamps of the proper denomina-
tions, equal in face value to the amount of tax paid, to
the secured debt, and shall cancel the same by the seal
of his office or by such other canceling device as he may
prescribe.

Sec. 333. No exemption unless stamps are
affixed and canceled. The payment of the tax upon
any secured debt, as provided in this article, shall
not exempt such secured debt from taxation, as pro-
vided in section three hundred and thirty-one, unless
stamps to the proper amount are affixed and canceled,
as provided in the preceding section.

Sec. 334. Contracts for dies; New York City
office; expenses, how paid. The state comptroller
is hereby directed to make, enter into and execute
for and in behalf of the state such contract or
contracts for dies, plates and printing necessary for
the manufacture of the stamps provided for by this
article, and provide such stationery and clerk hire, to-
gether with such books and blanks as in his discretion
may be necessary for putting into operation the pro-
visions of this article; he shall be the custodian of all
stamps, dies, plates or other material or thing fur-
nished by him and used in the manufacture of such
state tax stamps. In addition to the receipt of taxes
payable as provided in this article at his office in the

18



city of Albany, the comptroller shall maintain an office
for the receipt of such taxes in the city of New York.
He shall appoint, and may at pleasure remove, such
assistants, clerks and other persons as may be necessary
to carry out the provisions of this article and shall
fix and determine their salaries. All expenses in-
curred by him and under his direction in carrying out
the provisions of this article shall be paid to him by
the state treasurer from any moneys appropriated for
such purpose.

Sec. 335. Illegal use of stamps; penalty. Any

person who shall willfully remove or cause to be
removed, alter or cause to be altered the canceling or
defacing marks of any adhesive stamp provided for by
this article with intent to use the same, or to cause the
use of the same after it shall have been used, or shall
knowingly or willfully sell or buy any washed or re-
stored stamp, or offer the same for sale, or give or ex-
pose the same to any person for use, or knowingly use
the same or prepare the same w T ith intent for the fur-
ther use thereof; or shall willfully use any counterfeit
stamp or any forged stamp with intent to defraud the
state of New York, shall be guilty of a misdemeanor
and on conviction thereof shall be liable to a fine of
not less than five hundred nor more than one thousand
dollars, or be imprisoned for not more than six months,
or by both such fine and imprisonment, at the discre-
tion of the court.



19



Sec. 336. No deduction of debts against taxable
secured debt. The owner of any secured debt, on
which the tax provided for in this article has not
been paid, shall be assessed upon such secured debt
in the taxing district in which he resides, upon
the fair market value of such secured debt and no de-
duction for the just debts owing by him shall be
allowed against the assessed value of such secured debt,
as provided in section twenty-one of this chapter or
elsewhere in this chapter or in any other law of this
state, except that the deduction from the taxable prop-
erty permitted by section six of this chapter shall be
allowed to any person, in respect of any secured debt
which for the purpose of his business, as hereinafter
described and not for or as an investment, shall be
temporarily owned and held for sale by such person
then actually engaged in the bona fide purchase and sale
of such securities as a business, and who then shall have
and maintain an office or place of business in this state
for the carrying on of the actual bona fide business of
purchasing and selling such securities as distinguished
from the purchase thereof for investment, but such de-
duction shall not be allowed in respect of securities
owned and held for a longer period than eight months.

Sec. 337. Application of Taxes. The taxes im-
posed under this article and the revenues thereof
shall be paid by the state comptroller into the state
treasury and be applicable to the general fund, and to

20



the payment of all claims and demands which are a
lawful charge thereon.

Sec. 338. Exemption where tax has been paid
on secured debts before May first, nineteen hun-
dred and fifteen. If a tax shall have been paid
upon a secured debt pursuant to article fifteen of
the tax law prior to May first, nineteen hundred
and fifteen, such secured debt shall be exempt from
taxation hereunder and from all taxation in the
state or any of the municipalities or local divisions of
the state until maturity, except as provided in sections
twenty-four, one hundred and eighty-seven, one hun-
dred and eighty-eight and one hundred and eighty-nine
of this chapter and in articles ten and twelve of this
chapter.

Sec. 339. Exemption where tax has been paid
on secured debts between May first, nineteen hun-
dred and fifteen, and November first, nineteen hun-
dred and fifteen. If a tax shall have been paid
upon a secured debt pursuant to article fifteen of
the tax law, between May first, nineteen hundred
and fifteen, and November first, nineteen hundred
and fifteen, such secured debt shall be exempt
from taxation hereunder, and from all taxation in
the state or any , of the municipalities or local
divisions of the state, for the period of five years from
the date of the payment of such tax, except as provided



21



in sections twenty-four, one hundred and eighty-seven,
one hundred and eighty-eight and one hundred and
eighty-nine, of this chapter, and in articles ten and
twelve of this chapter.

Sec. 340. Apportionment of value of secured
debt secured by mortgage of property situated
partly within and partly without the state. If a

bond, note or debt be secured by mortgage or deed
of trust recorded in the state of New York of
property or properties, situated partly within and
partly without the state of New York, and a
proportion of such bond, note or debt constitutes
a secured debt as provided by section three hun-
dred and thirty, the holder of such secured debt may
apply to the comptroller for a determination of the pro-
portion of such bond, note or debt which is taxable as
a secured debt under this article and the comptroller
shall, as soon as practicable thereafter, furnish to such
applicant a determination upon which the tax imposed
by this article on such secured debt shall be based,
which determination shall be in the manner provided
for in section two hundred and sixty of this chapter
made in respect of the apportionment of the value of


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Online LibraryGuaranty Trust Company of New YorkThe Secured debts tax law of the state of New York, and the Mortgage tax law of the state of New York → online text (page 1 of 3)