Proposed New York Mortgage Recording Tax on Mezzanine Loans and Preferred Equity Financing Threatens to Increase Borrowing Costs in New York

New York State Senators have proposed Bill S-318, which would, if adopted, levy a “mortgage recording tax” on mezzanine debt and preferred equity investments. This bill resurrects earlier failed legislative efforts to pass virtually identical bills in 2020 and 2021. Supporters of the bill claim that mezzanine debt and preferred equity investments are used for the same purpose as traditional mortgage financing without the same transparency and tax revenue for the state, and that the additional tax revenue would help close the funding gaps for affordable and low-income housing in New York.

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