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BILL NUMBER:S3048

TITLE OF BILL: An act to amend the tax law, in relation to limiting the tax imposed on refinanced mortgages to the difference between the total indebtedness secured by the new mortgage and the remaining indebtedness secured by the former mortgage

PURPOSE OR GENERAL IDEA OF BILL: To address the concerns of real property owners double taxation. This bill would allow real property owners who refinance their mortgages to be taxed on the remaining amount of indebtedness instead of the original amount of the mortgage.

JUSTIFICATION: Real property owners, especially homeowners, should not be punished for taking advantage of refinancing options. Under the current law, real property owners, in essence, are being taxed twice: first on the original amount of the mortgage and second on the new mortgage after refinancing. This legislation will alleviate this burden by taxing only the remaining amount of indebtedness.

The mortgage refinancing boom of the past few years reached a high-water mark in 2003. Assuming that the pace of refinancing in the second half of 2003 was roughly equal to that of the first half, nearly 12 million mortgage loans were refinanced in 2003 on the heels of more than 8 million in 2002. With about 75 million home-owning households in the United States, 580 of which have mortgages, this means that more than one out of every four home mortgages in the country was refinanced in 2003.

By refinancing their mortgages, homeowners can significantly reduce their monthly mortgage payments, freeing up cash for other purposes. Moreover, it has become increasingly common, particularly in this period of rapid home price appreciation, for refinancing homeowners to take on a new mortgage for a larger amount than the loan they pay off. In short, there is no reason that real property owners should have to pay the same tax twice.

PRIOR LEGISLATIVE HISTORY: A.7806 of 2008. A.11828 of 2006 (MAISEL)

FISCAL IMPLICATIONS: Undetermined.

EFFECTIVE DATE: This act shall take effect on the first of January next succeeding the date on which it shall have become a law, and shall apply to the calculation of amount of tax due on mortgages executed on and after such date.

Text

STATE OF NEW YORK
________________________________________________________________________

3048

2011-2012 Regular Sessions

IN SENATE

February 7, 2011
___________

Introduced  by  Sen.  KRUGER -- read twice and ordered printed, and when
  printed to be committed to the Committee on Investigations and Govern-
  ment Operations

AN ACT to amend the tax law, in relation to limiting the tax imposed  on
  refinanced  mortgages to the difference between the total indebtedness
  secured by the new mortgage and the remaining indebtedness secured  by
  the former mortgage

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. Paragraph (b) of subdivision 2 of section 250  of  the  tax
law,  as  amended  by  section  1 of part Q of chapter 60 of the laws of
2004, is amended to read as follows:
  (b) Where all or part of the indebtedness secured  by  a  mortgage  of
real  property  within  any city in the state having a population of one
million or more has been paid and new funds are advanced or  re-advanced
which  are  to  be  secured by such mortgage, OR BY A NEW MORTGAGE WHICH
SECURES THE BALANCE OF INDEBTEDNESS REMAINING UNPAID  UNDER  THE  FORMER
MORTGAGE  PLUS  ALL  NEW  FUNDS ADVANCED OR RE-ADVANCED, the contract or
agreement by which such funds  are  advanced  or  re-advanced  shall  be
deemed  a  mortgage  of  real property for purposes of this article, and
shall be taxable as such upon the amount of such new funds, OR UPON  THE
DIFFERENCE  IN AMOUNTS BETWEEN THE TOTAL INDEBTEDNESS SECURED BY THE NEW
MORTGAGE AND THE REMAINING INDEBTEDNESS WHICH HAD BEEN  SECURED  BY  THE
FORMER  MORTGAGE,  except  as  otherwise provided in section two hundred
fifty-three-b of this article.
  S 2. This act shall take effect on the first of January next  succeed-
ing the date on which it shall have become a law, and shall apply to the
calculation of amount of tax due on mortgages executed on and after such
date.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD06389-01-1