Real Property Law Section Blog

Congress has modified the 80/20 Rule in Internal Revenue Code Section 216 [Deduction of taxes, interest, and business depreciation by cooperative housing corporation tenant-stockholder] requiring that at least 80% of a cooperative corporation's gross income be derived from tenant-shareholders.

The "Mortgage Forgiveness Debt Relief Act of 2007" (PL 110-142), signed into law by the President on December 20, 2007, amends the definition of "Cooperative housing corporation" for the purposes of Section 216 to read as follows:

"Section 216(b) Definitions - For purposes of this section --

(1) Cooperative housing corporation -- The term 'cooperative housing corporation' means a corporation --

(A) having one and only one class of stock outstanding,

(B) each of the stockholders of which is entitled, soley by reason of his ownership of stock in the corporation, to occupy for dwelling purposes a house, or an apartment in a building, owned or leased by such corporation,

(C) no stockholder of which is entitled (either conditionally or unconditionally) to receive any distribution not out of earnings and profits of the corporation except on a complete or partial liquidation of the corporation, and

[Subparagraph D has been amended by PL 110-142]

(D) meeting 1 or more of the following requirements for the taxable year in which the taxes and interest descibed in subsection (a) are paid or incurred:

(i) 80 percent or more of the corporation's gross income for such taxable year is derived from tenant-stockholders.

(ii) At all times during such taxable year, 80 percent or more of the total square footage of the corporation's property is used or available for use by the tenant-stockholders for residential purposes or purposes ancillary to such residential use.

(iii) 90 percent or more of the expenditures of the corporation paid or incurred during the taxable year are paid or incurred for the acquisition, construction, management, maintenance, or care of the corporation's property for the benefit of the tenant-shareholders".

This amendment applies to "taxable years ending after the date of the enactment of this Act".

The next meeting of the Real Property Section's Committee on Condominiums and Cooperatives will be held on Friday, November 7, from 9 AM until Noon at the Penn Club, which is located at 30 West 44th Street, in Manhattan.

Section Members will be able to participate in the meeting by telephone starting at 9:10 AM. Committee Members will receive dial-in information by email from the State Bar. Section Members who have not joined the Committee but who wish to participate by telephone need to contact Chairs Ira Goldenberg (Igoldenberg@hwkmlaw.com) or Dennis Greenstein (Dgreenstein@seyfarth.com) no later than Friday, October 24.

The Agenda for the meeting is the following:

I. General (Goldenberg & Greenstein) (9:10-9:15)
A. Comm. meetings by telephone conference
B. Condo & Coop Comm. meeting July 25, 2008, Hershey, PA
C. Advanced Topics CLE (1/29/09) Marriott Marquis, NYC
D. Upstate Practitioners CLE (March ‘09), Albany
E. RPLS Summer Meeting (7/16-7/20/09) Ogunquit, ME

II. Topics & Reports
A. Attorney General Update (9:15-10:15)
Asst. Atty. General Kenneth Demario
B. Representing Buyers or Sponsors in Difficult Economic Times: contract defaults and disputes (10:15-10:35)
Steve Goldman, Esq.
C. Attorney Escrow Account Issues for Offering Plans: are IOLA’s appropriate? Alvin Schein, Esq. (10:35 -10:55)
D. Condo/HOA/Coop Underlying Loans: Lender Concerns
Allen Seilhammer of Comm. Assoc. Banc &
Sheldon Gartenstein of NCB. (10:55-11:20)
E. Condemnation Issues for Condominiums
Douglas Heller, Esq. (11:20-11:40)
F. Tax Issues Update
Joel Miller, Esq. (11:40-noon)

III. Miscellaneous
Questions, Comments, and New Matters

IV. Adjournment

New York City's Department of Finance has announced a revised procedure to obtain its approval of applications submitted for new condominiums and the related issuance of tax lots to be effective on June 1, 2009. This will involve the following:

1. Completion of a new "Condominium Apportionment Worksheet". This will be an Excel spreadsheet to be downloaded from the Department's website at nyc.gov/finance. The Worksheet will be emailed to a specified email address at Finance. A confirmation of submission will be printed and included with the completed "Condominium Package" being submitted to Finance's Tax Map Unit. The Worksheet online will include a tab for Explanatory Notes.

2. The completed "Condominium Package" being submitted is to include Form RP-602C (Revised 5/8/09), an "Application for Condominium Apportionment and Approval", two copies of signed, sealed and notarized floor plans, two copies of the condominium declaration and floor plans signed and notarized and with exhibits, the Attorney General's Office's acceptance letter or no-action letter, and confirmation of the electronic submission of the Condominium Apportionment Worksheet.

3. The Tax Map Unit will only accept legible Condominium Floor Plans on 8 ½ " X 17" paper suitable for scanning. Mylar floor plans will no longer be accepted.

4. New tax lot numbers will be issued instead of tentative and final tax lot numbers. A single fee of $73.00 will be charged for the issuance of new tax lot numbers. (This will apply to the issuance of new tax lot numbers, whether or not involving condominium units).

Information has been received that the Governor's draft Budget Bill includes a provision for the imposition of mortgage recording tax on the filing of a financing statement for a cooperative unit. The security interest evidenced by such a filed financing statement would not be able to be enforced without payment of the tax.

If included in the final enacted Budget Bill this change would take effect on the first day of the third month after it shall have become law and shall apply to financing statements filed on or after that date.