The Department of Taxation & Finance has issued a Tax Bulletin to provide guidance on when mortgage recording tax will apply to “breakage costs” under an interest rate swap agreement that is secured by a mortgage on real property. Tax Bulletin TB-MR-30, June 5, 2012 (Application of the Mortgage Recording Tax to Breakage Costs Secured Under Interest Rate Swap Agreement). A swap agreement protects the property owner against mortgage interest rate fluctuations and, in certain cases, requires the borrower to pay the lender a “breakage cost” in the event the borrower breaks the contract. In those cases, the mortgage on the real property will often also secure the breakage costs. The Tax Bulletin explains when such breakage costs will be considered incidental amounts secured by the mortgage which are not subject to mortgage recording tax. However, if the breakage costs are secured in a separate and distinct mortgage, that mortgage would be subject to the tax.