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Volume 1 - Opinions of Counsel SBEA No. 40

Opinions of Counsel index

United States Government (Small Business Administration) - Real Property Tax Law, § 400:

Real property acquired by the Small Business Administration, a nonincorporated Federal agency, is exempt from taxation, and taxes levied prior to lien date are illegal even if title passes after taxable status date.

Our opinion has been requested as to the taxable status of property belonging to the Small Business Administration, a nonincorporated Federal agency.

The Administration together with a bank apparently made a loan secured by a mortgage on real property and upon default, 90 percent of the title to the property was conveyed to the Administration and 10 percent to the bank.

The recent Federal case United States v. Schwartz, 278 F.Supp. 328 (S.D.N.Y. 1968), is directly in point. In that case, property acquired by the Administration in the Town of Fallsburgh as a result of a mortgage foreclosure was held to be immune from taxation even though the Administration had contracted with several banks to share 50-50 any proceeds derived from the sale of the property and even though the property was leased for profit.

Federal property may be subjected to local taxation only to the extent Federal legislation consents. In this case, there is no statute permitting taxation.

Thus, any taxes levied after the Administration took title but prior to lien date are illegal and unenforceable. (This means, of course, that the taxes are illegal even if title was conveyed after taxable status date.)

February 18, 1971