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Volume 10 - Opinions of Counsel SBRPS No. 112

Opinions of Counsel index

Taxable status date (exemptions-generally) (transfers after taxable status date - mesne ownership by the Small Business Administration) - Real Property Tax Law, §§ 302, 400, 520:

Where property acquired after taxable status date by the Small Business Administration, which shares in the federal government’s immunity from taxation, is then sold to an owner not entitled to exemption, the property is subject to pro rata taxation as provided in section 520 of the Real Property Tax Law; reassessment of the property at its value as of the date of transfer from the SBA is required.

Our opinion has been requested concerning the applicability of section 520 of the Real Property Tax Law to the assessment of a particular parcel. The facts are rather involved.

From the information submitted, it appears that the property in question, a motel, was assessed for $344,100 on the 1999 assessment roll. There is some question as to whether, given its condition, the property was worth that much on the March 1, 1999 taxable status date, but no grievance was filed by its then-owner [hereafter corporate owner].

The Small Business Administration [SBA] acquired the property (for $35,300) at a foreclosure sale on April 1, 1999, but the 1999 tentative assessment roll did not reflect such acquisition. At about the time of the 1999-2000 school tax levy, the SBA notified the County Treasurer of its acquisition and claim of immunity from taxation. The 1999-2000 school taxes were canceled (presumably pursuant to RPTL, § 558), but the final 1999 assessment roll was not changed (as it should have been, per RPTL, § 553) to render the property exempt from 2000 town/county taxes.

The SBA then sold the property to new owners [hereafter current owners] on September 27, 1999 for $39,900. Given the condition of the property (a fire occurred sometime after March 1, 1999), the current owners demolished the buildings in November 1999. The 2000 town/county tax {1} was thereafter levied on the basis of the $344,100 assessment. Based on the March 1, 2000 condition of the property, the 2000 tentative assessment was $35,700.

The current owners are questioning their 2000 county/town tax bill, and we are asked if the assessor may reassess the property for purposes of those taxes. Given these particular facts, we believe so.

While the duration of the SBA’s ownership was a brief one, the property became exempt, indeed immune, from taxation when it took title (RPTL, § 400; 1 Op.Counsel SBEA No. 40). The 1999-2000 school taxes were properly canceled since SBA took title to the property before those taxes became a lien thereon. While the use of section 558 was the appropriate means to cancel those taxes, another step should also have been taken. That is, the assessor should have proceeded under section 553 of the RPTL to correct the 1999 assessment roll {2} to recognize that the parcel, while owned by the SBA, was not liable to taxation (see, RPTL, § 550(7)(a)) before the levy of the 2000 town/county tax. {3}

Since the property became entitled to exemption at the time of SBA’s acquisition (as of April 1, 1999), when it was subsequently sold to the current owners on September 27, the assessor should have implemented the section 520 procedure to restore it to taxable (i.e., non-exempt) status. This procedure includes the reassessment of the property “at its value as of the date of transfer” (RPTL, § 520(2)). {4}  It is that assessment (subject to possible administrative and judicial review - 10 Op.Counsel SBRPS No. 21) upon which the 2000 town/county tax should have been based.

Since the assessor did not timely implement section 520 and the 2000 town/county taxes were levied on the 1999 final assessment, correction of those taxes at this time requires the implementation of sections 556, 520 and 553. That is, assuming that the 2000 taxes have been paid, the current owners may seek a refund per section 556 claiming an unlawful entry. The assessor could then petition the board of assessment review (per § 553) to add the property to the 2000 final roll as an omission so that the property would be taxed pro rata for 1999-2000 school taxes (from September 27, 1999-June 30, 2000 [the end of the school fiscal year]) and 2000 town/county taxes, on the basis of the property’s September 27, 1999 assessed value.

We recognize that property which is damaged or demolished after taxable status date is generally still assessed as of its taxable status date value (3 Op.Counsel SBEA No. 108) and that, if administrative and judicial review of assessments is not timely sought, property owners, including new purchasers, are subject to the assessment on the current roll. Here, the intervening acquisition of title by an agency of the federal government entitled to tax immunity provides an exception. {5}

July 26, 2000

{1}  The tax roll assesses the property to the current owners with the corporate owner listed as prior owner, no mention being made of the SBA.

{2}  At that time, while the 1999 assessment roll had become a tax roll for school tax purposes, it still retained its assessment roll status for the as yet to be levied 2000 town/county taxes (see, RPTL, § 550(1), (6)).

{3}  Given the parcel’s corporate ownership as of March 1, 1999, it was appropriate to assess the property in that name on the 1999 tentative assessment roll. Yet, if the assessor was aware of SBA’s acquisition and acted at an earlier point in time, he or she could have proceeded to correct the 1999 tentative or final assessment roll (per RPTL, §§ 552, 553, respectively) even before the school levy.

{4}  This would reflect the presumably damaged condition of the buildings, but not their subsequent demolition.

{5}  Note that if the corporate owner had sold its property to a tax exempt (but not immune) entity (e.g., a nonprofit organization exempt per RPTL, § 420-a) after taxable status date, which then sold to the current owners before the next taxable status date, the current owners would be bound by the final 1999 assessment of $344,100. Of course, as presumably prudent buyers, we assume that the current owners would not have paid that amount as they in fact purchased the property for but a small fraction of that sum.