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Volume 10 - Opinions of Counsel SBRPS No. 28

Opinions of Counsel index

Senior citizens exemption (income requirement) (unreimbursed medical and prescription drug expenses) - Real Property Tax Law, § 467:

Where a municipality authorizing the senior citizens exemption permits applicants to offset unreimbursed medical and prescription drug expenses from their incomes in determining exemption eligibility, premiums paid for medical insurance (including Medicare Part B) may be deducted. The costs of over-the-counter drugs and pharmaceuticals may not be deducted. Assessors may not consider the appropriateness of the applicant’s choice of physician or the physician’s prescribed course of medical tests or treatment.

We have been asked to provide advice concerning the income requirement of the senior citizens exemption (Real Property Tax Law, § 467), specifically, the provisions added to the law by chapter 313 of the Laws of 1996.

Chapter 313 amended the statutory definition of income (§ 467(3)(a)) to provide that, “any such income shall be offset by all medical and prescription drug expenses actually paid which were not reimbursed or paid for by insurance, if the governing board of a municipality, after a public hearing, adopts a local law, ordinance or resolution providing therefor.” That is, each county, city, town, village and school district, which authorizes the exemption, has the further option of deciding whether to allow exemption applicants to deduct from their incomes (used to determine exemption eligibility) all medical and prescription drug expenses which are not reimbursed or paid by insurance. The question is which medical and drug expenses may be deducted.

Since the new law fails to define its terms, we must resort to rules of statutory interpretation. One of the cardinal rules of statutory construction is that, in general, the words used in the law are to be construed according to their natural and most obvious sense (McKinney’s Statutes, § 94). {1}

In interpreting the meaning of new legislation, we often attempt to discern the intent of the Legislature by examining the bill sponsor’s memorandum. Here, unfortunately, the memorandum (for 1995-96 Senate Bill No. 3502-C) is of minimal assistance. It simply asserts that, “For many senior citizens living on a fixed income, medical treatment and prescription drug costs not covered by insurance represents a financial burden that affects their standard of living.” The new option is intended to “enabl[e] more seniors to be eligible for the . . . exemption.”

Not surprisingly, the phrase “medical and prescription drug expenses” is not used elsewhere in the RPTL. While the courts have been called upon to interpret the meanings of similar terms, our research indicates that these have usually been in the context of the coverage of an insurance policy or the scope of a support agreement (e.g., Williams v. Helbig, 92 Misc.2d 32, 399 N.Y.S.2d 556 (Sup. Ct., Monroe Co., 1977); Noble v. Noble, 99 Misc.2d 498, 416 N.Y.S.2d 510 (Family Ct., Rensselaer Co., 1979)).

Similar terms are germane to the income tax, a subject clearly more akin to the property tax than insurance or domestic relations law. It is true, as we stated in 10 Op.Counsel SBRPS No. 12, “we have consistently stated that whether moneys received are taxable or nontaxable for income tax purposes is not dispositive of the issue of inclusion or exclusion for purposes of the senior citizens property tax exemption (Engle v. Talarico, 33 N.Y.2d 237, 306 N.E.2d 796, 351 N.Y.S.2d 677 (1973)).” Yet, this is not to say that we are precluded from looking to the income tax law for guidance.

Section 213 of the Internal Revenue Code (26 USCS) entitled “Medical, dental, etc., expenses,” permits, in certain circumstances, an itemized deduction for such expenses which are “not compensated for by insurance or otherwise” (26 USCS 213(a)). The term “medical care” is defined (in 213(d)(1)(A)) to include amounts paid “for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body” (see also, 47A C.J.S. Internal Revenue § 182). Also included are certain related transportation expenses, premiums for medical insurance (including Medicare B premiums), {2}  and certain lodging costs for treatment away from home (26 USCS § 213(d)(1)(B), (C), and (2)).

Examples of expenses incurred for the prevention or alleviation of a physical or mental defect or illness include the following: hospital services, nursing services, medical, laboratory, surgical, dental and other diagnostic and healing services, X-ray, medicine and drugs, artificial teeth or limbs, and ambulance hire (47A C.J.S. Internal Revenue § 182, citing Internal Revenue Regulation 1.213-1).

Section 213 of the Internal Revenue Code is also useful to our analysis in its definition of “prescribed drug” as “a drug or biological which requires a prescription of a physician for its use by an individual” (26 USCS § 213(d)(3)). That we cannot completely rely on the Internal Revenue Code standards for our purposes is evidenced by the fact that the Code permits a deduction for prescription drugs and insulin; section 467(3)(a) references only prescription drugs.

As such, we do not believe that an applicant may deduct the costs of aspirin even if prescribed by a doctor, unless the particular form of aspirin is only available by prescription. Neither do we think that the Legislature intended to include so-called over-the-counter drugs or other pharmaceuticals in the phrase “medical . . . expenses.”

As to the variation in the amount of the deduction which may be claimed depending on whether the senior citizen chooses a physician who accepts Medicare or not, this is an issue which goes beyond the plain language of the statute. {3}  It is not our role (nor do we think that of the assessor) to determine the appropriateness of an applicant’s choice of physician or of a physician’s prescribed course of medical tests or treatment. To the extent that some applicants may now initially qualify for the exemption (or qualify for a greater exemption percentage than heretofore) because of medical decisions that some might question is a factor which the municipal governing board may consider in deciding whether to allow the medical/drug income offset in the first instance or to allow it to continue in a subsequent year.

In conclusion, unless and until the Legislature decides to revisit its chapter 313 amendment or the courts have had the opportunity to construe the new medical/drug income offset provision, we recommend that assessors apply a plain language reading to the new law. To the extent they are of assistance, we believe that the Internal Revenue Code, its regulations, and interpretations thereof, may be useful tools.

December 3, 1996

{1}  Webster’s New Collegiate Dictionary defines “medical” as “of, relating to, or concerned with physicians or the practice of medicine” and “prescription drug” as “a drug that can be obtained only by means of a physician’s prescription.”

{2}  In 10 Op.Counsel SBRPS No. 22, we concluded that, “The amount of social security benefits withheld by the Social Security Administration to pay the premium for Medicare Part B, where a person chooses to be covered by that program, is income for purposes of determining eligibility for the senior citizens exemption.” That is, such moneys are included in “social security,” another element included in the definition of income in section 467(3)(a). Now, however, it would appear that such premium may be deducted from income, along with other medical insurance premiums, if the municipal corporation adopts the medical/drug income offset provision.

{3}  This issue is discussed for income tax purposes, however, at 34 Am Jur 2d, Federal Taxation (1996) ¶18862.