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Volume 10 - Opinions of Counsel SBRPS No. 44

Opinions of Counsel index

Public authorities exemption (Metropolitan Transportation Authority) (liability for tax liens) - Public Authorities Law, § 1275; Real Property Tax Law, §§ 302, 412:

The Metropolitan Transportation Authority is not immune from taxation. Its property’s exemption eligibility is measured as of taxable status date. [1 Op.Counsel SBEA No. 86 overruled in part]

Our opinion has been requested concerning the scope of the real property tax exemption enjoyed by the Metropolitan Transportation Authority (MTA). The facts are that the MTA acquired property on June 30, 1997, that is, after a Westchester County town’s June 1 taxable status date (Real Property Tax Law, § 302; Westchester County Administrative Code, § 283.141(1)). The question is whether the property was entitled to exemption immediately or not until the 1998 tentative assessment roll.

Real property is assessed according to its condition and ownership on taxable status date (RPTL, § 302(1)). As a general rule, exemption eligibility is also measured as of such date, that is, it is ownership as of taxable status date that determines whether real property is subject to taxation for the next tax year, notwithstanding the property’s subsequent acquisition by a tax exempt entity during that taxable year (People ex rel. Luther v. McDermott, 265 N.Y. 47, 191 N.E. 770 (1934); Semple School for Girls v. Boyland, 308 N.Y. 382, 126 N.E.2d 294 (1955); Matter of R.P. Adams Co. v. Nist, 72 A.D.2d 908, 422 N.Y.S.2d 184 (4th Dept., 1979)).

If, however, the acquiring entity is the State or Federal government, and the acquisition occurs before taxes become a lien, there is an exception to this general rule (see, 8 Op.Counsel SBEA No. 44; 4 id. No. 60). Section 404 of the RPTL codifies this “exemption” (actually, sovereign immunity) from taxation afforded the State “or any department or agency thereof. . . .”

In addition to the “immunity” exception afforded to State or Federal acquisitions, there is an exception - albeit limited - recognized for property exempt under statutes which indicate a contrary intention (see, e.g., Rochester Housing Authority v. Sibley Corp., 77 Misc.2d 205, 351 N.Y.S.2d 934 (Sup.Ct. Monroe Co. 1974), aff’d, 47 A.D.2d 718, 367 N.Y.S.2d 969 (4th Dept. 1975) which construes Public Housing Law, § 52; and 5 Op.Counsel SBEA No. 63 which discusses RPTL, §  418). In our opinion, the statutes in issue here do not indicate such an intention.

Section 412 of the RPTL provides that “[r]eal property owned by public authorities enumerated in the public authorities law shall be entitled to such exemption as may be provided therein.” The MTA is one such public authority and section 1275 of the Public Authorities Law provides that property owned by the MTA “shall . . . be exempt from taxation and special ad valorem levies.” {1}  This language is typical of that found in many exemption statutes and does not indicate any intent by the Legislature to provide an exception to the general taxable status date rule.

In addition, however, section 1275 further provides that, “The authority shall be required to pay no fees, taxes or assessments, whether state or local, including but not limited to fees, taxes or assessments on real estate . . . upon any of its property. . . .” This expansive language might be construed to extend to the MTA an immediate exemption from taxation regardless of when title may have been acquired. However, in Long Island Power Authority v. Shoreham-Wading River School District, 88 N.Y.2d 503, 670 N.E.2d 419, 647 N.Y.S.2d 135 (1996), the Court of Appeals considered virtually identical language applicable to property acquired by the Long Island Power Authority (LIPA), contained in Public Authorities Law, section 1020-p (“[t]he authority shall be required to pay no taxes nor assessments upon any of the property acquired or controlled by it . . .”), and held that nothing in the statutory language or legislative history was sufficient to find legislative intent “to override the general rule” and, thus, make the Shoreham Nuclear Power Plant’s tax exemption effective immediately upon acquisition by LIPA (88 N.Y.2d at 513, 647 N.Y.S.2d at 139). {2}

Based on the specific exemption provisions of section 1275 and the Court of Appeals’ reading of the comparable language in section 1020-p, then, we conclude that the MTA property is subject to the general “rule” regarding post-taxable status date acquisitions. However, one very early opinion of this office (1 Op.Counsel SBEA No. 86) suggests that the MTA may share the State’s immunity from taxation as an “agency” of the State. Though that conclusion was reached in a rather cursory fashion, we need to consider whether the opinion still has merit.

There is no general statutory definition indicating when a public entity is considered a State agency, and it appears that one may be a State agency for one or more, but not all, purposes. Clearly, this complicates our efforts to resolve this question. However, the courts have developed a “closeness of relation” test to be used in resolving the issue (see, 8 Op.Counsel SBEA No. 106 and the numerous cases and administrative opinions cited therein). As discussed in this later Opinion, factors such as who serves on the controlling body of the agency, the source of their appointment, and legislative statements as to their function are all considered.

In examining the applicable provisions of the Public Authorities Law, we note that the MTA is a public benefit corporation whose board consists of a chairman and members appointed by the Governor subject to approval by the State Senate (Public Authorities Law, § 1263). {3}  By virtue of these facts, it would be considered an “agency” of the State, for purposes of the transition assessment provisions of section 545 of the RPTL (see, § 545(7)(a) and (g)). In addition, the MTA is defined as a “state agency” for the purposes of sections 73 and 74 of the Public Officers Law (see, Public Authorities Law, § 1263(5)).

Other factors tending to indicate the closeness of relation between the MTA and the State are: the MTA may choose to participate in the New York State Employees Retirement System (Public Authorities Law, § 1265(9)(b)); the MTA may in its own name or in the name of the State apply for and receive grants of property, money, etc. (id., § 1266(6)); the MTA may request the State Commissioner of Transportation to acquire and dispose of property on its behalf (id., § 1267-a). {4}  Finally, section 1275 provides that the MTA was created for the “benefit of the people of the [S]tate of New York . . . and is a public purpose and that the authority will be performing an essential governmental function. . . .”

In contrast, however, the MTA is the custodian of its own funds, and its bonds are not guaranteed by the State (Public Authorities Law, §§ 1265; 1269(8)). We also note that in the context of the First Amendment to the United States Constitution, the MTA was found by a Federal appeals court to be functioning in a proprietary rather than a governmental capacity (Gannett Satellite Info. Network, Inc. v. MTA, 745 F.2d 767 (2d Cir. 1984)). These considerations could be found to make the relationship between the MTA and the State less close.

By way of analogy, contrast Albany Port District Commission v. Board of Assessment Review, 157 A.D.2d 959, 550 N.Y.S.2d 216 (3d Dept. 1990), where the Albany Port District Commission was found to be entitled to the RPTL, section 404, exemption with the aforecited R.P. Adams v. Nist, 72 A.D.2d 908, 422 N.Y.S.2d 184 (4th Dept. 1979), where the Erie County Industrial Development Authority was held not to be a State agency so entitled. In R.P. Adams, the court concluded that a conveyance to the IDA is not a conveyance to “the State,” noting that “[t]he Industrial Development Act . . . in express terms divorces the State from direct connection with or obligation under properties and projects engaged thereunder,” citing section 870 of the General Municipal Law (422 N.Y.S.2d at 185). Said section 870, which provides that “[t]he bonds or notes and other obligations of the [IDA] shall not be a debt of the state or of the municipality, and neither the state nor the municipality shall be liable thereon . . . ” closely parallels a provision of law applicable to the MTA, to wit, subdivision 8 of section 1269 of the Public Authorities Law: “[t]he state shall not be liable on notes or bonds of the authority and such notes and bonds shall not be a debt of the state. . . .” We believe that the R.P. Adams court’s reliance on similar language is a significant precedent to be followed in considering the relationship of the MTA to the State for real property tax exemption purposes.

Although this appears to be a “close” question, in the absence of some definitive judicial decision, we believe that the fact that the Legislature has provided specific, unique, exemptions for the MTA and other public authorities (Public Authorities Law, § 1275; RPTL, § 412), which do not entitle the MTA to exempt status upon acquisition, militates against a conclusion that the MTA enjoys the State’s greater “immunity” from taxation as codified in the distinct provisions of RPTL, section 404. Moreover, the Court of Appeals recent refusal to construe the comparable “no taxes” statutory language in section 1020-p of the Public Authorities Law as affording LIPA an exemption from taxation as of the date of its acquisition of title to certain real property is the best indicator to date of how that Court would likely construe the provisions of section 1275.

Accordingly, it is our opinion that property of the MTA is subject to the general rules of taxable status and is neither exempt nor immune from taxation as of the date of acquisition. 1 Op.Counsel SBEA No. 86 is overruled to the extent inconsistent herewith.

December 1, 1997

{1}  In 10 Op.Counsel SBRPS No. 16, we concluded that the MTA is also exempt from special assessments.

{2}  In this case, though, the lien had attached prior to the transfer of ownership (see, 88 N.Y.2d at 512, 647 N.Y.S.2d at 138).

{3}  Requirements are included in section 1263 that board members be from certain specified geographic areas.

{4}  The MTA also has authority to do so on its own behalf (Public Authorities Law, §§ 1266, 1267).