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Volume 10 - Opinions of Counsel SBRPS No. 76

Opinions of Counsel index

Exemptions, generally (transfer to non-exempt owner) (school tax relief [STAR] exemption) - Real Property Tax Law, §§ 425, 520:

Where property is entitled to receive a school tax relief [STAR] exemption as of taxable status date, a subsequent transfer of title to someone not eligible to receive that exemption will not result in the removal of the exemption from the assessment roll based upon such taxable status date.

Our opinion has been requested as to the eligibility of a particular parcel for a school tax relief [STAR] exemption (Real Property Tax Law, § 425). The facts are that a husband and wife owned property and filed an application for STAR prior to the town’s March 1, 1999 taxable status date. In a deed dated March 12, 1999, the couple conveyed their property to their son and daughter-in-law. That deed includes a two paragraph section entitled “Life use retained” which sets out the rights of the parents to use their residence for the rest of their lives or the survivor of them. That section goes on, however, to provide that “[t]his life use, however, shall not constitute a life estate and is personal to the grantors and each of them.” It also provides criteria for termination of their interest.

In 9 Op.Counsel SBEA No. 41, we contrasted life estates with rights of occupancy. As noted therein, this dichotomy is important as a person with a life tenancy is deemed to be the owner of property for purposes of taxation (and, if applicable, exemption), while a person with a right of occupancy has no such ownership interest. We noted that the phrase “use and possession” is often present in descriptions of life estates which may not be denominated as such. This deed is the converse: while the deed refers to the “life use retained,” the deed very clearly provides that the parents have not reserved a life estate (see 9 Op.Counsel SBEA No. 49). The children therefore became the legal owners of the property for purposes of taxation once the deed was delivered to and accepted by them (Real Property Law, § 244; Koehler v. Hughes, 148 N.Y. 507, 42 N.E. 1051 (1896)).

Nevertheless, for purposes of determining eligibility for the STAR exemption on the 1999 assessment roll, the parents must be considered the owners. This is because the conveyance occurred after the March 1, 1999 taxable status date, and determinations of exemption eligibility are generally made as of taxable status date (Semple School for Girls v. Boyland, 308 N.Y. 382, 126 N.E.2d 294 (1955)). Consequently, if the parents did indeed file a timely application evidencing their eligibility for STAR (or, as the case may be, enhanced STAR (RPTL, § 425(4))), their parcel is entitled to receive such exemption from 1999-00 school taxes.

For most exemptions, pursuant to section 520 of the RPTL, when property subject to an exemption is transferred to someone not eligible to receive such exemption, the exemption is terminated as of the date of transfer. Among other provisions, that section authorizes removal of such exemption from assessment rolls not yet levied upon (RPTL, § 520(4)). However, section 520(5) provides that such section does not apply to the STAR exemption. Without the section 520 authorization, the parents’ exemption (to which they were entitled on March 1, 1999) may not be removed from the 1999 assessment roll. If no further changes are made in the ownership of the property, entitlement to STAR on the 2000 assessment roll will be based upon the children’s eligibility.

April 14, 1999