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Volume 12 - Opinions of Counsel SBRPS No. 3

Opinions of Counsel index

Historic property exemption (scope) (requirement for alteration or improvement) - Real Property Tax Law § 444-a:

Section 444-a of the Real Property Tax Law does not empower a town to grant tax exemptions to historic parcels in the absence of their alteration or rehabilitation in a manner conforming to the provisions of such section.

Our opinion has been requested concerning the historic property exemption (Real Property Tax Law, § 444-a). An assessor has sent us her town’s local law adopting the exemption. She specifically requests our comments concerning a particular provision of the local law and asks if the exemption can be granted for town taxes in the absence of any physical improvements being made to the property.

RPTL, § 444-a(1) provides in relevant part that: “Real property altered or rehabilitated subsequent to the effective date of a local law . . . adopted pursuant to this section shall be exempt from taxation and special ad valorem levies as herein provided . . .” Subdivision (2)(a) provides that “[h]istoric property shall be exempt from taxation to the extent of any increase in value attributable to such alteration or rehabilitation” pursuant to a nine-year schedule set forth therein. Eligibility requirements for qualified historic alterations and rehabilitations are set forth in section 444-a(2)(b). Section 444-a(5)(b) further provides that a town “may limit eligibility for the exemption to those forms of alterations or rehabilitation as are prescribed in such local law . . .” Most of the provisions of the local law in question appear to properly implement section 444-a.

The specific provision questioned by the assessor, however, states that “[a]fter a building, structure, site or district . . . has been duly designated . . .  as historically significant, the owner or owners of said building, structure, site or district . . . shall be exempt from General Town and Highway Taxes.” We have been informed by the town attorney that this provision is intended to afford tax exemption to parcels designated as historically significant regardless of whether those parcels have been altered or rehabilitated in a qualified manner.

Article XVI, § 1 of the State Constitution provides that tax exemptions “may be granted only by general laws.” We have previously opined that municipalities “may exercise only options with respect to [exemptions] that have been made available by the State Legislature” (8 Op.Counsel SBEA No. 120). In our opinion, RPTL, § 444-a does not empower a town to grant tax exemptions to historic parcels in the absence of their alteration or rehabilitation in a manner that conforms to section 444-a. Likewise, there is no other State law authorizing the exemption purported in the quoted section of the local law.

The State Board’s role concerning exemption administration, however, is strictly advisory (State Board of Equalization and Assessment v. Kerwick, 52 NY2d 557, 421 NE2d 803, 439 NYS2d 311 (1981)). We also recognize that local laws are entitled to a prima facie presumption of validity (People of the State of New York v. Scott, 26 NY2d 286, 258 NE2d 206, 309 NYS2d 919 (1970)). Here, we suggested that the assessor ask her town board to reconsider this section of the local law to avoid a situation where she would be asked to approve an exemption for one or more parcels that, in our opinion, is clearly not authorized by State law.

We note that two provisions of the RPTL afford a full exemption from town taxes to certain historical properties: section 420-b of the RPTL, which applies to real property owned by a nonprofit corporation or association organized exclusively for “historical purposes” and section 444 of such law, which applies to real property “owned by a historical society acquired for the purpose of inclosure, preservation and erection of monuments.” Since neither section applies to historic commercial or residential real property, the town board might wish to consider providing a partial town tax reduction to such property pursuant to Town Law, § 64(17-a):

The town board may provide for the preservation and protection of places, buildings, works of art and other objects having a special character or aesthetic interest or value and also provide for appropriate and reasonable control of the use or appearance of neighborhood private property within public view. Any such measures, if adopted in the exercise of police power, shall be reasonable and appropriate to the purpose, or if constituting a taking of private property, shall provide for due compensation, which may include the limitation or remission of taxes. {1}

A similar provision is set forth in section 96-a of the General Municipal Law.

It appears that the owner of a private parcel that is subject to a section 64(17-a) restriction is under no obligation to alter or rehabilitate his or her parcel in order to receive compensation if the town’s use limitation constitutes a “taking” of his or her private property. Therefore, the town may wish to consider adopting a historical preservation requirement pursuant to this provision in lieu of the current provision in its historic preservation local law.

June 18, 2008

{1}  We note that the State Board’s rules require that, when preparing the tentative assessment roll, an assessor shall “note in the inventory of assessment information, the effect, if any, on the value of a parcel of . . . section 96-a of the General Municipal Law or section 64(17-a) of the Town Law (historical preservation)” (9 NYCRR 190-1.3(a)(2)(i)).