Skip to main content

Volume 12 - Opinions of Counsel SBRPS No. 17

Opinions of Counsel index

Annexation (effect on parcels qualifying for business investment exemption); Business investment exemption (calculation) (annexation of property qualifying for exemption); Correction of errors (clerical error) (partial exemption - failure to grant business investment exemption) - General Municipal Law § 710; Real Property Tax Law §§ 485-b, 550:

Where a non-assessing unit village, which authorizes the business investment exemption, annexes property receiving such exemption for other tax purposes, the property should receive the exemption for village tax purposes in a percentage based upon the exemption schedule applicable to the village.

Where a parcel is eligible for a business investment exemption for two municipal tax purposes, but the assessor grants the exemption for one tax purpose only, a clerical error has occurred as to the second tax purpose.

We have received an inquiry regarding the business investment exemption (Real Property Tax Law, § 485-b) as it pertains to two parcels [A and B] recently annexed by a village which is a non-assessing unit (RPTL, § 1402(3)). The annexation occurred after the March 1, 2008 town taxable status date (RPTL, § 302(1)) which applies for purposes of the non-assessing unit village’s 2009-10 fiscal year as well (§ 1402(3)(c)). {1}

Section 485-b generally provides a partial, 10-year exemption equal to 50 percent of the value of a qualifying improvement in year one with the exemption percentage decreasing thereafter by five percent per year for the next nine years (§ 485-b(2)(a)(iii)). However, a county, city, town, or village may adopt a local law, or a school district a resolution, to reduce or even eliminate the exemption for its municipal tax purposes (§ 485-b(7); 5 Op.Counsel SBEA No. 81). Here, the town has reduced the duration of the exemption to five years with a 25 percent exemption in year one declining by five percent over the next four years. The town assessor, however, was mistakenly informed when he took office that that the town had opted out entirely from the exemption (as had the town’s two school districts). {2}  The village has not yet reduced its exemption but is contemplating doing so.

The owner of Parcel A timely applied for the exemption and first received the same - for county tax purposes only - on the town’s 2005 assessment roll (A Ex 1). Parcel B first received a county exemption on the 2006 assessment roll (B Ex). A then added another improvement and first received a county tax exemption for this second improvement on the 2007 assessment roll (A Ex 2).

There are two questions presented. (1) How much, if any, exemption should the parcels receive for village tax purposes? (2) Can the failure to grant the exemptions for town tax purposes be corrected and, if so, how?

Village exemption

It is the town assessor’s duty to administer exemptions, including the business investment exemption, on the village’s behalf, according to the policies set by the village (8 Op.Counsel SBEA No. 16). Since the village has not opted to reduce or eliminate the exemption for village tax purposes, the town assessor has been granting it to parcels located within the village on the town roll according to the usual statutory exemption schedule. So, for example, a parcel within the village on March 1, 2008, which should have received a first-year 25 percent town business investment exemption on the town’s 2008 assessment roll, should have also received a first-year village exemption of 50 percent for purposes of the village’s 2009-10 tax levy. As noted above, however, as of that date, the annexation had not yet occurred.

The statutory annexation provisions (General Municipal Law, Article 17), specifically section 710(3), affect this process. We discussed this provision in 10 Op.Counsel SBRPS No. 48 as follows:

Section 710 of the General Municipal Law addresses the disposition of taxes and other charges against property in annexed territory. *** Subdivision three of that section provides that, “Any taxes levied or other charges made against or on account of any territory annexed pursuant to this article for a fiscal year commencing after the date such annexation takes effect shall be due and payable to and collected by the annexing local government.”

Subdivision three was added (L.1990, c.529) to address the question of taxes levied for fiscal years commencing after annexation but which are based on assessment rolls with a pre-annexation taxable status date. We note that it includes no provision for a redetermination of assessed value or taxable status by the annexing government. Indeed, it seems most reasonable to assume that no such redetermination is intended upon annexation.

We are of a similar opinion here. That is, since the 2009-10 village taxes are for a fiscal year commencing after the annexation, the town assessor needs to add those parcels to the 2008 town roll to be used for village purposes. In our opinion, the annexed parcels should be treated as “omissions” (per RPTL, § 550(4-a)) from the final 2008 assessment roll. The town assessor should petition the town board of assessment review during the period of time specified in section 553(3)(a) of the RPTL to correct the 2008 town roll before the 2009-10 village levy. {3}

It is also our opinion that the annexed parcels should receive the applicable village business investment exemption percentages. The annexed parcels should be treated as though they were included within the village and received a village exemption for the first time on the same year’s assessment roll when the parcels first received county exemptions. As such, when the two parcels are added to the 2008 assessment roll for 2009-10 village tax purposes, they should also receive the following village exemptions (presumably equal to those granted on the 2008 roll for county purposes): 

Villiage exemptions
A Ex 1: 35%
B Ex: 40%
A Ex 2: 45% {4}

We are also asked if the village may now choose to reduce or eliminate the exemption as to the recently annexed parcels. In our opinion, since those parcels already have been improved, it may not do so. While, as noted above, section 485-b(7) permits a village (or other municipal corporation) to reduce or eliminate the exemption (by local law in the case of a village), it also specifically provides: “that a project in course of construction and exemptions existing prior in time to passage of any such local law . . . shall not be subject to any such reduction so effected.” Consequently, although the village may certainly act to prohibit new business investment exemptions for the future, that action will not affect qualifying improvements already constructed (or in the course of construction) such as the improvements located on the recently annexed parcels.

Town exemption

An application for exemption under section 485-b which is timely filed with the town assessor is made for all available tax purposes. In our opinion, given the town’s local law, the following exemptions should have been granted for town tax purposes on the indicated assessment rolls: 

Exemptions for town tax purposes
A Ex 1: 25% 20% 15% 10%
B Ex: N/A 25% 20% 15%
A Ex 2: N/A N/A 25% 20% {5}

In our opinion, the failure to grant the exemptions for town tax purposes on those rolls constitutes a clerical error (per RPTL, § 550(2)(c)). {6}  The owners may petition the county director of real property tax services (per § 554) for corrected 2009 tax bills and may also petition for partial refunds of town taxes paid in prior years (per § 556). {7}

November 25 and December 2, 2008

{1}  The village has a fiscal year commencing on June 1 (Village Law, § 5-500(4)); its taxes are levied on the village portion of the town assessment roll filed as of July 1 (per RPTL, § 516) of the preceding calendar year.

{2}  The assessor therefore granted business investment exemptions for county and (where applicable) village purposes only.

{3}  There can be as many as three “second” meetings of a board of assessment review (per RPTL, § 553) to correct errors on a town’s final assessment roll, that is, before it is used for school, county/town, and village tax levy purposes (10 Op.Counsel SBRPS No. 84).

{4}  It necessarily follows that the three exemption percentages should be 30, 35, and 40, respectively, on the 2009 assessment roll to be used for 2010 county tax and 2010-11 village tax purposes. The exemption percentages will then decline by five percent per year until they phase out.

{5}  These town exemption percentages should then be reduced to five, 10, and 15, respectively, on the 2009 assessment roll. That will be the last assessment roll on which A Ex 1 qualifies for any exemption for town tax purposes.

{6}  “an incorrect entry of assessed valuation on an assessment roll or on a tax roll for a parcel which, except for a failure on the part of the assessor to act on a partial exemption, would be eligible for such partial exemption[.]” The parcels were eligible for county and town tax purposes; the assessor granted county exemptions only.

{7}  Note that petitions for correction under section 556 must be filed within three years of the annexation of the tax warrant (RPTL, § 556(1)(a)).