Skip to main content

Volume 12 - Opinions of Counsel SBRPS No. 29

Opinions of Counsel index

Business investment exemption (local option) (different percentages of exemption for different applications) - Real Property Tax Law § 485-b:

A resolution increasing a school district’s business investment exemption percentage must apply to all eligible improvements within the school district the building of which begins on or after the effective date of such resolution. Another resolution, this one reducing the exemption, could be adopted soon thereafter, effectively limiting the number of parcels that could benefit from the increased exemption.

We have received an inquiry concerning the business investment property exemption (Real Property Tax Law, § 485-b) as it pertains to a particular school district. Specifically, the issue concerns the local option provision of section 485-b (7) which provides, in relevant part, that:

a school board, except a city school district to which article fifty-two of the education law applies, may, by resolution, reduce the percentum of exemption otherwise allowed pursuant to this section; provided, however, that a project in course of construction and exemptions existing prior in time to passage of any such . . . resolution shall not be subject to any such resolution so effected. {1}

On February 9, 1989, the school board adopted a resolution providing that “the percentum of business investment exemption allowed pursuant to the provisions of Real Property Tax Law, Section 485-b . . . be and the same hereby is reduced to zero . . .” As required by the same statute, a copy of this resolution was filed with the State Board on February 17, 1989.

On December 20, 2007, the school board adopted a resolution providing that “BE IT RESOLVED that the Board of Education of the . . . School District supports the provision of NYS Real Property Tax Law [§]485-b granting a property tax exemption of ten years for the construction of a [particular motel] project in the Town of [X].”  There is some disagreement among local officials as to whether this resolution was intended to mean that the school board was considering an increase in the school district’s percentage of exemption for section 485-b in order to provide a tax exemption for the proposed motel or whether it was instead intended to approve such increase for the site of the proposed motel only.

The assessor asks the following questions:

1. Does the resolution need to be passed before the project is finished?

2. Does the resolution need to be passed before the project begins?

3. Are the parcels that receive the exemption from the town, but pre-exist the school district’s approval of the exemption entitled to receive the exemption for school tax purposes for whatever number of years remain on their town granted exemption?

4. May the school district grant the exemption for a single parcel?

The answers to the first three questions are found in section 485-b(7), which also provides in relevant part that:

Any . . . school district that has reduced the per centum of exemption pursuant to this subdivision may thereafter, by . . . resolution . . ., increase the per centum of exemption up to any per centum not exceeding the maximum allowed by subdivision two or twelve of this section, whichever is applicable, provided, however, that any such . . . resolution shall apply only to construction, alterations, installations, or improvements commenced subsequent to the effective date of such . . . resolution . . .(emphasis added).

Therefore, the school board may afford the business investment exemption to the proposed motel by adopting a resolution increasing the school district’s percentage of exemption, provided the resolution becomes effective before the date on which construction of the proposed motel begins. Such a school board resolution would not apply to property the construction of which began before the effective date of such a school board resolution. (Since the statute provides that the exemption is available only to completed projects (§ 485-b(2)(b)(3)), projects already receiving the exemption for town tax purposes would be unaffected by the school district resolution.)

In our opinion, RPTL, section 485-b(7), does not empower a school board (or other municipal governing board) to grant the exemption for only one parcel or project in the manner chosen here. Rather, a resolution increasing a school district’s percentage of section 485-b exemption must apply to all eligible improvements within the school district the building of which begins on or after the effective date of such a resolution (see, 5 Op.Counsel SBEA No. 109, in which we opined that “[t]he business investment exemption authorized by section 485-b must be applied uniformly for all commercial, business and industrial property which is otherwise qualified”). {2}

We note, however, that section 485-b does not place a limit on how many times a school board may adopt resolutions increasing or decreasing the school district’s exemption percentage. Accordingly, it appears that a school district could adopt a resolution decreasing the section 485-b percentage of exemption to zero shortly after the effective date of a resolution approving an increase in such exemption percentage. Such a procedure might be followed by a school board that intends to only offer a narrow “window” within which otherwise eligible business investment properties may commence construction and qualify for exemption from school taxes. {3}   For whatever period of time that “window” remains open, of course, construction of other qualifying improvements could be commenced and thereafter receive the exemption.

March 25, 2008

{1}  As we explained in 8 Op.Counsel SBEA No. 111: “[a] school district other than a school district in the Cities of New York, Buffalo, Rochester, Syracuse and Yonkers (the districts to which Article 52 of the Education Law applies) may now ‘opt out’ of the exemption.”

{2}  The targeting of the exemption to specific geographic areas, business types, or both, is now permitted, but only when the provisions of section 485-b(9) are followed (e.g., following the appointment of an industrial and commercial incentive board that provides recommendations to the school board which are adopted by that board).

{3}  We cannot say with any certainty, however, whether a court would find such a narrow, “targeted” offer of exemption to be consistent with the intent or provisions of section 485-b.