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Volume 2 - Opinions of Counsel SBEA No. 33

Opinions of Counsel index

Taxable status date (liability of State on property acquired between taxable status date and lien date) - Real Property Tax Law, §§ 302, 304:

Where taxable real property is transferred to a tax exempt organization between taxable status date and lien date, taxes subsequently levied on that property remain due in all cases except where the property was transferred to the State, in which case the tax is void.

We have received an inquiry as to whether the State is liable for taxes on property it acquires from a private citizen subsequent to taxable status date but prior to lien date.

When property owned by a private citizen on taxable status date is transferred to a tax exempt organization subsequent to taxable status date and prior to lien date (usually when the tax is levied), such property remains subject to taxation. However, if property is transferred to the State, subsequent to taxable status date but prior to lien date, then it is settled opinion that the tax is void. In other words, when a transfer is made between taxable status date and lien date the tax remains due in all cases except when the State is the grantee.

A basic principle, of very venerable age, is that tax liability is determined as of taxable status date. Considering the number of parcels and owners, as well as the amount of money and record keeping involved, it is apparent that a final “cut-off” date is necessary in the levy and collection or taxes. As stated in Rundell v. Lakey, 40 N.Y. 513, at page 517:

“The tax is imposed . . . on account of the ownership of such property, and . . . liability to such tax is conclusively fixed . . . in consequence of their ownership . . . at the time fixed by law for determining who should be taxed therefor as owner.”

A second principle is that if taxes based on a valid assessment are not paid, then “the lands may eventually be made to answer for the tax.” (Hilton v. Fonda, 86 N.Y. 339). Such principle is codified in section 304 of the Real Property Tax Law.

Therefore, insofar as private property is concerned,

“. . .the taxable status of persons and property becomes fixed on . . . [taxable status date] and . . . no power exists to enter property thereafter acquired upon the roll or to change an assessment theretofore made on account of any transfer of title” People ex rel. 23rd St. Ry. Co. v. Commissioners, 91 N.Y. 593, 602.

The result is that when title passes from a nonexempt owner to a tax-exempt private corporation very near to, but after taxable status date, that property is considered as being owned by the nonexempt entity for the tax year in question, and such property is therefore subject to taxation. Taxable status date is the controlling factor (Young Israel of Far Rockaway Inc. v. The City of New York, 33 App. Div.2d 561, 305 N.Y.S.2d 432). The real property becomes subject to the enforcement provisions of Article 10 of the Real Property Tax Law in the event that the tax is not paid.

If, however, under the same circumstances the State government purchases the property, there would not be any tax liability. The reasons that validly assessed taxes cannot be enforced against the State is to be found in the ancient doctrine of sovereign immunity as present in common law and in modern statutes. Simply stated, land owned by the State cannot be made subject to levy for the collection of unpaid taxes.

“The doctrine of sovereign immunity from suit, rooted in the ancient common law, was originally based on the monarchical, semireligious tenet that ‘the King can do no wrong’ . . . Most states today provide some remedy whereby individuals with claims against the government may seek redress ... and, in New York, the method has taken the form of a legislative waiver . . . in section 8 of the Court of Claims Act. The suits to which the state has thereby consented, however, must be brought in the Court of Claims and in accordance with the procedure outlined in the Act. . .” (Glassman v. Glassman, 309 N.Y. 436, 440, 131 N.E.2d 721.)

Taxable status date is not the controlling factor with regard to state-owned land. Rather, the State will honor tax claims upon land it acquires only when such claims exist as liens at the time of acquisition.

Absent a lien, it is well settled that taxes levied against a parcel cannot be enforced against the State. This principle is present in our case law as follows:

“At the time that the tax in question became a lien the property was owned by the plaintiff, the state of New York. Taxes may not be imposed upon land belonging to the state. Tax Law section 4(2) (Matter of Melrose Avenue, 234 N.Y. 48, 136 N.E. 235.) The lien, if any, would be valueless, for, under section 21 of the Public Lands Law, sales of state lands for unpaid taxes are void.” People v. City of New York, 120 Misc. 247, 198 N.Y.S. 860; aff’d 207 App. Div. 822, 201 N.Y.S. 931.

“The immunity of the State of New York as a sovereign from suit, as in the instant actions, so as to divest it of real property that had vested in the State, is a fundamental principle of our jurisprudence.” (In re Foreclosure of Tax Liens, 204 Misc. 76, 121 N.Y.S.2d 283, 288, 297.)

April 28, 1970