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Volume 4 - Opinions of Counsel SBEA No. 123

Opinions of Counsel index

Aged exemption (income requirement) (board received for hospital out-patients) - Real Property Tax Law, § 467:

Where an applicant for the aged exemption (Real Property Tax Law, § 467) boards hospital out-patients, that portion of the payments received, on behalf of such patients, which represents their ordinary living expenses, would not constitute income for purposes of such section. Any part of the payments, which constitutes a profit to the applicant, or remuneration for services in caring for the boarders, would be considered income.

Our opinion has been requested concerning the income requirement of the so-called “aged exemption,” section 467 of the Real Property Tax Law. An applicant for the exemption boards out-patients of the New York State hospital and receives $208 per month for each person she boards. An average of 7 to 10 people per month board there. The applicant claims that this income is not taxable for federal and state income tax purposes.

Section 467 authorizes a granting municipality, at its option, to set an annual income limit of between $3,000 and $6,500 for the income tax year immediately preceding the date of making application for exemption. This section further provides (in subdivision 3, paragraph (a)) that “[s]uch income shall include social security and retirement benefits, interest, dividends, net rental income, salary or earnings, and net income from self-employment, but shall not include gifts or inheritances.”

The foregoing language clearly indicates that the ordinary income tax rules do not apply when computing income for purposes of section 467, and the Court of Appeals so held in a 1973 decision, Engle v. Talarico, 33 N.Y.2d 237, 306 N.E.2d 796, 351 N.Y.S.2d 677. In that case the court declared (at p. 679) that “[t]he Legislature expressed no intention of incorporating the federal or state tax rules into the exemption statute. Absent direction to the contrary, the term ‘income,’ as used in the particular statute must be judicially construed.” In its decision the court supported a qualified “cash flow” concept and held, among other things, that depreciation was not deductible from net rental income for purposes of this exemption.

Thus, the fact that the payments in question may not be taxable for federal and state income tax purposes does not mean that they should be excluded from income for purposes of section 467, and as previously noted, the definition of “income” in that section specifically includes “net rental income” which would encompass payments such as those made to this particular applicant. However, based on our opinion with regard to monthly payments for the care of “welfare children” (2 Op.Counsel SBEA No. 6) we feel constrained to say that a portion of those payments made to this applicant on behalf of her out-patient boarders, which represents the ordinary living expenses of such boarders, would not constitute income for purposes of section 467. However, should any part of these payments constitute a profit to the taxpayer or remuneration for her services in caring for these boarders, such portion would be considered income for purposes of section 467.

In addition, there is the possibility that this property would not meet the “residence” requirement of the statute. A person meeting all the other qualifications of section 467 with respect to income, age and ownership would qualify for exemption even though a portion of the real property is leased for residential purposes provided that the real property is his legal residence and is occupied by him at least in part. However, where the leasing reaches the scale of a hotel business or where the property consists of a large apartment house which is in effect a commercial enterprise, it is readily apparent that no exemption may be allowed (4 Op.Counsel SBEA No. 115).

By providing that the exemption is to apply to residential property of an otherwise qualified person “occupied in whole or in part by the owner,” the Legislature clearly intended that the exemption apply to a one or two family residence. Section 467 is silent as to whether the exemption may be denied on a dwelling which serves as a boarding house for several individuals and, in general, eligibility in such a case is a matter for determination by the assessor after examining each case on its own facts. In cases such as this, of course, the income derived therefrom will often preclude an otherwise qualified owner from obtaining this exemption.

April 25, 1975