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Volume 4 - Opinions of Counsel SBEA No. 72

Opinions of Counsel index

Aged exemption (income requirement) (Supplemental Security Income) - Real Property Tax Law, § 467:

Supplemental Security Income benefits constitute a voluntary transfer without consideration and therefore should be considered a “gift” and not “income” for purposes of Real Property Tax Law, section 467.

We have received an inquiry concerning the income requirement of section 467 of the Real Property Tax Law, the so-called “aged exemption”. The question is whether Supplemental Security Income (hereinafter “SSI”) should be included in the computation of income for purposes of determining eligibility for this exemption or whether it should be considered a gift and therefore excluded from such computation.

Paragraph (a) of subdivision 3 of section 467 provides that no exemption shall be granted if the income of the applicant exceeds the limit set by the granting municipality, which limit must be at a level between $3,000 and $6,000. (Pursuant to chapter 1004 of the Laws of 1974, the maximum permissible income limit will be raised to $6,500 as of January 1, 1975.) This subdivision further provides 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 apparent intention of the New York State Legislature in providing for this income requirement was to exclude anyone who had more than a certain amount of cash accruing to him with which to meet expenses during the income tax year immediately preceding the date of making application for exemption.

As noted above, this statute specifically includes social security payments as “income” for the purpose of determining an applicant’s eligibility for the exemption. Under the social security program, during working years, employees, their employers and self-employed people pay social security contributions, the equivalent of which are pooled in special trust funds under automatic appropriation by Congress. A person must have a certain insured status before social security benefits can be paid to him or his family. A person is insured if he has a sufficient number of quarters of coverage credited to his social security earnings record. Basically, a quarter of coverage means a calendar quarter in which a person has been paid a certain salary (varying depending on type of employment) or been credited with a certain amount of income from self-employment; for example, a quarter of coverage would mean a calendar quarter in which a person has been paid $50 or more in wages for employment covered under the law (except wages for agricultural labor after 1954) . Individuals who died prior to 1951 were fully insured if they had six quarters of coverage. No one can be fully insured if he has less than six quarters of coverage. A person who has forty quarters of coverage is fully insured for life.

Thus, it is readily apparent that social security benefits are dependent on an individual’s having made contributions to social security, such contributions being based on his earnings or wages. On the other hand, according to information supplied us by the U.S. Department of Health, Education, and Welfare, the money to make SSI payments is derived from general funds of the U.S. Treasury - personal income taxes, corporation taxes, and other taxes. Unlike social security payments, SSI benefits are not dependent on contributions of workers, employers, and self-employed people. (Social security funds are not used to pay SSI benefits.) Apparently the only requirements for eligibility for SSI benefits are that the person (s) be either at least sixty-five years of age, or blind, or disabled, and that they have limited incomes and limited assets; in short, the only real qualification is need. There is no requirement that the individual (or any employer he might have) contribute to the program through deductions from his earnings; nor is there any requirement that the individual perform any service in return for such payments. This latter “non-requirement” serves to distinguish SSI benefits from those of other federal programs such as the “Foster Grandparent” program, under which low-income persons aged sixty or over render supportive person-to-person service in health, education, welfare, and related settings to children having exceptional needs, including services to children receiving care in hospitals, homes for dependent and neglected children or other establishments providing care for children with special needs. We have previously stated that the hourly stipends paid under the “Foster Grandparent” program are in the nature of “wages” in return for services performed and therefore (in light of the general rule that an exemption statute is to be construed most strictly against the taxpayer) should be included in computing income for purposes of section 467 (4 Op.Counsel SBEA No. 71). We believe such programs are readily distinguishable from that of SSI and that the benefits received under the latter program are in the nature of a gift and should therefore be excluded from the computation of income for purposes of section 467.

A “payment” or “wage” is given as compensation or consideration. Thus, the transfer of money in consideration of services performed (such as payments received under the “Foster Grandparent” program) is not a gift (Bachmann v. Clemente Contracting Corp., 86 N.Y.S.2d 899, 905, mod. on other grounds sub nom., Bachmann v. Dirrane, 275 App. Div. 753, 88 N.Y.S.2d 285) . A gift, on the other hand, has been judicially defined as “. . . a voluntary transfer of any property or thing by one to another without consideration.” (McKenzie v. Harrison, 120 N.Y. 260, 265, 24 N.E. 458).

It is the opinion of this office based on the foregoing analysis, that SSI benefits constitute a voluntary transfer without consideration and therefore should be considered a “gift” and not “income” for purposes of section 467.

December 4, 1974