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Volume 5 - Opinions of Counsel SBEA No. 16

Opinions of Counsel index

Housing exemption (in lieu of tax payments) (allocation) - Private Housing Finance Law, § 577:

When a town elects to grant a partial or total exemption from taxation to a housing project pursuant to section 577, such exemption applies to town, school district and county taxes. Accordingly when the town agrees to accept payments in lieu of taxes on such projects, the town, school district and county should each share in these payments.

We have received an inquiry concerning the taxable status of a community improvement and development corporation. The owner of the subject property, pursuant to the provisions of Article XI of the Private Housing Finance Law, made application to the town board for partial tax abatement of real estate taxes. The town agreed to accept in lieu thereof payments representing certain percentages of the gross shelter annual rents to be allocated pursuant to a formula set forth therein to the town and school district. The subject property consists of a housing project financed by a federally-aided mortgage.

The pertinent statutory provisions relating to the exempt status of such property are contained in section 577(1)(a) of Article XI of the Private Housing Finance Law which reads in part, “Whenever a housing project of a housing development fund company is or is to be permanently financed by a municipally-aided, state-aided or federally-aided mortgage, the local legislative body of any municipality in which such project is or is to be located may exempt the real property in such project from local and municipal taxes including school taxes, other than assessments for local improvements, to the extent of all or part of the value of the property included in the completed project.”  In addition, it is also noted section 577( l)(b) provides that where a municipality acts on behalf of another taxing jurisdiction in assessing real property for the purpose of taxation, the action of the local legislative body of such municipality in granting tax exemption shall have the effect of exempting the property from taxes levied by both taxing jurisdictions.

Pursuant to the above quoted statute, a municipality, in this case the town, may elect to grant a partial or total exemption from taxation for the type of projects specified therein, and such exemption, when granted by the town, applies to town, school district and county taxes. While the language of the town board resolution in this case speaks of a “partial tax abatement,” the effect is to grant a total exemption and to impose, by mutual consent, a payment in lieu of taxes to be made by the company to the municipality.

Accordingly, the subject parcel should be accorded the same status as other totally exempt parcels.

Two peripheral matters are noted. One is that the statute, while silent with respect to payments made in lieu of taxes, does not contain language which would prohibit an agreement between the respective parties to make such payments. The second is that the resolution calls for in lieu payments to be allocated between the town and school district.

In a 1973 case, where a school district was a party respondent (District Three IUE Housing Development Fund Corporation v. Buckley, 74 Misc. 2d 1078, 347N.Y.S.2d 125), construing a somewhat similar agreement calling for a “minimum tax liability” between the City of Troy and a company, the court held that the school district within which the property was located was entitled to its fair proportionate share of the tax collected by the city.

In 1977, the Court of Appeals affirmed without opinion, a 1976 decision of the Third Department (Troy Towers Redevelopment Company, Inc. v. City of Troy, 51 App.Div.2d 173, 380 N.Y.S.2d 89, aff’d, 41 N.Y.2d 816, 361 N.E.2d 1045, 393 N.Y.S.2d 397), which dealt with similar issues involving the school district. Citing the District Three case, supra, the Third Department held the school district to be “entitled to a fair and proportionate share of the payments made in lieu of taxes, both retroactively and prospectively . . .” (380 N.Y.S.2d at 93).

The county was not a party in District Three, supra, although it was a party in Troy Towers, supra. In neither case was the county’s interest in the in lieu of tax payments examined by the court. It would appear, however, under the reasoning of these cases, that the county would also be entitled to a share of the in lieu of tax payments.

July 9, 1975
Revised May 28, 1978