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Volume 6 - Opinions of Counsel SBEA No. 5

Opinions of Counsel index

Correction of errors (clerical error) (railroad ceilings established after levy of tax); Railroad property exemption (late certification of final railroad ceilings) (procedure) - Real Property Tax Law, Article 4, Titles 2-A, 2-B; §§ 550, 554:

If railroad real property subject to a ceiling assessment pursuant to Title 2-A or 2-B of Article 4 of the Real Property Tax Law is assessed in an amount in excess of the ceiling established by the State Board, such value is a “clerical error” as defined in section 550(2) (d) of the law. Correction or refund may be made pursuant to Title 3 of Article 5 of the law.

We have received an inquiry in regard to the right of a railroad company owning property subject to the provisions of the so-called “Railroad Ceiling Law” (Article 4, Titles 2-A and 2-B of the Real Property Tax Law) to a reduced assessment or a refund of taxes paid where the assessment (as determined by the assessor) exceeds the railroad ceiling established by the State Board. In particular, we are asked about the case of a school district levying a tax September 1 on an assessment roll for which the railroad ceilings have not yet been established.

Assessors are required to assess annually all real property of railroad companies situated within their respective assessing units (Real Property Tax Law, §§ 302,489-c(1), 489-cc (1) {1}). “Subsidized railroad real property” (defined in §§ 489-b(4) and 489-bb(4)) is exempt from taxation (id. §§ 489-d(4), 489-dd(4)). Other “railroad real property” is partially exempted from taxation to the extent that the assessed value thereof as determined by the assessor exceeds the “railroad ceiling” (id. §§ 489-d( 4 ), 489-dd(4)) established by the State Board of Equalization and Assessment (id. §§ 489-e, 489-ee).

When the assessed value does exceed {2} the railroad ceiling, the assessor is required to reduce the assessed valuation to the ceiling amount (id. §§ 489-p(1), 489-mm(l)). If receipt of the certificate of the railroad ceiling occurs after the final completion, verification and filing of the final assessment roll, the assessor or any other local officer - including school authorities - having custody and control of the assessment roll, is required to make the necessary reductions thereon (id. §§ 489-p(2), 489-mm(2)).

Therefore, it is clear that the school authorities in question may reduce the assessed valuation of the railroad real property on the assessment roll to the ceiling level. Since a tax roll is merely an assessment roll upon which taxes have been extended, we believe that the authority to make correction under subdivision 2 of sections 489-p and 489-mm is sufficiently broad to permit school authorities to correct the same assessment on its tax rolls. Furthermore, the more restrictive interpretation of the statutory language (i.e., to limit the right to correction merely to assessment roll) would appear to violate the spirit and intent of the statute, which is to ensure that no railroad be assessed in excess of a ceiling or pay taxes in excess of a levy based on that ceiling.

While the “Railroad Ceiling Law” is silent on the right to a refund of taxes (as well as on the question of the correction of a tax roll), it is readily apparent that denial of a refund - where taxes paid are subsequently determined to be in excess of a tax levied against the railroad ceiling-would result in the railroad having a right without a remedy. Since the ceiling law provides no specific method for the granting of a refund, we suggest that the procedures available under the so-called “correction of errors law” (Real Property Tax Law, Art. 5, tit. 3) be followed.

Once the assessed value subject to taxation has been corrected pursuant to section 489-p or 489-mm, the original entry on the tax roll of the tax due (i.e., the assessed value times the school district tax rate) will be incorrect. Since the corrected taxable assessed value multiplied by the tax rate does not equal the original levy against the property in question, the levy should be construed as an entry present as a result of a mathematical error in the computation of the tax. Such an error is classified as a “clerical error” under section 550 (2) (d), for purposes of administrative correction of assessment and tax rolls under the Real Property Tax Law. If correction of this type of error is sought prior to the payment of the tax, the procedure to be followed is that set forth in section 554 of the Real Property Tax Law; if thereafter, a refund may be had pursuant to section 556.

The question has also been raised as to the potential liability of the railroad company for interest charges on unpaid taxes if it withholds payment until the computation of the corrected tax upon certification of the final railroad ceiling assessment. This inquiry involves two possible situations: the first arises when the certification of the final railroad ceiling occurs during the interest free period for collection of taxes but prior to the expiration of such period; the second is when certification occurs after the expiration of that period.

If certification of the final railroad ceiling occurs before the expiration of the 30 day interest-free period (but after the levy of taxes), the railroad company should make application for correction of the clerical error pursuant to section 554 during the interest-free period. Subdivision 7 of section 554 specifically provides that an applicant who files within that time period may (assuming his application is approved) pay the corrected tax without interest if payment is made within 8 days of the date on which the notice of approval is mailed. This is so even if the notice of approval is not forwarded until after the expiration of the interest-free period.

On the other hand, a late certification of the final railroad ceiling will not relieve the railroad company of liability for interest charges if it fails to pay the tax levied on September 1 within the interest-free period. The company should pay that tax and then, if it turns out that the assessed value exceeds the railroad ceiling, seek a correction of that assessment and a partial refund as previously explained. This conclusion follows from case law (see below) and statutory provisions (e.g., § 554(7)(b)).

Generally speaking, the interest-free period for the collection of school district taxes runs for one month from the date of the first publication of the notice of the collection officer of receipt of the warrant for collection (see, Real Property Tax law, §§ 1322(1), 1324). The fact that a property owner contests his assessment or tax liability does not relieve him of the duty to pay a tax levied. Even if his protest is ultimately upheld, he will be liable for interest on the corrected amount due it payment was not made within the interest-free period (see, Matter of Smallwood v. Comptroller of City of N. Y., 63 App.Div.329, 71 N.Y.S.499).

In referring to a property owner who had refused to pay any taxes until her assessment protest had been resolved, the court in Smallwood, supra, stated as follows:

She had had the use of her money during the pendency of the proceeding, and, as to the portion of the tax which it was her duty to pay, we can discover no greater reason why she should be relieved from the payment of interest than any other person who had delayed the payment of his taxes for the same length of time. [71 N.Y.S. at 500]

Therefore, a railroad company which fails to pay taxes levied within the interest-free period for collection of same, will be liable for interest on the corrected amount, even if a late certification of the final railroad ceiling produces a reduced tax liability.

November 22, 1977

{1}  Pursuant to chapter 920 of the Laws of 1977, the “Railroad Ceiling Law” in New York State was revised. Article 2-A of Title 4 of the Real Property Tax Law now provides tor the establishment of railroad ceilings tor railroad real property of intrastate railroad companies. Article 2-B thereof for railroad ceilings for interstate railroad companies. Statutory references such as §§ 489-c(1) and 489-cc(1) pertain to intrastate and interstate railroad companies, respectively.

{2}  Where the assessed valuation is less than the ceiling, the assessor is statutory prohibited from making any adjustment in that assessed valuation (Real Property Tax Law, §§ 489-p(l), 489-mm(l)).