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Volume 6 - Opinions of Counsel SBEA No. 119

Opinions of Counsel index

Aged exemption (income requirement) (interest on U. S. Treasury notes) - Real Property Tax Law, § 467:

Interest earned on U. S. Treasury notes is income for purposes of section 467 of the Real Property Tax Law.

This opinion concerns an application for an aged exemption (Real Property Tax Law,  § 467) which has been denied because the assessor has made a determination that the applicant’s income is in excess of the permissible amount.  In computing income, the assessor included the applicant’s interest income on U.S. Treasury notes.  The applicant contends that the interest on these notes should be excluded from the computation, given section 742 of Title 31 of the United States Code.

Section 742 of Title 31 provides as follows:

Except as otherwise provided by law, all stocks, bonds, Treasury notes, and other obligations of the United States, shall be exempt from taxation by or under State or municipal or local authority. This exemption extends to every form of taxation that would require that either the obligations or the interest thereon, or both, be considered, directly or indirectly, in the computation of the tax, except nondiscriminatory franchise or other nonproperty taxes in lieu thereof imposed on corporations and except estate taxes or inheritance taxes.

Section 467 of the Real Property Tax Law provides a partial exemption from real property taxes to senior citizens with limited incomes satisfying the other requirements of that statute. Income is defined in subdivision 3(a) of section 467 as including interest. We have previously stated that accrued interest on U. S. government savings bonds is to be included as income for purposes of the aged exemption in the year in which the bonds are redeemed (1 Op.Counsel SBEA No. 98).

In our opinion, 31 U.S.C. section 742 does not prohibit the inclusion of interest on Treasury notes and other United States government obligations in the computation of one’s eligibility for the aged exemption. The code section prohibits the inclusion of the obligation or the interest thereon “in the computation of the tax.” Including the interest earned on Treasury notes in the computation of one’s claim for a real property tax exemption is neither a direct nor indirect tax on the interest itself. It is apparent from an analysis of the legislative intent of the U.S. Code section (see, e.g., 1959 U.S. Code Cong. and Adm. News, p.2769 and the various cases which have construed section 742 that Congress was concerned with the inclusion of the Treasury note interest in the computation of income taxes and personal property taxes. To extend the provisions of section 742 to section 467 of New York’s Real Property Tax Law would be to frustrate the obvious legislative intent of the New York Legislature in providing an exemption to senior citizens with limited incomes derived from whatever source.

Accordingly it is our opinion that it is correct to include the interest on U.S. Treasury notes in the computation of income for purposes of determining eligibility for exemption under section 467 of the Real Property Tax Law.

August 18, 1978