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Volume 6 - Opinions of Counsel SBEA No. 19

Opinions of Counsel index

Railroad property exemption (subsidized rail lines) (effect of L.1977, c.920) - Real Property Tax Law, Titles 2-A, 2-B; § 489-t:

The provisions of Titles 2-A and 2-B of Article 4 of the Real Property Tax Law, as enacted by chapter 920 of the Laws of 1977, authorize an exemption from taxation and special ad valorem levies on subsidized railroad real property applicable to all assessment rolls prepared on the basis of taxable status dates occurring on or after the date on which chapter 920 was signed into law.

In 6 Op.Counsel SBEA No. 3, we concluded that the provisions of sections 1 through 10 of chapter 920 of the Laws of 1977 were intended to apply “to any assessment rolls completed in 1977 used for the levy of taxes for fiscal years commencing on or after July 1, 1977.” That opinion is addressed only to the question of the retroactive application of those portions of chapter 920 applicable to “railroad ceiling assessments.” For the reasons set forth below, we believe the effective date clause of chapter 920 does not have the same effect in regard to the “subsidized line exemption.”

Section 5 of chapter 920 amended section 489-d of the Real Property Tax Law to provide, in part, an exemption from taxation to “subsidized railroad real property” of intrastate railroad companies (§ 489-d(1)). The same exemption was granted to subsidized railroad real property of interstate rail lines by section 10 of the same chapter (§ 489-dd(1)). In both cases “subsidized railroad real property” is defined as “any railroad real property for which a rail service continuation subsidy is paid or payable pursuant to titles III and IV of the regional rail reorganization act of nineteen hundred seventy-three, as amended to April first, nineteen hundred seventy-six” (§§ 489-b(4), 489-bb(4)).

Section 15 of chapter 920 provided for an immediate effective date, but included the following language:

except that the provisions of sections one through ten of this act shall not apply to any assessment roll finally completed prior to January first, nineteen hundred seventy-seven, nor to any assessment roll used in the levy of taxes for a fiscal year commencing prior to July first, nineteen hundred seventy-seven . . . .

In 6 Op.Counsel SBEA No. 3, we interpreted this negative statement in a positive fashion, concluding that the intent was to make the provisions in Sections 1 through 10 applicable to any assessment roll completed after January 1, 1977, used in the levy of taxes for a fiscal year beginning on or after July 1, 1977. For most assessing units, this would have meant the statute first applied to the August 1, 1977 final assessment roll on which 1977-78 school taxes and 1978 county and town taxes would be levied. In the case of the exemption afforded subsidized railroad real property, however, we believe a “prospective only” interpretation is warranted. That is, as in the case of most exemption statutes, it has application only to assessment rolls prepared on the basis of a taxable status date occurring on or after the date chapter 920 was signed into law. For most assessing units, then, this means the “subsidized line” exemption was not available until May 1, 1978 (the first taxable status date following the act’s effective date) and would therefore apply first to 1978-79 school taxes and 1979 county and town taxes.

An exemption statute must be strictly construed against the taxpayer applying for its benefits (Herkimer County v. Village of Herkimer, 251 App.Div. l26, 295 N.Y.S. 629, aff'd, 279 N.Y. 560, 18 N.E.2d 854; City of Lackawanna v. State Board of Equalization & Assessment, 16 N.Y.2d 222, 212 N.E.2d 42, 264 N.Y.S.2d 528). Statutes generally are construed as prospective in operation only (Kelley v. Yannotti, 4 N.Y.2d 603, 152 N.E.2d 69, 176 N.Y.S.2d 637; McKinney's Statutes, § 51), and this general rule against retroactive application of statutes is especially true in the case of exemption statutes (Matter of Van Kleeck, 121 N.Y. 701, 25 N.E. 50; McKinney's Statutes, § 57). This follows from the fact that an assessor's determination of whether property is taxable or exempt must be made on the basis of the condition and ownership of each parcel on taxable status dale, given the law on that day (Real Property Tax Law, § 302).

Only when there is a clear legislative intent to give retroactive effect to an exemption statute will such a construction be given. For example, in Aetna Ins. Co. v. the Mayor, 153 N.Y. 331, 47 N.E. 593, an exemption from taxation of the personal property of insurance companies was enacted in 1886, prior to the extension of taxes but subsequent to taxable status date. The statute provided that the exemption took effect “immediately.” The petitioner claimed that “as the tax had not been actually perfected by extending it upon the assessment roll. it was exempted from the taxes of that year” (id. at 337). The Court of Appeals rejected this contention declaring that [a]s there was no provision in the act under consideration in this case giving it a retroactive effect, it did not affect the assessment and tax for the year 1886” (id. at 338).

Recently, in 6 Op.Counsel SBEA No. 8, we considered the question of whether chapter 616 of the Laws of 1978 created an exemption from taxation for agricultural society meeting halls and Grange property effective on assessment roll prepared prior to the effective date of the act. The exemption was signed into law July 24, 1978, and section 2 thereof provided as follows:

§ 2. This act shall take effect immediately and shall apply to all taxable years commencing after December thirty-first, nineteen hundred seventy-seven.

Despite the suggestion that section 2 implied a retroactive application to January 1, 1978, we concluded for a variety of reasons that the statute applied prospectively only. In comparing the effective date clauses of the two statutes (i.e., L.1977, c.920, and L.1978, c.616), we believe any implication favoring retroactive application is even more tenuous with respect to chapter 920 than it was in the case of the “Grange exemption.” Therefore, we conclude that, as in the latter statute, chapter 920 does not require a retroactive interpretation in the case of the subsidized line exemption and therefore should be interpreted as prospective in operation.

Nonetheless, because both this opinion and 6 Op.Counsel SBEA No. 3 consider the effective date clause of the same statute, we believe that a review and comparison of the latter opinion will clarify our conclusion herein.

The entire thrust of 6 Op.Counsel SBEA No. 3 is premised upon the need to avoid a hiatus in the promulgation of railroad ceiling assessments. In that opinion, we cite the memorandum of the sponsors to the effect that:

any lapse or discontinuance in the production of the ceilings or of an acceptable substitute therefor would cause consternation among assessors statewide and would lead to many questionable assessment practices and results. (emphasis added)

Note that no mention was made with regard to the subsidized lines. This is due, of course, to the fact no exemption had previously been granted to subsidized lines. In contrast, railroad ceilings have been established for eligible lines since 1959.

Moreover, the fact that chapter 920 created no statutory authority permitting administrative changes of the assessment roll relative to the subsidized lines would only exacerbate the administrative and fiscal difficulties which would be caused by a retroactive interpretation of the “subsidized line” exemption. Given the general rules applicable to changes on assessment rolls, there would therefore be no means for removing these entries from those rolls.

Administrative correction of errors on assessment and tax rolls (other than by appeal to the board of assessment review on “grievance day”) is governed by the provisions of Article 5, title 3 of the Real Property Tax Law. Correctable “errors” are defined in section 550; subdivision 7, paragraph (a) includes within these definitions an “unlawful entry” of the following type:

(a) an entry on the taxable portion of the assessment roll, or the tax roll, or both, of the assessed valuation of real property which, except for the provisions of section four hundred ninety of this chapter, is wholly exempt from taxation.

Despite the reference to a “tax roll” in paragraph (a), this type of error is not administratively correctable once taxes have been extended on the assessment roll (see, §§ 554(1), 556(l)(a)). Thus, for example, once taxes were extended against the subsidized rail lines on the 1977-78 school tax roll and subsequent municipal tax rolls, no administrative “correction” could be made.

More importantly, however, the provisions of section 550(7)(a) are premised on an error having been made as to taxable status as of taxable status date. As of May 1, 1977, the subsidized rail lines were fully taxable. Since chapter 920 was enacted after taxable status date 1977 (for most assessing units), as of that 1977 taxable status date the assessor could only conclude that the railroad real property, which was later defined as “subsidized,” was fully taxable. Therefore, no “error” occurred in the entry of such property on the taxable portion of the assessment roll under Article 5, title 3, and, as previously noted, chapter 920 made no special provision for correction.

Consider in contrast the provisions of law relative to administrative application of “late” railroad ceilings. Sections 489-p and 489-mm include the following language:

2. The assessor is hereby authorized and directed to make the reductions, if any, provided for in this section on the assessment roll notwithstanding the fact that he may receive the certificate of the railroad ceiling after the final completion, verification and filing of such assessment roll. Other local officers, including school authorities having custody and control of such roll, are hereby authorized and directed, on the basis of information which shall be furnished by the assessor, to make the reductions provided for in this section.

Thus, the retroactive application of the railroad ceiling exemption poses no significant administrative problems, given the language cited above. This is not the case with respect to the exemption for subsidized lines. (For an example of a statutory enactment in which the Legislature made special provision to resolve administrative problems arising out of retroactive application of an exemption statute, see L.1977, c.187, § 2.)

Therefore, considering the absence of specific authorization to the assessor to change the assessment roll to allow for the exemption of subsidized lines, the general rule against retroactive interpretation of exemption statutes and the absence of clear legislative intent to the contrary, we conclude that the Legislature did not intend for the “subsidized line” exemption to be applied retroactively.

January 30, 1979