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Volume 6 - Opinions of Counsel SBEA No. 27

Opinions of Counsel index

Business investment exemption (local option) (reduction of percentage of exemption) (transfer of property) - Real Property Tax Law, § 485-b:

The reduction or disallowance of an exemption pursuant to section 485-b initially allowed by a municipality will apply uniformly on subsequently prepared assessment rolls for all properties. Sale of property upon which an exempt improvement is located will not affect its exempt status provided the property continues to be used for eligible purposes.

Section 485-b, added to the Real Property Tax Law in 1976, provides for a ten year exemption on certain new construction, alterations, installations or improvements for the purpose of commercial, business or industrial activity. The measure of the exemption is fifty percent of the increase in assessed value due to such construction or improvement the first year, decreasing by five percentage points each year thereafter for nine years. Application for the exemption is to be made by the owner of the property and filed with the appropriate assessor who must be satisfied that the applicant is entitled to the exemption and upon approval of the application the real property thereafter is exempt from taxation.

Subdivision 7 of section 485-b authorizes any county, city, town or village to adopt a local law, and school districts to adopt a resolution, to reduce the percentum of exemption otherwise allowed pursuant to this section. Subdivision 7, in effect, is a local option provision affording a municipality three options: (1) allowing the exemption, (2) reducing the amount of exemption, and (3) disallowing the exemption entirely (5 Op.Counsel SBEA No. 81). Where no action is taken by a municipality, the exemption applies with respect to taxes to be levied by or on behalf of the respective municipality. Where a municipality acts to reduce the percent of the exemption, the amount of the exemption will be determined by the percent set forth in the local law or resolution adopted by the municipality. The local law or resolution may be amended or rescinded in a subsequent year.

To obtain an exemption on otherwise qualified property, the owner must file an application with the assessor responsible for preparing the assessment roll to be used for the levy of taxes of the municipality or municipalities allowing the exemption. Thus an applicant seeking exemption from town, county and school district taxes must file an application with the town assessor since the town assessment roll is used for the levy of taxes for each of the three municipalities. An application need be filed only in the first year for which the exemption is sought. Thereafter the exemption, where allowed by a municipality, is continued automatically from year to year and applied as set forth in section 485-b or at the reduced amount set forth in the local law or resolution adopted thereunder. In the event that the real property ceases to be used for eligible purposes, the exemption ceases and may not be allowed on a subsequently prepared assessment roll.

Under current provisions of the law, a municipality may allow the exemption initially (i.e., for town assessment rolls prepared in 1977) and reduce or fallow the exemption the following year (i.e., for town assessment rolls prepared in 1978) or in any subsequent year. In reducing or disallowing the exemption, the reduction or disallowance would apply uniformly on subsequently prepared assessment rolls for all properties; that is, for those properties for which application may be filed prospectively as well as those properties which may have been granted partial exempt status in an earlier year.

Where one or more municipalities within which otherwise qualified property is located have allowed the exemption but one or more other municipalities in which the property is located have disallowed the exemption, the property will be exempt only in those municipalities allowing the exemption. Thus, to use a hypothetical example, an exemption may be allowed for town and county purposes but not for school purposes where the school district has adopted a resolution disallowing the exemption. However, should the school district in the following year rescind its resolution, it would appear that an otherwise qualified property owner could file a new and separate application with respect to an exemption for school district purposes. We reach this conclusion because under the current statutory provisions, there is no requirement that a property owner file an application for exemption within a stated period of time following completion of the improvement.

If property upon which an exempt improvement is located is sold during the ten year exemption period, the exemption will continue until the expiration of ten years from the year in which the exemption was originally granted provided that, as discussed above, no affirmative action is taken by a municipality to reduce or disallow the exemption and the property continues to be used primarily for eligible purposes. In the absence of direct notification by the property owner, the assessor should, upon learning of the transfer, ascertain whether the property is converted to a noneligible use.

June 2, 1977

NOTE: Chapter 397 of the Laws of 1977 amended section 485-b to provide that exemptions existing prior in time to the passage of a local law or resolution reducing the percentage of exemption are not subject to the reduction so effected.