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Volume 7 - Opinions of Counsel SBEA No. 113

Opinions of Counsel index

Correction of errors (cancellation of taxes) (charge-back) - Real Property Tax Law, §§ 550, 558, 1330:

A school district may not cancel an unpaid tax levied on Federal property. However, the county legislative body may cancel such tax upon relevy and then “charge-back” the amount thereof by withholding an equal amount from any moneys payable to the district by reason of school taxes returned as unpaid in the succeeding year.

Two questions are presented concerning a tax levied by a school district on property owned by the Small Business Administration (SBA), a Federal agency: first, the applicability of the “correction of errors” procedure (RPTL, Article 5, Title 3) and, second, the respective obligations of the county and the school district regarding the amount of money billed on the allegedly erroneous tax bill.

We have previously stated that under the “sovereign immunity” doctrine the Federal government is immune from local taxation unless it otherwise consents (RPTL, § 400; 1 Op.Counsel SBEA No. 40; cf., 5 id  No. 56). If title vested in the SBA at any time prior to lien date for this school tax, the tax is void and unenforceable (see, e.g., United States v. Certain Lands Located in Town of Hempstead, 31 F.Supp. 513 (E.D., N.Y., 1940)). Assuming this to be the case, it has been suggested that it would be incumbent for the school authorities to correct this “error”.

The administrative process for correction of errors in the assessment and taxation of real property is governed exclusively by title 3 of Article 5 of the Real Property Tax Law. Provision is made there for correction of certain errors, both before and after the extension of taxes. One such error is the “unlawful entry”, defined in paragraph (a) of subdivision 7 of section 550 as “an entry on the taxable portion of the assessment roll of the assessed valuation of real property which, except for the provisions of [§ 490] . . . is wholly exempt from taxation” (emphasis added). Unlike the other administratively correctible errors defined in section 550, this definition is limited to entries on an “assessment roll”. Thus, section 554, which provides for the correction of tax rolls, states that “[t]he appropriate tax levying body may correct a clerical error or an unlawful entry other than an unlawful entry as defined in paragraph (a) of subdivision seven of section five hundred fifty of this chapter in accordance with the provisions of this section” (subd. (1); emphasis added).

Accordingly, once an “assessment roll” becomes a “tax roll” (see, §§ 550(6), 904(1)), as is the case here, an unlawful entry as defined in section 550(7)(a) is not administratively correctible.

Thus, there is no authority for the school district to conduct proceedings for the purpose of cancelling the assessment of this property or the tax imposed thereon. {*}  However, upon the return of the list of unpaid school taxes to the county treasurer, and their relevy by the county legislature (RPTL, § 1330 (5)), the tax may be cancelled as provided in subdivision 2 of section 558.

Regarding the effect of this unenforceable tax upon the school district’s right to be reimbursed by the county for returned unpaid taxes, we believe that, for the current fiscal year, the county is responsible to the school district for the entire amount. When school district taxes remain unpaid at the time of the expiration of the collecting officer’s warrant, a list of unpaid taxes must be filed with the county treasurer (see, RPTL, § 1330(2)). (In city school districts the list is similarly transmitted to the city tax enforcement officer if any of the delinquent parcels are located within the city’s borders; § 1332(3)). The county treasurer then becomes the collecting officer on behalf of the school district until such time as remaining unpaid school taxes are relevied by the county (§ 1330(6), (5)).

On or before April 1 of each year, the county treasurer is required to pay to the school district the amount of school taxes “returned” to the county in the preceding November as unpaid (§ 1330 (4)). The practical result, therefore, is that the county acts as guarantor of school taxes.

In return for its duty to reimburse the school for unpaid taxes, the county acquires the right to enforce collection of those unpaid levies (plus interest and penalties) through appropriate tax enforcement proceedings, for example, by sales of tax liens in accordance with Article 10 of the Real Property Tax Law (see, In re Wadhams’ Estate, 249 App.Div. 271, 292 N.Y.S.102 (4th Dept., 1936)). This right constitutes the consideration for the county’s guarantee of school taxes. Therefore, there is normally no need for a so-called “charge-back” to the school district for unpaid taxes, on the theory that the county’s enforcement of its liens will make it whole with respect to the unpaid school taxes for which it has been responsible.

There are, however, some situations in which, through no fault of its own, the county cannot be made whole-that is, where it cannot recoup the amounts advanced to the school district. In these instances, certain statutes contain provisions whereby the county may charge back the amount of the uncollected tax to the school districts which, because of the county’s role as guarantor, have received their taxes in full.

Section 558 of the Real Property Tax Law is one such statute. It authorizes the cancellation, by the county legislature {**}, of unenforceable tax liens against property of the State or United States. It further provides, in pertinent part:

The amount of any [relevied school] tax so cancelled shall be charged against the school district which levied such tax. The amount so charged against a school district shall be withheld by the county treasurer from any moneys which shall become payable by him to such school district by reason of taxes which shall thereafter be returned to him as uncollectable by such school district. (Subd. [2]; emphasis added).

The key phrase here is “taxes which shall thereafter be returned”. These returned taxes are those which are uncollected in the fiscal year subsequent to the creation of the unenforceable lien. This is the only money against which the charge-back can be made. Thus, the existence of this lien will not affect the school district in the current fiscal year but only in the succeeding year. This has the advantage of not disrupting already budgeted programs while allowing the school district to prepare accordingly for the charge-back in its next budget.

Certain opinions by the State Comptroller have been published on this subject. In 1964, the Comptroller stated that, even where a tax lien has been cancelled, “[i]n no event, however, do we feel that the county treasurer can withhold the amount of such returned unpaid school taxes which he is required to pay over to the school district on account of such returned unpaid tax from moneys due the school district in the subsequent year” (20 Op.St.Compt. 292; emphasis added). In 1982, the Comptroller issued a seemingly contradictory Opinion (Op.St.Compt. 82-77). However, we believe that our reading of the law, which is consistent with the earlier Opinion of the State Comptroller, is correct.

November 29, 1982

{*}  In the event the SBA would be interested in remedying the situation (unlikely since the tax would be unenforceable), a possible judicial remedy would be the commencement of an Article 78 proceeding.

{**}  Section 558 does not give authority to cancel such liens to tax levying bodies generally.