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Volume 7 - Opinions of Counsel SBEA No. 116

Opinions of Counsel index

Business investment exemption (eligibility) (cessation of use) - Real Property Tax Law, § 485-b:

Real property ceases to be used/or eligible purposes under section 485-b if there occurs an extended non-use, other than a temporary suspension of activities which might be anticipated in the ordinary course of business. Cessation for this purpose does not necessarily involve a complete destruction or conversion.

We are asked whether property entitled to a partial exemption from taxation under section 485-b of the Real Property Tax Law, would continue to be eligible for that exemption if left vacant for a long period of time. That section provides for a local option ten year partial exemption for certain commercial or industrial construction. Unless the local government elects to reduce the scale of exemption (per subdivision 7), the amount of the exemption is fifty percent of the increase in assessment attributable to this construction in the first year, with this percentage reduced by five percentage points in each succeeding year.

Subdivision 6 of section 485-b provides that “In the event that real property granted an exemption pursuant to this section ceases to be used primarily for eligible purposes, the exemption granted pursuant to this section shall cease.” Research discloses no judicial construction of this subdivision. The issue is thus what type of stoppage, non-use or vacancy constitute cessation.

In construing the Greater New York Charter, one court read “ceasing” in a predecessor statute to be equivalent to “suspended and forfeited” - that is, a stoppage short of complete destruction (Marks v. LaGuardia, n.o.r., 31 N.Y.S.2d 336 (S.Ct., New York Co., 1940), mod. on other grounds, 262 App.Div. 709, 27 N.Y.S.2d 770 (1st Dept., 1941), aff’d, 286 N.Y. 625, 36 N.E.2d 460 (1941)). Another court, in construing a fire insurance policy held that “cease” did not mean a “temporary suspension” such as might arise in the ordinary course of running a mill (Ladd v. Aetna Insurance Co., 70 Hun 490, 24 N.Y.S. 384 (2d Dept., 1893)). The policy became void should a lumber mill “cease to be operated”. The mill had been closed for 10 days due to the illness of the sawyer.

Finally the Court of Appeals construed as follows an endowment which terminated and a mortgage which came due when “the Ontario Female Seminary shall cease”:

When the corporation ceased to keep and maintain a female school or seminary of learning, or to exercise the franchise conferred by the act under which it was incorporated, and had no longer the means to enable it further to perform the duties devolving upon it as a corporation, we think the seminary ceased within the meaning of the contract . . . (Trustees of Canandarqua Academy v. McKechnie, 90 N.Y. 618, at 626 (1882)).

Taking these three interpretations together, a reading of subdivision 6 of section 485-b is suggested. A property ceases to be used for eligible purposes when an extended stoppage takes place which would not be anticipated in the ordinary course of carrying on the eligible purpose. Such stoppage does not necessarily involve complete destruction or conversion, but is more than a temporary suspension of activity. However, if the stoppage is such that the eligible purpose cannot be carried out, the property is no longer eligible for the exemption.

Eligibility for exemption is determined by condition and ownership as of taxable status date (RPTL, §§ 102(2)(2), 302). Thus, whether property ceases to be used for eligible purposes must be determined annually on that date and, as indicated above, is a factual issue to be determined on a case-by-case basis.

October 15, 1982