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Volume 7 - Opinions of Counsel SBEA No. 55

Opinions of Counsel index

State of New York exemption (N.Y.S. Teachers’ Retirement System) - Real Property Tax Law, § 404:

In addition to the special exemption granted to certain real property of the New York State Teachers’ Retirement System by subdivision 3 of section 404, all other real property of that organization is entitled to the general exemption afforded real property of State agencies by subdivision 1 thereof.

Our opinion has been requested as to the taxable status of real property owned by the New York State Teachers’ Retirement System (NYSTRS) located in the City of Syracuse and leased for “commercial” purposes.

Section 404 of the Real Property Tax Law provides generally that real property owned by the State of New York, its departments or agencies is exempt from taxation, special ad valorem levies and special assessments to the extent provided in section 490. Subdivision 3 of section 404 grants exempt status to real property owned by the NYSTRS acquired or constructed pursuant to section 508, subdivision 8 of the Education Law. Said subdivision 8 authorizes the NYSTRS to construct office buildings for the transaction of its own business in the City of Albany, and to construct office buildings in certain designated cities (not Syracuse) for sale or lease to the State or for the use of various State agencies, departments and the State University.

We are asked whether by specifically exempting a particular class of real property owned by NYSTRS in subdivision 3 of section 404, the Legislature intended to deny tax exempt status to all other properties of NYSTRS.

The State Attorney General has considered the same question in regard to the real property of the New York State Employees’ Retirement System (NYSERS), certain property of which is made exempt from taxation pursuant to subdivision 2 of section 404 (see, 1976 Op.Atty.Gen. 24). Unlike the NYSERS, there appear to be no cases specifically holding that the NYSTRS is a “state agency” (cf., Sunlit Gardens Inc. v. Moore, 183 Misc. 343, 48 N.Y.S.2d 376 (S.Ct., Kings Co., 1944)). However, the Opinion of the Attorney General does refer to legislative history which seems conclusive on the question of whether the NYSTRS is to be considered an agency of the State within the meaning of subdivision 1, section 404.

The history is that of Chapter 391 of the Laws of 1960 which, in part, amended subdivision 1 of section 404. Section 11 of Chapter 391 specified that the exemption from taxation available for real property owned by the State of New York was to include that of “any department or agency thereof, including, but not limited to, real property described in subdivision 2 and 3 of this section”. The significance of this language is made more apparent by the note which followed section 11 in the original bill passed by the Legislature. That read:

NOTE: Section 11 of this act declares the continuing intent of the Legislature that real properties owned by departments or agencies of the state, including the two principal retirement systems of the state are exempt from taxation under principles and provisions of law which generally exempt property of the state. (Emphasis added).

In effect, the Legislature thereby declared the NYSERS and the NYSTRS to be agencies of the State within the meaning of subdivision 1 of section 404. Therefore, real property of those agencies is entitled to the exemption otherwise provided in subdivision 1, and neither subdivision 3 nor 2 is intended to be a limitation on the general grant of exempt status.

Since there is no “use” requirement which limits the applicability of the exemption granted by section 404, subdivision 1 (see, e.g. 2 Op.Counsel SBEA No. 36; cf. §§ 406, 420), real property owned by a State agency is exempt even if the building is used for non-governmental purposes. In conclusion, we believe that real property of the NYSTRS located in the City of Syracuse and leased for “commercial” purposes is entitled to the exemption granted by subdivision 1 of section 404 to real property owned by State “agencies”.

We must note, however, that in the absence of the legislative history of the 1960 amendment to section 404, a cogent argument could be made that there is not that identity of interest between the State and the NYSTRS, such that one would naturally conclude that the latter is a State “agency”. For example, the Attorney General, in his Opinion in regard to the NYSERS cites four factors as demonstrating a close relationship between the retirement system and the State government. A review of the statutory authority for the NYSTRS reveals several significant differences between the two retirement systems.

September 17, 1979

NOTE: The Onondaga County Supreme Court reached a contrary conclusion in N.Y.S. Teachers Retirement System v. Srogi, 104 Misc.2d 392, 428 N.Y.S.2d 439 (1980), but was reversed on appeal, 84 A.D.2d 912, 447 N.Y.S.2d 57 (4th Dept., 1981), aff’d 56 N.Y.2d 690, 436 N.E.2d 1335, 451 N.Y.S.2d 733 (1982).