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Volume 8 - Opinions of Counsel SBEA No. 106

Opinions of Counsel index

OTB Corporation exemption (scope) (State department or agency) - Racing, Pari-Mutuel Wagering and Breeding Law, § 513; Real Property Tax Law, § 404:

Regional Off-Track Betting Corporations lack the “closeness of relation” with the State government of agencies such as the State Thruway Authority and they, therefore, are not departments or agencies of the State of New York, such that they would be exempt from taxation as provided in section 404 of the RPTL. They are exempt, however, as provided in the Racing, Pari-Mutuel Wagering and Breeding Law.

We have been asked whether real property acquired by a Regional Off-Track Betting Corporation (OTB) subsequent to taxable status date is immune from the ensuing school and county/town tax levies. We are also asked whether, if OTB leases a portion of its property to a commercial tenant, the taxable status of its property is affected.

Before an analysis of OTB’s taxable status may be made, it is necessary to examine the structure of OTB. Section 502 of the Racing, Pari-Mutuel Wagering and Breeding Law established a Regional Off-track Betting Corporation in each of seven regions throughout the State. Each corporation is designated as “a body corporate and politic” constituting a public benefit corporation. Each corporation is administered by a board of directors whose members are appointed by the legislatures of the respective counties in the region. Participation in the management and revenues of a regional corporation is a matter of local option for counties in the region and for cities with a population of over 150,000.

The OTB corporations are empowered to acquire and own real property in their own names, to issue bonds and notes, and to do such other acts and engage in such other activities as may be necessary and proper for the corporations to exercise their powers and duties prescribed under Article 5 of the Racing, Pari-Mutuel Wagering and Breeding Law. Section 510 of that law provides that neither the State of New York nor any participating county is liable for the payment of the bonds, notes or other obligations of an OTB corporation. Further, section 516 of that law provides that net revenues accruing to OTB corporations are to be divided among the participating counties at prescribed intervals.

If the Regional OTB Corporations were departments or agencies of New York State, their property would be entitled to the exemption provided by RPTL, section 404. That section states, in applicable part, that:

Real property owned by the state of New York or any department or agency thereof . . . is and shall be deemed to have been and to be exempt from any taxation and exempt from special ad valorem levies and special assessments to the extent provided in section four hundred ninety of this chapter.

Property exempt pursuant to RPTL, section 404, is not liable for taxes which become a lien subsequent to the date of acquisition, and existing tax liens are unenforceable while the State holds title (2 Op.Counsel SBEA No. 33).

There is no general definition of the term “state agency” in the Consolidated Laws of New York. {*}  As to whether or not a given body is a State agency, the Courts have established a “closeness of relation” test (see, Easley v. N.Y.S. Thruway Authority, 1 N.Y.2d 374, 135 N.E.2d 572, 153 N.Y.S.2d 28 (1956); and Glassman v. Glassman, 309 N.Y. 436, 131 N.E.2d 721 (1956)). For example, in the Glassman case, the Court of Appeals found that a “close relationship” between the State Retirement System and the State government was evidenced by the following factors:

(1) the State Comptroller is the administrative head and trustee of its several funds;

(2) the Attorney-General is its legal advisor;

(3) custody of its funds is in the hands of the State Department of Taxation and Finance; and

(4) the State, as an employer of members of the System, is obligated for the maintenance of various reserves and funds of the System, and for its expenses and the payment of all employee benefits.

In Easley, the Court cited similar circumstances which indicated that the Thruway Authority was an arm or agency of the State, entitled to share in the State’s sovereign immunity. In addition, the Court referred to these factors among others:

(1) the Authority’s members are appointed by the Governor with Senate approval;

(2) its functions are statutorily declared “governmental”;

(3) its real property is held in the name of the State; and

(4) its bonds are guaranteed by the State pursuant to the vote of the people.

In contrast to public bodies such as the State Retirement System and the Thruway Authority, Regional OTB Corporations lack the “close relationship” with the State so as to be clothed in its sovereign immunity. For example, members of each regional board of directors are appointed locally, not by State officials (Racing, Pari-Mutuel Wagering and Breeding Law, § 502(1)); bonds and notes issued by the corporations are general obligations of each, payable out of revenues or moneys of that corporation (§ 508(1)); bonds, notes or other obligations of a corporation are statutorily declared to “not be a debt of either the State of New York or of any participating county” (§ 510 (emphasis added)); and, although subject to audit by the State Comptroller, each regional corporation manages its own funds (§ 516(1)).

Given the nature, structure, funding and scope of OTB operation, these regional corporations appear more closely akin to quasi-governmental agencies such as urban renewal agencies, economic development agencies and industrial development agencies. In regard to each of these bodies, we have advised that they are not entitled to the exemption provided for property of the State pursuant to RPTL, § 404 (see, 1 Op.Counsel SBEA No. 68, 2 id. No. 28 and 5 id. No. 55). Similarly, we conclude that OTB is not a department or agency of the State, and its property is not entitled to exemption from the date of acquisition.

Although it is not exempt pursuant to RPTL, section 404, OTB’s property is entitled to a real property tax exemption pursuant to section 513 of the Racing, Pari-Mutuel Wagering and Breeding Law. That section states, in applicable part, that:

The monies and real property of each corporation and any property under its jurisdiction, control or supervision and all of its activities and operation shall be exempt from taxation. Provided, however, no exemption is granted . . . from real property taxation on real property not owned by such a corporation (emphasis added).

In our opinion, this exemption, like most others, prospectively exempts the property of the benefitted entity when it holds title as of taxable status date (RPTL, § 302). Section 513 differs from many exemption statutes in that it does not include a requirement that the property be used exclusively for the purposes of OTB. Therefore, even if a portion of the property is leased to a commercial entity, the property is exempt from taxation.

Based on the nature of a regional OTB corporation and the exemption granted to such corporation by section 513 of the Racing, Pari-Mutuel Wagering and Breeding Law, it is our opinion that property owned by OTB is prospectively exempt from taxation.

October 20, 1986

{*}  Perhaps most instructive are the definitions of “state agency” provided in §§ 73(1) and 74(1) of the Public Officers Law, which define that term as “any state department, or division, board, commission or bureau of any state department or any public benefit corporation or public authority at least one of whose members is appointed by the governor”.