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Volume 8 - Opinions of Counsel SBEA No. 44

Opinions of Counsel index

Tax lien (enforceability) (acquisition by the State or by a public authority) - Public Authorities Law, § 1806; Real Property Tax Law, §§ 412, 558, 902:

Property remains subject to a tax lien if title is transferred to the State or to a public authority after lien date, although the lien may be unenforceable as long as title remains in the public entity.

We are asked whether a county may cancel a lien for unpaid county and town taxes levied against real property acquired by the New York Job Development Authority (JDA) subsequent to “lien date” (January 1; see, RPTL, § 902). The JDA is in the process of transferring title and would like a clear title for purposes of the conveyance.

We know of no authority for a county to cancel a lien under these circumstances. In general, a county tax will become a lien “as of the first day of January . . . and shall remain a lien until paid” (RPTL, § 902 (emphasis added)). Although the property of IDA is exempt from taxation (RPTL, § 412; Public Authorities Law, § 1806), this does not relieve such property of liability for tax liens existing prior to acquisition of title by the JDA. (See, e.g., 6 Op.Counsel SBEA No. 97; In re Major Deegan Blvd. (Expressway), City of New York, n.o.r., 131 N.Y.S.2d 330 (S.Ct., Bronx Co. 1954); cf., R.P. Adams Co., Inc. v. Nist, 72 A.D.2d 908, 422 N.Y.S.2d 184 (4th Dept. 1979).)

Section 558 of the Real Property Tax Law authorizes a county legislature to cancel tax liens under certain specific circumstances, including:

(1) where it is determined that the lien of an unpaid tax levied or imposed by the county against property of the State or the United States “cannot be enforced”;

(2) where the lien of an unpaid tax levied or imposed by the county “is rendered permanently unenforceable by operation of the provisions of any statute.”

However, neither of these exceptions to the general rule applies to the facts at hand. Both exceptions are based upon the doctrine of sovereign immunity - that is, real property of the State (or Federal) government is immune from local taxation unless that government otherwise consents. Thus, real property acquired by the State or Federal government is not liable for taxes which become a lien after acquisition by the government (see, e.g., 4 Op.Counsel SBEA No. 60).

In limited instances, this immunity has been extended to other exempt properties, and it is in these instances that the second exception, noted above, would apply. For example, the Real Property Tax Law provides that the exemption granted pursuant to subdivision 1 of section 418 to real property of foreign governments “shall apply to taxes which become due and payable after the date such property is used for the purposes herein stated” (emphasis added). We have interpreted this language as granting an exemption from all taxes which were not liens as of the date of transfer (see, 5 id. No. 63).

Section 418 was one of three statutes cited by the sponsors of the 1977 legislation which created this second exception (L.1977, c.622), the others being section 476 of the Real Property Tax Law (since repealed by L.1977, c.920) and section 52 of the Public Housing Law (the latter as construed in Rochester Housing Authority v. Sibley Corp., 77 Misc.2d 205, 351 N.Y.S.2d 934 (S.Ct., Monroe Co. 1974), aff’d, 47 A.D.2d 718, 367 N.Y.S.2d 969 (4th Dept., 1975)). Again, however, even if language similar to section 418 were found in the exemption provisions relevant to the JDA, it would afford no relief where, as here, the lien attached prior to the acquisition by the JDA.

Moreover, it is our opinion that the first exception set forth in section 558 would not apply even if the JDA were to be considered the “State” (which it is not - see, Story House Corp. v. State of New York Job Development Authority, 37 A.D.2d 345, 325 N.Y.S.2d 659 (3d Dept. 1971), aff’d 31 N.Y.2d 942 (1972)) and therefore entitled to be treated in like manner for purposes of that section of law. While section 558 provides for cancellation of a tax lien “levied or imposed . . . against property of the state”, it has application only “. . . where it is determined that the lien of such tax cannot be enforced”. It is true, of course, that a sale of State land for unpaid taxes would be void (Public Lands Law, § 19). However, this bar imposed by the Public Lands Law applies only as long as the State holds title (see, Raisch v. City of New York, 235 App.Div. 706, 255 N.Y.S. 589 (2d Dept. 1932)). Assuming the lien to have validly attached initially, although the right to enforce the same may be temporarily suspended as long as the State (or the JDA) holds title, we believe that there is no bar to the commencement of tax sale proceedings upon the State’s transfer of title. Our opinion is premised upon a decision of the United States Supreme Court.

In United States v. Alabama, 313 U.S. 274, 61 S.Ct. 1011, 85 L.Ed. 1327 (1941), at issue was the liability of real property for unpaid taxes which had become liens prior to the date of acquisition of such property by the United States. Acknowledging that in the absence of a statute to the contrary, the tax liens could not be foreclosed while title was in the Federal government, the Supreme Court held that the temporary immunity could not be predicated upon the invalidity of the liens. Chief Justice Hughes, writing for the Court, stated as follows:

[The] Government brings this suit in the view that it is entitled to have a marketable title and it seeks to remove the liens in question as clouds upon that title which would interfere with the disposition of the lands in the future. From that standpoint the Government asks a decree declaring the invalidity of the liens and enjoining the State from asserting any claim in the lands either adverse to the United States or to its successors in title. We think that the United States is not entitled to that relief. . . . [We] perceive no reason why the United States, albeit protected with respect to proceedings against it without its consent, should stand, so far as the existence of the liens is concerned, in any different position from that of other purchasers of lands in Alabama who take conveyances on and after the specified tax date (313 U.S., at 281-282).

Another case in point is U.S. v. Certain Lands Located in Town of Hempstead, 31 F.Supp. 513 (E.D.N.Y., 1940). There, the Federal government acquired through condemnation proceeds to be awarded one of the landowners. The county and school district demanded payment of taxes due on the property. The former owner claimed that the taxes were invalid and unenforceable because they had been levied against property now owned by the Federal government. The school taxes had become a lien on October 1, 1939. Nearly two months later, on November 30, 1939, the Federal government acquired title. The county tax became a lien on January 1, 1940 (after the Federal government took title).

The Federal district court held that the former owner was obligated to pay only the school tax out of the condemnation award, the rationale being that a lien which had attached to the real property prior to Federal acquisition was valid and collectible. The county taxes, however, did not have to be paid. This decision thus supports the conclusion that property remains subject to a tax lien if title is transferred to the Federal government after lien date, but a lien that attaches after acquisition is void and unenforceable.

Although there are no cases in point which have arisen concerning State acquisition (but see, Raisch v. City of New York, supra), it is our opinion that the rule laid down by the Supreme Court of the United States and followed by other Federal courts would apply equally to land subject to local tax liens at the time of acquisition by the State, or a public authority such as the JDA.

July 28, 1981