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Volume 8 - Opinions of Counsel SBEA No. 48

Opinions of Counsel index

Special assessing units (transition assessment) (court ordered reduction) - Real Property Tax Law, §§ 102(2), 489, 1805; 9 NYCRR Part 193:

For the purpose of determining the necessity of a transition assessment, “the assessment appearing on the previous year’s assessment roll” is the assessment as reduced by judicial review and not the original assessment.

We have been asked to interpret the “transition assessment” provisions of section 1805 of the Real Property Tax Law in the context of a court ordered reduction of the 1981 assessed value (“A.V.”) of property in class two, three or four (§ 1805(1)):

$100,000 - A. V. on 1981 Assessment Roll (Prior to judicial review)

$60,000 - 1981 A.V. as reduced by court order

$80,000 - A.V. on 1982 Assessment Roll

(Note that transition assessments for class one property, in contrast, are based upon the 1980 assessed value of such property).

For those three classes of property in Nassau County, transition assessments are determined pursuant to section 1805(2), which provides as follows:

If the assessment appearing on an assessment roll completed on or after January first, nineteen hundred eighty-two for any parcel not classified as class one is greater than the assessment appearing on the previous year’s assessment roll the assessors shall determine a transition assessment for such parcel for the first assessment roll on which such greater assessment appears . . .

Thus, the issue for resolution is whether “the assessment appearing on the previous year’s assessment roll” is the original assessment of $100,000 or the assessment of $60,000 per the court order. If the latter, then the 1982 assessment of $80,000 would require a transition assessment, since the Assessors’ determination for 1982 ($80,000) would be greater than $60,000.

There is little in the way of legislative history to guide us. The only reference to the provisions of this section appears in a memorandum dated October 23, 1981, submitted by the Assembly, in support of the bill known as “Senate 7000-A”. That reference merely declares that for classes two, three and four “any assessment increases would be phased in over five years” (Memorandum, p. 2). Accordingly, we must look elsewhere for a resolution to this question.

Section 1805(2) bases the transition assessment upon “the assessment appearing on the previous year’s assessment roll”. “‘Assessment’ means a determination made by assessors . . .” RPTL, §102(2). In 1981, the Assessors’ determination of the value of the parcel was $100,000. It is this number which appeared on the “assessment roll”, which is the document prepared by the Assessors.

However, an “assessment” or “assessment roll” passes through several stages between taxable status date and the expiration of the warrant for the collection of taxes (e.g., RPTL, §§ 552, 553, 554). And although the issue may not be free from doubt, there is case law in a related context to support a conclusion that “assessed valuation” means the assessor’s determination of value as reduced by judicial review.

Section 489 of the RPTL (Title J of Chapter 51 of the New York City Administrative Code) provides an exemption from real property taxation for certain construction or rehabilitation of residential property, based upon the “increase in assessed valuation resulting from alterations and improvements . . .” (§ J51-2.4(b); see, RPTL, § 489). An assessment of one property which was receiving this exemption was reduced in an Article 7 proceeding. The City Finance Administration recomputed the exemption as the difference between the reduced assessment and the assessment prior to the improvements being made to the property. The court approved this construction of the statute, saying that “a court reduction in assessment replaces the original erroneous assessment . . .” (Linden Hill No. 2 Co-op. Corp. v. Tishelman, 107 Misc.2d 799, 435 N.Y.S.2d 936, at 938 (S.Ct, Queens Co. 1981), aff’d, 87 A.D.2d 577, 450 N.Y.S.2d 404 (2d Dept. 1982)). {*}  If this “replacement” interpretation of the Linden Hill case is applied to this example, then a transition assessment should have been computed in 1982.

We also note that subdivision three of section 1805 specifies certain changes in assessed value which “shall not be included in the computation of the limitations prescribed by this section”. In the group of excluded changes causing decreases in assessed value, the subdivision lists “fire, demolition, destruction or new exemption”. Similarly excluded from the limitations of section 1805 are increases in assessed value due to “new property, additions to or improvements of existing property”, or changes in status of “formerly exempt property”.

By identifying such exclusions it is arguable that the Legislature thereby included what we would call “equalization changes” (9 NYCRR 193-1.1(c), (d)); changes of taxable status or of a “physical or quantity” type (9 NYCRR 193-2; 193-1.1(g)) are the excluded categories. (The latter would not be subject to the limitation provisions of section 1805, the former would be.) In this regard, it should be noted that the State Board categorizes a court-ordered reduction as an “equalization change” (see, Assessor’s Annual Report Instructions For Cities and Towns, SBEA, May 1983, at p. 21; see also, 9 NYCRR 193-1.1(c)).

We also believe that this is a fair result. The purpose of a statute such as section. 1805(2) appears to be to ensure that increases in tax share liability for property in classes two, three and four will be phased in over a five year period (excepting, of course, increases in value attributable to a physical improvement made to the property). Accordingly, in the example, we believe a transition assessment of $64,000 should have been established for this property in 1982, since the property’s 1981 assessed value, for tax purposes was finally determined to be $60,000, not $100,000.

May 19, 1983

{*}  The contrary result has also been reached, although not by an appellate court (see, 600 West 183rd St. Corp. v. Tishelman, 108 Misc.2d 780, 441 N.Y.S.2d 846 (S.Ct., N.Y.Co., 1980); Prince Wooster Corp. v. Tax Comm. of City of N.Y., 115 Misc.2d 100, 453 N.Y.S.2d 547 (S.Ct., N.Y.Co. 1982)).