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Volume 8 - Opinions of Counsel SBEA No. 66

Opinions of Counsel index

Municipal corporations exemption (agreement to exempt) (effective date); Annexation (effect on tax liability) - General Municipal Law, §§ 706, 710; Real Property Tax Law, §§ 302, 406:

An inter-municipal agreement after taxable status date with respect to a proposed annexation of real property will not affect the taxable status of such property for assessment rolls prepared on the basis of such date.

We have received an inquiry concerning a village’s proposed annexation of land presently located in the area of the town outside of the village. The parcel to be annexed is a reservoir owned by the village, and listed as taxable on the most recent town assessment roll. Since the preparation of that assessment roll, the village and town have drafted a proposed agreement pursuant to General Municipal Law, section 706 to provide for the annexation of the parcel by the village, and by which they purport to exempt the parcel from town and county taxes which will become a lien on the first day of January next succeeding (Real Property Tax Law, § 902).

Entitlement to exemption is generally contingent upon the “condition and ownership” of real property as of taxable status date (RPTL, § 302; but cf., § 520). The exemption of municipal property from taxation is provided for in section 406 of the RPTL. Subdivision 1 of section 406 provides an exemption for real property “owned by a municipal corporation within its corporate limits held for a public use”. Certainly, a reservoir used in supplying a village’s water supply needs would be deemed to be held for a public use. However, since the reservoir was not located within the “corporate limits” of the village on taxable status date, it was not eligible for an exemption pursuant to subdivision 1.

Subdivision 3 of section 406 provides that real property owned by a municipality not within its boundaries and used as a reservoir may be exempted from taxation if the governing board of each municipality in which it is located so agrees in writing. Neither the county nor the town has made such agreement here and the reservoir would, therefore, not be eligible for an exemption from such taxes pursuant to subdivision 3. (In any event, the town could not act pursuant to subdivision 3 to grant an exemption from county taxes; that would be the privilege of the county.)

Therefore, there appears to be no authority for the provision in the proposed annexation agreement exempting the parcel from the ensuing year’s county and town taxes. The parcel will be exempt pursuant to section 406(1) with respect to taxes levied against assessment rolls prepared on the basis of a taxable status date subsequent to the annexation.

Subdivision 2 of section 710 of the General Municipal Law authorizes agreements between municipalities for the purpose of apportioning taxes in cases of annexation. However, we believe that a careful reading of this subdivision leads to the conclusion that it is intended only to apply in the case of an annexation by a city or town of real property from another city or town. In the instant case, the parcel will be within the boundaries of the same town both before and after the annexation; therefore, it is our opinion that section 710(2) has no application.

January 7, 1985