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Volume 9 - Opinions of Counsel SBEA No. 18

Opinions of Counsel index

Assessments, generally (selective reassessment); Board of assessment review (assessments for prior years); Correction of errors (refund) (selective assessments) - Real Property Tax Law, §§ 305, 525 and 556:

A city may not re-open past assessments and grant refunds to taxpayers whose parcels have been selectively assessed, nor may the city grant credits towards future tax liability or permit the filing of new assessment complaints for prior years.

We have been asked whether a city may re-open past assessments and grant refunds to taxpayers determined to have been selectively assessed under the so-called “welcome stranger” method; and, if not, whether credits may be granted towards future tax liability. Additionally, we have been asked whether the city may now permit the filing of new assessment complaints for prior years.

The practice of selectively reassessing only those properties which are the subject of a recent sale has been reviewed and rejected by the U.S. Supreme Court, the New York Supreme Court, Appellate Division and the Suffolk County Supreme Court (Allegheny Pittsburgh Coal Co. v. County Commission of Webster County, West Virginia, 488 U.S. 336; 109 S.Ct. 633, 102 LEd.2d 688 (1989); Matter of Charles Krugman v. Board of Assessors of the Wage of Atlantic Beach, et al., 141 A.D.2d 175, 533 N.Y.S.2d 495 (2d Dept. 1988); Nash v. Assessor of the Town of Southampton, Sup.Ct., Suffolk Co., January 25, 1989, Cromarty, J.). The U.S. Supreme Court concluded that this type of selective reassessment practice is unconstitutional because it systematically produces dramatic differences in values between recently transferred property and otherwise comparable property. The New York courts have also concluded that selective reassessment is constitutionally infirm.

The assessment of real property is an annual process; each taxable year is separate and distinct (Hilton v. Fahrenkopf, 279 N.Y. 49, 17 N.E.2d 765 (1938); F.O.R. Holding Co. v. Board of Assessors, 45 A.D.2d 875, 357 N.Y.S.2d 875 (2d Dept. 1974), app. dsmd., 35 N.Y.2d 959, 324 N.E.2d 556, 365 N.Y.S.2d 177 (1974); St. Agnes Church v. Daby, 148 A.D.2d 31, 543 N.Y.S.2d 208 (3d Dept. 1989)). That is, all real property is assessed according to its condition and ownership as of taxable status date (RPTL, § 302) at its value as of the applicable valuation date (RPTL, § 301; see also 9 NYCRR 190-1.3(a)(1)). The tentative assessment roll, upon which assessments are to be at a uniform percentage of value (RPTL, § 305), is then filed and opened for public inspection (RPTL, § 506; 9 NYCRR 190-1.4).

If dissatisfied with their tentative assessments, taxpayers may pursue an administrative remedy before the board of assessment review (RPTL, Art. 5, title 1-A). Property owners who are dissatisfied with the determination of the board of assessment review may then seek judicial review pursuant to Article 7 of the RPTL within 30 days after the last day set by law for filing the final assessment roll, or 30 days after the notice of such filing has been given as required by law, whichever is later.

However, where the challenge to the assessment concerns the general method of assessment, rather than the value of a specific property, a proceeding pursuant to CPLR Article 78 also is an appropriate remedy (Dudley v. Kerwick, 52 N.Y.2d 542,421 N.E.2d 797, 439 N.Y.S.2d 305 (1981); Matter of Krugman v. Board of Assessors of the Village of Atlantic Beach, 141 A.D.2d 175, 533 N.Y.S.2d 495 (2d Dept. 1988); Mundinger v. The Assessor of the City of Rye, Sup.Ct., Westchester Co., September 25, 1989, Silvennan, J.).

Accordingly, there are two judicial remedies for challenging assessments: certiorari (RPTL, Article 7) and special proceedings (CPLR, Article 78). An Article 7 proceeding must be commenced within 30 days of the filing of final roll notice and an Article 78 proceeding must be filed within four months of that date. A failure to follow through on either of these procedures, within the prescribed time limits, prevents any further review of that assessment for that year.

With respect to the re-opening of past assessments to grant refunds, the Real Property Tax Law provides for administrative refunds of taxes (i.e., RPTL, § 556). However, that section is only applicable where the tax, or portion thereof, was attributable to a “clerical error” or an “unlawful entry” as those terms are defined in RPTL, § 550, and the application for the refund is made within three years from the annexation of the warrant for such tax. Where such tax is attributable to an “error in essential fact,” other than an error in essential fact as defined in RPTL, § 550(3)(d), application for a refund must be made within one year from the annexation of the warrant for such tax. The practice of “selective” assessing does not fit within any of these defined errors. Accordingly, there is no authority for granting administrative refunds in this instance.

With respect to whether the city may permit retroactive complaints, it should be noted that a board of assessment review is authorized only to review and reduce assessments set forth on the assessing unit’s tentative roll for a specific year (RPTL, § 525). A board of assessment review has no authority to order reductions in assessments included on prior years’ rolls.

Nor is there any authority which would enable the city to grant “credits” toward future tax liability. Taxes are levied upon the assessments appearing on the current assessment roll less any statutory exemptions (RPTL, Article 4). Moreover, because of the limitations imposed by the State Constitution on the expenditure of public moneys (see, Article 8, § 1), a municipal corporation may not make gifts of public money to property owners subjected previously to “selective assessments.” Since there is no statutory authority for such “credits”, they would likely be considered as unauthorized gifts to those property owners.

Finally, we note that in the three “selective assessment” cases, none of these Courts ordered refunds for all taxpayers who were subjected to such assessments. Specifically, the Courts considered only the plaintiffs’ assessments and either ordered a reduction in those assessments or remitted the matter to the defendants for new assessments based upon the Court’s decision.

October 4, 1989