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Volume 9 - Opinions of Counsel SBEA No. 35

Opinions of Counsel index

Alternative veterans exemption (eligibility) (non-homestead class property); Approved assessing units (non-homestead class) (eligibility for alternative veterans exemption) - Real Property Tax Law, §§ 458-a, 1901:

The residential part of a non-homestead class parcel may receive an alternative veterans exemption if all other exemption criteria are satisfied. The property, though receiving the partial exemption on its residential part, is to be taxed at the non-homestead class tax rate.

Our opinion has been requested as to whether a four-family residence in an approved assessing unit may qualify for the alternative veterans exemption (Real Property Tax Law, § 458-a).

As originally enacted (L.1984, c.525), section 458-a(1)(d) provided that the exemption could be granted only to the primary residence of the veteran, and the “qualifying residential real property” for which exemption was sought was to be “used exclusively for residential purposes.” In our opinion, this language precluded any alternative veterans exemption where the property was used more than incidentally for non-residential purposes.

The phrase “used exclusively for residential purposes” in section 458-a is identical to that used in the exemption for real property owned by senior citizens with limited incomes (RPTL, § 467). In discussing the eligibility of an apartment house for the senior citizens exemption, we stated in 4 Op.Counsel SBEA No. 115, that the law was silent as to whether the senior citizens exemption could be allowed to a parcel containing three or more family residences. However, we concluded that, “Denial of the exemption on a four or more family residence would appear to be consistent with the intent of the statute.”

While each individual unit may be used exclusively for residential purposes, in our opinion, the property, taken as a whole, is not residential within the meaning of this statute. Although the three-family/four-family line of demarcation may seem arbitrary, we believe that the Legislature did not intend to make the exemption available, in toto, to multi-unit, income producing apartment houses. A line must be drawn somewhere, and the three-family criterion is both reasonable and consistent, and it has been codified in other provisions of the RPTL.

For example, chapter 1057 of the Laws of 1981, which added Articles 18 and 19 to the RPTL, contains this very distinction. Section 1802(1), applicable to special assessing units (i.e., New York City and Nassau County), defines Class 1 property as “all one, two and three family residential real property. . . .” For purposes of an approved assessing unit, section 1901(13) (as renumbered L.1990, c.355) defines the “homestead class” in part, as “all one, two or three family dwelling residential real property. . . .” Significantly, these provisions were enacted subsequent to the issuance of 4 Op.Counsel SBEA No. 115.

Similarly, the Small Claims Assessment Review procedure (RPTL, Article 7, Title 1-A) is generally applicable to one, two, or three family {*} owner occupied structures used exclusively for residential purposes. While these similar terms do not specifically define “residential” property for purposes of section 458-a, they do provide some insight into the Legislature’s intent in using that term in the statute. Accordingly, in our opinion, when the alternative veterans exemption was first enacted, a four-family property was entirely ineligible for the alternative veterans exemption.

However, chapter 899 of the Laws of 1985 amended the exclusive residential use requirement of section 458-a(1)(d) to provide that “in the event any portion of such property is not so used exclusively for residential purposes but is used for other purposes, such portion shall be subject to taxation and the remaining portion only shall be entitled to the exemption provided by this section.” In other words, if a portion of a property is used for non-residential purposes, the alternative veterans exemption can still be granted, but only on the residential portion of the parcel. Accordingly, an assessor may now grant an alternative veterans exemption to that portion of a four-family property which the assessor determines to be residential.

The assessor of an approved assessing unit may not classify two parts of a single structure differently based on their respective uses, since such a practice is neither authorized by nor compatible with Article 19. The law provides that a structure used partly for residential purposes and partly for non-residential purposes is to be classified either as homestead or non-homestead based on its primary use (RPTL, § 1901(13),(22)). If each part could be separately classified, there obviously would be no need for a primary use test. Since the primary use test has been included, therefore, separate classifications of parts of a single structure are, by implication, precluded.

Thus, where a structure is used primarily for non-residential purposes, but a portion is used for residential purposes, separate classification is not permitted; the property is to be classified as non-homestead. However, as noted above, where such a structure is owned by an individual who qualifies for an alternative veterans exemption (RPTL, § 458-a) or a senior citizens exemption (RPTL, § 467), and a portion of the structure is his or her primary residence, the assessor is required to ascertain the value of that portion that comprises the residence, since that portion is entitled to exemption (RPTL §§ 458-a(1)(d), 467(3)(c)). Such a structure should receive an exemption on the proportionate share of the assessment attributable to residential use, should be classified as non-homestead, and be taxed at the non-homestead class tax rate.

October 5, 1990

{*}  The Court of Appeals found no violation of equal protection of law guarantees when owners of more than three family residences were excluded from small claims assessment review (Town of Tonawanda v. Ayler, 68 N.Y.2d 836, 500 N.E.2d 869, 508 N.Y.S.2d 171 (1986)).