The Honorable Sheldon Silver
Speaker of the Assembly
Room 932 - Legislative Office Building
Albany, New York 12248

Dear Speaker Silver:

I am pleased to submit the 2006 Annual Report of the Assembly Standing Committee on Real Property Taxation. This was a busy year for the Committee, with a wide range of challenging issues and diverse legislation to consider.

This year, as in the past, the Committee was immersed in proposed budget negotiations. Two key 2006 budget issues of particular interest to the Real Property Taxation Committee were: STAR Plus Rebates and an enhanced STAR cost of living adjustment (COLA) for 2006/2007. I am pleased to state that with your leadership and the assistance of Dean Fuleihan, we were successful in passing legislation affording a 2006 STAR rebate and a STAR COLA.

The initial proposal by the governor for a STAR Plus Rebate had precarious provisions which would have punished property taxpayers if their school district failed to adhere to a proposed spending limitation. Further his proposal excluded New York City homeowners from any benefit. As our goal was to provide school real property tax relief, the committee is pleased that the STAR rebate program that was enacted provides school property tax relief to all eligible STAR homeowners and omits the Governor’s original unattainable spending cap proposal. The Committee was mindful that the value of enhanced STAR benefits for seniors had been eroded due to an inflationary housing market. To rectify this diminution, we pushed for and were able to enact a temporary enhanced STAR COLA applicable to 2006/2007, which will hopefully be made permanent. It is estimated that the STAR COLA will provide an additional state-wide savings of over seventy-million dollars to eligible seniors in 2006/2007. Although, there is still much work that needs to be done to address skyrocketing school real property taxes, the STAR rebate and the STAR COLA are provisions that provided immediate elemental real property tax relief.

In 2006 the Committee met fourteen times and reported 121 bills. We reviewed and reported proposed legislation in a variety of areas including general administration, exemption administration, and jurisdiction specific (local) legislation. In addition to our daily legislative responsibilities, the Committee worked closely with the New York State Office of Real Property Services (NYS ORPS) to promote informed and responsible legislation. Other notable issues that the Committee embarked on this year were in relation to:

• Encouraging Residential Investment through Real Property Tax Incentives
• Improving Notification of Impending In-Rem Foreclosures
• Transparency/Ethics in the Assessment Review Process

In 2007, the Committee will continue to focus on legislation that will provide school real property tax relief, improving assessment practices for condominiums, and exam the affects of real property tax exemptions on the real property taxation process.

I have greatly enjoyed working with the Real Property Tax Committee members and Committee staff. Their knowledge and enthusiasm were instrumental in making this a pleasant and productive year. I look forward to another exceptional year.

Sincerely,

Sandy Galef
Chairperson
Real Property Taxation Committee

2006 STANDING COMMITTEE ON

REAL PROPERTY TAXATION

SANDY GALEF, CHAIRPERSON

MEMBERS of the COMMITTEE

1. PUBLIC FORUMS

   1. Public Hearings

      1. 421-a Exemptions

      2. STAR Rebate

   2. Round-Table
      
      Alternatives to Real Property Tax Funding of Schools

2. GENERAL ADMINISTRATION

   1. Assessment Procedures

      1. Board of Assessment Review (BAR)

      2. Small Claims Assessment Review (SCAR)

      3. Assessor Position

      4. Base Proportional Shift(s) - Suffolk County

      5. Final Assessment Roll - Town of Milton

   2. Real Property Tax Collection and Enforcement

      1. Foreclosure Proceedings

      2. Village Tax Lien Extender

      3. Senior Citizens Interest-Free Real Property Tax Period

      4. Penalties and Fees - Brownfields

      5. Partial Payments - Erie County

   3. Miscellaneous

      1. Oil and Gas

      2. Triennial Aid Extender

      3. Taxable State-Owned Land

3. REAL PROPERTY TAX EXEMPTIONS

   1. Volunteer Firefighter(s) and Ambulance Worker(s) Exemption

   2. Solar or Wind Energy Exemption

   3. Senior Citizens and Persons with Disability and Limited Income Exemption

   4. Residential Investment Exemption

   5. Non-Profit Exemptions

4. Special Assessing Units - New York City & Nassau County

   1. NYC Exemptions/Abatements

      1. Exemption Extenders

         1. SRO Exemption

         2. J-51 Exemption

      2. Modification to Current Exemptions/Abatements

         1. Commercial Expansion Program (CEP) - Technical Amendments to New York City’s Administrative Code

         2. CEP - Modifications and Clarification

         3. Commercial Revitalization Program (CRP) - Modify Definition of Eligible Premise

         4. CRP - Special Recertification

   2. NYC Administrative Process

      1. Exemption Filing Deadlines

      2. Enhanced STAR Income Verification Process

      3. Nassau County - Base Proportional Limitations

      4. Nassau County - Assessment Review Petitions

5. STAR REBATE AND COLA

   1. The STAR Rebate Program

   2. STAR COLA

6. Outlook for 2007

7. Appendices

Appendix A: 2006 RPT Committee Summary

Appendix B: RPT Committee Bills Legislation Enacted

Appendix C: RPT Committee Bills Passed Assembly

I. PUBLIC FORUMS

A.  PUBLIC HEARINGS

a.  421-a Exemptions (NYC)

The Real Property Tax Committee and the Housing Committee held a joint public hearing on June 8, 2006 to discuss the 421-a exemption program and possible modifications to this program. The Committees heard from New York City officials, housing advocates and union officials concerning their suggestions for revision of the 421-a Program.

NOTE: The purpose of the New York City 421-a Program has been questioned by a recent study and by policy makers who believe that the program has outlived its original purpose. The 421-a incentive program was enacted in 1971 as an economic development tool to promote the construction of multi-family residential building. The program currently costs the City of New York approximately $320 million per year in lost tax revenue. Because there is a mounting need for the construction of affordable moderate and low income housing, the Mayor and housing advocates have called for revision of the program. The Mayor had announced the formation of a Task Force to examine the 421-a exemption program. The task force was to evaluate the program and make recommendations that were in accordance with today’s real estate market. Within the scope of the task force’s analysis of the 421-a program, the Mayor is seeking measures that could increase incentives for the creation of affordable housing.

The focus of the public hearing centered on whether there is still a need for the continuation of the 421-a program and/or whether the provisions of the 421-a real property tax exemption should be modified to provide a greater incentive to builders that create affordable housing units in the same location or thereabouts as to which dwelling classified as up-scale or luxury are being erected.

Although there appeared to be no immediate consensus on extending the 421-a program, it was apparent that the interested parties agreed that if the 421-a program were to continue, it would need to be modified to expand the eligible geographical areas and perhaps be amended to require specific affordable housing quotas.

Follow-up: In October, 2006 the Mayor’s 421-a Task Force (can be found on the NYC website athttp://www.nyc.gov/html/hpd/downloads/pdf/421ataskforcereporfinal4.pdf) issued recommendations for a number of programmatic and policy changes to leverage greater resources for the production of affordable housing. The Real Property Tax Committee and the Housing Committee are now considering those recommendations as well as the comments and suggestions of those who testified at the joint public hearing in June for future legislative action. The existing 421-a State legislative authorization expires at the end of 2007, any legislative action extending and/or modifying it must take place during the next legislative session.

b.  STAR Rebate

On December 12, 2006, the Assembly’s Real Property Taxation Committee held its budget implementation hearing pursuant to Assembly Rule IV, §4(b) requiring each standing committee to have at least one annual budget implementation hearing. The hearing focused on the 2006 School Tax Relief (STAR) Rebate Program. The objective of the hearing was to gather information on the effectiveness of the STAR Rebate program in relation to the cost of administering the program, its ability to accomplish the goal of real property tax relief to New York’s homeowners and ways to enhance the STAR Rebate program and/or discuss alternatives for school real property tax relief.

Background: Skyrocketing school property taxes have become a major issue to homeowners throughout New York. To provide immediate real property tax relief to homeowners, the legislature enacted a school property tax rebate to all STAR eligible homeowners (see Chapter 109). The amount of the rebate for each school district was determined by multiplying $9,000 by the 2004 school tax rate. The rebate checks were to be issued to eligible homeowners between September 2006 and November 30, 2006. The New York State Department of Taxation and Finance (Tax and Finance) is/was responsible for overseeing and issuing the STAR rebate checks. However, to complete its task Tax and Finance needed additional property data and homeowner eligibility information which required a great deal of collaboration with the New York State Office of Real Property Services (ORPS), New York City’s Department of Finance (Finance) and local assessors.

It was evident by the testimony that the STAR rebate program was a tremendous undertaking for Tax and Finance especially given the time frame in which it had to complete the issuance of rebate checks. Nonetheless, with the assistance of ORPS, Finance, and local assessors, most of the logistical problems were resolved in a timely manner and the majority of eligible homeowners received their STAR rebate checks by the November 30, 2006 deadline.

According to their testimony, Tax and Finance, as well as ORPS remained neutral on the effectiveness and efficiency of the STAR rebate program. However, the consensus of the various taxpayer groups who testified was that the STAR rebate program was a band-aid approach to out-of-control school property taxes and school spending. They pointed out that the amount of the rebate had no correlation with the amount of school taxes an individual homeowner actually paid, nor did it take into consideration the homeowner’s ability to pay. Most, if not all of the witnesses called for a repeal of the STAR rebate program and called upon the legislature to explore other avenues of providing school real property tax relief. Some suggested providing a personal income tax credit (circuit breaker) that would include provisions related to property value and a homeowner’s ability to pay; others suggested variations on a foundation formula (State pays) that would permit localities to supplement with a property and/or local income tax.

NOTE: Cost of the STAR Rebate Program:

•  Total estimated cost after all DTF-178 submitted and funds distributed $700 million in property tax rebates to homeowners (as of Oct. 31 - $674 million distributed)

•  Administrative costs:

•  Taxation and Finance - $2.1 million
•  NYS Office of Real Property Services: $150,000
•  Assessors - unknown but significant in personnel time

B.  ROUND-TABLE

Roundtable on Alternatives to Real Property Tax Funding of Schools

On September 21, 2006, the Assembly’s Real Property Taxation Committee in conjunction with the Ways and Means Committee held a roundtable in Cortlandt Manor, New York to discuss alternatives and/or supplements to the real property tax for funding New York’s public schools. The goal was to lay the foundation for additional discussions and public hearings on school property tax.

Participants at the roundtable were: James Dunne, Ph.D. (New York State Office of Real Property Services - Director of Research), Trudi Renwick (Fiscal Policy Institute, Senior Economist), Betsey Swan (NYS League of Women Voters, Co-Chair), Neal Foley (NYSUT Research Associate), Julie Marlette (NYS School Board Association, Government Relations Representative), Assemblyman Herman "Denny" Farrell (Assembly Ways and Means Chair), and Sandy Galef (Real Property Tax Chair).

Panel members recognized that the responsibility to properly educate our children belongs to everyone and should be a national concern, not simply a state or local concern. It was aptly pointed out that other countries, such as China and the UK, provide an education on a national level as they know the children are the foundation for their future. It was agreed that more needs to be done to get additional school aid from the federal government. Nonetheless, the issue at hand at this roundtable was to focus on what can be done in the foreseeable future at the State level to alleviate the affects of high property taxes to adequately fund schools, especially those imposed on homeowners.

The discussion was predominately focused on a school real property taxation system that provides no mechanism by which the homeowner’s ability to pay is taken into consideration and the state’s uneven effort in meeting the educational needs of its children; especially in school districts having high needs.

The discussion of a property owner’s ability to pay focused on a personal income tax credit also known as a "circuit breaker". Currently tax law allows for a circuit breaker that is limited to households making a gross income of $18,000 or less and only provides a maximum income credit of $75 for taxpayers 65 years of age or younger. That threshold was established years ago and has not been adjusted to reflect the current economy. (Note: A circuit breaker proposal that would have provided a sliding scale income credit was introduced and passed in the Assembly in 2006 - refer to A. 10258).

Discussion that focused on the state providing additional aid had various components; some discussion focused on requiring the state to pick-up the majority of school funding while some discussion was geared toward modifying the current state aid formula to make it more equitable.

Of particular interest was the a discussion for the State to pick up the entire cost of funding a basic education (a/k/a "education foundation") and allow individual school taxing jurisdictions to retain the ability to continue collecting a property tax for additional local educational needs. It was suggested that monies for this proposal could be generated from widening the personal income tax structure (e.g. returning the tax brackets to reflect those of the 19070’s) and from restructuring the current formulas by which school aid is calculated and distributed.

In addition to revamping the school aid formula and establishing additional revenue sources, there was a brief discussion on the need to control local spending and the necessity for school districts to reduce overhead, such as by consolidating services.

The roundtable provided interesting insight into the complicated and layered solutions that will be needed to truly find a feasible means by which to reduce school property taxes while concomitantly preparing our citizens for twenty-first century jobs.

A.  ASSESSMENT PROCEDURES

a.  BOARD OF ASSESSMENT REVIEW (BAR)

In recent years there has been some concern over the apparent conflict of interest when members of the board of assessment review (BAR) are required to determine the outcome of an assessment grievance for an active member of the board. This was evidenced this year when in one jurisdiction four out of five members of an assessment review board heard each other’s grievances. Significantly, the Board in that instance, exhibiting an arrogant and blatant exercise of quid pro quo authority reduced the assessed value of every parcel owned by their Board colleagues. This incident led to a public outcry. The appearance of impropriety was apparent. Chapter 503 addresses the public's concern by authorizing, in situations where a member of a local board of assessment review has a direct or indirect interest, the municipality to enter into an inter-municipal agreement allowing the Board member’s grievance to be heard in the other locale. The inter-municipal agreement authorized under this legislation is limited to municipalities within the same county.

NOTE: The goal of Chapter 503, amending RPTL §523(3), is not to damage the integrity of BAR, it is simply an option that a municipality may use to preserve public confidence in the assessment process and a means by which to promote ethical behavior and transparency in the operations of the BAR.

In addition to the above referenced amendment to RPTL §523(3), chapter 405 increases the civil fine from two-hundred and fifty dollars ($250) to one thousand dollars ($1000) for members of the BAR who knowingly and intentionally fail to disclose interest in a parcel for which a complaint has been filed.

b.  SMALL CLAIMS ASSESSMENT REVIEW (SCAR)

There have been instances where the real property assessor has not been made aware of a small claims assessment review petition. The lack of notification has led to instances where the municipality had no representation at the hearing. Without the ability of the assessor to rebut the facts of the petitioner, the petitioner is often granted the full assessment reduction in the absence of adequate and necessary due process notice to the locality. Chapter 556 addresses the potential communication breakdown by requiring assessors to be notified of the filing of an assessment challenge petition. Proof of notice to the assessor or the chairman of the board of assessors will now be required prior to any action being taken on the petition just as proof of such notice is currently required for the clerk of a school district.

c.  ASSESSOR POSITION

Many municipalities that would like to either change to a single appointed assessor or to a sole elected assessor have expressed that sections 328 and 329 of the Real Property Tax Law are unclear and confusing with respect to how they may initiate these changes. Chapter 521 cured this deficiency by empowering the local legislative body to determine the manner in which they may change to a single appointed assessor or to a sole elected assessor. The municipality has three choices, they may adopt provisions that require a mandatory voter referendum, a permissive voter referendum or they may elect to have no referendum.

d.  BASE PROPORTIONAL SHIFT(S) - SUFFOLK COUNTY

Chapter 376 limits the base proportional shift to 1% for the 2006/2007 assessment roll in the Town of Islip, Suffolk County - a homestead/non-homestead taxing jurisdiction. Capping the shift allows a modest transition of the tax liability between the two classes and should forestall massive swings in tax obligations for the average homeowner.

Note: This legislation extends for an additional year the 1% base proportional cap that was authorized in 2005 (see L.2005, c. 697)

e.  FINAL ASSESSMENT ROLL - TOWN OF MILTON

Upon reviewing the preliminary 2006 tentative assessment roll, the Town Board of Milton (Saratoga County) and its counsel were concerned that potential inequities and irregularities existed. These irregularities appeared to have been exacerbated by the upswing in the current real estate market and the affects of valuation trends that are applicable to different property types and different neighborhoods within the town.

In an effort to promote fairness, the leaders of the Town of Milton requested special legislation to change the tentative assessment roll date to June 30, 2006 (current law requires tentative assessment date as of March 1 of each year) and further requested the option of using the 2005 tentative assessment roll. As precedent had already been established when similar legislation was passed last year for the towns within Fulton County experiencing similar trends (see L. 2005, c177), the legislature enacted legislation authorizing the Town of Milton to use the alternative assessment date of June 30, 2006 (see L. 2006, c. 418).

Note: As this legislation was not signed by the Governor until July 5, the Town of Milton was unable to implement the provisions of this statute. None-the-less after checking with the local assessor, it appears that the initial concerns were perhaps unwarranted as a public out-cry related to inequitable or unfair assessments did not materialize.

B.  REAL PROPERTY TAX COLLECTION AND ENFORCEMENT

a.  FORECLOSURE PROCEEDINGS

Chapter 415 comprehensively addresses prior notification requirements for the collection of delinquent real property taxes. The enactment of this legislation brings New York in compliance with an April 26, 2006 United States Supreme Court decision. In that decision, Jones v. Flowers, the Court held that when a mailed notice of foreclosure is returned unclaimed, a tax district must take reasonable steps to provide notice to the property owner before continuing the in-rem foreclosure process. Specifically the enactment of this legislation will:

• Amend existing law to require concomitant certified mail notice when sending via first class mail; and
• Require certified mail notice to all of the interested parties (e.g. mortgagees) not just the owners.

If both notifications are returned within 45 days, the enforcing officer will be required to attempt to obtain an alternative mailing address from the U.S. Postal Service. If a new address is found then notice must be made again, to the owner, by both certified and first class mail, and the owner may redeem or answer until either the 30th day after such mailing, or the date specified in the notice of foreclosure, whichever is later.

If no alternative address can be found, then a copy of the notice must be posted on the owner’s property. Again, the time to redeem or answer may be extended as noted above. Posting notice on property is acceptable. The notice may be posted on the door of a residential or commercial structure or affixed to a vertical object (such as a tree) and in plain sight from the road. (NOTE: provisions within the bill allow for a surcharge of $100 for such service). In the event there is a person of suitable age and discretion on the property at the time of posting - the enforcing officer is authorized to "deliver" the notice to said individual.

If an owner is listed as "unknown" on the tax roll, then the notice should be mailed to the property address addressed to "occupant."

In addition to the above provisions, with the enactment of this legislation, any party that has an interest in a parcel is also required to notify the enforcing officer when their mailing addresses changes. This permits a court to take into consideration the failure of a party to abide by this notification requirement when determining whether the tax district provided reasonable notice.

b.  VILLAGE TAX LIEN EXTENDER

Chapter 599 extends until December 31, 2009 the provisions afforded under Article 14, Title 3 of the Real Property Tax Law allowing various eligible villages to continue to collect delinquent real property taxes via a tax lien sale to a private entity.

Historical Note: Chapter 602 of the Laws of 1993, which became effective on January 1, 1995, comprehensively reformed the method by which local governments enforce the collection of delinquent real property taxes. Part of that reform included eliminating municipal authority to enforce unpaid taxes via tax lien sales. However, Chapter 602 authorized counties, cities and towns with local charters that included tax enforcement provisions - including tax lien sales - to opt out of the new enforcement system by adopting a local law prior to July 1, 1994. To address the needs of the 165 villages for whom the county does not enforce village taxes, the Legislature then enacted Chapter 532 of the Laws of 1994, amending Chapter 602 to provide that any village using tax lien sales as a means of tax enforcement were authorized to enact a local law retaining the right to continue to hold annual tax lien sales up until 1997. This provision was then extended for three year terms in 1998, 2001, 2003 and again this year.

c.  SENIOR CITIZENS INTEREST-FREE REAL PROPERTY TAX PERIOD

Chapter 161 amends RPTL §925-b authorizing municipal corporations, other than counties to extend the interest-free tax payment period by five business days to homeowners who are receiving the enhanced STAR exemption. Prior to the passage of this legislation RPTL §925-b limited the five day interest free period to only persons 65 years of age or over who were receiving a partial real property tax exemption pursuant to RPTL §467.

Note: In order to be eligible for the five day interest-free period the municipal corporation (to include school districts) must adopt the provisions of RPTL §925-b prior to the levy date.

d.  PENALTIES AND FEES - BROWNFIELDS

Chapter 716 is a technical amendment to chapter 219 of the laws of 2005 which amended RPTL §924-b rescinding the waiver of interest and penalties on delinquent real property taxes afforded to certain brownfields in circumstances where such real property failed to receive a certificate of completion pursuant to section 27-1419 of the environmental conservation law.

The technical amendment ensures that municipalities that are not governed by Article 11 of the Real Property Tax Law will have the same authority to revoke the interest and/or penalties on brownfields when the said property fails to obtain the required certification(s).

e.  PARTIAL PAYMENTS - ERIE COUNTY

The Erie County Tax Act previously only authorized the acceptance of partial real property tax payment for county tax purposes. This year with the enactment of Chapter 8, the collection agent(s) for village, town and school real property taxes within Erie County are now authorized to accept partial payments. If the property owner elects to remit partial payments the outstanding balance on taxes due will be subject to the same interest and penalties as that of county real property taxes.

Note: The provisions within this legislation do not negate any current action for outstanding real property taxes related to prior years.

C.  MISCELLANEOUS

a.  OIL AND GAS

Chapter 140 extends the authorization pursuant to RPTL §593 for the New York State Office of Real Property Services to continue to charge producers of oil for the assessment of oil and gas economic units. The provisions within RPTL §593 were scheduled to sunset on March 31, 2006.

Note: The charge was initially imposed in 1992 and has been extended in three year increments since 1997. The charge is intended to partially reimburse the Office of Real Property Service for the expenses it incurs for determining unit production values of utility companies for assessment purposes.

b.  TRIENNIAL AID EXTENDER

Chapter 212 extends the Triennial Aid program for assessment rolls filed in years up to and including 2011. Prior to the enactment of this legislation, triennial aid was due to sunset after the 2008 assessment rolls were completed.

Triennial Aid provides for a payment of up to $5 per parcel to an assessing unit that conducts a reassessment at 100 percent of market value. The aid is available no more than once every three years. The reassessment must include re-inspection and reappraisal of all parcels on the assessment roll.

c.  TAXABLE STATE-OWNED LAND

Chapter 627 makes property that was recently acquired by the State University of New York at Stony Brook in Suffolk County taxable for school purposes only. The state will be required to pay school taxes on the newly acquired property to two school districts, the Three Village School District and the Smithtown School District.

The State University of New York at Stony Brook recently acquired the 246 acres owned by Gyrodyne Corporation of America by eminent domain. As a state agency the acquisition of this property by the University makes it tax exempt. The tax exempt status would have meant that the two school districts would have had to endure a revenue loss of over a quarter million dollars. It is believed that such a substantial revenue loss would have resulted in a reduction in staff and services as well as cause a sizeable increase in school taxes for both school districts. This legislation is a means by which to provide tax relief to the taxpayers, especially for the homeowners in these school districts.

A.  VOLUNTEER FIREFIGHTER(S) AND AMBULANCE WORKER(S) EXEMPTION

Chapter 250 authorizes taxing jurisdictions in Ulster County to include school districts to provide a partial real property tax exemption to volunteer firefighters and ambulance workers. The exemption is at local option. The provisions of this exemption (see real property tax law section 466-h) allow for a 10% reduction on the assessed value of the primary residence of the qualified volunteer, not to exceed $3000 multiplied by the applicable equalization rate. Eligibility requirements include the following:

• The property must be the primary residence of the volunteer;
• The property must be used for residential purposes;
• The applicant has a minimum of five certified years as a volunteer firefighter/ambulance worker; and
• The applicant resides in the city, town, village, or school district that is served by the volunteer fire company/fire department or volunteer ambulance service.

With the enactment of chapter 250, there are now 27 counties that are authorized to adopt legislation affording a partial real property tax exemption to volunteer firefighters/volunteer ambulance workers. The 27 counties are: Cattaraugus, Chautauqua, Columbia, Dutchess, Erie, Jefferson, Lewis, Montgomery, Nassau, Niagara, Oneida, Onondaga, Orange, Orleans, Oswego, Putnam, Rockland, Saratoga, Schenectady, Schoharie, Steuben, St. Lawrence, Suffolk, Sullivan, Ulster, Westchester, and Wyoming.

In 2003 legislation was enacted that authorized municipalities within Westchester County to adopt local legislation permitting a partial real property tax exemption for volunteer firefighters and ambulance workers. The exemption was limited to 10% of the assessed value of the eligible property, not to exceed $3000 multiplied by the latest equalization rate. Local authorities cited the cap was too restrictive and did not provide the necessary recruitment tool needed to attract and retain volunteers. Thus in 2004, chapter 399 was enacted which eliminated the $3000 equalization cap. This allowed eligible volunteers firefighters and ambulance workers to realize a full 10% reduction on the assessed value of their primary dwelling. This year, citing that more needed to be done to attract and retain volunteer firefighters and ambulances workers, chapter 205 was enacted which authorizes school districts within Westchester County to adopt local legislation permitting eligible volunteer firefighters and ambulance workers to realize a 10% assessment reduction applicable to school taxes. (see RPTL §466-d).

NOTE: Out of the 27 counties that are authorized to adopt local legislation affording a partial real property tax exemption to volunteer firefighters and ambulance workers, there are now only 11 that do not permit the exemption for school tax purposes; they are Cattaraugus, Chautauqua, Dutchess, Erie, Niagara, Oneida, Oswego, Rockland, Saratoga, Steuben, and Wyoming. There are only four counties that do not have the $3000 times the equalization cap; they are Montgomery, Nassau, Suffolk, and Westchester.

Chapter 305 allows municipalities, at local option, to adopt provisions that would extend the volunteer firefighter/ambulance worker exemption to a surviving spouse of a volunteer. The authority having jurisdiction of the volunteer company must certify that the surviving spouse has not remarried, that the deceased had been enrolled in the company for at least twenty years, and the exemption had been granted prior to the death of the volunteer firefighter/ambulance worker.

Note: The un-remarried spouse provision does not apply to the newly added Ulster County volunteer firefighter/ambulance worker exemption under RPTL §466-h.

*Related Interest: Provisions within the 2006 New York State Budget (Assembly Bill 9560/Part U) created a new $200 personal income tax credit for volunteer firefighters/volunteer ambulance worker to begin in the 2007 tax year. To be eligible for the personal income tax credit, the volunteer firefighter would have to have been a volunteer for the entire tax year for which he/she is filing. In addition, provisions of this statute state that the personal income tax credit is not permitted if the volunteer firefighter/volunteer ambulance worker is receiving the real property tax exemption (see NYS Tax Law Section 606).

B.  SOLAR OR WIND ENERGY EXEMPTION

Chapter 129 extends the exemption afforded under RPTL §487 for solar or wind energy systems or farm waste energy systems until January 1, 2011. The exemption would have expired as of January 1, 2006 if this legislation was not enacted.

Note: The exemption from taxation for certain solar or wind energy systems or farm waste energy systems allows for an exemption from taxation for a period of 15 years applicable to the increase in assessed value due to the approved system (approved systems are determined by the State Energy Research and Development Authority). A county, city, town, village or school district may adopt a local resolution to prohibit said exemption.

C.  SENIOR CITIZENS AND PERSONS WITH DISABILITY AND LIMITED INCOME EXEMPTION

A. Chapter 252 increases the income limits for persons with disabilities that is permitted under RPTL §459-c. Under prior law, the qualifying person's income limit could have been as low as three-thousand dollars and as high as twenty-four thousand dollars or anywhere in between.

Under this statute, the locality has the authority to increase the upper limit to twenty-six thousand dollars effective July 1, 2006.

Subsequent legislation, that went through the Assembly Aging Committee and was enacted into law (refer to Chapter 187), increased the upper income limit to twenty-seven thousand dollars effective July 1, 2007, twenty-eight thousand dollars effective July 1, 2008, and twenty-nine thousand dollars effective July 1, 2009.

Note: The exemption afforded under RPTL §459-c is at local option. To qualify the property must (1) be owned by one or more persons with disabilities and meet one of the following scenarios; be owned by a husband, wife, or both; or by siblings; at least one of whom has a disability and whose income is limited by reason of such disability, and (2) is used exclusively for residential purposes. The maximum exemption allowable by statute is a 50% reduction on the assessed value of the property. However, localities do have the authority to provide a reduced sliding scale exemption limit for eligible homeowners that have an income in excess of the authorized income limit - not to exceed income in excess of $8400 of the local eligible limit. For instance, effective July 1, 2007 a municipality can authorize a 50% property assessment exemption for eligible homeowners earning up to $27,000. If the local taxing jurisdiction so chooses they may pass a local statute allowing homeowners that earn in excess of the allowable maximum income limit to receive a reduced assessment exemption. The reduced exemption will be on a sliding scale - meaning the greater the income the lower the assessment exemption. For example, effective July 2007, the maximum allowable income limit for a 50% assessment exemption is $27,000. If a local jurisdiction so chooses they can adopt legislation that would authorize a maximum of a 45% exemption to eligible homeowners making between $27,000 and $28,000, a 40% assessment exemption to those making $28,000 but less than $29,000, a 35% assessment exemption to those making $29,000 but less than $30,000, a 30% assessment exemption to those making $30,000 but less than $30,900, a 25% assessment reduction to those making $30,900 but less than $31,800, a 20% assessment making $31,800 but less than $32,700, a 15% exemption for those making $32,700 but less than $33,600, a 10% assessment exemption to those making $33,600 but less than $34,500 and a 5% assessment exemption to those making $34,500 but less than $35,400. The local taxing jurisdictions has the option of keeping the allowable income eligibility level at $3000 or choosing an eligibility limit anywhere between the minimum requirement of $3000 or the maximum limit of $26,000 (which as noted above will be increasing in 2007, 2008, and 2009).

B. Chapter 174 provides that when real property is owned by one or more persons and one of them qualifies for an exemption under RPTL §467 (persons sixty-five years of age or over) and another qualifies for an exemption under RPTL §459-c (persons with disabilities and limited incomes) that they may choose the "most beneficial" exemption. Prior statute disallowed either exemption to the joint owners/taxpayers.

D.  RESIDENTIAL INVESTMENT EXEMPTION

In recent years, real property residential investment tax exemptions have become a tool for cities to use to encourage new construction and/or the revitalization of current dwellings. The fundamental goal is to provide a means to stimulate renewal in established neighborhoods and stabilize the population in such areas so that these neighborhoods attract young and vibrant families.

This year, seven cities were granted authorization to pass local legislation affording a partial real property tax exemption for any increase in assessed value attributed to construction and/or reconstruction of dwellings; they were: Amsterdam, Buffalo, Cohoes, Dunkirk, Niagara, Syracuse, and Utica.

Because each of the cities listed above had similar but not identical obstacles and needs in their endeavor to encourage growth and revitalization of their cities, the provisions within the enacted legislation differ somewhat in the maximum and minimum allowable exemption, the exemption base, the phase-out period of said exemption, and owner occupancy. In addition, the Cities of Dunkirk, Syracuse and Utica have the option of extending the exemption to school taxes provided local adoption is granted by the school district. The following is a chart listing the basic parameters of residential investment exemptions that were enacted in 2006.

*Chapter 399 for the City of Niagara is applicable to dwelling units consisting of 4 or more units and does not require owner occupancy, whereas chapter 594 requires the residence to be owner occupied to qualify.

E.  NONPROFIT EXEMPTION(S)

Assessors in several jurisdictions were authorized to accept exemption applications after the applicable taxable status date on specific properties (36 in all) owned by religious organizations, municipalities, educational institutions, and other nonprofit entities, provided such exemption rolls did not exceed a three year look back. In most cases, the property was purchased and/or acquired after the taxable status date. In some instances, the property owners were either unaware of the need to file annual exemption applications or simply failed to file the exemption application by the taxable status date. The following is a list, by chapter number, organization name and taxing jurisdiction that was affected by this legislation. The assessor is granted the authority to review the application and determine if said entity qualifies and is eligible for the nonprofit real property tax exemption. If the assessor determines the nonprofit entity is eligible, the governing body or tax department may, in its sole discretion, provide for the refund of those taxes paid and cancel fines, penalties, or interest remaining unpaid.

a.  EXEMPTION EXTENDERS

1.   SRO Exemption

Chapter 609 extends the provisions of RPTL Section 488-a (a/k/a SRO exemption) until December 31, 2011. The exemption was due to sunset on December 31, 2007. RPTL Section 488-a provides an exemption from real property taxation as well as an abatement from taxation for the rehabilitation of certain multiple dwellings. The exemption is applied to the increase in assessed value due to eligible improvements (e.g. boilers, electrical entities, windows to include window guards, installation /replacement of bathrooms, plumbing, etc.) to single room occupancy dwellings and cannot exceed a 32 year period. The tax abatement is equivalent to 12.5 percent of either 150 percent of the certified reasonable cost of eligible improvements or the actual cost, whichever is less and cannot exceed a 20 year period.

2.   J-51 Exemption

Chapter 244 extends the provisions of RPTL Section 489 (a/k/a J-51 program) until 2011. The J-51 program was scheduled to sunset December 31, 2007. The J-51 program is administered by the NYC Department of Housing Preservation and Development (HPD) to encourage the renovation of residential properties by granting partial tax exemption and abatement benefits. The program also grants tax benefits to owners of non-residential buildings who convert their buildings to residential use. J-51 benefits apply to a variety of improvements including, but not limited to, the installation or replacement of heating systems, plumbing, wiring, elevators, windows and a range of other major capital improvements. The program issues 14 to 34 year exemptions from taxes on the increase in assessed valuation resulting from those alterations certified by the City’s Department of Housing Preservation and Development ("HPD") and an abatement of property taxes on construction costs as certified by HPD.

Note: Even though the sunset date for both the J-51 and SRO exemption were not until December 31, 2007, New York City requested the extension for these two important programs during 2006 legislative session. The primary reason for an early extension is to provide necessary assurances to builders and financial institutions that the tax abatements authorized under this provision of law will be available when construction activity actually commences. In addition, this legislation promotes orderly planning while acknowledging the reality that many of these projects require substantial lead time and preliminary approval prior to actual construction.

1.   Commercial Expansion Program (CEP) - Technical Amendments to New York City’s Administrative Code

The provisions in chapter 529 are technical amendments to New York City’s Administrative Code Sections 11-704 that reference the Commercial Expansion Program (CEP). These amendments are needed to ensure that the provisions of Chapters 2 and 727 of the laws of 2005 can be properly administered within the restrictions of state statute.

Key changes to CEP that were implemented via Chapters 2 and 727 of the laws of 2005 are:

• Includes the Garment District - prior to 2005 the Garment District is specifically excluded;

• Expands the program for industrial / manufacturing entities to include: a) the assembly of goods to create a different product; b) the processing or fabrication of goods; and c) the packing of goods - prior to 2005 such entities were ineligible;

• Eliminates the square footage eligibility requirement. Prior to 2005, an eligible building was required to have an aggregate floor area of at least 25,000 square feet; and

• Each condominium unit is now considered a separate eligible building. Prior to passage of the 2005 legislation there were no such provisions.

Note: The CEP program provides property tax abatements for new, renewal, and expansion leases for commercial offices and industrial spaces to increase tenant occupancy in a designated abatement zone. The abatement is passed through to the tenant as a reduction in rent.

Chapter 403 references needed technical amendments to aptly implement the provisions in chapters 2 and 727 of the laws of 2005 and allows for greater clarity regarding the original intent of said chapters. Specifically, the bill:

• conforms the description of the "abatement benefit" and "benefit period" with the new description of "eligible" premises;
• prohibits granting commercial abatement benefits concurrently with manufacturing/industrial abatement benefits for the same eligible premises in abatement zones where both programs are available;
• clarifies that if 90% or more of the eligible premises are used for industrial or manufacturing activities, the applicant will receive the full benefit. Eligible use that is less than 90% will be prorated accordingly and if less than 50% of the premise is used for eligible manufacturing/industrial activities, the property is ineligible for the abatement;
• stipulates that mixed-use government-owned buildings cannot receive CEP exemption/abatement benefits; and
• extends commercial expansion program until 2010 (was set to expire June 30, 2007).

3.   Commercial Revitalization Program (CRP) - Modify Definition of Eligible Premise

Section 499-a of the RPTL(a/k/a CRP) was designed to encourage private development of Lower Manhattan by defining a specific abatement zone and extending defined tax benefits to eligible premises within the zone. In its original 1995 definition of eligible premises, the law’s authors envisioned commercial offices and retail establishments as the most probable applicants. As Lower Manhattan has continued to diversify its community character and expand residential units, the need for local community schools has grown. Chapter 280 amends the definition of the eligible premises to include private elementary or secondary schools to address the changing community demographics. Prior to the enactment of this legislation the definition of eligible premises was limited to office and retail space.

Note: The Commercial Revitalization Program allows a tax benefit of either a three or five year abatement, depending on terms of the lease. Qualifying leases with a minimum term of three years but less than five years are eligible for three-year tax abatement. The tax abatement in the initial year is equal to the actual property tax liability per square foot or $2.50 per square foot, whichever is less. In years two and three, the abatement benefit is equal to two-thirds and one-third, respectively, of the initial tax abatement.

Chapter 424 allows tenants displaced from the Fulton Street Hub, who previously received a certificate of abatement pursuant to the CRP, to re-certify for the abatement at their new location. The re-certification is only for tenants whose leases have been terminated as a result of the taking of said premise by eminent domain to make way for the new Fulton Street Transportation Hub. To be eligible to receive a second certificate of abatement the following conditions must apply:

• The tenant must relocate to eligible premises within the Lower Manhattan abatement zone;
• The relocation is within eighteen months after termination of the first lease, or eighteen months after July 26, 2006 (the effective date of the law), whichever is later; and
• The applicant must meet all other CRP eligibility requirements, including expenditure requirements.

Note: The Department of Finance will waive the $500 CRP application fee for Fulton Street Hub businesses that reapply for the benefit.

a.   EXEMPTION FILING DEADLINES

Chapter 531 extends the filing deadline in the City of New York from January 5 (taxable status date) to March 15 of each year for certain real property tax exemptions. This provision will benefit the consumer, especially senior citizens, by providing a single filing deadline for personal real property tax exemptions. The filing deadline applies to the following "personal" real property tax exemptions: STAR (RPTL 425), veterans (RPTL 458 and 458-A), the persons with disabilities (RPTL 459, 459-A, 459-B, & 460), clergy (RPTL 460), and residential property owned by religious corporations (RPTL 462).

Chapter 631 is simply a streamlining measure that will create greater efficiency in New York City's enhanced STAR income verification program. Specifically this legislation authorizes the New York City Department of Finance to share income data directly with the New York State Department of Tax and Finance for purposes of determining Enhanced STAR income eligibility.

Prior to the enactment of this legislation, the NYS Office of Real Property Services was required to retrieve the information from the City's Department of Finance and then transmit said data to the State Department of Taxation and Finance. This measure removes a cumbersome and unnecessary step in the income verification process for seniors residing in New York City.

Chapter 19 provides that, in a special assessing unit that is not a city (Nassau County), for the 2006 assessment roll, the current base proportion of any class shall not exceed the adjusted base proportion or adjusted proportion, whichever is appropriate, of the immediately preceding year by more than one percent.

Note: Base proportional caps were initially enacted in 2003 as a tool to ease the fiscal impact of the 2002 county-wide reassessment data. In 2003 when the initial 2% cap was enacted it was believed that it would only be needed for one year. However, due to an unexpected boom in the residential housing market, it is believed that the caps are still needed to prevent sudden and significant tax shifts onto homeowners. Therefore, the 2% cap had been extended annually since its inception (see L. 2003, c. 43; L. 2004, c. 43, L. 2005, c. 17).

In addition to lowering the base proportional cap for property owners in Nassau County that are governed by Article 18, chapter 24 extends the 1% base proportional cap for the three taxing jurisdictions (City of Long Beach, City of Glen Cove, Village of Lake Success) that have adopted the homestead/non-homestead provisions afforded under Article 19 of Real Property Tax Law. As with the four class system, the intent of this legislation is to control the tax base in such a manner as to avoid sudden and wide shifts in the property tax burden that can impose a financial hardship on property owners, especially homeowners on a fixed income.

Chapter 20 amends subdivision two of Section 706 of the Real Property Tax Law to allow two or more persons who have real property assessed on the same roll and who assert the same grounds for review to be consolidated in a single petition. This chapter will promote an orderly review process on numerous requests for modifications in the level of assessments on properties in Nassau County.

Note: Due to the court ordered county-wide re-evaluation that took place in 2003 there were numerous assessment complaints. It is believed that due to the massive influx of assessment complaints related to the 2003 countywide reassessment it became a common administrative practice to consolidate assessment complaints into one petition. Such consolidation was in the spirit of RPTL §706 but were recently deemed by a local administrative judge to be outside of the scope of RPTL §706. The judge ruled these consolidations to be improper. Due to time restraints, it was believed that immediately implementing the ruling would require every property owner to pay additional court filing fees and would overwhelm the county clerk’s filing system. This legislation simply establishes a one year moratorium on the judges ruling to allow time for the property owner, the county clerk and the court system to properly prepare for the required rule change.

Understanding that school property taxes are becoming more and more burdensome, especially for seniors, the legislature passed two separate STAR budgetary initiatives that are designed to provide real property tax relief to eligible homeowners throughout New York State, they are the 2006 STAR rebate and the enhanced STAR COLA.

The Legislature and the Governor came to an agreement on a new property tax relief plan that passed the Legislature on June 23rd (see chapter 105 and 109). The STAR rebate, unlike the basic or enhanced STAR which provides reductions in the amount of school property tax payable by a homeowner, authorizes a tax refund on the school taxes previously paid by such homeowner. The checks were issued by the New York State Department of Taxation and Finance which used the data that was collected by the local assessors and then transmitted to the Office of Real Property Tax Services. The amounts of the rebates were determined by multiplying $9,000 by the school district’s 2004 tax rate and where applicable by the sales price differential factor (applies to counties where the median home value is higher than the statewide home value).

(NOTE: In New York City in addition to the school real property tax rebate check, all taxpayers will receive an increase in their existing income tax credit. The current credit for married individuals filing joint returns is raised from $125 to $230. The current credit for unmarried individuals is raised from $62.50 to $115.)

Chapter 53 (budget bill) provides a STAR cost-of-living (COLA) adjustment applicable to the base exemption for enhanced STAR homeowners. To account for cost of living adjustments as reflected by the consumer price index since 2001 the base exemption was increased by 13.6%. For eligible enhanced STAR homeowners the base exemption amount was increased from $50,000 to $56,800 for the 2006/2007. As this legislation was part of a budget bill, the increase in the base exemption for enhanced STAR is only authorized for the 2006/2007 fiscal year. Nonetheless, providing meaningful real property tax relief to homeowners, especially senior homeowners, remains a priority for the Assembly and as such the legislature will review the merits of the increase in the enhanced STAR base exemption limit and make recommendations accordingly.

Note: In 2002, the legislature enacted legislation (see Chapter 83) that provided an annual COLA applicable to household income eligibility. The annual COLA has increased income eligibility for enhanced STAR from $60,000 in 2002 to $67,850 in 2007/2008.

Real property tax assessments and exemptions determine the distribution of tax liability that local governments and school districts impose on residential and commercial real property. Not only is the Committee responsible for bills that set policies for equity and fairness in the way assessors determine real property tax assessments, but it is also responsible for developing ways to reduce the overall tax burden.

In 2007, the Committee will continue its obligation in reviewing and proposing legislation that will enhance the real property taxation and assessment process. Our focus will be on the following issues:

• real property school taxation;
• equity and transparency of the assessment process; and
• real property tax exemptions.

School Property Taxes: Currently schools are funded by the Federal and State government and with local school property taxes. The property tax can impose a disproportionate burden on long tenured homeowners whose homes over time have greatly appreciated but whose fixed retirement incomes cannot easily absorb. Providing our children with a quality education is a fundamental and Constitutional protected obligation of government.

The Committee is mindful that ever increasing school taxes can encroach on the quality of life of adults in the present, but that a drastic reduction in educational services will impair the quality of life of our children in the future. In order to obtain expert assistance in solving this dilemma, the Committee hopes to advance legislation authorizing a Blue Ribbon Commission to study public school funding by all levels of government, federal, state and local and to make recommendations on how best to minimize existing inequities. It is our hope to thereafter design legislation that will implement the recommended solutions proposed by said Commission.

Assessment Process: As the foundation of the real property taxes are based on the assessment process, it is imperative to the credibility of the assessment process that it be transparent. Assessments should be based on the most accurate and up-to-date information that is available. The committee will continue to review proposals that will promote taxing jurisdictions to use up-to-date, full value assessment practices.

Exemptions: There are over 100 real property tax exemptions applicable to private property. Some of the exemptions are only for a limited period of time, while others are permanent (depending on ownership). The exemptions range from as little as a few dollars to full fledge 100 percent exemptions. As many of the exemptions are necessary to ensure that our aged, disabled and poor are not forced to move out of their communities, there are others - like the 421-a - that may no longer serve their initial purpose and need to be modified. It is for this reason that Committee will take an in-depth review of current statutes and that of proposed exemption legislation to ensure the tax base in not unduly compromised by excessive real property tax exemptions.

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