ROBERTO RAMIREZ Assemblyman 78th District

THE ASSEMBLY STATE OF NEW YORK ALBANY

CHAIRMAN Real Property Tax Committee CHAIRMAN Puerto Rican/Hispanic Task Force COMMITTEES Codes Corporation, Authorities and Commissions Health Judiciary Social Services Steering Ways and Means

December 15, 1997  

The Honorable Sheldon Silver
Speaker of the Assembly
L.O.B., Room 932
Albany, New York 12248

I am pleased to submit the 1997 Annual Report of the Assembly Standing Committee on Real Property Taxation. This year was extremely busy for the Committee, with a wide range of issues and legislation considered.

The high point of this year's budget was the School Tax Relief program (STAR). The School Tax Relief Exemption provides State-funded exemption from school property taxes for owner-occupied, primary residences that meet certain specifications. The enhanced portion of the exemption is eligible to senior citizens who meet eligibility requirements. In conjunction with the STAR exemption program, the Property Taxpayer's Bill of Rights was enacted to provide more thorough real property taxation information to the tax payers. The information, to be mailed out regularly with either tax bills or no later than 10 days after the filing of the prior tentative assessment roll, will include: market value, uniform percentage of value used in assessments, total tax levy and percent change from prior year, and explanation of the assessment review process.

The legislative accomplishments of the Committee were equally important. Among many pressing issues that came before the committee, the enactment of the following was a great accomplishment. Chapter 315 authorizes municipalities to grant a partial real property tax exemption to property owned by persons with disabilities with limited incomes, and who meet certain qualifications. There are also several new chapters that address real property concerns in New York City: Chapter 440 reduces the allowable increase for each class tax share in the City for fiscal year ending in 1998; Chapter 2 is part of the historic agreement between the City and local governments in the City's watershed areas to comply with directives of the Federal Government to assure the continued purity of the City's water supply; and four other chapters provide continued abatements for New York City rehabilitation programs.

The 1998 Session will be no less demanding. I expect the fiscal situation of the State will require vigilance by the Committee to assure that adequate resources are devoted to real property tax administration.

I greatly appreciate the dedication of the Committee members and the staff during this Session. I thank you, also, for your support and leadership throughout the year.

Sincerely,

Roberto Ramirez,
Chairman
Committee on Real Property Taxation

1997 STANDING COMMITTEE ON

REAL PROPERTY TAXATION

Roberto Ramirez, Chairman

Bernard H. Bryan, Legislative Coordinator
Anthony S. Cantore, Legislative Counsel
Andrea K. Nasrallah, Legislative Associate
Alexander Payne, Committee Clerk
Jodie Fritz, Program and Counsel Secretary

I. SUMMARY

The Assembly Committee on Real Property Taxation is responsible for legislation concerning the administration of real property tax assessments and levies; the administration of State real property tax programs, such as equalization rate determination, special franchise assessments, assessor training, railroad assessments, and oil and gas production values; the administration of tax share procedures in special and approved assessing units; and, administrative and judicial review of assessments. Legislation within the jurisdiction of the Committee includes bills amending the Real Property Tax Law, or pertaining to property assessment determination, the levy and collection of real property taxes, the payment of delinquent real property taxes, and assessment review procedures. In 1997, the Committee reviewed 233 bills, of which 85 were signed into law.

II. STAR PROGRAM

The New York State School Tax Relief (STAR) Program was established by Chapter 389 of the Laws of 1997. The central feature of the STAR program is a State-funded exemption from school property taxes for owner-occupied, primary residences (RPTL,§425). To be eligible for the exemption, the property must be a one, two, or three-family residence, a mobile home, a farm home, or a residential condominium or cooperative apartment.

The "enhanced" STAR exemption will be available to eligible senior citizens starting with the taxes for school year 1998-99. The amount of the exemption will ultimately be $50,000, subject to equalization and other adjustments, to be phased-in over four years ($12,500 in school year 1998-99, $25,000 in 1999-2000, $37,500 in 2000-01, and $50,000 in 2001-02 and thereafter). To be eligible, the property owners must all be 65 years of age or older, except that if the property is owned by a husband and wife, only one of them must be at least 65 years of age. In addition, the combined annual income of all of the owners, and of any owners' spouses residing on the premises, must not exceed $60,000.

"Income" has the same meaning for STAR purposes as it does for purposes of the senior citizens exemption (RPTL, §467), except that any exclusions or deductions from income that are allowed at local option for purposes of the senior citizens exemption will not be allowed for STAR purposes. Low-income seniors who will be receiving the senior citizens exemption will automatically qualify for the STAR exemption, without filing a separate STAR application.

The "basic" STAR exemption will be extended to all primary-residence homeowners, regardless of age or income, starting with the taxes for school year 1999-2000. The amount of the basic exemption will ultimately be $30,000, subject to equalization and other adjustments, to be phased-in over three years (10,000 in school year 1999-2000, $20,000 in 2000-01, and $30,000 in 2001-02 and thereafter). Senior citizens whose annual incomes exceed $60,000 will be eligible for the basic STAR exemption.

The STAR exemption amounts will be adjusted for each assessing unit by the applicable State equalization rate, and, in counties where the median home value exceeds the statewide median home value, by a "sales price differential factor." The State Board will calculate the applicable STAR exemption amounts and certify them to assessing units at least 20 days before their tentative assessment rolls must be filed.

The STAR exemption must be applied after the senior citizen exemption and any other applicable exemptions have been applied to the property's assessed value. However, the exemption may not reduce the property's taxable assessed value below zero.

Anyone who misrepresents his or her primary residence, age or income on a STAR application may be subject to a $100 penalty, may be prohibited from receiving the STAR exemption for five years, may have to return up to three years of tax savings, and may be subject to criminal prosecution.

School districts are required to provide information about the STAR exemption to each person who owns a residence in the school district. This requirement may be satisfied by sending such person a notice in the form prescribed by the STAR law (§425(5)).

While other exemptions merely shift the tax burden to other taxpayers, the STAR exemption is funded by the State. School districts will determine their tax rates without regard to the STAR exemption, but will levy their taxes against the taxable assessed value of each parcel after the STAR exemption, if any (§1306-a). The State will then reimburse each school district for the tax shortfall attributable to the STAR exemption, upon receiving the necessary application from the school district.

In conjunction with the STAR program, legislation was enacted to improve the process by which the public reviews school district expenditures (L.1997, c.436).

A "property Taxpayer's Bill of Rights" was also enacted by Chapter 389 as part of the STAR Program. For tax levies for fiscal years that begin on and after July 1, 1998, property tax bills will have to state: the market value of the property to which the tax bill pertains; the uniform percentage of value used in assessing property in that assessing unit pursuant to section 305 of the RPTL; the total tax levy and percent change from the prior year for each taxing purpose; and an explanation of the assessment review process (RPTL, §922(1)(a)). The market value, uniform percentage and assessment review information need not be included on the tax bill if the assessing unit mailed such information to taxpayers no later than 10 days after the filing of the prior tentative assessment roll. In the case of a school district, the tax bill will also have to state the tax savings attributable to the STAR exemption (§1306-a(2)).

When taxes are paid through an escrow account, the collecting officer will be required to provide the property owner with a receipt within three weeks after the tax has been paid (§955(3)). These receipts will be in the same form as tax bills, except that they will be marked "Paid" and will show the date of payment.

Chapter 293 enables municipal corporations, other than New York City and Nassau County, to provide that "converted condominiums" (i.e., residential condominium units which have been converted to condominium ownership from conventional ownership) shall be assessed without regard to the assessment restrictions otherwise applicable to condominiums (RPTL,§581(1)(c); Real Property Law, §339-y(1)(f)).

The general rule is that the sum of the assessments of individual condominium units must not exceed the value of the entire complex if it was valued as a single entity. This restriction tends to reduce condominium assessments by preventing the use of sales of units in the assessment process. (Note, however, that this restriction does not apply to condominiums in Class 1 in a special assessing unit or in the homestead class of an approved assessing unit which uses dual tax rates.)

Chapter 293 allows local governments to decline to grant these benefits to converted condominiums, thereby removing the incentive to convert existing housing to condominium ownership to reduce taxes. Pre-existing condominiums are not affected by this change.

Assembly Bill 4807 (DiNapoli, Weisenberg) would classify all residential property held in condominium or cooperative form of ownership and located in a special assessing unit which is not a city in Class one for assessment and real property taxation purposes. This bill would have ensured that all homeowners, regardless of the type of ownership, pay no more than their fair share of property taxes. Although the Assembly passed this bill, the Senate did not approve it during the 1997 Session.

Assembly Bill 3169-A, (Pheffer, McLaughlin) would authorize, at local option, the inclusion of unpaid building code enforcement fines in New York City, which are finally adjudicated, in the tax levy for the succeeding tax year, and deem such fines to be a tax on real property for purposes of collection, establishing a lien against such real property, and any foreclosure proceeding authorized by law for unpaid real property taxes. The need for this legislation stems from the illegal conversion of apartments and Single Room Occupancies which, when inspected, result in fines for the landlords. The fines are often ignored. This legislation would help communities rid neighborhoods of landlords who are bringing down property values. This bill was passed in the Assembly but not approved in the Senate during the 1997 Session.

Chapter 355 provides mandate relief to local governments in relation to real property tax administration. The proposal eliminates unnecessary paperwork and excessive bureaucracy in a number of different program areas. Most notably, the legislation:

(a) Repeals the requirement that assessors prepare certain reports concerning exemptions (former RPTL, §496)

(b) Authorizes the issuance of transition assessments upon certain State acquisitions without applications from the affected tax districts (§545).

(c) Simplifies the process for becoming an approved assessing unit (Article 19).

(d) Allows special and approved assessing units to levy taxes without advance review of their adjusted base proportions by the State Board (§§1803-a, 1903).

(e) Allows tax districts to use non-State Board forms for tax enforcement (Article 11).

Chapter 527 authorizes the State to reimburse elected assessors for their actual and necessary costs incurred when they complete continuing education training programs (RPTL, §318(4)). Elected assessors who serve on three-member Boards of Assessors are not generally subject to a continuing education requirement, and under prior law, could not receive reimbursement when they voluntarily completed such training.

Chapters 199 and 665 allow school districts to establish installment programs under which school taxes may be paid in three installments, so as to ease the burden upon school taxpayers (RPTL, §1326-a). If a school district elects to exercise this option, the payment schedule would be as follows:

(1) The first installment would be at least 50% of the total taxes due, and would generally be payable by September 30th.

(2) The second installment would be at least 50% of the remainder, plus interest, and would be payable by a date set by the school district.

(3) The third and final installment would be the amount remaining due, plus interest, and would be payable by the date on which the warrant expires.

The program would apply to all classes of property, unless the school district opted to limit it to (1) residential property, (2) property which is receiving the senior citizens exemption (§467), (3) property which is either receiving the disabled persons exemption (§459) or owned and occupied by a person who qualifies as disabled under that statute, or (4) a combination of these types of property. The collecting officer would be authorized to receive installment payments as provided by the program until the expiration of the warrant, and would make a return upon the expiration of the warrant in the usual manner.

The adoption of the program does not extend the normal collection period; any taxes remaining unpaid when the warrant expires, whether "regular" taxes or installments, will be returned to the county treasurer or city tax enforcement officer (§§1330(5), 1332(3)), and the unpaid amount will be enforced in the manner provided by law. Thus, the program should have no direct effect upon counties or cities.

Chapter 389, in addition to establishing the STAR program, consolidates and improves the installment payment options available to counties, primarily by updating certain laws that were already in effect (RPTL, §§972-976, 1336-1342). The program is optional at all levels; if a county decides to offer such a program, each town and school district in the county would have the ability to opt-in, but none would be obliged to do so.

A county which decides to offer such a program must prescribe by local law the number of payments that may be made, and the dates on which each payment is due. One or more of the payments may be due after the collecting officer's warrant expires. This, for example, a county may allow taxes to be paid in two bi-annual payments, four quarterly payments, or 12 monthly payments. The payments would include interest determined at the rate that is normally applied to unpaid taxes (§924-a). the first installment must be paid to the Collecting Officer; all subsequent installments must be paid to the County Treasurer.

A county may extend its installment program to all classes of taxpayers, or may limit the program to homeowners, to persons receiving the senior citizens exemption (§467), to the disabled and/or to recipients of Supplemental Security Income. However, those whose taxes are paid through escrow accounts may not participate in this installment program.

The collecting officer must deliver to the County Treasurer a separate return identifying the owners who have chosen to pay their taxes in installments. The return must be delivered by February first in the case of a town, or upon the expiration of the time for paying the first installment in the case of a school district. The County Treasurer must pay over the amount of the pending installments within 10 days of receiving the return.

In conjunction with this new law, a variety of other laws that had authorized installment programs in counties have been repealed as unnecessary (former §§928,928-b). Any programs that had been adopted under those laws have been preserved by a "grandfather" clause.

IV. GENERAL EXEMPTION PROGRAMS

Chapter 315 authorizes municipalities to grant a partial real property tax exemption to property owned by persons with disabilities whose incomes are limited by reason of such disabilities (RPTL, §459-c).

This new exemption is patterned on the senior citizens exemption (§467), and includes a similar ownership requirement whereby all of the owners must have a disability (except where property is owned by spouses or siblings, in which case only one must be disabled). Like section 467, there is a basic 50 % exemption, with lesser exemption percentages authorized as incomes increase. The definition of "income" is also similar to that in section 467(3)(a). A parcel may not receive an exemption (for the same tax purpose) pursuant to both section 467 and the new law (§459c(3)). Annual applications are required, except that proof of a permanent disability is required only once.

To be eligible for the new exemption, the disabled person must be (1) certified to receive Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits under the Federal Social Security Act, (2) certified to receive Railroad Retirement Disability Benefits under the Federal Railroad Retirement Act, or (3) a recipient of a certificate of legal blindness from the State Commission for the Blind and Visually Handicapped. Chapter 315 includes the definition of "disability" used in the Americans with Disabilities Act of 1990 ("a physical or mental impairment that substantially limits one of more of the major life activities..." (42 USCS §12102(2)(A)), and includes examples of such activities. Persons who are disabled as the result of the current use of alcohol or illegal drug use will not be eligible for the exemption.

Chapter 315 will become effective on January 2, 1998. Municipalities may adopt their local laws or (school district ) resolutions to authorize the exemption prior to that date.

Assembly Bill 5472-A (Harenberg) enables first time home buyers to purchase a primary residential property and receive a property tax exemption on their new home. A temporary tax relief would assist first time home buyers who, in many instances, have been excluded from the housing market because of the significant monthly costs of the mortgage and escrow account charges. This abatement would ease the initial financial strain of a home purchase. In addition, the bill would provide an important stimulus to the residential construction industry which has been decimated by the impact of the recession. Although this bill passed the Assembly it was not passed in the Senate.

Assembly Bill A.2986 (Weisenberg, Calhoun) would promote the use of local labor with respect to business, commercial and industrial development under the business investment exemption program. It would permit local governments to condition receipt of a business investment exemption upon the use of a local labor source for construction, alteration, installation, and improvements to the real property for which the exemption is granted. Although this bill passed the Assembly it was not approved in the Senate.

Assembly Bill 3758-A (Bragman) would recognize the valuable community service provided by volunteer firefighters and ambulance workers and their organizations. The bill would exempt from taxation property owned by an incorporated association of present or former members of a volunteer ambulance service or leased to a municipality or a fire district for specified purposes. It would also permit localities to exempt from taxation five percent of assessed value, with a maximum of $3,000. of residential property owned by enrolled members of a volunteer fire department or voluntary ambulance service. This bill was passed in the Assembly but not approved in the Senate.

Assembly Bill 3982-A (Abbate) would provide that when a nonprofit organization purchases property after the taxable status date for a real property tax exemption, it will be granted immediate exempt status. The bill also establishes procedures to change the assessment roll and allow for the exemption benefits granted upon purchase of property after taxable status date to be applied against the eligible individual's tax levy of the subsequent year. There is added flexibility in that localities may opt to adopt the legislation but also later rescind such decision to adopt the local law, ordinance or resolution.

Currently, nonprofit organizations which are eligible for a real property tax exemption do not receive it upon the purchase of the property but receive it upon the next occurring taxable status date. They may be required to pay the full amount of taxes, in some cases, up to almost two years after purchasing the property. Since current law permits property sold by someone receiving a real property tax exemption to a purchaser not entitled to an exemption to be taxed immediately, it would be equitable to grant immediate exempt status to property purchased by an eligible nonprofit organization.

The inequity of delaying tax exempt status to the next taxable status date to eligible non-profit organizations has led to a proliferation of bills for specific non-profit property owners. In this 1997 legislative session alone there were 20 such local and individual bills that came through the Real Property Taxation Committee which were eventually signed by the governor (Chapters: 384, 281, 279, 282, 278, 280, 427, 428, 412, 276, 410, 283, 419, 364, 377, 630, 416, 277, 411, & 284) while the Abbate bill A3982-A, which would provide the much needed uniformity, passed only the Assembly this year.

Chapter 440 reduces the allowable increase for each class tax share in New York City for the fiscal year ending in 1998. More specifically, it provides that the current base proportion of any class for the 1997-98 fiscal year may not exceed the prior adjusted base proportion by more than 2.5 percent. Similar bills have been enacted repeatedly in recent years (L.1992, c.298; L.1994,c.711;L.1995,c.73;L.1996,c.151).

Chapter 2 is part of the historic agreement Governor Pataki negotiated between the City of New York and local governments in the City's watershed to comply with directives of the federal Government to assure the continued purity of the City's water supply. In order to protect its watershed, the City of New York will embark on a program of both purchasing land and obtaining conservation easements over land. Chapter 2 established the statutory framework for these conservation easements, and provides that they will generally be taxable (RPTL, §§583-589-a).

Conservation easements are enforceable restrictions upon the uses to which real property may be placed. Under Chapter 2, two types of easements will be taxable to the City; "Watershed Conservation Easements" and "Watershed Agricultural Easements." The difference is that the agricultural easements allow the burdened parcels to continue in agricultural production. Both types of easements are fully taxable, and the City does not receive any benefit from exemptions applied to the burdened parcels, with one exception; If a parcel with a watershed agricultural easement receives an agricultural assessment pursuant to Article 25AA of the Agriculture and Markets Law, the easement will not be taxable.

This program will be administered in a manner parallel to the administration of taxable State easements (RPTL, §543; see also, Environmental Conservation Law, Article 49). The allocation factor used to value the easements will be subject to review by the State Board after 20 years. The penalty provisions of the agricultural assessments program and the forest tax exemption program (RPTL, §480-a) will not be triggered by the granting of a conservation easement.

Four important bills were introduced and signed this 1997 legislative session which provide incentives for construction and rehabilitation of multiple dwellings in the New York city area.

1. Chapter 629 (A.8416, Rules (Silver)) revises the eligibility criteria for real property tax abatements for commercial property under the Lower Manhattan Revitalization Program (RPTL, §§499-a et seq.), and extends the period for obtaining benefits under the program. It also modifies the provisions relating to the exemption for certain improvements to multiple dwellings in New York City (§421-g).

2. Chapter 534 (A.8256, Rules (Ramirez)) extends the Section 421-a exemption programs for New multiple dwellings by providing an incentive for new multiple unit residential construction initiated before January 1,1999 and completed prior to December 31, 2000.

The 421-a Program was authorized by State Statute in 1971 in order to provide an important incentive for the construction of ne multiple unit residential construction. Since then, the program has been an important component in the financing of 111,000 units of housing in NYC.

3. Chapter 599 (A.8254, Rules (Espaillat)) extends the authority of New York City Council to amend the local laws relating to the J-51 program by which New York City can adopt or amend a local law granting tax incentives for certain rehabilitation of multiple dwellings to June 1, 1999.

Section 489 of the Real Property Tax Law, known as the J-51 Program, authorizes cities to enact local laws which grant real estate tax exemptions and abatements for rehabilitation work on multiple dwellings. In New York City, benefits granted pursuant to this law have played a critical role in financing rehabilitation of affordable housing for over three decades.

4. Chapter 540 (A.8257-A Rules (Rivera)) allows condominiums consisting of 10,000 or more dwelling units access to all tax abatement benefits provided to rental projects without limitation under the J-51 program, granted that these projects are carried out with the assistance of loans or subsidies from City, State or Federal sources or from a not-for-profit organization whose primary purpose is financing low or moderate income housing.

Provisions include:

A. A calculation of tax abatement based on 150% of the certified reasonable cost; permits completion dates of such projects to be as long as 60 months allowing for the filing of sequential applications to facilitate the granting of benefits.

B. Apportionment of benefits, once work is begun and completed on a particular section of a condominium, throughout the entire complex in order to ensure that all residents receive minimal and equal increases in common charges.

C. Abatement benefits will flow to the project in a timely manner and will not be held by administrative requirements. This amendment would allow the extension of the compliance period to reflect the difficulties associated with a staged construction job for such a large project.

Chapter 517 requires that Small Claims Assessment Review (SCAR) petitions be served upon an assessing unit either by personal delivery or by certified mail, return receipt requested (RPTL, §730(8)). If served by personal delivery, the clerk of the assessing unit or "other appropriate person" must furnish the petitioner with a receipt setting forth the date and time of service.

Previously, a SCAR petitioner was only required to mail a copy of the petition to the assessing unit within 10 days of filing the petition with the county clerk. Chapter 517 will make it unnecessary for SCAR hearing officers to determine the threshold issue of whether the petitioner did in fact comply with this requirement.

Chapter 389, in addition to establishing the STAR program, includes a provision which permits a party in a certiorari proceeding to submit evidence of ratio "actual sales of real property within the assessing units that occurred during the year in which the assessment under review was made" (RPTL, §720(3)). This method of proof, commonly known as a "sales ratio study," had been permitted until 1986, but not since then (L.1986, c.679). Chapter 389 restores the right to offer sales ratio studies, effective with certiorari proceedings commenced on or after January 1, 1998.

The Real Property Tax Committee will deal with many diverse and demanding issues in the 1998 Legislative Session. Initially, the Committee will be actively involved in the budget process as it pertains to (ORPS) and real property tax administration.

Other areas that will involve the Committee include:

1. The review of the inplementation of the STAR program and possible technical ammendments, including a look at wether assessors have sufficient funding to implement the STAR program.

2. The review of assessment practices for small businesses.

3. Work with New York City to review its classification system.

 

4. The review of reforms of the administration of assessment practices.

5. The review of mechanisms to stabilize tax shifts resulting from reassessments.

The Committee looks forward to working with State and local governments, including school districts, in the coming session.

APPENDIX A

APPENDIX C

REAL PROPERTY TAXATION BILLS THAT PASSED THE ASSEMBLY ONLY

APPENDIX D

REAL PROPERTY TAXATION BILLS THAT WERE VETOED