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Guidance on the new 459-c and 467 income worksheets for non-filers

As part of the 2023-2024 Enacted Budget, RPTL § 459-c and § 467 were revised to change the definition of income for purposes of the senior citizens exemption. The new definition is essentially Federal Adjusted Gross Income (FAGI) plus (or minus) five potential adjustments. Since the amount of an applicant’s FAGI and the various adjustments can generally be found on their Form 1040 (and Schedule 1 if applicable), this change will greatly simplify the administration of the exemption in most cases. 

However, there are applicants for the exemption whose incomes are low enough that they are not required to file a Form 1040. These applicants, who we will refer to as non-filers, are asked to complete and attach to their application a simple worksheet, Form RP-459-c-Wkst, Income Worksheet for Exemption for Persons with Disabilities and Limited Incomes or Form RP-467-Wkst, Income Worksheet for Senior Citizens Exemption, to give the assessor sufficient information to determine their income eligibility. It contains the key elements that go into the calculation of FAGI as well as the adjustments that one might reasonably expect to see with lower-income applicants. While we believe most of the lines on the worksheet are self-explanatory, we have prepared the following additional explanations regarding Lines 2, 4 and 6.  

We must emphasize that Form RP-467-Wkst, and the explanations that follow, apply specifically to applicants who do not file federal income tax returns. Determinations of eligibility for those who do file federal income tax returns should be based upon their returns.

Interest (Line 2): For a non-filer, all interest and dividends must be included in the § 459-c/467 income calculation, whether they are taxable or tax-exempt. There is no reason for either the applicant or the assessor to differentiate between taxable and tax-exempt interest or dividends for this purpose.

IRA Distributions (Line 4): In general, taxable IRA distributions are not included in the exemption income calculation unless the municipality has opted to include them. For non-filers, we believe this rule should be administered as follows:

  • In a municipality that has not opted to count taxable IRA distributions, any IRA distributions received by non-filers—whether taxable or non-taxable—should be disregarded when determining their exemption eligibility. That means that the amount shown on Line 4 of the Worksheet should be excluded from the income calculation.
  • In a municipality that has opted to count taxable IRA distributions, our non-binding opinion is that it would be appropriate to treat the entire IRA distribution of a non-filer as taxable — meaning that the amount shown on Line 4 of the Worksheet should be included in the income calculation—unless one of the following conditions apply:
    • If their Form 1099-R shows a Taxable amount in Box 2, then only that amount should be included in the exemption income calculation. (Their Form 1099-R will be attached to their worksheet if they complied with the instruction on Line 4.)
    • If the applicant can show—using IRS worksheets or similar materials—that if they had filed a Form 1040, only a portion of their IRA distribution would have been treated as taxable and that as a result, their income would be low enough to qualify for the exemption, then only that portion should be included in the exemption income calculation.
      • Note: The assessor is not compelled to try to conduct this analysis on the applicant’s behalf; as with all exemptions, it is the applicant’s burden to demonstrate their eligibility.
    • If their Form 1099-R shows a Distribution Code B in Box 7, then none of the distribution should be included in the exemption income calculation. Distribution Code B signifies that it is a Roth IRA, and distributions from Roth IRAs are never taxable. 

Social Security Benefits (Line 6): In general, Social Security benefits that are not taxable are included in the exemption income calculation unless the municipality has opted to exclude them. For non-filers, we believe this rule should be administered as follows:

  • In a municipality that has not opted to exclude non-taxable Social Security benefits, all Social Security benefits received by non-filers, whether taxable or non-taxable, should be counted when determining their eligibility for the exemption. That means that the amount shown on Line 6 of the Worksheet should be included in the income calculation.
  • In a municipality that has opted to exclude non-taxable Social Security benefits, it is our non-binding opinion that none of a non-filer’s Social Security benefits, whether taxable or non-taxable, should be counted when determining the non-filer’s exemption income. That would mean that the amount shown on Line 6 of the Worksheet should be excluded from the income calculation. Social Security benefits don’t become taxable unless the recipient also has substantial income from other sources (see Income Taxes And Your Social Security Benefit); if they do, they would almost certainly be required to file a Form 1040. In other words, where an applicant’s income was not high enough to require them to file a return, you may reasonably assume that all of their Social Security benefits were non-taxable. Thus, where this option is in effect, we believe it would be reasonable to simply exclude all Social Security income received by a non-filer from the exemption income calculation. 

Loss limitations: In the case of non-filers, we believe assessors need not concern themselves with the limitation that the law generally imposes upon losses. The losses that are subject to this limitation are those that have been reported on the applicant’s federal income tax return. A non-filer by definition has not filed a federal income tax return, and thus has no reported losses to limit. Accordingly, the worksheet does not request information about losses.

Finally, it bears mention that property tax exemptions are administered at the local level, not by the State. The burden is upon the applicant for an exemption to establish their eligibility to the assessor’s satisfaction. If an assessor believes that in order to verify a non-filer’s eligibility they must have information that does not appear on the RP-459-Wkst or RP-467-Wkst, it is the assessor’s prerogative to ask the non-filer to supply it. 

Scenarios

If you believe the applicant has completed the worksheet accurately and completely, this is how we would recommend you use the worksheet to determine their income for purposes of the exemption:

For a municipality that did not exercise either the IRA or Social Security options (in other words, they accepted the defaults that IRA distributions are excluded from the income calculation and Social Security benefits are included in it):

  • Take the amount shown on Line 8 (Total of Lines 1 through 7).
  • Subtract the amount shown on Line 4 (Total IRA distributions).
  • Apply the adjustments for unreimbursed medical/prescription drug expenses and residential health care expenses (Lines 9 and 10 of RP-459-c, RP-459-c-Rnw, RP-467 or Lines 4 and 5 of RP-467-Rnw), if applicable. 

For a municipality that exercised the IRA option but not the Social Security option:

  • Take the amount shown on Line 8 (Total of Lines 1 through 7).
  • Apply the adjustments for unreimbursed medical/prescription drug expenses and residential health care expenses (Lines 9 and 10 of RP-459-c, RP-459-c-Rnw, RP-467, or Lines 4 and 5 of RP-467-Rnw), if applicable. 

For a municipality that exercised the Social Security option but not the IRA option:

  • Take the amount shown on Line 8 (Total of Lines 1 through 7).
  • Subtract the amount shown on Line 4 (Total IRA distributions).
  • Subtract the amount shown on Line 6 (Total Social Security benefits). 
  • Apply the adjustments for unreimbursed medical/prescription drug expenses and residential health care expenses (Lines 9 and 10 of RP-459-c, RP-459-c-Rnw, RP-467, or Lines 4 and 5 of RP-467-Rnw), if applicable. 

For a municipality that exercised both the IRA option and the Social Security option:

  • Take the amount shown on Line 8 (Total of Lines 1 through 7).
  • Subtract the amount shown on Line 6 (Total Social Security benefits). 
  • Apply the adjustments for unreimbursed medical/prescription drug expenses and residential health care expenses (Lines 9 and 10 of RP-459-c, RP-459-c-Rnw, RP-467, or Lines 4 and 5 of RP-467-Rnw), if applicable. 

Reminder: Applicable income tax year. For 2024 assessment rolls, eligibility for the exemption will be based upon 2022 income in most assessing units. However, in those assessing units that have taxable status dates of April 15 or later, eligibility will be based upon 2023 income.  

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