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Volume 10 - Opinions of Counsel SBRPS No. 124

Opinions of Counsel index

Business investment exemption (local option) (increase in minimum cost of improvement) - Real Property Tax Law, § 485-b:

A municipality granting the business investment exemption may set the minimum cost of a qualifying improvement at an amount no lower than $10,000 and no higher than $50,000. There is no limitation on the maximum cost of an improvement qualifying for the exemption.

Our opinion has been requested concerning the business investment exemption(Real Property Tax Law, §485-b). Specifically, we are asked to explain the meaning of a provision of subdivision 2(b) of such section: “No such exemption shall be granted unless ... (2) the cost of such construction, alteration, installation or improvement exceeds the sum of ten thousand dollars or such greater amount as may be specified by local law or resolution...” (emphasis added)

The emphasized clause in the quoted provision was added by chapter 305 of the Laws of 1994 which also added a new subdivision eight to section 485-b. That subdivision, provides, in relevant part: “A county, city, town or village may, by local law, and a school district ... may, by resolution,... provide that the provisions of this section shall apply only to construction, alteration, installation or improvements having a greater value than that specified by subdivision two of this section, provided, however, that such amount shall not exceed fifty thousand dollars.” Clearly, these two provisions must be read together (McKinney’s Statutes, §97).

Chapter 305 was based on a recommendation made by the Governor’s Panel on Real Property Tax Exemption and Classification Issues. As discussed by then Governor Cuomo in his approval message of chapter 305:

[T]he bill gives local governments the option to target the business investment exemption so that they can more effectively attract the business activity they need most and encourage it to locate where it will be most appropriate and beneficial to the community.

Too often, as the Governor’s Panel on Real Property Tax Exemption pointed out, the current business investment exemption is an inefficient economic development tool. Local governments must grant it to all businesses or to none, and cannot guide new business to certain areas where it is most needed (Governor’s Approval Memorandum #16, reprinted at 1994 NYS Legislative Annual, p.221).

While the targeting of the exemption toward (or away from) certain types of business or geographic areas (see, §485-b(9)-(11)) was the principal focus of chapter 305, as noted above, the amendment to subdivision two and the addition of subdivision eight were also intended to improve the exemption’s flexibility. The sponsor’s memorandum for the bill enacted as chapter 305 (S.3463-B; A.5961-B) stated that this amendment to subdivision two was to “permit[] localities to set a lower limit of up to $50,000 for property eligible to the receive the exemption.”

In our opinion, the amendment to subdivision two and the addition of subdivision eight were intended to permit local governments to set the minimum construction cost at any amount between $10,000 and $50,000. By raising the minimum cost figure, local governments can avoid granting the exemption to businesses which undergo minor improvement. At no time, however, either before or after the enactment of chapter 305, has section 485-b provided a limitation on the maximum cost of an improvement qualifying for the exemption.

January 18, 2001

Updated: