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Volume 11 - Opinions of Counsel SBRPS No. 4

Opinions of Counsel index

School tax relief [STAR] exemption (income) (spouse’s income) - Real Property Tax Law, § 425:

For purposes of determining income eligibility for the enhanced school tax relief [STAR] exemption, the income of the owner’s resident spouse must be considered, even if the marriage occurred during or after the income tax year upon which eligibility is determined.

Our opinion has been requested concerning the income requirement of the enhanced school tax relief (STAR) exemption (Real Property Tax Law, § 425(4)(b)). The facts are that a woman qualified for the exemption on the 2000 assessment roll based upon her 1999 income which was below $60,000 (i.e., the enhanced exemption’s statutory maximum (RPTL, § 425(4)(b)(i))). She then married in August 2000, and her and her husband’s combined incomes for 2000 exceed the statutory limit. The question is if, in determining exemption eligibility for the 2001 assessment roll, the husband’s income may be pro rated so as to consider only that income he received on and after the date of their marriage. We think not.

For purposes of enhanced STAR, “income” is defined as “[t]he combined income of all of the owners, and of any owners’ spouses residing on the premises, for the income tax year immediately preceding the date of making application for the exemption. . .” (RPTL, § 425(4)(b)(i)). The income to be measured is that reported on the “applicant’s latest available federal or state income tax return” (RPTL, § 425(4)(b)(ii)). “Latest available return” is now defined as the “return for the tax year immediately preceding the date of making application, provided however, that if the tax return for such tax year has not been filed, then the income tax return for the tax year two years preceding the date of making application shall be considered the latest available” (ibid.).

The statute includes no provision for pro rating income where there is a change in marital status in the year upon which income eligibility is determined. Consequently, in this case, even if the wife is the sole owner of the property, her husband’s income must also be considered (assuming he resides on the property).

We previously discussed the rationale for basing exemption income eligibility on income received in the prior year in the context of the senior citizens exemption (RPTL, § 467):

Although the tax relief provided by the exemption actually applies to the financial condition of the owner for the year in which he receives the exemption, it would obviously be impossible to accurately compute his income for the year in which the application must be made and the taxes levied, that being the same year.

Therefore, the time period for measuring income is one year prior to the year of application, and that year is considered to be the best estimate of the income earned in the year in which the application is filed. However, since the intent of the statute is to estimate the income for the year in which the application is made, it follows that this estimate should not include the income of the deceased spouse [who died before taxable status date] since that income will not be received by the owner due to the death of his spouse (1 Op.Counsel SBEA No. 70).

Years after that opinion was issued, taxable status date in most jurisdictions was changed from May 1 to March 1 (L.1984, c.379); given the April 15 income tax filing deadline for most taxpayers, the preceding year’s tax return is not always available on the most commonly used exemption filing deadline. We addressed this in 10 Op.Counsel SBRPS No. 47 (which was issued before the enactment of § 425(4)(b)(ii) by L.1998, c.56, pt. A, §2), where we concluded, “In providing proof of income for purposes of the enhanced school tax relief [STAR] or senior citizens exemption, the applicant must provide a copy of his or her income tax return for the year immediately preceding the date of application, or, if that form has not yet been filed, the form for the year before such year.”

Nevertheless, the rationale expressed in 1 Op.Counsel SBEA No. 70 is still apt. Of course, the factual situation here is the converse of the situation therein: rather than being widowed in the year preceding application for the exemption, the applicant was wed. Both spouses’ incomes can be expected to be received in 2001. Their 2001 income eligibility should therefore be determined on the basis of his 2000 income as well as hers. If the applicants’ 2000 income tax return was not available as of the filing deadline, their 1999 returns were acceptable, but both incomes still were required to be considered. [Ed. note: Enhanced STAR income eligibility was subsequently changed (by L.2002, c.83, Pt. E) to provide that for 2003 assessment rolls, 2001 income was to be considered; for 2004, 2002 income was to be used, and so on (RPTL, § 425(4)(b)(i)(B), (C)).]

March 2, 2001