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Volume 11 - Opinions of Counsel SBRPS No. 106

Opinions of Counsel index

Industrial development agencies exemption (scope of exemption) (continuation of industrial waste treatment facilities and air pollution control facilities exemptions); Industrial waste treatment facilities exemption (continuation following acquisition by industrial development agency); Air pollution control facilities exemption (continuation following acquisition by industrial development agency) - General Municipal Law, § 874; Real Property Tax Law, §§ 412-a, 477, 477-a:

The industrial waste treatment facilities and air pollution control facilities exemptions may not be granted initially to an otherwise qualifying facility during a period of industrial development agency ownership, jurisdiction, supervision or control. However, such previously granted exemptions may be continued, along with the industrial development agencies exemption, so long as the statutory eligibility requirements remain satisfied.

We have received an inquiry regarding the exempt status of a power generating facility which has become eligible for the industrial development agency [IDA] exemption (per Real Property Tax Law, § 412-a and General Municipal Law, § 874). The question is whether the property may also continue to receive the industrial waste treatment facility exemption (RPTL, § 477) and air pollution control facility exemption (RPTL, § 477-a). The reason that there is still an interest in receiving the sections 477 and 477-a exemptions is that those exemptions apply to special ad valorem levies (RPTL, §§ 477(4), 477-a(5)), while the IDA exemption does not (Cerro v. Washington County Board of Supervisors, 247 A.D.2d 726, 669 N.Y.S.2d 385 (3d Dept., 1998), mot. lv. app. den., 92 N.Y.2d 811, 703 N.E.2d 269, 680 N.Y.S.2d 457 (1998); 1 Op.Counsel SBEA No. 23; 3 id. No. 76).

As a general rule, property which is receiving an exemption under a section within Title 1 of Article 4 of the RPTL cannot also receive an exemption under Title 2, because Title 1 is for public property – which would include property under an IDA’s ownership, jurisdiction, supervision or control – while Title 2 is for private property. This “public versus private” distinction is not explicit in the law, but it has been recognized by the Court of Appeals (Honeoye Central School District v. Berle, 51 N.Y.2d 970, 416 N.E.2d 1056, 435 N.Y.S.2d 721 (1980)). Though the Court’s discussion of this issue was terse, it cannot be disregarded. Given this holding and our two Opinions which are to the same effect (i.e., 5 Op.Counsel SBEA No. 112, which preceded Honeoye, and 9 id. No. 51, which followed it), combined with the oft-stated rule that exemption statutes must be construed narrowly, we conclude that for the most part, property which is receiving a Title 1 exemption (e.g., the IDA exemption), may not also receive a Title 2 exemption (e.g., the §§ 477 and 477-a exemptions).

In this particular case, however, the facilities in question qualified for and received the sections 477 and 477-a exemptions before the IDA became involved. Thus, the question here is not whether the 477 and 477-a exemptions may be initiated when the property qualifies for the IDA exemption as well, but whether pre-existing sections 477 and 477-a exemption may be continued if the property subsequently qualifies for the IDA exemption. The answer requires an examination of the applicable statutes.

Both the 477 and 477-a exemptions are structured so that, once granted, they remain in effect indefinitely, so long as the facility is still protecting the environment as it was designed to do. There is no renewal application or other annual filing requirement, as there is in section 480-a (the Title 2 exemption that was at issue in Honeoye), nor is there a specified exemption term, as there is in section 485-b, the business investment exemption (the Title 2 exemption that was at issue both in 5 Op.Counsel SBEA No. 112 and 9 id. No. 51). Notably, unlike other exemption statutes, these eligibility criteria are cast in the past tense – the exemptions both apply to facilities which “were” constructed for exempt purposes – which reinforces the notion that it is the past rather than the present which controls. Indeed, the only circumstance that appears to warrant a termination of the exemption authorized under section 477 or 477-a – other than the destruction or disassembly of the facility, of course – is a revocation of the facility’s certification by the Department of Environmental Conservation (see, 6 NYCRR 655.6 [re § 477] and RPTL, § 477-a(3); see also, NYS Assessors’ Manual, Vol. 4, § 4.06, pp.341.01 and 343.01 (1/1/95)). As far as we are aware, no such revocation has occurred here.

We have previously opined that where an industrial waste treatment facility had been constructed in the past with IDA financing and received an IDA exemption for a period of time, the 477 exemption could be initiated after the IDA exemption had ended, as long as the 477 eligibility requirements were satisfied (11 Op.Counsel SBRPS No. 40). Since the IDA was no longer involved with the property, Honeoye was not an impediment.

In the instant situation, the facility was receiving the 477 and 477-a exemptions prior to coming under the jurisdiction of the IDA. Honeoye would seem to preclude a facility from receiving either or both exemptions for the first time while under IDA jurisdiction. However, we do not believe that Honeoye requires a previously granted 477 or 477-a exemption to be removed merely because such a period has begun. Thus, we believe these facilities may continue to receive the 477 and 477-a exemptions along with the IDA exemption, as long as the statutory eligibility requirements are satisfied.

May 23, 2007