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Volume 11 - Opinions of Counsel SBRPS No. 42

Opinions of Counsel index

Exemptions, generally (transfer of property after taxable status date) (transfer from municipal corporation to industrial development agency) - General Municipal Law, § 874; Real Property Tax Law, §§ 412-a, 520:

The pro rata taxation provisions of section 520 of the Real Property Tax Law do not apply to a transfer of tax exempt property from a municipal corporation to an industrial development agency.

We have been asked whether the provisions of section 520 of the Real Property Tax Law apply to a transfer of title to real property from a town (which has been receiving an exemption pursuant to section 406(1) of the RPTL) to the town’s industrial development agency [IDA]. The conveyance took place in October of 2002, subsequent to the filing of the town’s tentative and final 2002 assessment rolls, which were prepared on the basis of a March 1, 2002 taxable status date (RPTL, §302). As we further understand the facts, the IDA will hold title only so long as it takes to complete a construction project on behalf of the State University of New York.

With respect to the upcoming 2003 roll (the tentative roll for the town will be filed by May 1, 2003), if the IDA holds title and makes timely application for exemption (as required by RPTL, §412-a), the property will be exempt from taxation pursuant to General Municipal Law, section 874. The question is whether the property is liable for any pro rata tax attributable to the transfer of title from the town to the IDA.

Ordinarily, the condition and ownership of real property as of “taxable status date” determines whether and to what extent it is liable for taxation for the ensuing tax year(s) (RPTL, §302). Thus, if property is not entitled to exemption as of taxable status date, the property remains liable to taxation even if transferred to an entity which might have otherwise qualified for an exemption, with certain limited exceptions such as acquisitions by the State or Federal government prior to lien date (see, LIPA v. Shoreham-Wading River Cent. Sch. Dist., 88 N.Y.2d 503, 670 N.E.2d 419, 647 N.Y.S.2d 135 (1996), rearg. den., 88 N.Y.2d 1010, 672 N.E.2d 600, 649 N.Y.S.2d 375 (1996); see also, 8 Op.Counsel SBEA No. 44).

In fact, at least one court had occasion to consider the circumstances of a post-taxable status date transfer from a taxable entity to an IDA and concluded that “there is nothing in the statutes to suggest that property transferred to the [industrial development] agency ... after the taxable status date should have retroactive tax exemption...” (R.P. Adams Co., Inc. v. Nist, 72 A.D.2d 908, 909, 422 N.Y.S.2d 184, 185 (4th Dept., 1979)).

Until the enactment of section 520 of the RPTL in 1978 (L.1978, c.635), the opposite was also generally true, {1} that is, if property was entitled to exemption as of taxable status date, it continued to enjoy that status for the ensuing tax year no matter who acquired the title thereto. The Legislature evidently became concerned, however, that persons or entities who would not have otherwise been entitled to an exemption had they owned the property as of taxable status date were receiving an unintended benefit - at a cost to all other taxpayers - by the happenstance of the timing of their acquisition of title to tax exempt real property.

Accordingly, section 520 was added to the RPTL. It provides for the assessment and taxation of exempt property upon transfer of title to “any person, association or corporation not otherwise entitled to an exemption from taxation...” (emphasis added). In the ordinary course of events, an exemption from real property taxes for property of an IDA requires the filing of a timely application for exemption (RPTL, §412-a(2), as added by L.1991, c.372), which, in the given case, could not have occurred prior to March 1, 2002. Note, however, that the purpose of that application is to notify the assessor of the transfer of title. There are no attendant jurisdictional issues (such as an “exclusive use” prerequisite) affecting an IDA’s right to exemption. Such a procedural, pro forma requirement should not be construed to compel a result that would render property taxable under these circumstances.

Although the precise meaning of the phrase “not otherwise entitled to exemption” in section 520 may not be entirely free from doubt, in our opinion, an interpretation which would render exempt real property taxable by virtue of its acquisition by an IDA would, in effect, turn the statute “on its head,” since its purpose was “to make exempt real property immediately subject to taxation when it is transferred to a non-exempt owner” (Governor’s Program Memorandum for L.1978, c.635; reprinted at 1978 NYS Legislative Annual, p.362, emphasis added). Since an IDA is entitled to an exemption by virtue of ownership alone, it is our opinion that section 520 should have no application to the transfer in question.

April 17, 2003


{1}  Section 494 of the RPTL had provided for the pro rata taxation of exempt real property transferred to a non-exempt person or entity, in New York City or Westchester County, for many years before the enactment of section 520. While section 520 now governs in Westchester, section 494 remains applicable to New York City (RPTL, §494(1)).

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