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Volume 11 - Opinions of Counsel SBRPS No. 68

Opinions of Counsel index

Municipal corporations exemption (property acquired by tax deed) (liability for library charges) - Real Property Tax Law, § 406:

Where a municipality acquires title through tax enforcement after taxable status date, the three-year limited exemption provided by section 406(5) commences as of the taxable status date next following such acquisition. Such exemption applies to special ad valorem levies for library districts, but not to library charges that are part of the school tax.

We have received an inquiry concerning the provisions of section 406(5) of the Real Property Tax Law as it affects charges for certain library districts. The first question is, after a county has taken title through tax enforcement, when does the exemption provided by that subdivision begin. The second question is whether the county, Suffolk County in this case, is liable for certain library charges. We have been referred to three specific legislative enactments creating libraries within the County.

As a general rule, when property located within a municipal corporation’s boundaries is acquired by such municipal corporation, it is exempt from “taxation” (RPTL, § 102(20)) and most “special ad valorem levies” (RPTL, § 102(14)) and “special assessments” (RPTL, § 102(15)) provided it is “held for a public use” (RPTL, §§ 406(1), 490). Pursuant to section 406(5):

Real property owned by a municipal corporation acquired by tax deed, by referee’s deed in tax foreclosure, pursuant to article eleven of this chapter or pursuant to a deed made in lieu of tax foreclosure shall be deemed to be held by it for a public use for a period of three years from the date of the deed and during such period shall be exempt from taxation and special ad valorem levies, but shall be liable for taxes for school purposes and special assessments. Any such property from which a municipal corporation is receiving revenue on the date of taxable status, however, shall not be so exempt.

In other words, after a municipality takes title to a parcel through tax enforcement proceedings, the public use test referred to in subdivision one is presumed satisfied for three years, but the scope of that exemption is restricted to general municipal taxes and special ad valorem levies; liability remains for school taxes and special assessments.

Also as a general rule, property is assessed according to its condition and ownership as of taxable status date (RPTL, § 302(1)). With the exception of the State and Federal governments (which enjoy sovereign immunity) and statutes (or U.S. treaties) which provide otherwise, eligibility for exemption is also measured as of taxable status date (see, Long Island Power Auth. v. Shoreham-Wading River Cent. School Dist., 88 N.Y.2d 503, 670 N.E.2d 419, 647 N.Y.S.2d 135 (1996); R. P. Adams Company, Inc. v. Nist, 72 A.D.2d 908, 422 N.Y.S.2d 184 (4th Dept., 1979)). Municipal acquisitions by purchase are subject to the usual ownership as of taxable status date requirement (10 Op.State Compt. 316 [county]; 11 id. 185 [village]; 23 id. No. 774 [town]). Where a municipality acquires title through tax enforcement after taxable status date, the exemption provided by section 406(5), though limited in scope and duration, also commences as of the next taxable status date (23 Op.State Compt. 539; 25 id. No. 63). We concur with the State Comptroller’s opinions on this question.

Having resolved the issue of when a county’s exemption under section 406(5) commences, the remaining question is whether it covers the library charges in question. That is, if they are considered taxes or special ad valorem levies, the county will be exempt from such charges for three years; if they are school taxes or special assessments, the county will be liable.

The Third Department, Appellate Division, in Crandall Public Library v. City of Glens Falls, 216 A.D.2d 814, 629 N.Y.S.2d 100 (1995), considered whether the charge for a library district was a “tax” or a “special ad valorem levy” for the purpose of determining the scope of exemption provided to certain housing projects in the City (see, Private Housing Finance Law, § 125, and Public Housing Law, § 52(4)(a)). {1}  The court decided that the charge was a “tax.” {2} 

While not explicitly stated, the logical implication of the Crandall decision is that the charge was found to be a “tax” of the City of Glens Falls, the City being one of three municipalities comprising the library district. The library district’s special act states that the library district’s charges “shall be levied and collected yearly in the same manner and at the same time as other municipal charges” (L.1992, c.456, § 5). The special act additionally states that the governing boards of the three municipalities “shall each levy a local assessment upon the real property lying within the boundaries of their municipalities for their shares of the total public library district expenditures to be raised by an ad valorem assessment in accordance with the provisions hereof” (L.1992, c.456, § 5).

The Crandall decision is the only judicial precedent of which we are aware regarding this issue. Therefore, the provisions of the special acts that apply to the three libraries in question must be reviewed in light of Crandall to answer the question, notwithstanding the fact that the inquiry concerns Suffolk County which is located within the Second Department of the Appellate Division. {3} 

The special act for the Commack Public Library District states “[t]he town board [of the Town of Huntington] shall assess, levy and collect assessments from the several lots and parcels of land in Commack public library district as hereinabove specified for the amount of such appropriations less any estimated revenues” (L.1971, c.834, § 10). Similarly, the special act for the North Shore Public Library District states “the town boards of the towns of Brookhaven and Riverhead are hereby authorized to assess, levy and collect the necessary expenses . . . of such library district as may be hereafter authorized pursuant to the provisions of this act from such lots and parcels of land in the same manner and at the same time as other town charges” (L.1997, c.299, § 6). {4}  Based on the language in Crandall, (supra), it is our opinion that the charges of those two libraries should be considered town “taxation” that Suffolk County is exempt from paying pursuant to section 406(5) of the RPTL. (Of course, given the provisions of section 406(5), the same conclusion would be reached if the library charges were determined to be special ad valorem levies.)

In contrast, the special act of the Hauppauge Public Library, as amended by chapter 515 of the Laws of 1971, states “[a]ny such tax so voted . . . shall be collected in the same manner as other school district taxes” (L.1971, c.515, § 4). As the Court of Appeals has noted:

The general statutes do not provide for the creation of library districts--libraries are generally created and funded by municipal corporations under the Education Law (Education Law, §§ 255, 256). In recent decades, however, several special library districts have been created, either to limit support of a library to one part of a town or school district (see, e.g., L.1975, c.593), or to expand support to more than one municipality (see, e.g., L.1992, c.456) (Greater Poughkeepsie Library v. Poughkeepsie, 81 N.Y.2d 574, 582, 618 N.E.2d 127, 131, 601 N.Y.S.2d 94, 98 (1993)).

The Hauppauge Library charges therefore appear to fit within the general category and are “taxes for school purposes” that section 406(5) of the RPTL obligates Suffolk County to pay.{5}

We recognize that our opinion results in inconsistency as to the various library charges for which Suffolk County is liable while property owned by it is subject to section 406(5). This, however, is a direct result of the differing statutory provisions the Legislature has chosen to enact in prescribing the means of raising revenue in the various special library districts it has created.

February 16, 2005

{1}  Like many exemptions, section 125 of the Private Housing Finance Law exempts property eligible thereunder from taxation but not special district charges.

{2}  The court in Crandall stated, “the provision of library services brings immeasurable benefits to property and nonproperty owners alike and does not directly benefit or enhance the value of the property within that library district” (216 A.D.2d at 815, 629 N.Y.S.2d at 102). The court concluded that “[f]or that reason, we view the subject levy as a tax” (216 A.D.2d at 815, 629 N.Y.S.2d at 102). The court did not address the fact that, by definition (RPTL, § 102(14)), cities may not impose special ad valorem levies.

{3}  “Where a question has not yet been decided by the appellate division in a certain department, inferior courts in that department must follow the determinations of the appellate courts in any other department until such time as their own appellate tribunals or the Court of Appeals passes upon the question” (28 NY Jur.2d, Courts and Judges, § 220).

{4}  Interestingly, the section heading of bill section six is entitled “ad valorem levy.”

{5}  The special act for the Hauppauge Public Library originally provided that “[t]he necessary expenses of operation, maintenance and repair of such facilities and services and the cost of improvements shall be paid for by taxes assessed, levied and collected from the several lots and parcels of land in the area to be served by said public library in the same manner and at the same time as other town charges” (L.1966, c.853, § 5). Accordingly, our opinion re Hauppauge would be the same as for Commack and North Shore had the provisions of the Hauppauge special act not been amended as they were.