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Volume 2 - Opinions of Counsel SBEA No. 27

Opinions of Counsel index

Farm structures and buildings exemption (measuring exemption as of taxable status date) - Real Property Tax Law, § 483:

For purposes of administering the exemption provided by section 483 of the Real Property Tax Law in a situation, where, prior to taxable status date, farm property is destroyed and new property is constructed, the assessor should determine the value of the property as of taxable status date (1) without the new construction, and (2) with the new construction and the excess of (2) over (1) should be placed on the exempt portion of the assessment roll.

We have received an inquiry concerning the administration of the exemption provided by section 483 of the Real Property Tax Law in a situation where, prior to taxable status date, farm property is destroyed by fire and a replacement property is constructed.

In a letter dated November 1, 1968, we indicated that the increase in value due to the new construction would be measured from the assessment on the prior assessment roll. However, we have reconsidered this matter in the light of the many hypothetical questions which assessors have asked since the enactment of section 483.

We have now concluded that measuring the amount of the exemption by the increase over the prior assessment creates the possibility for inequitable application of the exemption. Specifically, an owner whose real property is accidentally destroyed prior to taxable status date would, if he also replaces the property prior to such taxable status date, be entitled to an exemption which would be limited to the increase in assessed value as computed by subtracting the prior year’s assessment from the current year’s assessment. However, a second owner could obtain a total exemption for replacement property simply by delaying construction of such property until after taxable status date.

For example, using this method of computation, consider the following two situations:

1. A owns a barn assessed at $2,000. The barn is destroyed in January and A rebuilds it immediately (taxable status date is May 1). The assessment on the new barn is $4,000. A’s exemption pursuant to section 483 is limited to $2,000 ($4,000-$2,000).

2. B owns a barn assessed at $2,000. The barn is destroyed in January and B does not rebuild it until May 2 (taxable status date is May 1). The assessment on the new barn is $5,000. B’s exemption pursuant to section 483 is $5,000 ($5,000 - 0).

Therefore, the computation of the exemption by this method penalizes the owner who replaces his property prior to taxable status date. Thus the amount of the exemption would depend upon factors which may be wholly outside the knowledge or control of the owner. These factors include the date of destruction, the necessity for immediate reconstruction, and the owner’s knowledge of the benefit of delaying reconstruction.

We believe that the above described possibilities would constitute an inequitable implementation of this exemption. Therefore, it is our opinion that in order to properly administer the statute, the assessor should make the following two determinations on taxable status date:

1. The value of the property without the new construction.

2. The value of the property with the new construction.

Any excess of (2) over (1) would be placed on the exempt portion of the roll.

We believe that this procedure would simplify the administration of this exemption since the assessor would not have to concern himself with property accidentally or intentionally destroyed prior to taxable status date but rather would assess the property according to its condition on each taxable status date.

June 16, 1969

Updated: