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Volume 3 - Opinions of Counsel SBEA No. 86

Opinions of Counsel index

Industrial development agencies exemption (in lieu payments) - General Municipal Law, Article 18-A; Real Property Tax Law, § 412-a:

There is no constitutional or statutory law prohibiting an industrial development agency from requiring a lessee to make in lieu of tax payments to the various municipalities, including school districts, in which the leased property is located. Such payments are not entered on the tax roll nor collected by the tax collector. The payments are collected in the same manner as are other payments due the town under contract.

Our opinion has been requested with regard to in lieu of tax payments which an “Industrial Development Corporation” proposes to make to a town.

An industrial development corporation has been granted a charter by New York State to operate in the town. We assume that this is an industrial development agency (hereinafter called “IDA”) formed under Article 18-A of the General Municipal Law. These agencies are formed by special acts of the Legislature but then are subject to the provisions of Title 1 of Article 18-A. Property of these agencies is exempt from taxation.

The agency has recently purchased a piece of land in the town. There is a question as to what procedure should be set up with reference to payments to be made to the town in lieu of taxes for this land.

Section 412-a of the Real Property Tax Law provides an exemption for industrial development agencies to the extent provided in the General Municipal Law. Nowhere in Article 18-A is there specific mention of in lieu of tax payments. We therefore think that it is inadvisable for the IDA to itself make a commitment to local governments to arrange for the payments of in lieu of taxes in the absence of specific statutory authority without consulting their bonding attorneys. The reason is that such as obligation might be construed to impair the covenant which the agency has to holders of its bonds.

However, there is no constitutional or statutory law which would prohibit t he IDA from providing in its contracts with a lessee that the lessee shall make certain in lieu of tax payments to the various municipalities, including school districts, in which leased property is located. These payments should be separate and apart from any rent or revenues payable by the lessee which are pledged to the payment of IDA’s bonds.

Payments in lieu of taxes are not entered on the roll nor are they collected by the tax collector. The town board in preparing its annual budget should treat payments in lieu of taxes as payments due under a contract and as such they constitute general revenue of the town. The payments are collected in the same manner as are other payments due the town under contract.

March 13, 1974

Updated: