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Volume 4 - Opinions of Counsel SBEA No. 84

Opinions of Counsel index

Real property, definition of (power generating equipment) (unused) - Real Property Tax Law, § 102(12)(f):

If power generating equipment is not presently functioning, has been disconnected and cannot be used in the foreseeable future as installed, the assessor would be justified in treating the units as “retired in place” and not attributing value to them even though they have not been physically removed from the premises.

Our opinion has been requested as to whether or not certain power generating equipment should be included in the assessment of the office buildings in which they are located (see, Real Property Tax Law, § 102(12)(f)).

According to the information furnished us, the power generating units were purchased by the owner of three office buildings for the purpose of furnishing power to the buildings. The reported reason was that the office buildings were to be rented to data processing organizations who required continuous and uninterrupted power.

The equipment as installed has never functioned properly and is at present the subject of a lawsuit between the office building owners and the sellers of the equipment. Electric power in the office buildings is therefore now being supplied by the local public utility.

It has consistently been the practice of the State Board’s appraisers in making any appraisals based on replacement cost to exclude the cost of equipment (even though it is taxable as real property) where the equipment is obsolete for one reason or another and is not being used. This is called “retirement in place”. We understand that it is not at all uncommon for new equipment to prove to be inadequate for the purposes for which it is installed. So long as this equipment is disconnected and not used in any way, our appraisers do not insist upon its removal in order to be excluded.

Thus, if the assessor ascertains that, in fact, the power generating equipment is not presently functioning, has been disconnected and cannot be used in the foreseeable future as installed, he would be justified in treating the units as “retired in place” and attribute no value to the units even though they have not physically been removed.

March 26, 1975

Updated: