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Volume 5 - Opinions of Counsel SBEA No. 109

Opinions of Counsel index

Business investment exemption (local option) (necessity for annual resolution) (different percentages of exemption for different applications) (different percentages of exemption in subsequent years) - Real Property Tax Law, § 485-b:

The resolution of a school district reducing the percentage of exemption allowed by section 485-b of the Real Property Tax Law is controlling until such time as it is amended or rescinded. Hence, no annual resolution is required.

A school district, having acted to reduce the percent of exemption, may thereafter further reduce such percentage, or increase such percentage to the amount set forth in subdivision 2(a) of section 485-b.

There is no authority for a school district to reduce the percentage of exemption to different percentages for one or more of the enumerated categories of commercial, business, or industrial properties, nor for individual applications or properties within each of the categories.

We have received an inquiry containing several questions relating to section 485-b of the Real Property Tax Law (L.1976, c.278) entitled “Business Investment Exemption.”

The questions relate to the local option afforded by this law to school districts. The questions are (1) whether an annual resolution is required, (2) whether a different percentage of exemption may be set in a subsequent year, and (3) whether different percentages of exemption may be set for various enumerated categories of property otherwise qualified.

Section 485-b provides for a ten year partial real property tax exemption based on the increase in value as a result of improvements to certain commercial, business or industrial real property where the costs incurred exceed $10,000. As provided by this statute, the measure of the exemption for property which qualifies is 50 percent of the increase in value the first year decreasing by 5 percentage points each year thereafter for nine years (subd. 2 (a)).

This law sets forth two options which require the adoption of a resolution by school districts in order that they may be implemented. The first is contained in subdivision 7, which provides, in pertinent part, that “a school district which levies school taxes may, by resolution, reduce the per centum of exemption otherwise allowed pursuant to this section.” The second option, contained in subdivision 8, provides, in part, that “a school district which levies school taxes may by resolution establish a board to be known as the industrial and commercial incentive board for the purpose of advising the governing board thereof of the exercise of their options available pursuant to subdivision seven of this section.”

Taken in inverse order, a school district has the option of adopting a resolution establishing an industrial and commercial incentive board. The purposes of such board would essentially be to review the economic conditions of the area and make recommendations to the school authorities as to actions that the school district might take in relation to the subject matter covered under section 485-b. The other option afforded school districts is adopting a resolution to reduce the percentage of exemption that would otherwise be allowed.

Where no action is taken by a school district, the exemption applies for school district purposes to the extent set forth in subdivision 2(a) of section 485-b. If either upon recommendation of the industrial and commercial incentive board or upon its own initiative, a school district acts by resolution to reduce the percent of the exemption, the amount of the exemption for school district purposes will be determined by the percent set forth in the resolution adopted by the school district. Such resolution could also provide that no exemption be allowed (5 Op.Counsel SBEA No. 81). Once adopted, the provisions set forth in the resolution would be controlling until or unless the resolution was amended or rescinded at a later date. Hence, no annual resolution per se is required. However, if in a subsequent year a school district wished to further reduce the percent of exemption, or, once having reduced the percent of exemption, wished to increase the percent of exemption to the amount set forth in subdivision 2 (a), under the present provisions of the statute, this could be accomplished by formal action of the school district authorities.

The business investment exemption authorized by section 485-b must be applied uniformly for all commercial, business and industrial property which is otherwise qualified. Where a school district acts to reduce the percent of exemption, the reduced percent set forth in the resolution must apply uniformly to all otherwise qualified commercial, business and industrial property which may be located within the school district. There is no authority to reduce the percent of exemption to differing percentages for one or more of the enumerated categories of commercial, business and industrial properties nor for individual applications or properties within each of the categories.

December 30, 1976

NOTE: Chapter 397 of the Laws of 1977 (effective July 6, 1977) amends subdivision 7 of section 485-b to provide that exemptions, existing prior in time to passage of a local law or resolution adopted pursuant to that subdivision, are not subject to any reduction so effected.

Updated: