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Volume 5 - Opinions of Counsel SBEA No. 112

Opinions of Counsel index

Business investment exemption (local option) (effect on other exemption); Industrial development agencies exemption (scope of exemption) (effect of business investment exemption) - General Municipal Law, § 874; Real Property Tax Law, §§ 412-a, 485-b:

Real property of an industrial development agency qualifying for an exemption under the provisions of Article 18-A of the General Municipal Law is excluded from the provisions of section 485-b of the Real Property Tax Law.

The act of a municipality taken to reduce the percentage of exemption authorized by section 485-b must be effective on or before the appropriate taxable status date which will be used in determining the taxable status of real property appearing on the assessment roll to be used in levying the municipality’s taxes.

Our opinion has been requested concerning section 485-b of the Real Property Tax Law which provides for a partial tax exemption for certain new improvements to real property for the purpose of commercial, business or industrial activity. The question is whether exempt property owned by an industrial development agency may qualify for exempt status under section 485-b. We are also asked whether there is a deadline date for a municipality to reduce the percentage of exemption allowed by section 485-b.

Subdivision 1 of section 485-b provides that “Real property constructed, altered, installed or improved subsequent to the first day of July, nineteen hundred seventy-six for the purpose of commercial, business or industrial activity shall be exempt from taxation, special ad valorem levies and service charges to the extent hereinafter provided.” Subdivision 2 provides, in essence, that the costs incurred must exceed $10,000, and that for property which qualifies, the measure of exemption is 50 percent of the increase in value as a result of the new construction the first year, decreasing by 5 percentage points each year thereafter for nine years. Subdivision 7 authorizes counties, cities, towns and school districts to adopt a resolution to reduce the per centum of exemption otherwise allowed by law.

Section 412-a of the Real Property Tax Law provides that real property owned by an industrial development agency shall be entitled to exemption as provided in the General Municipal Law. The pertinent statutory provisions are set forth in Article 18-A of the General Municipal Law. This article provides that an industrial development agency, created by special act of the Legislature for the benefit of local municipalities, shall be a corporate governmental agency, constituting a public benefit corporation. This article further provides that the use of the rights and powers enumerated therein by industrial development agencies is a public purpose and authorizes such agencies to acquire, construct, reconstruct, lease, improve, maintain, equip or furnish any land, building, improvement, including machinery and equipment, suitable for manufacturing, warehousing, research, commercial or industrial purposes. Section 874 of Article 18-A provides that property of industrial development agencies shall be required to pay no taxes or assessments. This office has construed this to mean that the exemption authorized for property of industrial development agencies applies only to general taxes and not to special ad valorem levies (1 Op.Counsel SBEA No. 23).

As relevant to this inquiry, in summary. Real Property Tax Law, section 485-b provides that where real property has been improved subsequent to July 1,1976, for the purpose of commercial, business or industrial activity, a partial exemption from charges imposed for general municipal or school district purposes as well as from charges categorized as special ad valorem levies, imposed to defray the cost of a special district improvement or service, applies for a ten year period, unless one or more of the municipalities within which the subject property is located acts, with respect to taxes to be levied for the respective municipality, to reduce the percentage of exemption otherwise allowed. Section 874 of the General Municipal Law provides for a mandatory total exemption on real property of industrial development agencies from charges imposed for general municipal purposes, exclusive of special ad valorem levies, so long as the property remains under the jurisdiction of the industrial development agency. The question here is whether the property of an agency, in addition to the exemption authorized by section 874 of the General Municipal Law, may also be granted a partial exemption with respect to special ad valorem levies under the provisions of section 485-b of the Real Property Tax Law.

For purposes of exempt status, property owned by an industrial development agency is to be distinguished. Section 412-a is contained within Title 1 of Article 4 of the Real Property Tax Law, the provisions of which relate to public property, as distinguished from the authorization for the granting of exemptions on privately owned property set forth in Title 2 of Article 4, wherein the provisions of section 485-b are set forth. Secondly, section 412-a expressly provides that property of industrial development agencies is entitled to exemption as provided in the General Municipal Law. This language may be construed as limiting the granting of exemptions for industrial development agencies to the provisions set forth in the General Municipal Law. It is a well established principle of law that statutes providing for an exemption from taxation must be strictly construed (In the Matter of City of Lackawanna v. State Board of Equalization and Assessment, 16 N. Y. 2d 222, 212 N. E. 2d 42, 264 N. Y. S. 2d 528). If ambiguity or uncertainty occurs, all doubt must be resolved against the exemption (People ex rel. Mizpah Lodge v. Burke, 228 N.Y. 245, 126 N.E. 703). Accordingly, it is our opinion that the real property of industrial development agencies may not be considered within the context of section 485-b of the Real Property Tax Law.

As to the second inquiry wherein we are asked whether there is a deadline date for a municipality to act in reducing the percent of exemption otherwise allowed under section 485-b, it is our opinion that there is no deadline date as such. As indicated earlier, subdivision 7 of section 485-b authorizes each county, city, town, village or school district to act independently in its own behalf to reduce the amount of exemption otherwise allowed by law. Should a municipality not act in the first year, the exemption will apply as set forth in the statute. If a municipality acts to reduce the exemption in the first year, the amount of the exemption will be determined by the percent set forth in the local law (resolution if a school district) adopted by the municipality. The local law (or resolution) may be amended or rescinded in a subsequent year. It should be noted, however, that the act of a municipality taken to reduce the percent of exemption in order to apply in a particular year must be effective on or before the appropriate taxable status date which will be used in determining the taxable status of real property appearing on the assessment roll to be used in levying the municipality’s taxes.

February 10, 1977

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.  See Opinion 9-51.

Updated: