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Volume 6 - Opinions of Counsel SBEA No. 13

Opinions of Counsel index

Correction of errors (unlawful entry) (payment of taxes improperly levied) - Real Property Tax Law, §§ 550, 556:

The assessment of property not within a sewer district’s boundaries for a sewer usage tax constitutes an “unlawful entry” to which section 536 of the Real Property Law is applicable. A property owner who filed an application for correction prior to the enactment of the present three year statute of limitation has the benefit of the six year statute previously in effect.

We have received an inquiry concerning the payment of taxes improperly levied. A taxpayer has been paying a “sewer usage tax” since 1965, although her property has never been served by a sewer system. She has since been granted a refund for these taxes paid in 1975 and 1976, but she would like an administrative refund back through 1965.

A special sewer district had been created in 1965. Although the taxpayer’s property was not within the district’s boundaries, it was inadvertently included on the district’s assessment roll for 1965 and every year thereafter. Apparently, the taxpayer made no formal protest until her application for a refund, dated February 10. 1976.

Generally, in order to obtain administrative review of an assessment in any given year, a verified, written complaint must be filed with the assessor or the board of assessment review of the assessing unit in which the property is located. This complaint must be filed on or before “grievance day,” and it must specify the manner in which the assessment is “illegal, erroneous or unequal.” Thereafter, judicial review may be obtained pursuant to Article 7 of the Real Property Tax Law.

However, in the case of a “clerical error,” “error in essential fact” or “unlawful entry,” as those terms are defined in section 550 of the Real Property Tax Law, administrative review and relief (the latter including a reduced assessment, a refund, or both) is available whether or not a formal complaint was filed on grievance day.

Paragraph (b), subdivision 6 of section 550 includes in the definition of an “unlawful entry” the following:

(b) an entry on an assessment roll or a tax roll, or both, of the assessed valuation of real property which is entirely outside the boundaries of ... the special district in which the real property is designated as being located.

Based on the facts presented to us, this definition clearly includes the assessment of the taxpayer’s property by the sewer district. The question then becomes the extent to which refunds are available for an “unlawful entry.”

Paragraph (a), subdivision 1 of section 556 of the Real Property Tax Law authorizes a refund of a tax where the tax was attributable (inter alia) to an unlawful entry as defined in paragraph (b) of subdivision 6 of section 550 and “application for refund is made within three years from the annexation of the warrant for such tax.” Thus, the statute establishes a three year limitation on a refund for a tax based on an “unlawful entry.”

However, this limitation only became effective July 21, 1976, the effective date of chapter 634 of the Laws of 1976 which enacted this proviso. Prior thereto, no limitation was specified and therefore a six year limitation was imposed, as indicated in a number of judicial decisions as well as in opinions of the State Comptroller. Since statutes of limitation are given prospective construction and application (McKinney’s Statutes, §59), where a property owner has filed an application for correction prior to the adoption of a more limited statute of limitations, the statute of limitations in effect at the time said application was made is controlling (see, Battlefields, Inc. v. Rockland County Legislature, 86 Misc.2d 181, 381 N.Y.S.2d 769).

Therefore, in the case at hand, the taxpayer was (and is) entitled to a refund for taxes based on the unlawful entry in question for six years preceding the date of her application for correction (in effect, then, for all sewer district taxes levied subsequent to February 10, 1970).

The reason a six year refund was not previously granted apparently stems from confusion as to the type of error which occurred. This error was classified (incorrectly) as an “error in essential fact” pursuant to paragraph (b), subdivision 3 of section 550 of the Real Property Tax Law. That paragraph provides for correction on an assessment roll or tax roll of the assessed valuation “of an improvement to real property which was not in existence or which was present on a different parcel,” which is not the error in this case. In any event, a refund for an “error in essential fact” is limited to applications made “within one year from the annexation of the warrant” (Real Property Tax Law, §556-a(4)(a)).

What the County Department of Finance should now do is amend its order dated December 6,1976, to provide for a refund for sewer district taxes paid on or after February 10, 1970, and to order payment of the balance due (other) than the amount already refunded). However, the County may not grant a refund for taxes levied and paid prior to that date.

One of the tenets of the real property tax system is that each property owner has the opportunity - and, indeed, the duty - to verify that his or her property is assessed and taxed according to law. If it is found that the law has not been followed in an individual case, administrative and judicial forums are available to consider any complaint, assuming certain simple procedures are followed. While it is unfortunate that this taxpayer has paid taxes improperly levied on her property, it appears (from the limited facts presented) that she failed to pursue any of the statutory remedies provided for some eleven years. Had she acted more promptly, more complete relief might have been available. Under these circumstances, however, relief is limited to a refund for all sewer district taxes levied and paid on or after February 10, 1970.

March 4, 1977

Updated: