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Volume 8 - Opinions of Counsel SBEA No. 40

Opinions of Counsel index

Approved assessing units (base proportions) (local adjustments - timing) - Real Property Tax Law, § 1903; 9 NYCRR Part 190:

The option to alter base proportions in approved assessing units must be exercised promptly once the base percentages are initially determined. Otherwise, class tax shares will be calculated using the base proportions until the State Board certifies its adjusted proportions.

We have been asked whether there are any time constraints imposed by law on the right of an approved assessing unit, which has adopted the provisions of section 1903 of the Real Property Tax Law, to establish locally-adjusted homestead and non-homestead proportions.

Section 1903 of the Real Property Tax Law (RPTL) provides “approved assessing units” (defined in RPTL, §1901(d)) with the option of establishing separate tax rates for the “homestead” and “non-homestead” classes of real property to eliminate or reduce the inter-class tax shift resulting from revaluation (see, 7 Op.Counsel SBEA No. 77). To take advantage of this option, section 1903(l)(a) provides that “[t]he governing body of any approved assessing unit. . . may adopt the provisions of this section [RPTL, §1903] by local law without referendum, provided however, that the local law is enacted no later than thirty days prior to the completion of the tentative assessment roll to which it is applicable”. Once the local law is enacted, section 1903 applies prospectively to all “taxes” (see, RPTL, §1901(n)) levied on the approved assessing unit’s assessment roll until the governing body of the approved assessing unit enacts a local law (without referendum) determining that section 1903 shall no longer apply to any subsequent levies on its assessment roll (see, RPTL, §1903(6)).

Section §1903(2)(a) then requires that:

The governing body of each assessing unit which has adopted the provisions of this section [RPTL, §1903] shall in the first year in which the provisions of this section apply, establish a homestead base proportion and a non-homestead base proportion for the approved assessing unit. Such governing body shall also establish for each portion a homestead base proportion and a non-homestead base proportion.* * * (Emphasis added)

Once “homestead and non-homestead base proportions” are established, subdivisions 3 and 4 of section 1903 require proportional allocation of tax levies between the classes and, therefore, establishment of a separate tax rate for each class. This will prevent any inter-class tax shift which would otherwise result from revaluation.

The authority for an approved assessing unit which completed a post-1981 revaluation to establish “locally-adjusted homestead and non-homestead proportions” is found in section 1903(2)(b)(i) which, as amended in 1984 (L.I 984, c.426), provides:

The governing body of such assessing unit may by the local law enacted pursuant to subdivision one of this section [RPTL, §1903(1)] alter the homestead base proportion of such assessing unit for any portion by subtracting the homestead base proportion from the base percentage for the homestead class computed in accordance with subdivision two of [RPTL] section nineteen hundred five and multiplying the difference by twenty-five percent, fifty percent, seventy-five percent or one hundred percent as such local law may provide; the product thereof shall be added to the homestead base proportion and such sum shall be the locally-adjusted homestead proportion, which shall be used for all purposes of this section until an adjusted homestead base proportion is certified to such governing body by the state board. (Emphasis added)

The authority to establish locally-adjusted homestead and non-homestead proportions gives approved assessing units the option to permit some, or even all of the inter-class tax shift resulting from revaluation (7 Op.Counsel SBEA No. 77). This option must be exercised in the local law adopting section 1903.

We also note that section 1903(2)(b)(ii) authorizes establishment of locally-adjusted homestead and non-homestead proportions, in an analogous fashion, when pursuant to RPTL, §1905, the State Board certifies adjusted homestead and non-homestead base proportions to take account of changes in the total estimated taxable market value of each class. Certification of “adjusted homestead and non-homestead base proportions” will routinely occur no later than the sixth year following the first year the provisions of section 1903 are in effect, and then every three years thereafter (RPTL, §1905(l)(a); see also, 9 NYCRR 190-4.5(b)). Certification can occur at any time the assessor of an approved assessing unit demonstrates to the State Board that there has been “a change in excess of ten percent in the percentage that the estimated taxable market value of the homestead class constitutes of the total estimated taxable market value of all real property in such assessing unit or in any portion thereof since certification of the most recent homestead base proportions and non-homestead base proportions . . .” (RPTL, §1905(l)(b); see also 9 NYCRR 190-4.5(c)).

Consider the case of an approved assessing unit which enacted a local law adopting section 1903 without providing for the establishment of locally-adjusted homestead and non-homestead proportions. Under a strict reading of section 1903(2)(b)(i), the assessing unit may not establish locally-adjusted homestead and non-homestead proportions until the State Board certifies adjusted homestead and non-homestead base proportions. Since the assessing unit in question first implemented section 1903 in 1983, such certification must occur no later than 1989 (see, RPTL, §1905(l)(a); see also, 9 NYCRR 190-4.5(b)), unless the assessor petitions the State Board for earlier certification (see, RPTL, §1905(l)(b); see also, 9 NYCRR 190-4.5(c)).

We recognize that under a strict reading of section 1903(2)(b)(i), an approved assessing unit which completed a post-1981 revaluation and implements section 1903 on its first revaluation roll must decide whether to establish locally-adjusted homestead and non-homestead proportions, and the percentage (25, 50, 75 or 100%) to be applied to the difference between the base percentages and the homestead and non-homestead base proportions, prior to the time that the base percentages are known. This is because locally-adjusted homestead and non-homestead proportions must be established no later than thirty days prior to the completion and filing of the first tentative assessment roll to which section 1903 applies (see, RPTL, §§1903(2)(b)(i) and 1903(l)(a)), while the base percentages will not be known until the final completion and filing of that roll (see, RPTL, §1905(2); see also, 9 NYCRR 190-4.l(e)). Consequently, in this situation, we believe the most reasonable construction of section 1903(2)(b)(i) is that which authorizes establishment of locally-adjusted homestead and non-homestead proportions as soon as possible following receipt of base percentages from the State Board.

However, this does not mean that an approved assessing unit which fails to establish locally-adjusted homestead and non-homestead proportions in a timely manner is free to do so at any time. We believe from an overall reading of Article 19 of the RPTL that the requirement in section 1903(2)(b)(i) that locally-adjusted homestead and non-homestead proportions be provided for in the local law adopting section 1903 signifies an intent that the class tax shares be established as early as possible in the local administration of section 1903, and that they remain fixed until the State Board certifies adjusted homestead and non-homestead base proportions pursuant to either section 1905(l)(a) or (b). Although this construction somewhat limits local freedom of action, we note that where locally-adjusted homestead and non-homestead proportions are established, section 1903(2)(b)(i) expressly provides that such proportions “shall be used for all purposes of this section [RPTL, §1903] until an adjusted homestead base proportion is certified ... by the State Board”. Accordingly, in our opinion, a failure to act as soon as possible following the determination and certification of base percentages precludes determination of locally-adjusted homestead and non-homestead proportions until the State Board certifies adjusted homestead and non-homestead base proportions.

From our records, it appears that the assessing unit was granted contingent approved assessing unit status in April 1982 (see, 9 NYCRR 190-4.6(d)). The assessing unit passed a local law adopting RPTL, §1903, on October 4, 1982, for use in connection with taxes levied on its 1983 assessment roll (see, RPTL, §1903(l)(a)). By letter dated June 21, 1983, we provided the assessing unit with base percentages, and we stated that locally adjusted homestead and non-homestead proportions could be established for use in connection with the 1984 city and county tax levies and the 1984-85 school tax levy. Final approved assessing unit status was granted on September 21, 1983. On these facts, we think there was ample time for the assessing unit to establish locally adjusted homestead and non-homestead proportions prior to the levies referred to in our letter of June 21. Its failure to do so means that the next opportunity to establish locally adjusted homestead and non-homestead proportions will occur by 1989 when the State Board certifies adjusted homestead and non-homestead base proportions, unless the assessing unit petitions the State Board to establish adjusted homestead and non-homestead base proportions prior to that time.

November 20, 1984

NOTE: On June 6, 1985, in Foss v. City of Rochester, 65 N.Y.2d 247, the Court of Appeals declared unconstitutional the local law adopted by the City of Rochester pursuant to section 1903 to the extent that the base proportions were used in the levy of taxes by or on behalf of tax districts which cross assessing unit lines (i.e., counties and most school districts).

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