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Volume 8 - Opinions of Counsel SBEA No. 77

Opinions of Counsel index

Agricultural exemption (calculation) (effect of court ordered reduction in assessed value) - Agriculture and Markets Law, § 305; Real Property Tax Law, § 726; 9 NYCRR 194.13:

If the assessed value of land subject to an agricultural value assessment is reduced by court order, the amount of exemption attributable to the agricultural value assessment must be recalculated. A refund based upon the reduced assessment will be due only if the taxes paid were based upon a value greater than the taxable value after recalculation.

A question has been raised concerning the procedure to be followed when a court orders a reduction in the assessment of land which qualifies for an agricultural value assessment (Agriculture and Markets Law, Art. 25AA). In the case in point, petitioners owned 2 parcels of land that qualified for an agricultural value assessment and received a partial exemption because the agricultural value ceiling was less than the assessment as determined by the town assessor. The petitioners paid taxes based on the agricultural value ceiling but challenged their assessments pursuant to Article 7 of the Real Property Tax Law (RPTL).

By stipulation, the assessed value of both parcels was reduced. The petitioners sought a refund based upon the assessments, as so reduced, although the taxes paid were based on the agricultural value ceilings. We have been asked whether the agricultural value assessment exemption must be recalculated, and whether refunds should be based on the stipulated assessment rather than the agricultural value ceiling where the former is less than the latter. (For purposes of this Opinion assume that all the property affected by the reduced assessment is unimproved and eligible for the agricultural value assessment, so that no apportionment is necessary. Cf., 9 NYCRR 194.13(b)(l), (2).)

The following table illustrates the circumstances to be considered. For the two parcels in question we show the assessor’s original determination of assessed value [A.V.] (a “highest and best use” assessment), the agricultural value ceiling upon which taxes were paid and, finally, the assessed value as reduced by court order.

Assessed value
Original A.V.Agricultural Value CeilingCourt-ordered A.V.
Parcel #1 $70,000 $60,000 $52,000
Parcel #2 $45,000 $36,000 $43,000

Section 726 of the RPTL has been construed to mean that the assessed value set forth in the final order in an Article 7 proceeding replaces the original assessment and entitles a taxpayer to a refund with interest based on the tax liability as it would have been if the reduced assessment had originally been used (see, Linden Hill No. 2 Cooperative Corp. v. Tishelman, 107 Misc.2d 799, 435 N.Y.S.2d 936 (S.Ct., Queens Co. 1981), aff’, 87 A.D.2d 577, 450 N.Y.S.2d 404 (2d Dept. 1982)). Applying this rationale to a case in which property is entitled to a partial exemption from taxation, a reduction in assessed value in an Article 7 proceeding would also require an adjustment in the calculation of the taxable assessed value based upon such partial exemption.

Property which qualifies for the agricultural value assessment may receive a partial exemption from taxation equal to the difference between its conventional “highest and best use” assessment and its agricultural value ceiling (Agriculture and Markets Law, §305; 9 NYCRR 194.13(b)(4)). The agricultural value ceiling is computed by multiplying the appropriate agricultural value per acre as certified by the State Board by the number of qualified acres and applying the appropriate equalization rate (9 NYCRR 194.12(b)). If the assessed value is less than or equal to the agricultural value ceiling, there is no exemption.

Since the extent of any exemption attributable to the agricultural value assessment is a function of the assessed value, once the assessed value has been reduced by court order, the exemption based upon the agricultural ceiling must also be recalculated. Where the assessed value as reduced by court order is less than the agricultural value ceiling and taxes were paid based upon that ceiling, the taxpayer will be entitled to a refund based on the difference between the reduced assessment and the agricultural value ceiling. This is because had the reduced assessments been in place at the outset, the petitioners would have paid taxes on those assessments rather than the ceilings in that year.

For example, the reduced assessment on parcel #1 was $52,000. The agricultural value ceiling was $60,000. As recalculated, the exemption attributable to the agricultural value assessment would be zero, because the agricultural value ceiling was greater than the reduced assessment. The petitioner, however, is entitled to a refund based upon an $8,000 overassessment, this being the difference between the agricultural value ceiling upon which taxes were actually paid and the court ordered reduced assessment.

Where the agricultural value ceiling is less than the assessed value both before and after the court order, no refund is due because taxes were properly paid on the agricultural value ceiling. For example, the reduced assessment on parcel #2 was $43,000. The agricultural value ceiling for that year was $36,000. The exemption as recalculated will be $7,000 of assessed value, this being the amount by which the reduced assessment exceeds the agricultural value ceiling. The petitioners, however, are not entitled to any refund because taxes were properly paid on the $36,000 agricultural ceiling.

September 11, 1985

Updated: