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Volume 9 - Opinions of Counsel SBEA No. 113

Opinions of Counsel index

Assessment review (tax certiorari proceeding) (refund - penalty - interest) - Real Property Tax Law, § 726:

Where a final judicial order in a tax certiorari proceeding reduces a challenged assessment, the taxpayer is entitled to interest on the amount of taxes he or she overpaid as well as interest on penalties which were paid on the amount of taxes which are to be refunded.

A taxpayer filed a tax certiorari proceeding to review an assessment pursuant to Article 7 of the Real Property Tax Law. During the pendency of the proceeding, the taxpayer paid the taxes levied on the challenged assessment, as well as all penalties imposed for late payment of such taxes. Subsequently, the proceeding was resolved in the taxpayer’s favor. The question is whether the taxpayer is entitled to interest on the amount of the penalties refunded.

Section 726 of the Real Property Tax Law requires a tax district to pay a refund of “any amount at any time collected upon such excessive, unequal or unlawful assessment....” Thus, interest is due to the taxpayer for the time periods (1) from the date of payment of the tax to the date of the final order reducing the assessment, and (2) from the date of application for a refund until the date of payment of the refund (Innes & Gaenzler v. Village Assessor, 19 A.D.2d 627, 241 N.Y.S.2d 406 (2d Dept. 1963); People ex rel. Ottley Estate Corp. v. Lilly, 302 N.Y. 278,97 N.E.2d 903 (1951); Op.State Compt. 80-435). The question is whether the taxpayer is entitled to interest on the penalties originally imposed on account of late payment of the taxes which will now be refunded.

Our research has not disclosed any case law or administrative opinion directly on point. {*}  However, we do note that in Linden Hill No. 2 v. Tishelman, 107 Misc.2d 799, 435 N.Y.S.2d 936 (Sup.Ct. Queens Co. 1981), aff’d, 87 A.D.2d 450, 450 N.Y.S.2d 404 (2d Dept. 1982), the court held that an assessment ordered reduced by a court replaces the original erroneous assessment. Applying this concept, together with section 726, any taxes and penalties collected upon “such excessive, unequal or unlawful assessment,” that is, the reduction in assessment, must be refunded to the taxpayer, since it never would have been collected if the assessment had originally been established at the correct amount.

Therefore, it is our opinion that the taxpayer is entitled to interest on the penalties originally imposed on the taxes collected and which will now be refunded based upon the amount of reduction in assessment.

December 7, 1992


{*}  It has been suggested that Moon v. Bloomer, 183 Misc. 62, 50 N.Y.S.2d 531 (Sup.Ct. Broome Co. 1944), stands for the proposition that interest must be paid on a refund of any penalty which was imposed on the amount by which an assessment is ordered reduced. We cannot agree that Moon stands for such proposition. Our reading of the case is that it merely states that the amount of any penalty imposed on the “excessive tax” must be refunded.

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