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Volume 9 - Opinions of Counsel SBEA No. 31

Opinions of Counsel index

Business investment exemption (local option) (school district centralization) - Real Property Tax Law, § 485-b:

Where two school districts combine to form one new school district, the business investment exemption will apply to new improvements unless the new district acts to eliminate or reduce the exemption.

Two school districts combined to form a new school district. One of the former school districts had adopted a resolution reducing the business investment exemption (Real Property Tax Law, §485-b) from school taxes to zero. The other school district had taken no action to reduce or eliminate the exemption. Subsequent to the formation of the new school district, an application for a business investment exemption was submitted to the assessor. We are asked whether the resolution adopted by the one predecessor component school district carries over, and, if so, what effect it has with respect to the newly created school district.

Real Property Tax Law, section 485-b, authorizes a 10 year exemption on certain new construction, alterations, installations or improvements for the purpose of commercial, business or industrial activity. Subdivision 7 of section 485-b authorizes a county, city, town or village (by local law) or a school district (by resolution) to reduce the percentum of exemption otherwise allowed pursuant to that section, even to zero (5 Op.Counsel SBEA No. 81). Such local laws or resolutions have no effect on preexisting exemptions (§485-b(7); 6 Op.Counsel SBEA No. 45); they have prospective effect only and must be effective on or before the appropriate taxable status date for the assessment roll to be used in levying the municipality’s taxes (5 Op.Counsel SBEA No. 112). If a municipality or school district takes no action, the exemption applies for purposes of that municipality or school district to the extent set forth in RPTL, §485-b(2)(a).

We understand that the consolidation of the two school districts into the new district was the result of a “centralization” in accordance with the procedures set forth in Article 37 of the Education Law. In a centralization, the predecessor component school districts are dissolved, except that the component districts are continued for purposes of payment of indebtedness, sale of property and allocation of proceeds of such sale (Education Law, §1804). The board of education of the central school district is empowered to assess and levy upon the taxable property of each component district, which has an outstanding indebtedness, an additional sum sufficient to pay all of such indebtedness which shall become due during the school year for which the tax is levied (Education Law, §1804(5)(a)).

The Education Law does not specifically address the enforcement and administration of resolutions adopted by the component school districts prior to the centralization. By contrast, upon the incorporation of a village, Village Law, §2-250 provides, in part:

For a period of two years after the date of incorporation, all local laws, ordinances, rules or regulations, which otherwise would apply to and affect only such part of a town as is outside the limits of any incorporated village, of any town in which the village, or part thereof, is located in effect on the date of incorporation of the village, including but not limited to zoning ordinances, shall remain in effect in such village or such part thereof as if same had been duly adopted by the board of trustees...

Since there is no such carry-over provision for school district resolutions in the Education Law, certainly none related to local option exemptions for real property taxes, in our opinion, such resolutions do not carry over to the new school district.

Therefore, the situation is equivalent to that of any school district that has not “opted out” of the exemption. In the absence of a new resolution, the exemption will apply to new improvements. If the school district hereafter opts to reduce or eliminate the exemption, new construction commenced after that resolution’s effective date will be ineligible for exemption. Pre-existing exemptions would remain on the roll for the balance of their terms of exemptions.

March 9, 1998

Updated: