Fundamentals of Real Property Taxation in New York

The wide ranging impact of New York’s system of real property taxation is well known: these taxes affect a variety of property owners, as well as local governments and school districts throughout the State. Still, the details of the assessment process remain a mystery to many. A comprehensive analysis, including a step-by-step guide to specific, technical procedures, is beyond the scope of this article. Rather, the discussion below features selected issues of interest to taxpayers, municipalities and school districts alike.
Overview of New York State’s System of Real Property Taxation

If you find real property tax issues to be complex, you are not alone. Even the New York State Office of Real Property Services (ORPS), on its homepage, states that:

New York’s property tax system is arguably the most complex and confusing system in the nation. [ORPS] is working to improve the system’s equity, efficiency and transparency on behalf of taxpayers and taxing jurisdictions.

www.orps.state.ny.us, under “Reforming New York’s Property Tax System.”

Real property taxes are administered mainly at the municipal level, but these local efforts are overseen by ORPS, an independent agency within the Executive Department of New York State. The New York Real Property Tax Law (RPTL), among other things, establishes a State Board of Real Property Services (the “State Board”), which is comprised of five members appointed by the Governor, with the New York State Senate’s advice and consent. Under the Real Property Tax Law (RPTL) the State Board’s powers and duties include the “general supervision of the function of assessing” throughout the State.

ORPS’ Executive Director (who is also the State Board’s Executive Officer and Secretary) effectuates State Board policies and other “powers and duties” that the State Board may delegate. As a result, ORPS has significant responsibility for policy. ORPS’s website is an excellent resource for a variety of real property tax issues in New York State, including information and data on localities, e.g., organized by county, city, town and village.

Many local entities such as schools, counties and “special districts” (that provide services such as water, lighting and public safety) depend on real property taxes, but the actual work of assessment — that is, official annual valuations of all properties in a particular jurisdiction — is done by the “assessing unit.” Most often, this is a city or town but in some cases it will be a village or county.

The calendar governs important parts of our real property tax system. Many dates below are established by State law, but specific dates vary by municipality. Accordingly, taxpayers should contact their local assessors to ascertain precise dates.

Valuation Date: Most taxable real property in New York State is valued as of July 1 of the preceding year. For example, most real property on the 2008 assessment roll will be valued as of July 1, 2007. Until a few years ago, the Valuation Date was January 1 of the current year. In December of 2004 however, the State Legislature changed the Valuation Date to July 1 of the preceding year, in part to make the timing of valuations more uniform and consistent among municipalities, as many cities and towns base assessments on appraisals from the prior year. The Valuation Date is important to most property owners and local officials because it is the date as of which property on an assessment roll is valued.

Taxable Status Date: The taxable status (including condition and ownership) of real property in most cities and towns is determined annually as of March 1. Whether a particular parcel of real property is taxable or exempt, in whole or in part, is determined as of this date. In other municipalities, the Taxable Status Date can differ, and may be determined by local law. Again, you should contact your assessor to confirm dates and other important details. This date is important where, for example, there have been changes to the realty (including the construction or demolition of buildings or other taxable improvements), but for many, the Taxable Status Date is important principally because it is the deadline by which applications for exemption must be filed.

Tentative Assessment Roll: This is the date by which assessors complete, certify and file a roll with proposed assessments for each property in a particular assessing unit. Notices of changes in assessment or taxable status are usually mailed to property owners, but the best practice for anyone considering an assessment challenge is to take advantage of the opportunity provided for public inspection of the Tentative Assessment Roll.

Grievance Day: Generally, this is the last day for property owners to file formal administrative complaints (commonly known as “grievances”) seeking reductions in their tentative assessments; this is also the day that local Boards of Assessment Review (BARs) meet to hear assessment complaints. Taxpayers should contact their local assessor for the schedule and other details of the grievance process, as requirements vary by municipality. In addition, if a BAR requests additional documentation or other information, the taxpayer should make a diligent effort to comply fully, including, if necessary, requests for reasonable extensions of time. Even if the taxpayer does not have (and cannot reasonably secure) information requested by a BAR, the taxpayer should make that clear, as a willful failure to respond to BAR requests can preclude taxpayers from challenging their assessments later in court.

Formal rules and informal practices vary widely but both the municipality and taxpayer often benefit from resolutions that are negotiated before the assessment roll is finalized. The administrative grievance is often the best opportunity for these kinds of resolutions. Lacy Katzen LLP has experience representing both taxpayers and municipalities in this appeal.

Judicial Challenges to Assessments

Of course, not all valuation disputes can be resolved through grievances or negotiations. For taxpayers wishing to bring legal actions challenging their assessments, a threshold issue of critical importance is timing: these proceedings, which are authorized by Article 7 of the Real Property Tax Law and are commonly known as “Article 7” or “real property tax certiorari” actions, must be filed withinthirty (30) days after the final completion and filing of the assessment roll. (Under the statute, the roll is not considered finallycompleted and filed until the later of: the last day set by law for the filing, or when notice of the filing is given as required by law.)Most town assessment rolls are finally completed and filed on or about July 1 of each year. Article 7 proceedings against these townsmust then be commenced by or before July 31. This deadline is among the shortest statute of limitations provided by law, and is just one example of the technical requirements in the niche area of real property tax certiorari.

Costs are another important consideration. To start such a proceeding requires several hundred dollars just for out of pocket disbursements such as fees for filing and serving the pleadings. Adding attorney’s fees, the cost of commencing litigation will easily exceed One Thousand Dollars ($1,000.00). Of course, municipalities also incur costs to defend these proceedings, meritorious or not.Thus, negotiated resolutions early in a lawsuit often are in the best interests of both parties. This is especially true when you consider 24that most real property tax certiorari actions last several years, and a taxpayer wishing to continue the case from year to year must file a new proceeding (thereby incurring the associated costs) each year.

Real property tax litigation depends heavily on experts — usually, real property appraisers, though in complex cases, other experts (such as environmental consultants or engineers) may be required. The effective use of expert witnesses is beyond the scope of this article, but it suffices to say that opinion evidence from professional appraisers can make or break a case. Many times, a lessformal (and thus less expensive) analysis from an appraiser can facilitate a resolution before parties incur the substantial costs – and risks – of trial.

Title 1-A of the RPTL provides for small claims review of properties that are, among other things: (1) improved by a one, two or three family owner-occupied structure used exclusively for residential purposes, or (2) if unimproved, too small (as determined by the assessing unit) to contain such structures. Other requirements apply, including grievance filing. In fact, BARs are required, upon determining grievance complaints, to provide eligible taxpayers with notice of their rights to, and instructions for, small claimsassessment review.

Conclusion

In June, the Commission on Property Tax Relief issued its Preliminary Report of Findings and Recommendations. The proposal, which has been widely covered in the media and on ORPS’ website, includes a call to cap annual growth in the property tax levy at the lesser of 4%, or 120% of the Consumer Price Index. The proposal also recommends a STAR exemption “circuit breaker”based on individual taxpayers’ ability to pay, mandate relief and other changes in State law e.g., to reduce costs. Governor Patersonhas introduced a tax cap proposal, but substantive action will likely have to await the next legislative session. If you have any questions please contact John Refermat, 585.324.5762.