Volume 10 - Opinions of Counsel SBRPS No. 109
Senior citizens exemption (income requirement) (retirement benefits - individual retirement annuities) - Real Property Tax Law, § 467:
In determining income for the senior citizens exemption, individual retirement annuities should be treated in the same manner as individual retirement accounts: no deduction should be allowed for contributions to such annuities, earnings thereon should be considered income, distributions therefrom should not be considered income.
Our opinion has been requested as to the income requirement for the senior citizens exemption (Real Property Tax Law, § 467), specifically, as to moneys alleged to be distributions from an individual retirement annuity as reported on Form 1099-R. The requestor expressed familiarity with our opinion 8 Op.Counsel SBEA No. 22 in which we concluded that “distributions from IRA’s [referred to therein as ‘individual retirement accounts’] should not be treated as income [for purposes of section 467]” (emphasis added), but questions whether the same is true of individual retirement annuities. We believe so.
Although section 408 of the Internal Revenue Code is entitled “individual retirement accounts,” and subdivision (a) thereof is similarly designated, subdivision (b) thereof is denominated “individual retirement annuity.” Indeed, it now appears that the “A” in “IRA” is more precisely meant to stand for “arrangement,” not “account” (33A Am Jur2d, Federal Taxation (2000) ¶8950); IRS Publication 590 “Individual Retirement Arrangements (IRAs).” As noted in the latter publication, “Your traditional IRA can be an individual retirement account or annuity (p.4).” {1} That publication continues with a list of requirements for both types of arrangements, several of which are identical (e.g., contributions limited to $2,000 per year; mandatory commencement of distributions by April 1 of the year following the year in which the IRA holder reaches the age of 70½).
It is also noteworthy that the definition of income for the enhanced STAR exemption is “‘adjusted gross income’ for federal income tax purposes . . . reduced by distributions, to the extent included in federal adjusted gross income, received from an individual retirement account and an individual retirement annuity” (RPTL, § 425(4)(b)(ii); emphasis added). This, too, is seeming legislative recognition of the affinity of these arrangements.
Based upon the foregoing, in our opinion, in determining income for the senior citizens exemption, individual retirement annuities should be treated in the same manner as individual retirement accounts: no deduction should be allowed for contributions to such annuities, earnings thereon should be considered income, distributions therefrom should not be considered income (see, 8 Op.Counsel SBEA No. 22). {2}
April 28, 2000
{1} The instruction booklet for Form 1040 (1999 ed., p.22) similarly refers to IRAs as individual retirement arrangements.
{2} Note that distributions from individual retirement annuities should be reported on the line of the federal income tax return set aside for IRA distributions (e.g., line 15 on 1999 Form 1040); other (non-IRA) annuity distributions are reported elsewhere (e.g., line 16 on 1999 Form 1040). This should help assessors distinguish among annuity types.