Volume 10 - Opinions of Counsel SBRPS No. 61
Senior citizens exemption (income requirement) (alimony) - Real Property Tax Law, § 467:
The amount of alimony paid in a given income tax year is not includable as income by the payor when determining his or her eligibility for the senior citizens exemption, but is considered income for determining the exemption eligibility of its recipient.
We have been asked whether alimony payments made by an owner of property may be deducted from the income of that owner for the purposes of determining eligibility for the senior citizens exemption (Real Property Tax Law, § 467). We believe so.
Section 467 authorizes local governments to grant a partial exemption from real property taxation to senior citizen homeowners who meet certain statutory requirements. One of these requirements is that no senior citizens exemption shall be granted if the income of the owner or combined income of the owners of the property for the income tax year immediately preceding the date of making the application exceeds a certain amount as provided in section 467(3)(a) of the RPTL:
Such income shall include social security and retirement benefits, interest, dividends, total gain from the sale or exchange of a capital asset which may be offset by a loss from the sale or exchange of a capital asset in the same income tax year, net rental income, salary or earnings, and net income from self-employment, but shall not include a return of capital, gifts, inheritances, payments made to individuals because of their status as victims of Nazi persecution, . . . or monies earned through employment in the federal foster grandparent program and [at local option] any such income shall be offset by all [unreimbursed] medical and prescription drug expenses [and/or] . . . veterans disability compensation. . . .
As is evident, alimony is not an enumerated item. However, this is not an exhaustive list of what is required to be included in the applicant’s “income” as that term is defined in the law. Indeed, we have been asked on previous occasions whether a specific sum or item constitutes “income” although it is not specifically enumerated therein.
For instance, in 7 Op.Counsel SBEA No. 84, we stated that proceeds received in an out of court insurance settlement on account of personal injuries are not income for purposes of section 467 of the Real Property Tax Law. This Opinion was based, in part, on Engle v. Talarico, 33 N.Y.2d 237, 306 N.E.2d 796, 351 N.Y.S.2d 677 (1973), a decision by the Court of Appeals which stated that since the Legislature did not express any intent of incorporating the Federal or State income tax rules into section 467, the term “income” in the statute is subject to judicial construction. However, in construing “income,” the Court did look to the Internal Revenue Code for guidance. Based on a specific provision in the Internal Revenue Code, which provides that the amount of damages received on account of personal injuries or sickness, whether by suit or agreement, is generally not included in gross income for purposes of Federal income taxation, we concluded that such proceeds were not income for purposes of section 467 of the Real Property Tax Law (see, 26 U.S.C.S. § 104(a)(2)). {1}
As to alimony payments, the Internal Revenue Code provides, “General Rule. Gross income includes amounts received as alimony or separate maintenance payments” (26 U.S.C.S. § 71(a)). Thus, alimony received is included in the gross income of the recipient for purposes of Federal income taxation. For purposes of alimony payments made by an individual, the Internal Revenue Code provides, “General Rule. In the case of an individual, there shall be allowed as a deduction an amount equal to the alimony or separate maintenance payments paid during such individual’s taxable year” (26 U.S.C.S. § 215(a)). {2} Simply put, “[a]limony or separate maintenance payments are deductible by the payor and taxable to the payee” (34 Am.Jur. 2d, Federal Taxation (1998) ¶19350). The same considerations should be applied in determining income eligibility for purposes of the senior citizens exemption.
We have often stated that the legislative intent in enacting the income requirement of section 467 is to exclude persons who have more than a set amount of cash accruing to them from all sources with which to meet expenses during the income tax year immediately preceding the date of making application for exemption, excluding gifts and inheritances. However, an alimony payment made by an individual is not cash accruing to that individual; rather, it is cash accruing to the recipient. Accordingly, for the foregoing reasons, it is our opinion that the amount of alimony paid in a given “income” tax year is not includable as “income” by the payor when determining his or her eligibility for the senior citizens exemption, but is considered “income” for determining the exemption eligibility of its recipient.
March 14, 1995
Revised May 15, 1998
{1} We followed a similar analysis in 10 Op.Counsel SBRPS No. 28.
{2} The statutory intent is that someone must treat such sums as income; if the wife must treat the payments as income, the husband may deduct payments, but if the wife need not treat the payments as income, the husband cannot deduct them (Smith v. Commissioner, 48-1 U.S.T.C. 9294 (1947)).