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Volume 12 - Opinions of Counsel SBRPS No. 13

Opinions of Counsel index

Residential-commercial urban exemption (county adoption) (variation of terms throughout county) - Real Property Tax Law § 485-a:

If any city, town or a village in a county adopts the residential-commercial urban exemption, the county may then do so for county tax purposes, but the county exemption will apply only within the area of that city, town or village. In addition, the county exemption must have the same eligibility limitations that are set forth in that city, town or village’s local law.

We have received an inquiry concerning the residential-commercial urban exemption (RESCUE) exemption (Real Property Tax Law, § 485-a). A county is considering adopting the exemption, and the question is whether the county will need to adopt a new local law each time a city, town or village within the county separately approves the exemption.

RPTL, § 485-a (2), provides that:

Any municipality may, by local law, provide for the exemption of real property from taxation as provided in (§ 485-a). {1}  Upon the adoption of such a local law, the county in which such municipality is located may, by local law, and any school district, all or part of which is located in such municipality, may, by resolution, exempt such property from its taxation in the same manner and to the same extent as such municipality has done (emphasis added).

We have previously construed section 485-a (2) concluding that “before a county may adopt section 485-a for its purposes, at least one city, town or village therein must first adopt it for its purposes” (11 Op.Counsel SBRPS No. 104). In a July 15, 2004 memo included in the Governor’s Bill Jacket regarding the bill subsequently enacted as chapter 632 of the Laws of 2004 which amended section 485-a to expand that law’s definition of a municipality, we stated:

[A]fter a village approves the RESCUE exemption, a school district, whose area includes the village, might approve the exemption. However, such an approval would not apply to converted, mixed-use properties situated in other portions of the school district because the district would only have the power to approve exemption “in the same manner and extent as the village” (see RPTL, § 485-a(2)).

We reach the same conclusion as to counties. That is, if a city, town or a village in a county were to adopt the RESCUE exemption, in our opinion, the county exemption applies only in the area of that city, town or village. Moreover, the county exemption must have the same eligibility limitations that are set forth in that city, town or village’s local law. {2}

It is further our opinion that in the event other cities, towns or villages in the county subsequently approve the RESCUE exemption, section 485-a apparently is intended to give the county the power to separately approve the county exemption for the area of each such city, town or village. It might be permissible for the county to do so by providing in its local law that the county is adopting the RESCUE exemption in every city, town and village that approves such exemption in the same manner and to the same extent as the city, town or village has approved the exemption.

Even assuming that such amendments to the county local law would be permissible, the county exemption might vary in different parts of the county in two ways. First, the county exemption might become effective on many different dates because the county exemption must take effect on or after the effective date of the applicable municipal local law (see, RPTL, § 485-a(4)(b)(i)). Second, the minimum conversion cost might vary in different areas of the county depending upon the minimum cost set forth in the municipal local law (see, RPTL, § 485-a(4)(b)(ii)). It is also uncertain which such limitations would apply when a town and a village within the town separately approve the RESCUE exemption by local laws that take effect on different dates, have different minimum required costs for an eligible conversion, or both.

This, of course, raises a possible constitutional issue. The Court of Appeals has stated:

The Federal and State Constitutions do not prohibit dual tax rates or require that all taxpayers be treated the same. They require only that those similarly situated be treated uniformly. Thus, the creation of different classes for purposes of taxation is permissible as long as the classification is reasonable and the taxes imposed are uniform within the class . . .  (Foss v. City of Rochester, 65 NY2d 247, 256, 480 NE2d 717, 722, 491 NYS2d 128, 133 (1985)).

RPTL, § 485-a may be open to constitutional challenge as contrary to the Foss decision because it could result in different taxable values, for county tax purposes, for similar, converted parcels in different parts of the county. For example, a renovated, former warehouse in Town A might be eligible for the county exemption because the rehabilitation’s cost amounted to the minimum required by Town A’s local law, but a renovated warehouse in Town B would not qualify for the county tax exemption because its identical rehabilitation cost is less than the minimum required by Town B’s local law. Whether a court will find such differences in taxable value for county tax purposes to be “reasonable” within the Foss standard must await the appropriate litigation. {3}

October 21, 2008


{1}  RPTL, § 485-a(1)(a) defines a municipality as “any town, city or village except for a city having more than one million inhabitants.”

{2} RPTL, § 485-a(4)(b) provides that “[n]o such exemption shall be granted unless (i) such conversion was commenced subsequent to the date on which the municipality’s local law took effect; and (ii) the cost of such conversion exceeds the sum of ($10,000) or such greater amount as may be specified by local law.” Therefore, in our opinion, (1) a county’s local law must become effective on or after the date on which the local law of a town or village in that county takes effect; and (2) the county’s local law must require the same minimum conversion cost that is required by the town or village’s local law.

{3} This possible constitutional issue is generally avoided in most local option tax exemptions because counties are given the same authority to grant or refrain from granting an exemption throughout the county as is given to cities, towns or villages throughout those localities. For example, RPTL, § 459(1) provides that “[a]fter a public hearing, the governing body of a county, city, town or village may adopt a local law . . . providing for an exemption pursuant to the provisions of . . . section [459].” We do not know the rationale for the unusual methodology the Legislature chose for the RESCUE program.

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