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Volume 5 - Opinions of Counsel SBEA No. 22

Opinions of Counsel index

Nonprofit organizations exemption (local option to tax) (determination by assessor) (school district challenge) - Real Property Tax Law, §§ 421, 708:

Once having adopted a resolution pursuant to paragraph (b) of section 421(1) of the Real Property Tax Law making property owned by certain nonprofit corporations taxable, a school district may not challenge an assessor’s determination that a particular corporation falls within the mandatorily exempt class of paragraph (a) of section 421(1) rather than in the permissively taxable class of paragraph (b). However, a property-owning taxpayer may challenge such determination, and a school district maintains its right to intervene and participate in Article 7 proceedings.

We have been asked whether an assessor is required to place on the taxable portion of the assessment roll certain real property which the school district believes to be taxable pursuant to a resolution properly adopted pursuant to paragraph (b) of subdivision 1 of section 421 of the Real Property Tax Law.

The starting point in this analysis must be the principle that the duty and right to assess real property for purposes of taxation is solely that of the local assessor (Real Property Tax Law, § 102(3); Drelich v. Kahn, 60 Misc.2d 227, 302 N.Y.S.2d 634; McAlevey v. Williams, 41 App. Div.2d 971, 344 N.Y.S.2d 193). A school district has no authority to assess real property, a principle which we believe was finally clarified by the amendment to subdivision 3 of section 1302 of the Real Property Tax Law which deleted the authority of the school district to make adjustments in assessments caused by improvements to or demolitions of property (L.1968, c.901).

The precise duty of the assessor includes the ascertainment of all real property located within the assessing unit and the names of the owners thereof, and the determination of the assessed value of such property based on its condition and ownership as of taxable status date (Real Property Tax Law, §§ 500,302(1)). The determination of the assessed valuation of taxable real property is clearly the jurisdiction of the assessor, subject to administrative review by the board of assessment review. Just as clearly, the right to commence an administrative review of an assessment belongs to the owner of real property or to persons who maintain an ownership or tenancy interest in the real property (Real Property Tax Law, § 512(1)). A school district is not a taxpayer and consequently has no standing entitling it to complain as an aggrieved party (Central School District No. 1 of the Towns of Ontario, et al., Wayne County v. Rochester Gas and Electric Corporation, 61 Misc.2d 846, 306 N.Y.S.2d 765; Board of Education Central School District No. 1 of the Towns of Ontario, et al., Wayne County v. Parsons, 61 Misc.2d 838, 306 N.Y.S.2d 833). This principle applies as well to other property owners within an assessing unit.

However, while it is abundantly clear that the assessor’s judgment as to assessed valuation can only be challenged by one who has an ownership or tenancy interest in the real property, it now also appears to be clear that the assessor’s determination as to the taxable status of real property is subject to a continuing review and challenge by all taxpayers within the assessing unit. Specifically, it has been held on several occasions that a property-owning taxpayer has the right to commence an Article 78 proceeding to challenge the assessor’s determination that particular real property is entitled to an exemption from taxation (Winter v. Board of Assessors of Nassau County, 63 Misc.2d 451, 311 N.Y.S.2d 684; Dubbs v. Board of Assessment Review of County of Nassau, 46 App. Div.2d 651, 359 N.Y.S.2d 815). The duty to assess real property, as supplemented by section 551 of the Real Property Tax Law, has been held to be a continuing duty and “any citizen may present his petition for the enforcement of mandatory duties imposed upon officials.”

The proper implementation of the authority provided for by paragraph (b) of subdivision 1 of section 421 of the Real Property Tax Law now places an additional duty upon the assessor. Namely, the assessor must determine the precise classification of real property which is potentially entitled to an exemption pursuant to section 421, and, upon determining such classification, the assessor must then denote on the assessment roll whether the property is subject to taxes due to the proper implementation of the authority provided for in said paragraph (b). Having made a judgment that a particular parcel of real property is classifiable within the listing contained in paragraph (a), and therefore entitled to a mandatory exemption, the assessor may continue to be challenged by taxpayers within the assessing unit to put the subject parcel on the taxable portion of the assessment roll pursuant to the authorities cited above. However, we also believe that the school district does not have a concomitant right to challenge the assessor’s determination as to taxable status.

In the situation at hand, the question of the proper classification of the property (i.e., either bible and tract or religious) is an extremely delicate determination. We have only to examine two recent cases in the area for a stark indication of this fact. In the case, American Bible Society v. Lewisohn, 48 App. Div.2d 308, 369 N.Y.S.2d 725, the Appellate Division held that property owned by the American Bible Society should be classified as a corporation or association organized for bible, tract or missionary purposes rather than for religious (and therefore exempt) purposes (see also, Matter of Swedenborg Foundation. Inc., 48 App. Div.2d 798, 369 N.Y.S.2d 429). On the other hand, in both Watchtower Bible and Tract Society of New York v. Lewisohn, 35 N.Y.2d 92, 315 N.E.2d 801, 358 N.Y.S.2d 757, and Matter ofAmerican Press, Inc. v. Lewisohn, 74 Misc.2d 562, 345 N.Y.S.2d 396, aff’d, 48 App. Div.2d 798, 372 N.Y.S.2d 194), the courts endeavored to distinguish what appears to be similar organizations and held them to be entitled to the mandatory religious exemption set forth in paragraph (a) of subdivision 1 of section 421 of the Real Property Tax Law.

In our opinion, the assessor’s determination as to the classification of real property potentially subject to taxation pursuant to paragraph (b) of subdivision 1 of section 421 must stand, subject only to the challenge of taxpaying property owners within the assessing unit or school district. The school district has no right to challenge the assessor’s determination.

In passing, we note that the clear right of the school district to intervene and participate in Article 7 proceedings brought by taxpayers within the district is distinguishable. This right, which includes that of vacating a settlement order reached without the participation of the school district (Stanford Associates v. Board of Assessors of Town of Niskayuna, 39 App.Div.2d 800, 332 N.Y.S.2d 286, motion for leave to appeal denied, 31 N.Y.2d 643, 337 N.Y.S.2d 1027; 2 Op.Counsel SBEA No. 37), is based upon a statutory right set forth in section 708 of the Real Property Tax Law. The primary purpose of section 708 is to alert the school district that a proceeding has been commenced that may affect it by virtue of the refund provisions contained in section 726 of the Real Property Tax Law. This statute recognizes the interest of the school board in the outcome of an Article 7 proceeding to which it is not a party by statute, although it may suffer the consequences of an unfavorable result. Therefore, the authorities hold that a school district has the right to intervene to determine “in each instance whether its interest will best be served by intervention or not” (Xerox Corporation v. Sanger, 79 Misc.2d 480, 360 N.Y.S.2d 161).

Accordingly, based on the authorities cited above, we believe that the school district must abide by the determination of the assessor in classifying real property within either paragraph (a) or paragraph (b) of subdivision 1 of section 421 of the Real Property Tax Law (see also, 3 Op. Counsel SBEA No. 40). A school district may certainly exercise the right to adopt local legislation pursuant to paragraph (b) of the Real Property Tax Law, but once having adopted such legislation, the judgmental determinations of the assessor must stand, subject only to administrative and judicial review pursuant to Article 7 of the Real Property Tax Law or judicial review commenced by a property owner pursuant to Article 78 of the Civil Practice Law and Rules.

August 26, 1975

NOTE: The American Bible and Swedenborg cases referred to above have been affirmed (40 N.Y.2d 78, 351 N.E.2d 697, 386 N.Y.S.2d 49 and 40 N.Y.2d 87, 351 N.E.2d 702, 386 N.Y.S.2d 54, respectively).

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