Volume 6 - Opinions of Counsel SBEA No. 7
Telephone equipment exemption (effect of revaluation) - Real Property Tax Law, § 470:
The taxable assessed value of telephone and telegraph property entered on any assessment roll completed as of December 31, 1974, which is subject to the provisions of section 470 of the Real Property Tax Law, is to be increased or decreased on each tax roll following a revaluation. This increase or decrease is in an amount proportionally equal to the proportional difference between the latest relevant state or county equalization rate for the year in which the assessment is made and the state or county equalization rate in effect on December 31, 1974.
Our opinion has been requested concerning the provisions of section 470 of the Real Property Tax Law. That statute provides for a limitation on the assessed value of certain types of telephone and telegraph equipment subject to taxation, with an exception in cases of “tax district-wide” revaluations. The specific question relates to this exception provision; namely, how does an assessor determine the assessment of the equipment in question after a revaluation?
Section 470 was both enacted and amended during the 1973 session of the New York State Legislature. By chapter 1019 of the Laws of 1973, particular items of telephone and telegraph equipment were exempted from taxation, special ad valorem levies and special assessments, to the extent that the assessed value thereof exceeded the assessed value appearing on the last assessment roll of the “tax district” completed prior to December 31,1974. By amendment in the same year (L. 1973, c. 1044), the taxable assessed value of the aforementioned equipment is required to be increased or decreased in the event of a “tax district-wide revaluation” had after December 31, 1974. The method of determining the amount of increase is as follows:
[F]or each tax year following such revaluation the level of assessed valuation of such property in such district in excess of which such property shall be exempt shall be increased or decreased, as the case may be, in a proportionate amount equal to the difference between the equalization rate for such tax year and the equalization rate in effect on December thirty-first, nineteen hundred seventy-four.
As will become apparent from the following discussion, despite the fact that this statute consists of only two sentences, the language and structure is such that an extended analysis is required for a proper interpretation. The first consideration must be the definition of several terms which are used in this law. We may then construe the foregoing formula in light of these definitions.
(a) “Tax district”
There are a variety of forms of local government in New York State. Some, such as cities, towns and villages, have plenary powers in the areas of assessment and taxation. Others, such as school districts and counties, generally levy taxes but must rely on those other municipalities for assessment rolls on which their taxes are to be levied. Another type of local government, known as the special district, is more limited still in these areas.
Under the Real Property Tax Law. these local governments are grouped in various ways in different definitions. For example, an “assessing unit” is defined to include cities, towns, villages and any county “having a county department of assessment with the power to assess real property” (Real Property Tax Law, § 102(1)). A “municipal corporation,” however, is defined as “a county, city, town, village or school district” (id. § 102(10)). A “special district” is also defined (id. § 102(16)).
There is, however, no general definition of the term “tax district” in section 102. Moreover, although it is defined for the limited purposes of specific Titles and Articles of the Law (e.g., id. §§ 545(7)(h), 1040(1)), the term “tax district” is not defined for purposes of section 470 or Article 4 generally. An examination of these other definitions shows that, in each, a “tax district” includes, at least cities, counties, towns, villages and school districts (i.e., “municipal corporations”, see, e.g., id. §§ 1040(1), 1070(1), 1102(1)). Moreover, in some of the definitions the term is defined to include “special districts” as well as municipal corporations generally, (id. §§ 545(7)(h), 910,1080). It is clear, therefore, that the term is not limited, in these other definitions, to assessing units only.
Lacking a definition specifically applicable to section 470, or a definition having general application, we must consider the general rules of statutory construction. Thus, each word in a statute must be given its appropriate meaning, and sense must be brought out of the words used (see, McKinney’s Statutes, § 94; People ex rel. Stockier v. Warden of City Prison, 259 N.Y. 430. 182 N.E. 73). Moreover, a statute must be read as a whole, and all parts of the law must be read together to determine their fair meaning (id. § 97). In accordance with this latter rule, it is generally accepted that every part of an act should receive some consideration in determining its meaning, and that, if possible, meaning and effect be given to all its provisions and language (id. § 231; see also, Matter of Social I. E. Assn. v. Taylor, 268 N.Y.233, 197 N.E. 262).
Given these general rules, we must consider the contexts in which the term “tax district” appears. First, reference is made to the “last assessment roll of the tax district,” then to a “tax district-wide revaluation,” and finally in the provision that “the level of assessed valuation of such property in such district . . . shall be increased or decreased. . . .”
Looking only to the phrase “tax district-wide revaluation,” one might conclude that section 470 intended to limit “tax districts” to “assessing units” since revaluations are done by assessing unit rather than, for example, by school district or special district. (Counties often serve as coordinators of large-scale revaluation programs, but implementation of the revaluation is the responsibility of each of the assessing units.) As should be apparent from our previous discussion, equating the terms “tax district” and “assessing unit” would result in a definition more limited than any other definition of “tax district” in the Real Property Tax Law. Moreover, as otherwise used in section 470, “tax district” appears to contemplate a broader definition.
For example, the first sentence exempts the telephone and telegraph equipment from “taxation, special ad valorem levies and special assessments.” These three terms are specifically defined in section 102 (subds. 20, 14, 15, respectively), and they encompass levies by or on behalf of counties, cities, towns, villages, school districts and special districts. By including these terms in the first sentence, the Legislature apparently intended the exemption to apply to all assessment rolls prepared by or used by the aforementioned units of local government and therefore intended the broadest possible definition of “tax district.”
We believe this broad definition has equal application to the second sentence, the reference to “tax district-wide revaluation” notwithstanding. Logic and general rules of statutory construction support this opinion. For one, to conclude that the term means one thing in the first sentence and something else in the second would create a basic contradiction in the statute itself, an interpretation which would be permissible only if the legislative intent therefor were clearly expressed, which is not the case here.
Moreover, this is an exemption statute which by definition must be strictly construed against the applicant, and the intent to grant the benefits thereof must be clear and unmistakable on the face of the statute (see, City of Lackawanna v. State Board of Equalization and Assessment, 16 N.Y.2d 222, 212 N.E.2d 42, 264 N.Y.S.2d 528). To construe the term “tax district” broadly in considering the limitation on taxable assessed value established by the first sentence, and narrowly in construing the change provisions of the second sentence, flies in the face of this rule.
Construing the statute as a whole, then, and giving weight to the apparent legislative intent, we conclude that the term “tax district” in section 470 is not limited to “assessing units” or even “municipal corporations” but rather includes any municipal corporation or special district by or on behalf of which taxes, special ad valorem levies or special assessments are levied, and wherein telephone or telegraph property eligible for exemption was assessed on the last assessment roll of the district completed prior to December 31, 1974.
(b) “Tax year”
As with the term “tax district,” the phrase “tax year” is not generally defined for purposes of the Real Property Tax Law. In fact, that precise phrase does not appear to be defined in any of the statutes of this State although similar phrases do appear and are defined elsewhere. For example, for personal income tax purposes, the phrase “taxable year” means “the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the net income and net capital gain are computed under this article.” (Tax Law (§ 350(4).) A “school year” or school “fiscal year” is defined as the period from July 1 to June 30 (Education Law, §§ 2, 2515). Towns (Town Law, § 101) and counties (County Law, § 352) have “fiscal years” which run from January 1 to December 31.
Given the lack of an adequate definition, we assume that the phrase “tax year” means the fiscal year of the given “tax district” for which taxes are to be levied. However, the term “tax year” is used in reference to “each tax year following . . . [a] revaluation,” and we must, therefore, consider it in relation to the meaning of a “revaluation.”
Two questions arise with respect to this term. The first is what is a “revaluation,” and the second is when is a revaluation “had” (the verb used in the statute). The second question is of importance in determining what tax year(s) constitute “each tax year following a revaluation.”
Although undefined in the Real Property Tax Law, the word “revaluation” does appear in two sections of that Law. The first is section 306, as amended by chapter 888 of the Laws of 1977. There, the word implies a reassessment designed to comply with the full value standard of assessment. The second instance is in section 607, which applies to adjustments of certain special franchise assessments for “changes in the level of assessments” on other property. A “change in the level of assessment” is elsewhere defined as “the net increase or decrease in the assessed valuation of the taxable property in the assessing unit as a result of assessing such property at a higher or lower ratio of full value” (Real Property Tax Law, § 606(2)(a); Public Housing Law, § 52(4)(b)). A change in the level of assessment does not necessarily mean a full value reassessment.
“Revaluation” does not, therefore, appear to have the same meaning in the two other sections of the Real Property Tax Law in which it is found. And it is not clear from section 470 whether the draftsmen intended either of these meanings to be applicable to adjustments in the taxable assessed value of telephone and telegraph equipment.
However, as previously noted, one of the cardinal rules of statutory construction is that the right to an exemption must be plainly and unmistakably granted and any doubts are to be construed strictly against the property owner. This being the case, we conclude that the term “revaluation” in section 470 should be construed so as to require a change in the taxable assessed value of telephone and telegraph property if there has been a reassessment of property in a “tax district” which creates a change in the level of assessment of such property, even if the reassessment is not to 100 percent of market value. To construe the term otherwise would permit an unwarranted extension of this exemption statute.
The second question relative to a “revaluation” is when does it occur or, in the terminology of section 470, when has one been “had.” The question is particularly critical in terms of the impact of section 470 on school levies. This results from the fact that the school “tax year” commences on July 1, thus falling midway between the date for the filing of the tentative assessment roll (Real Property Tax Law, § 506) and that for the filing of the final roll (id. § 516).
If we conclude that a revaluation is not “had” until the filing of the final roll, the level of assessment of exempt telephone and telegraph property would not be affected for school purposes on the first revalued assessment roll on which school taxes are levied. Rather, it would be increased only on the following year’s school roll since that would be the tax year “following” the revaluation.
To understand when a revaluation has taken place, it is necessary to understand how one occurs. The revaluation process requires the expenditure of substantial time and effort to collect and compile current descriptions of real property and current information relative to market values of these properties generally. This information is then employed by the assessor to adjust assessments to reflect the changes he deems necessary.
The revaluation process is effectively completed by an assessor when he enters the new values on the tentative assessment roll. Tentative assessed values are, of course, subject to the right of each property owner to complain to the board of assessment review. However, in the absence of review by the board of assessment review, the assessed value of such property as listed on the tentative assessment roll will be the same on the final assessment roll. Accordingly, we conclude that a revaluation is “had,” for purposes of section 470, upon the filing of the tentative assessment roll.
Moreover, the formula for changing the taxable assessed value of telephone and telegraph equipment under section 470 is a self-effectuating one in which the assessment of the equipment is automatically changed in accordance with said formula. Thus, the fact that the higher assessed value of the equipment would not be reflected on the tentative roll does not appear to be a bar to construing the statute so that a revaluation is “had” as soon as the first tentative assessment roll including the values of such revaluation are filed.
(d) “Equalization Rate”
Simply stated, an equalization rate measures the percentage of full value (market value) at which taxable real property in a given jurisdiction is assessed. Both the State and individual counties determine “equalization rates” (Real Property Tax Law, §§ 1202, 804). (The terms “state equalization rate” and “county equalization rate” are specifically defined in section 102(19) and (8), respectively.)
The State Board of Equalization and Assessment is required to annually establish an “equalization rate,” “[u]pon the final completion of the assessment roll of each city, town and village . . .” (id. § 1202). In addition, in the case of multi-jurisdictional school districts, the State Board, under certain circumstances, must provide a “special equalization rate” (id. § 1314). State equalization rates are used for such purposes as the apportionment of multi-jurisdictional school levies and the distribution of various types of State aid.
Counties, on the other hand, must annually, on or before November 15, ascertain the percentage of full value at which taxable real property in each city and town therein is assessed “for the purpose of apportioning county taxes . . .”(id. § 804(1)).
We must determine, then, whether section 470 refers to the state equalization rate, the county rate, or both. Here, the statute presents an immediate problem in referring to an equalization rate “for such tax year.” An equalization rate is made for an assessment roll, not for a tax year. Moreover, under current circumstances, the state equalization rate is established for the last assessment roll of the year preceding the “tax year.”
For example, a state equalization rate for a town assessment roll finally completed and filed on August 1, 1978, will not be established until some time in 1979, even though that assessment roll will be used for the levy of school taxes on September 1, 1978 and county/town taxes on January 1, 1979. Thus, the latest regular state equalization rate at the time of the levy of 1978-79 school tax will be the rate established for the 1977 assessment roll. (In apportioning the school district tax levy, the school district is required to use the latest applicable state equalization rate or any special rate established pursuant to section 1314.)
To limit the reference to “equalization rates” in section 470 to regular state equalization rates would, in effect, guarantee telephone and telegraph equipment a one year hiatus after a revaluation had been completed before the taxable assessed value of such equipment would be increased. This makes little sense in terms of the apparent intent of the statute to provide for adjustments in the total taxable assessed value and in light of the fact that this is an exemption statute which must be strictly construed against the taxpayer.
Given the absence of any legislative direction, we conclude that a “tax district equalization rate” refers to whatever equalization rate is used for the apportionment of taxes, whether those taxes be school levies, county levies or otherwise. We further conclude that the term “equalization rate for such tax year” means the latest regular or special state equalization rate for the school tax year and, for the county/town (or city) tax year, the term must mean the county equalization rate prepared for the apportionment of taxes to be levied on the first assessment roll containing the revaluation figures.
II. The formula for changing the taxable assessed valuation of equipment subject to the ceiling assessment of Section 470
As we have explained, section 470 exempts from taxation, special ad valorem levies and special assessments all of the property described in the statute to the extent that the assessed value of that property exceeds its assessed value on the assessment roll completed prior to December 31, 1974. The apparent intent of the Legislature was to limit (or place a “ceiling” on) the assessed valuation of this type of property and to, thereby in effect, grant a total exemption to any of this type of property installed after that date (other than replacements for existing property).
The result of this type of statute standing alone is that the property thus partially exempted will continue to bear a portion of the tax burden, albeit a declining one if other assessments generally increase. Accordingly, in an apparent attempt to ensure that the share of the tax burden borne by such property would not necessarily decline as other assessed values (not subject to a ceiling) rose, the Legislature added a second sentence to section 470. Said sentence directs that the ceiling assessment of the described property entered on the 1974 assessment roll be increased or decreased for each tax year following a revaluation, “in a proportionate amount equal to the difference between the equalization rate for such tax year and the equalization rate in effect” on December 31, 1974. (emphasis added)
At the outset, it is noted that the language of this formula is distinct from that used in other “ceiling exemption” statutes in which taxable assessed value may be increased or decreased after a change in the level of assessment. For example, section 52 of the Public Housing Law partially exempts from taxation property of a Municipal Housing Authority in a state project, but authorizes a change in the taxable assessed value “to reflect a change in the overall level of assessment of all properties on the assessment rolls of the assessing unit.” Similar language is found in subdivision 3(a) of section 480 of the Real Property Tax Law which exempts eligible forest lands from taxation.
The general intent of provisions such as subdivision 4(a) of section 52 of the Public Housing Law is to ensure that properties which have become partially exempt (or subject to a ceiling assessment for purposes of taxation) will continue to bear a proportionate share of the tax burden in the years following the granting of the exemption. For example, if a housing project became entitled to a partial exemption in a year in which the general level of assessment was 20 percent, and the following year the assessor increased the general level to 80 percent, under section 52, the taxable assessed value of the housing project would be increased proportional to the change in the level of assessment, i.e., a four-fold increase in our example.
Unfortunately, the section 470 formula does not employ this relatively plain and simple language. Rather, the law requires increases or decreases in “a proportionate amount equal to the difference between” equalization rates, instead of relating increases or decreases to changes in the level of assessment.
As has been discussed, this entire Statute is plagued by inartful language which must somehow be construed to provide both meaning and practical effect to the law. Unfortunately, however, the direction contained in the second sentence, particularly the phrase just quoted, virtually defies reasonable interpretation. The resulting ambiguities lead to a conclusion which is both unavoidable and wholly inequitable.
To begin, we cannot construe the language “difference between” the equalization rates [which would normally imply subtraction] as standing alone, without reference to the word “proportionate” in the same phrase. To isolate the words “difference between” would result in the following computation to determine the extent to which the taxable assessed value would be changed:
First, the appropriate (state or county) equalization rate “in effect” on December 31, 1974 would be subtracted from the appropriate equalization rate “for each tax year following the revaluation;” and
Second, the taxable assessed value of the subject property would be increased or decreased in a “proportionate amount equal to the difference” (i.e., the difference between the equalization rates multiplied by the taxable assessed value on the roll as of December 31, 1974).
Using the percentages in our Public Housing Law example, this would mean that the taxable assessed value of telephone and telegraph equipment would be increased by only 60% (80% - 20%; the difference being 60%), rather than 400% as would be the case under the “change in level” provisions of section 52 of the Public Housing Law and section 480 of the Real Property Tax Law.
That the Legislature intended owners of telephone and telegraph property to benefit so disproportionately vis-à-vis other property owners from a revaluation is not at all clear from the statute. Moreover, bearing in mind the imprecise language of the entire statute, there is little reason to believe that the draftsmen carefully considered the use of the phrase “in a proportionate amount equal to the difference.”
Rather, we conclude that the intent of the Legislature was to permit changes to be made in amounts of taxable assessed value equal to the proportional changes in the equalization rates. Thus, if the latest state rate for Town “A” for school purposes in 1974 was 25 percent, and a special state rate for Town “A” for purposes of a revalued school roll in 1978 is 125 .percent, the taxable assessed valuation of telephone property affected by the section 470 ceiling would be increased 500 percent, the proportional difference between the two rates being 5 to 1.
However, while there is thus achieved a relatively equitable result in the first year of a revaluation, we must also consider the statutory requirement that the assessed value shall be “increased or decreased” in accordance with this formula “for each tax year following such revaluation.” That is, while we have explained its application in terms of the first tax year following a revaluation. the question remains as to what the law requires in the years thereafter.
Referring back to the example of Town “A” with state equalization rates of 25 percent in 1974 and 125 percent following a 1978 revaluation, assume that for purposes of a school levy for 1980-81 the latest rate for the Town is now 100 percent. The section 470 formula requires a change in taxable assessed valuation in each tax year following a revaluation. Therefore, in this example, the taxable assessed value of the telephone and telegraph equipment would be reduced from the level on the 1978-79 school roll, since the latest rate as of the 1980-81 school roll is only four times that of 1974, whereas the rate in 1978-79 was five times that in 1974.
The result of this formula is that in years after a revaluation, the taxable assessed value of this telephone and telegraph property will generally decline in proportion to a decreasing equalization rate. Even if assessed values generally were increased to keep pace with rates of inflation and the equalization rate thereby became somewhat constant, the taxable assessed value of this property would not increase (since the equalization rate did not) and, therefore, relative to other taxable properties, this property will bear a lesser share of the tax burden in each succeeding year.
We recognize the inequity of this result and the fact that it is wholly inconsistent, both in terms of the treatment afforded other property subject to “ceiling assessments,” and in terms of efforts to create a logical, improved system of assessment administration. The statutory language is such, however, that it mandates this end.
III. Making changes on the assessment roll
There is no provision in section 470 for making “late entries” on assessment rolls. That is, if an equalization rate for a tax year “following a revaluation” is not determined until, for example, after the filing of the final assessment roll, does the assessor have the authority to make an appropriate entry on the assessment roll?
We believe the answer to this must be yes despite the absence of a specific direction in the statute to do so and despite the inclusion of such directives in other related sections of the Real Property Tax Law. For example, section 606, subdivision 2(a) of the Real Property Tax Law provides for “late entry” of special franchise assessments as follows:
b. The assessor is hereby authorized and directed to make the changes, if any, occurring as a result of the application of this section on the assessment roll notwithstanding the fact that he may receive the determination of the final assessment of any special franchise after the final completion, verification and filing of such assessment roll. Other local officers including school authorities, having custody and control of such roll, are also hereby authorized and directed to make any such changes.
(Similarly, see, §§ 489-p, 489-mm.)
Since the Legislature intended changes in taxable assessed valuation to be made for each tax year following a revaluation, we conclude that it must have intended for assessors and other local authorities to exercise authority such as that granted in section 606(2)(a). Accordingly, assessors and other local officers having custody and control of an assessment roll should make appropriate changes of assessed value of the aforementioned telephone and telegraph property upon establishment of the state or county equalization rate, as the case may be, in accordance with the directives of this opinion.
April 14, 1978
Note: But see Opinion 9-16.