Volume 6 - Opinions of Counsel SBEA No. 25
Correction of errors (refund) (property transferred after taxable status date) - Real Property Tax Law, §§ 550, 554, 556, 556-a:
A party acquiring title to real property subsequent to taxable status date is an owner within the meaning of sections 554(2) and 556(3) of the Real Property Tax Law, and is entitled to seek correction of errors on tax rolls pursuant to the provisions of these sections. The purchaser of property who pays his seller a pro rata share of taxes for the year in which title has been transferred is entitled to a refund of taxes levied on the basis of an incorrect assessment.
An individual who acquired title to real property after taxable status date thereafter discovered an error in the assessment or taxation of his property. We are asked whether this individual may have this error corrected and, if a refund is granted, whether the former owner is entitled to a share in the proceeds.
If the error was one defined in section 550 of the Real Property Tax Law (i.e., clerical error,” “error in essential fact” or “unlawful entry”) and was not discovered until after the levy of the tax (prior to the levy, correction may be made upon the petition of the assessor; see, Real Property Tax Law, §§ 553(2), 556-a(2)), two questions must be answered. The first is whether the new owner a right to have the tax roll corrected prior to the expiration of the warrant collection of taxes; the second is whether thereafter he is entitled to a refund.
In regard to errors on tax rolls, persons who may seek correction include “an owner of real property, or any person who would be entitled to file a complaint pursuant to section five hundred twelve of this chapter . . .” (§§ 554(2), 556-a(3)(a)). There is nothing in this statutory language suggesting that the word “owner” is limited to the “owner of record” (i.e., the owner as of taxable status date).
Even if so construed, it is clear that a party acquiring title to real property subsequent to taxable status date falls within the definition of a person “whose property is assessed” and who therefore has a right to complain under section 512 of the Real Property Tax Law (see, People ex rel. Bingham Operating Corp. v. Eyrich, 179 Misc. 197, 38 N.Y.S.2d 326, aff’d, 265 App.Div. 562, 40 N.Y.S.2d 33, app.den., 266 App.Div. 803, 41 N.Y.S.2d 959). In that case, the Appellate Division denied the assessor’s contention that only the owner of record could seek assessment review under the predecessor statutes to section 512,and Article 7 of the Real Property Tax Law, noting that:
The assessment under review is just as effectual for the purpose of taking the property of relator as though levied against it by name. Respondents apparently ignore the fact that an assessment is levied against the land and not against the owner, the name of the latter being noted merely for the purpose of identification [265 App.Div. 562, 40 N.Y.S.2d at 36].
Thus, a party acquiring title to real property subsequent to taxable status date is an “owner” within the meaning of sections 554(2) and 556-a(3) of the Real Property Tax Law and is entitled to seek correction of errors on tax rolls pursuant to the provisions of these sections.
Less certain is the answer to the question of who is entitled to a refund of taxes levied on the basis of an error in assessment where title has been transferred subsequent to taxable status date. If a tax has been paid based in whole or in part upon a “clerical error” or certain “unlawful entries,” a tax levying body may refund to any person “the amount of any tax paid by him, or portion thereof as the case may be . . .” (Real Property Tax Law, § 556(1)(a) (emphasis added)). When a tax is paid based in whole or in part upon an “error in essential fact,” a refund may be made “to a person who has paid a tax . . .” (§ 556-a(4)(a) (emphasis added)).
Taken literally, this language would mean only the party who has made the physical payment of taxes to an appropriate municipal collecting officer might apply for a refund. In the broader sense, however, also included should be the purchaser of property who pays his seller pro rata share of taxes for the year in which title has been transferred.
At most title closings, the attorneys for each party agree on the apportionment of all property taxes for the year, with the purchaser liable for that portion of the taxes attributable from the date of title transfer to the end of the year. In this sense, then, the post-taxable status date owner has “paid” taxes as much as his transferor did. In addition, for federal income tax purposes, it would appear that where a pro rata apportionment occurs, the transferee may deduct as real property taxes paid that portion of the tax bill paid to the former owner. (Consequently, the former owner may only deduct that portion of the taxes for which he was not reimbursed.)
Moreover, the general rule in the case of remedial statutes is that they should be liberally construed so that a taxpayer’s right will not be defeated by a mere technically (McKinney’s Statutes, § 321). The Court of Appeals has construed assessment review statutes to be remedial in nature (People ex rel. New York City Omnibus Corp. v. Miller, 282 N.Y.5 at 9, 24 N.E.2d 722 at 724).
To refuse to consider a complaint from a new owner of real property (where there has been an apportionment of taxes between seller and purchaser) on the ground that he paid his tax (or portion thereof) to the former owner rather than to the tax collection officer would seem to be just the type of “mere technicality” to which the Court of Appeals was referring in Miller.
Where an apportionment has occurred, both parties would seem to have an interest in any refund granted. While there is no statutory mandate in this regard, we recommend either: (1) a unified petition by both parties; or (2) that the tax levying body to whom petition is made notify the former owner so that he may present his case for a portion of the refund.
That is the practical approach. Stricter, less reasonable alternatives would be either: (a) refusal of the tax levying body to consider a petition submitted solely by the new owner on the ground that it was not paid by him; or (b) acceptance of the petition with the total refund paid to the new owner, the former being left to any remedies at law which might be available. Since there is a practical, common sense solution not violative of any statutory mandate, however, we do not recommend that these latter alternatives be followed.
April 14, 1977