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Volume 6 - Opinions of Counsel SBEA No. 76

Opinions of Counsel index

Public authorities exemption (MTA); Railroad property exemption (subsidized rail lines) (application) - Public Authorities Law, § 1275; Real Property Tax Law, § 489-d:

Property leased by the MTA and used for transportation purposes is entitled to exemption by virtue of section 1275 of the Public Authorities Law rather than the provisions of the Real Property Tax Law applicable to subsidized railroad real property. The right to this exemption is not contingent upon the filing of an application.

We have been asked whether property of the Penn Central Transportation Corporation (PCTC) which is leased to the Metropolitan Transportation Authority (MTA) for transportation purposes is the type of railroad real property for which an application for exemption must be filed under section 489-d of the Real Property Tax Law.

Section 489-d, subdivision 1, of the Real Property Tax Law exempts subsidized railroad property of intrastate railroad companies from taxation (§ 489-dd similarly exempts subsidized railroad property of interstate rail companies). By amendment in 1978 (L.1978, c.391), owners of subsidized railroad real property were required to file an application on a form prescribed by the State Board in order to be eligible for exemption.

“Subsidized railroad real property” is defined in subdivision 4 of section 489-b (see also, § 489-bb(4)) to mean any railroad real property for which a rail service continuation subsidy is paid or payable under titles 3 and 4 of the Regional Rail Reorganization Act of Nineteen Hundred Seventy-Three as amended to April 1, 1976 (i.e. 45 U.S.C.A. §§ 741 et seq., 761 et seq.). In general, subsidized railroad real property is that railroad property which might otherwise have been abandoned by the various railroad lines which have been in bankruptcy or reorganization in recent years. The purpose of the subsidy is to create the financial support essential to the continued operation of these lines, given the fact that the owning organizations (such as Penn Central), or successors in interest (such as Conrail), would find it otherwise unprofitable to maintain their operation.

Railroad real property owned, leased or used by the MTA is not “subsidized railroad real property.” Real property owned, leased or used by the MTA receives its right to exempt status from section 1275 of the Public Authorities Law. That section provides a full exemption from taxation to (1) property owned by the Authority, (2) property leased by the Authority and used for transportation purposes (see, Metropolitan Transportation Authority v. City of New York, 70 A.D.2d 551, 416 N.Y.S.2d 612) and (3) property used for transportation purposes pursuant to the provisions of a joint service arrangement or of a joint facilities agreement or trackage rights agreement. There is no requirement in section 1275 that the MTA file an application for exemption for any of these properties.

The provisions of the Real Property Tax Law relating to exemptions from taxation for subsidized railroad real property have no application to the right of the MTA to exemption from taxation under section 1275 of the Public Authorities Law. Therefore, neither the PCTC nor the MTA need file the application prescribed by section 489-d of the Real Property Tax Law with respect to this property. Assuming that the property in question is owned or leased and used by the MTA in accordance with the provisions of the Public Authorities Law on taxable status date, the MTA’s right to exemption is not conditioned on the filing of an application prior to that date.

January 14, 1979

Updated: