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Volume 6 - Opinions of Counsel SBEA No. 94

Opinions of Counsel index

Business investment exemption (local option) (scope); Job incentive exemption (local option) (scope) - Real Property Tax Law, §§ 485, 485-b:

A town may not exercise its local option under the business investment exemption authorized by Real Property Tax Law, section 485-b, or the job incentive exemption authorized by Real Property Tax Law, section 485, to make an otherwise exempt parcel liable only for highway taxes.

Our opinion has been requested concerning the amount of discretion allowed a municipality in granting exemptions from real property taxation pursuant to section 485 of the Real Property Tax Law. The specific situation involves a town which wishes to adopt a local law exempting eligible improvements from all town taxes except highway taxes. Since there is occasional confusion between section 485 (the job incentive exemption) and section 485-b (the business investment exemption), this opinion will discuss both. Although these sections differ in purpose and scope, in some cases the same project may be eligible for each exemption. Moreover, despite their differences, the answer to the question posed is the same for each exemption.

Section 485 authorizes certain municipalities to adopt a local law, or in the case of a school district, to adopt a resolution, exempting certain business facilities from taxation, or special ad valorem levies, or both, for a period of time not to exceed 10 years, to the extent provided in the local law or resolution. The local law or resolution may exempt such facilities to the extent of all or a percentage of any increase in value attributable to expenditures certified by the New York State Job Incentive Board.

Section 485-b provides that where real property has been improved for purposes of commercial, business or industrial activity, at a cost in excess of $10,000, that property shall be eligible for a ten year partial exemption from taxation and special ad valorem levies, to the extent of any increase in value attributable to such improvement. Municipalities may reduce the percentage of exemption otherwise allowed, even to zero (5 Op.Counsel SBEA No. 81).

Each section allows for a certain amount of discretion on the part of municipalities, namely subdivision 3 of section 485 which reads, in part, “an eligible business facility . . . shall be exempt from taxes and special ad valorem levies to the extent authorized in such local law or resolution . . .” and subdivision 7 of section 485-b, which authorizes a municipality to “reduce the per centum of exemption otherwise allowed pursuant to this section.” When the percentage of exemption is reduced, this new percentage applies to both taxation and special ad valorem levies, just as the original statutory percentage would have so applied. Although the method of exemption differs in the two sections, both provide an exemption from “taxation” (defined in Real Property Tax Law, § 102(20)) and “special ad valorem levies” (defined in Real Property Tax Law, § 102 (14)).

Highway taxes are neither levied in proportion to the benefit received nor levied on behalf of a special district; thus they cannot be deemed special ad valorem levies. Rather, the town superintendent of highways is required to submit an annual estimate of expenditures which must be divided into four types of expenses (Highway Law, § 141). Apparently it is this estimate which the town in question considers to be its “highway taxes.” However, this estimate is the same type of estimate which is required of the head of each of the administrative units in the town (Town Law, § 104). The funds raised for highway purposes based on this estimate are part of the single tax levy authorized for the town (Town Law, § 115). While highway revenues constitute a separate fund (see, 24 Op.State Compt. 726), this does not change the fact that such revenues are raised as part of a single tax levy process. The common source of the highway fund and the town general purpose fund is evident in Town Law, section 113, which authorizes transfers of surplus moneys from the latter to the former.

In conclusion, the discretion granted to municipalities is the option of whether to grant either or both of the exemptions authorized by sections 485 and 485-b, and if granted, the extent of the exemptions. No discretion exists to vary a taxpayer’s liability based upon the projected uses to which the tax revenue raised might be put.

This same conclusion has been reached by the Comptroller (Op.State Compt. 77-761 (unpublished)). There it was decided that section 485 is “mandatory in its declaration” that an exemption is authorized from taxes and special ad valorem levies. A municipality is not authorized to selectively apply the exemption to different taxes and special ad valorem levies. A fortiori, the more restrictive language of section 485-b would also not allow selective application.

July, 1979

Updated: