Volume 7 - Opinions of Counsel SBEA No. 77
Base proportions (local adjustments) (calculation) (portions) - Real Property Tax Law, §§ 1901(k), 1903(2)(b):
Formulas for local adjustments in base proportions provided for in subparagraphs (i) and (ii) of section 1903(2)(b) should be applied algebraically. Such adjustments may vary among portions within an approved assessing unit.
Two questions are presented concerning the computation of “locally adjusted homestead proportions” (Real Property Tax Law, §§ 1901(k), 1903(2)(b)). The first is how these proportions should be calculated where literal application of the formulas contained in sub-paragraphs (i) and (ii) of section 1903(2)(b) would require a negative number to be “added” to either a homestead base proportion or an adjusted homestead base proportion. The second question is whether the adjustments authorized may vary among “portions” of an approved assessing unit. Upon analysis of the overall statutory scheme of Article 19 of the Real Property Tax Law, we believe that the formulas contained in subparagraphs (i) and (ii) should be applied algebraically, in accordance with their literal terms, and that the adjustments authorized by these provisions may vary among portions.
Article 19 of the Real Property Tax Law, as added by Chapter 1057 of the Laws of 1981, applies to all assessing units in the State except New York City and Nassau County, and is intended to provide assessing units with the authority to ameliorate the inter- and intra-class tax shifts which could result from a revaluation. Inter-class tax shifts may be prevented or reduced by the adoption of the “homestead base proportion” provisions of section 1903. Intra-class tax shifts may be phased-in over a five year period through the use of “transition assessments” as provided in section 1904.
As indicated above, in order to minimize inter-class tax shifts, the governing body of an “approved assessing unit” {*} may enact a local law adopting the provisions of section 1903 of the Real Property Tax Law (§ 1903(l)(a)). Upon adoption of the requisite local law, all real property in the assessing unit must be classified on the assessment roll as either homestead or non-homestead real property (9 NYCRR 190-4.2(a)), and the governing body of the assessing unit must establish a “homestead base proportion” {**} for the assessing unit and for each “portion” therein (Real Property Tax Law, § 1903(2)(a)). The homestead base proportion is equal to “the proportion which the taxable assessed value of real property in the homestead class constituted of the total taxable assessed value of real property” on the assessment roll, or part thereof, applicable to a portion, completed in the year immediately preceding the revaluation (Real Property Tax Law, §§ 1903(2)(a), 1901(1)). More simply, the homestead base proportion expresses the homestead class tax share prior to revaluation.
There is a distinction, in terms of the calculation of class tax shares, between approved assessing units which completed revaluations prior to December 3, 1981 (the effective date of Chapter 1057), and those assessing units completing revaluations thereafter. In the case of approved assessing units which complete revaluations on or after December 3, 1981, the homestead and non-homestead base proportions will be used to allocate tax levies between the two classes, resulting in separate tax rates for each class (Real Property Tax Law, § 1903(3), (4)), until the State Board certifies “adjusted” homestead and non-homestead base proportions (see, §§ 1903(2)(a), 1905(1); 9 NYCRR 190-4.5(b)). In general, these State Board certifications will first occur with respect to the “sixth assessment roll following the first assessment roll” to which section 1903 applies (§ 1905(l)(a); but cf., § 1905(l)(b)).
However, for approved assessing units which completed revaluations prior to December 3, 1981, the State Board must establish “adjusted homestead base proportions” for the assessing unit and for each portion therein, for the first assessment roll to which the provisions of section 1903 apply (Real Property Tax Law, § 1905(1)(c)). The adjusted homestead base proportions are calculated pursuant to a formula which (1) adjusts each base proportion by a factor expressing the relative change in the class share of total market value occurring between the first revaluation assessment roll and the assessment roll used as the basis for certification as an approved assessing unit; and (2) adjusts the results further so that the adjusted proportions sum to one hundred (Real Property Tax Law, § 1905(2), (3)(b) and (5); 9 NYCRR 190-4.5(a)). Once established, the adjusted base proportions supersede the base proportions for purposes of allocating tax levies between the two classes, until the State Board certifies new adjusted base proportions (see, §§ 1903(2)(a), 1905(1); 9 NYCRR 190-4.5(a)). The effect of this procedure will be to permit an allocation of the tax burden between the two classes equal to that which existed prior to the revaluation, subject to adjustments for subsequent changes in the class shares of total market value.
Whether its revaluation was completed before or after December 3, 1981, the governing body of an approved assessing unit may alter a homestead base proportion or adjusted homestead base proportion, by enacting a local law adopting a “locally adjusted homestead proportion” pursuant to section 1903(2)(b). Once established, the locally adjusted homestead proportion would supersede the homestead base proportion or the adjusted homestead base proportion previously established, and would be used to allocate tax levies between the homestead and non-homestead classes until the State Board certifies either initial or new adjusted base proportions (see, §§ 1903(2)(b)(i) and (ii), 1905(1); 9 NYCRR 190-4.5(a) and (b)).
In the case of approved assessing units which complete revaluations on or after December 3, 1981, the formula for computing locally adjusted homestead proportions is set forth in subparagraph (i) of section 1903(2)(b). The key elements in this calculation are the “homestead base proportion” and the “base percentage”. As previously indicated, the homestead base proportion represents the homestead class tax share on the pre-revaluation assessment roll. In contrast, the base percentage, calculated by the State Board for the assessing unit and each portion therein, is equal to the “percentage that the estimated taxable market value of the homestead class constitutes of the total estimated taxable market value of real property” on the assessment roll used as the basis for certification as an approved assessing unit (§ 1905(2)). In other words, for an assessing unit with a post-December 3, 1981 revaluation, the base percentages represent what the class tax shares would be on the revalued assessment roll, without the adjustments available as a result of Chapter 1057.
In calculating a locally adjusted homestead proportion, the first step is to subtract the homestead base proportion from the base percentage. Upon determining the difference between the base proportion and the base percentage for the homestead class, the assessing unit must add 25%, 50% or 75% of that difference to the homestead base proportion. The result is the locally adjusted homestead proportion.
Where the base percentage exceeds the homestead base proportion (i.e., where the homestead class share of the tax levy would be greater after the revaluation than before), the locally adjusted homestead proportion will always be greater than the homestead base proportion but less than the base percentage. To be distinguished is the situation where the homestead base proportion exceeds the base percentage (i.e., based upon the revaluation assessments, the homestead class share of the tax levy would be less than it was prior to revaluation). In this instance, the formula for computing the locally adjusted homestead proportion will require adding a negative number to the homestead base proportion and, thus, the locally adjusted homestead proportion will always be less than the homestead base proportion but greater than the base percentage.
In either case, a locally adjusted homestead proportion will fall between the minimum and maximum class tax shares, as expressed in the homestead base proportion and the base percentage, permitting some, but not all, of the inter-class tax shift resulting from the revaluation to occur. It seems evident that the Legislature intended to provide approved assessing units with significant flexibility in the selection of class tax shares between the extremes represented by the homestead base proportion and the base percentage. We find no basis to conclude that the option to vary the class tax shares was to be available only where the base percentage exceeds the homestead base proportion. Accordingly, it is our opinion that the formula for computing locally adjusted homestead proportions set forth in subparagraph (i) should be applied algebraically, in accordance with its literal terms.
With respect to approved assessing units which completed revaluations before December 3, 1981, and any other approved assessing unit to which the State Board certifies an adjusted homestead base proportion (see, e.g., § 1905(l)(a) and (b)), the formula for calculating permissible local adjustments is set forth in subparagraph (ii) of section 1903(2)(b). The same conclusions reached in regard to subparagraph (i) apply to the calculation of locally adjusted homestead proportions under subparagraph (ii). The only differences in the calculation are that a “current percentage” (see, § 1905(3)) is substituted for “base percentage” and, in lieu of a “base proportion”, the formula of subparagraph (ii) requires the use of the “adjusted homestead base proportion” (§ 1905(5)) as certified by the State Board.
As was true under subparagraph (i), application of the formula of subparagraph (ii) will result in a locally adjusted homestead proportion falling between the adjusted homestead base proportion and the current percentage. The effect, of course, would be to permit the assessing unit to avoid the extremes of levying taxes on the basis of either the adjusted homestead base proportion or a current, presumably uniform, assessment roll. Since this is the obvious purpose for authorizing approved assessing units to adopt locally adjusted homestead proportions, we believe that the formula set forth in subparagraph (ii) for computing locally adjusted homestead proportions should also be applied algebraically, in accordance with its literal terms.
With respect to the second question, whether the calculation of locally adjusted homestead proportions may vary among the “portions” of an approved assessing unit, we note that subparagraphs (i) and (ii) of section 1903(2)(b) are silent on the issue. Indeed, Article 19 does not even specifically provide for the determination of locally adjusted homestead proportions for portions (cf., Real Property Tax Law, § 1803(2)).
The term “portion” is defined for purposes of Real Property Tax Law, Article 19, in section 1901(g) as follows:
(g) “Portion” means the part of an assessing unit within: the boundaries of a school district which levies taxes on the assessment roll of such assessing unit; a town excluding all villages therein; and that part of an assessing unit which is a special district which encompasses the entire assessing unit with the exception of one or more entire villages. In the case of a county assessing unit, it shall mean the part of such assessing unit included within the boundaries of a city, village or town.
An approved assessing unit which establishes a homestead base proportion must also establish a homestead base proportion for each portion therein (§ 1903(2)(a)). Similarly, subdivisions 2, 3 and 5 of section 1905 require the State Board to compute base percentages, current percentages and, presumably, adjusted homestead base proportions for each approved assessing unit and for each portion of each approved assessing unit. The purpose for introducing the concept of a “portion” into Article 19 is to make it possible for approved assessing units to allocate tax levies between the homestead and non-homestead classes in situations other than where a taxing jurisdiction is coterminous with an approved assessing unit. This is consistent with the sponsor’s memorandum in support of 1981 Senate Bill No. 7000-A (which became Chapter 1057) which states in relation to approved assessing units that:
A qualifying assessing unit would be authorized to determine the percentage shares of the tax levy borne by the homestead class and the remaining property on its last prior assessment roll, and thereafter all taxing jurisdictions levying upon that assessing unit’s roll would be required to levy its tax separately upon the homestead class and upon the remaining property in the same percentage shares, thus avoiding any shift of burdens. Each assessing unit would have the further option to avoid less than the full burden shift that would otherwise occur. Different percentage shares would be established for each taxing jurisdiction using the roll. (Emphasis added).
Clearly, the locally adjusted homestead proportion is an essential part of the statutory scheme for allocating tax levies between the homestead and non-homestead classes. The local adjustment provides approved assessing units with the opportunity to permit some, but not all, of the inter-class tax shifts resulting from a revaluation to occur. Therefore, since taxes levied, by taxing jurisdictions which are not coterminous with approved assessing units may be levied on the basis of either a homestead base proportion or adjusted homestead base proportion, we believe that locally adjusted homestead proportions may be established for portions within an approved assessing unit.
Further, we note that where an approved assessing unit contains one or more portions, the impact of a revaluation on the assessing unit and on each portion thereof is apt to be different. In view of the emphasis in Article 19 on providing approved assessing units with considerable latitude in fashioning local real property tax policy, we believe that the calculation of locally adjusted homestead proportions may vary between or among the assessing unit and one or more portions contained therein.
July 15, 1982
{*} An “approved assessing unit” is one certified by the State Board as having completed a revaluation in conformance with the Board’s rules promulgated pursuant to section 1570 of the Real Property Tax Law (Real Property Tax Law, §§ 1902, 1901(d); 9 NYCRR 190-4.6). A re-valuation program is deemed completed when its results are available for entry on a tentative assessment roll (Real Property Tax Law, § 1902(2)).
{**} This Opinion is concerned primarily with the “homestead base proportion”. In all instances, it is assumed that the “non-homestead base proportion” is equal to the difference between the whole number one and the “homestead base proportion”.
