Volume 9 - Opinions of Counsel SBEA No. 1
Business investment exemption (calculation) (effect of revaluation) - Real Property Tax Law, § 485-b; 9 NYCRR 186-3.8:
Where a change in the level of assessment of 15% or more is certified, the assessed value of an improvement receiving the business investment exemption should be increased proportionally and the otherwise applicable exemption percentage should be applied to the recomputed assessed value.
Our opinion has been requested as to how to compute the business investment exemption (Real Property Tax Law, §485-b) after an assessing unit conducts a revaluation.
Section 485-b provides a sliding scale exemption which is applicable to an increase in assessed value attributable to construction, alteration, installation or improvement of commercial, business or industrial property. As amended by chapter 512 of the Laws of 1985, subdivision 2 of section 485-b provides that the exemption in the first year is to be calculated at 50% of the increase in assessed value attributable to the improvement. In subsequent years, the percentage is to decrease by 5% per year for an additional 9 years. In relevant part, the statute provides that:
[S]uch exemption shall be computed with respect to the increase in assessed value as determined in the initial year of such ten year period following the filing of an original application; provided, however, in any year in which a change in level of assessment of fifteen percent or more is certified for an assessment roll pursuant to the rules of the state board, the exemption shall be recomputed to take into account the increase in assessed value due to the change in the level of assessment....
In accordance with the statute, the State Board will issue a change in level of assessment factor for purposes of the business investment exemption (9 NYCRR 186-3.5(a)(8)), provided the change in level is equal to or greater than 15 percent (186-3.5(e)). Both the statute (quoted above) and the Board’s rules provide for adjustment of the exemption by the assessor or other local official having custody of the roll when the certified change in level of assessment factor is issued. Specifically, the rules provide:
Where...a change in level of assessment factor is certified for purposes of determining...business investment exemptions pursuant to section 485-b of the Real Property Tax Law, the assessor shall recompute the exemptions on the assessment roll by applying such...change in level of assessment factor and make the appropriate corrections on the assessment roll. If the assessor does not have custody of the roll when such recomputation is accomplished, the assessor shall certify such recomputation to the local officers having custody and control of such roll. Such local officers shall enter the recomputed exemptions certified by the assessor on the assessment roll (9 NYCRR 186-3.8(c)).
For example, assume the assessed value of an improvement, completed after July 24, 1985 (the effective date of chapter 512), is $10,000. Assuming a 20% change in level of assessment in the third year of the 10 year business investment exemption, the $10,000 assessed value of the improvement would be increased to $12,000 (i.e., $10,000 times 1.20 change in level). The exemption would then equal $4,800 ($12,000 x 40%). The following year, the exemption would equal $4,200 ($12,000 x 35%), assuming no further change in level of assessment.
Assuming another change in level of assessment, this time one of 25% in year nine of the exemption, the exemption would be computed as follows:
$12,000 x 1.25 equals $15,000
$15,000 x 10% exemption equals $1,500
In other words, the statute requires that the assessment of the improvement be computed in only year one and that the declining exemption be applied to that assessed value thereafter. If, however, a certified change in level of assessment of 15 percent or more is issued, the assessed value of the improvement shall be increased proportionately and the otherwise applicable exemption percentage shall be applied to the recomputed assessed value of the improvement.
April 1, 1987
NOTE: Construes law prior to L.1995, c.625. For property granted exemption pursuant to section 485-b before its amendment by L.1985, c.512, the calculation of the exemption is as described in 6 Op.Counsel SBEA No. 48.