I. SCHOOL TAX RELIEF (STAR) PROGRAM

    Several new laws were enacted this year relating to the School Tax Relief (STAR) Exemption authorized by section 425 of the Real Property Tax Law. These laws address specific issues that have arisen as a result of local administration of this important state tax benefit for homeowners. Chapter 405, a comprehensive budget-related enactment, contains provisions that revise the STAR program prospectively beginning, effective with STAR applications for the 2000-01 school year, and is a direct result of recommendations made by the Assembly to ease administration of the program and ensure qualifying homeowners receive the exemption benefit.

A. Enhanced Exemption Eligibility Issues

Age Requirement: Previously, to receive the enhanced STAR exemption, the applicants generally had to be at least 65 years of age by the locally applicable "taxable status date," which varies throughout the State. Chapter 405 specifies that for the 2000-01 school year, all owners must be 65 years of age as of December 31, 2000. In each succeeding school year, this standard will be advanced by one year (e.g., for the 2001-02 school year, age will be determined as of 12/31/01). Consequently, any homeowner who attains the age of 65 during the calendar year who is otherwise eligible for the enhanced STAR benefit will receive it. (A.2557 Smith, passed Assembly 6/3/99).

Jointly Owned Property: Previously, the only exception to the age requirement was that in the case of property owned by husband and wife, only one of the spouses had to satisfy the age requirement. Chapter 405 extends that exception to property owned jointly by siblings, as has already been done for purposes of the senior citizens exemption. (A.2410 Ramirez, passed Assembly 6/3/99).

Surviving Spouses: The enhanced exemption may be granted to a husband and wife when only one spouse is 65 or older. Previously, if the older spouse died, the exemption had to be removed because the surviving spouse would not have been eligible in his or her own right. Chapter 405 provides that in such cases, the exemption may continue if the surviving spouse is less than 65, but at least 62 years of age, as is done for purposes of the senior citizens exemption. (A.2410 Ramirez, passed Assembly 6/3/99).

Nursing Home Residents: Previously, the enhanced exemption had to be denied when the owner was absent from the residence due to long-term confinement in a nursing home or other health care facility, since the property may no longer have been his or her primary residence. Chapter 405 allows the exemption to be granted under such circumstances, as long as the property is not occupied by anyone other than the co-owner or spouse. A similar provision applies to the senior citizens exemption, except that no income adjustment is applicable for STAR purposes. (A.8358 Rules-Mazzarelli, passed Assembly 6/3/99).

Failure to Re-apply: Seniors receiving the enhanced exemption must reapply annually in order to retain that exemption. Annual applications ensure that the income eligibility requirement continues to be satisfied. Chapter 405 specifies that seniors who fail to reapply for the enhanced exemption will at least receive the "basic" exemption. (A.4794 Mazzarelli, passed Assembly 6/3/99).

B. Technical Issues

Co-ops and Manufactured Homes: STAR contains special provisions to enable residents of co-operative apartments and owners of manufactured homes (which are referred to in the RPTL as "trailers or mobile homes") to receive the benefit of the STAR exemption. The law allows these persons to apply for the exemption even though co-ops are not individually assessed (the tax bill goes to the co-operative corporation), and the same is generally true for the manufactured home communities (the tax bill generally goes to the landowner). To ensure that the correct amounts are credited to the correct parties, Chapter 405 clarifies that the assessor must provide a breakdown of the aggregate STAR exemption to the co-operative apartment owners in the case of co-ops, and to the landowner on the case of manufactured home communities. These requirements had been implicit in existing law; now they are explicit. (A.8356 Carrozza; A.8357 Koon & A.6721 Tokasz, all passed Assembly 6/3/99).

Notice of Denial: Chapter 441 requires assessors to mail a notice to any STAR applicant who has been denied the STAR exemption. The notice must be sent on a form prescribed by the State Board of Real Property Services, must set forth the basis for the denial, and must be sent "not later than ten days prior to Grievance Day (except in New York City, where it must be "mailed not later than thirty days prior to the final date for filing an assessment appeal"). However, the failure by an assessor to mail the notice of denial, or the failure of the applicant to receive the notice, will not jeopardize the "levy, collection and enforcement" of the real property taxes. (A.3471-B Brodsky).

Escrow Accounts: Chapter 400 relates to the administration of real property tax escrow accounts that are impacted by the STAR exemption. It provides essentially that when an owner of qualified residential property pays his or her taxes through an escrow account, and the property owner learns that the property will be receiving STAR, the property owner may ask the mortgage investing institution to review the expected real property tax liability of the account. If the institution finds there is an overage, it is obliged to make a proportionate reduction in the required monthly payment. The review would be considered "maintenance" of the account, meaning that no fee may be charged to performing this service. (A.8075, Rules-Sweeney).

Deadline Extensions: A STAR-related law was enacted in December of 1998, after the Summary of 1998 Legislation was published. That law, Chapter 627 of the Laws of 1998, extended the STAR application period for purposes of the 1999 assessment roll to March 1, 1999 in assessing units where the taxable status date for that roll was earlier than March 1, 1999. The affected assessing units were given special authority to adjust their local procedures and calendars as necessary to accommodate the full processing of STAR applications. This law does not affect any assessment rolls other than the 1999 rolls of these assessing units. (1998 S.7871, Senate Rules Committee).

C. STAR Bills that Passed Assembly Only

    In addition to the Assembly bill numbers mentioned above with regard to Chapter 405, there are a series of STAR initiatives that passed the Assembly this year.

Proof of Age: This bill sets forth examples of the documentation acceptable to establish proof of age for the STAR enhanced exemption while not precluding other forms the assessor may want to accept. (A.1882 Colman, passed Assembly 6/3/99).

Eligible Property:

1. This bill provides that for purposes of the real property tax exemption available under STAR, if a property has multiple uses, not just residential and a portion of the property is used by the owner as a primary residence, such residential portion shall be entitled to STAR exemption to the extent of the assessed value attributable to it. (A.1936 Tokasz, passed Assembly 6/3/99).

2. This bill provides for the application of the STAR exemption in cases of parcels with two or more separate residences, residences split by municipal boundaries, and mixed-use property in certain approved assessing units. (A.8360 Rules-Cahill, passed Assembly 6/3/99).

3. This bill extends the STAR exemption to certain Mitchel/Lama housing programs which are required to make payments in lieu of taxes or shelter rent payments to a municipality. (A.8603 Rules-Silver, passed Assembly 6/3/99).

Extension for Filing:

1. This bill extends the period for filing applications for the STAR exemption to on or before the taxable status date of the assessment roll to be completed in 1999. (A.2598-A Brodsky, passed Assembly 2/22/99).

2. This bill extends the period for filing STAR exemption with respect to 1999-2000 school taxes application. (A.5271 Silver, passed Assembly 3/1/99).

Continuation of Exemption:

1. This bill sets forth criteria for senior citizens to continue to receive the enhanced STAR exemption and provides for giving notice to them thereof. It also authorizes the Department of Taxation and Finance to provide verification of income. (A.4795 Mazzarelli, passed Assembly 6/3/99).

2. This bill provides that an enhanced STAR exemption shall be granted for the 1999-2000 school year, where such exemption was granted with respect to the 1998-1999 school year, whether or not an application therefor is timely filed. (A.5844 Silver, passed Assembly 3/1/99).

Proof of Income: This bill authorizes localities to use the federal income tax definition of adjusted gross income for determining eligibility for the STAR exemption. (A.5426 Destito, passed Assembly 6/30/99).

Calculation of Benefit: This bill includes the ratio of assessed value to market value of residential property for purposes of calculating the equalization adjustment for the STAR exemption. (A.6898 Rules-Brodsky, passed Assembly 3/15/99).

Retrospective Application:

1. This bill provides for a retrospective application for STAR exemption where an eligible person purchases property after the applicable taxable status date. (A.7210-B Higgins, passed Assembly 6/10/99).

2. This bill authorizes assessors to approve or deny applications for STAR exemption where failure to file on time resulted from a death of an immediate relative or other hardships as defined by the rules of the board. (A.7993 Rules-Christensen, passed Assembly 6/22/99.)

Annual Notice: This bill requires school districts to give property owners annual notice of the availability of the STAR exemption and modifies the text of the notice required to be given. (A.8359 Rules-Higgins, passed Assembly 6/3/99).

II. NEW YORK CITY REAL PROPERTY TAX ADMINISTRATION

A. 1999 Chapter Laws

New York City Class Shares: Chapter 407, a comprehensive budget-related enactment, contains provisions which direct that for purposes of New York City's fiscal year ending in 2000, the current base proportion of any class may not exceed the adjusted base proportion of the class in the prior fiscal year by more than 2.5%, as opposed to the 5% increase that otherwise could have occurred. (A.8807 Rules-Silver, passed Assembly 6/23/99).

New York City Class Two Tax Abatements: Chapter 407 also contains provisions that modify and extend the temporary tax abatement program for eligible condominiums and cooperatives in New York City. The program had been set to terminate after the fiscal year commencing in 1998; it is now set to end after the fiscal year commencing in 2000. In addition, the City is required to submit a plan to the Legislature by December 31, 1999 recommending how to alleviate the disparities in the real property tax burden between Class One and Class Two residential properties. (A.8808 Rules-Grannis, passed Assembly 6/22/99).

Low Income Housing in New York City: Chapter 104 expands the class of property owners eligible to receive the real property tax exemption for certain low income housing accommodations in New York City, previously limited to certain corporations and partnerships, to include limited liability companies. The newly eligible owners are subject to the same statutory criteria as have been applicable heretofore to corporations and partnerships. (A.7120 Luster).

New York City Industrial and Commercial Incentive Program: Chapter 143 makes minor technical changes to certain provisions within RPTL, Title 2-D (Tax Exemption and Deferral of Tax Payments for Certain Industrial and Commercial Properties in a City of One Million or more Persons) with respect to the New York City Industrial and Commercial Incentive Program (ICIP), and extends the program for four years. In major respects, Title 2-D is the equivalent of the business investment exemption, which is available in localities outside of New York City. (A.7119 Luster).

B. New York City Legislation that Passed Assembly Only

Single Room Occupancy (SRO) Dwellings: This bill provides for the enforcement of judgements of violations of the building code by NYC Environmental control board as tax liens against the property for private dwellings, SROs, and multiple dwellings with legal occupancy of six or fewer dwelling units. It also provides that such liens shall have priority over all other liens and encumbrances, except taxes and assessments. (A.6626-A Pheffer, passed Assembly 6/23/99).

III. ENACTMENTS PERTAINING TO SPECIFIC JURISDICTIONS

A. Nassau County Assessment Review: Chapter 218 makes a series of amendments to RPTL, '523-b, which was added last year, establishing a new Assessment Review Commission to hear complaints in Nassau County. (A.5627 Weisenberg).

B. Erie County Tax Act: Chapter 390 amends the Erie County Tax Act to allow taxpayers in Erie County to make partial payments of real property taxes. State law already generally provides for partial or installment payments at local option. This Chapter incorporates that same concept into the law which governs that tax collection process in Erie County. (A.8790 Rules-Tokasz).

IV. GENERAL ADMINISTRATION

A. 1999 Chapter Laws

Maintenance Aid: Chapter 405, a comprehensive budget-related enactment, revises the Maintenance Aid program so that it will provide $5 per locally-assessed Taxable parcel annually through the 2004 assessment roll for cities and towns that meet the applicable criteria, including annually maintaining assessments at a uniform 100% of value.

Correction of Errors: Chapter 262 extends the filing period for petitions for corrections of "errors in essential fact" from one year to three years. This conforms this filing period to that which has long governed "clerical errors" and "unlawful entries". (A.643 Luster).

Divestiture Study: Chapter 239 directs the State Board and the Public Service Commission (PSC) to submit, on or before January 1, 2000, a report to the Governor and enumerated legislative leaders. This report will analyze the real property tax implications of the divestiture of generating assets by investor-owned utilities. The report will be prepared by ORPS and will review and detail the projected real property tax implications of the divestiture of generating assets by investor-owned utilities and recommend ways to address any negative fiscal implications of such divestiture on local governments. The report will include an analysis of the potential impact on real property tax rates and revenues of those local governments in which a significant portion of the tax base consists of real property and generating assets of utilities subject to divestiture; the real property tax impact of the transfer of generating facilities and assets to other companies; and the effect that such divestiture may have upon the methods of valuing such generating facilities and assets for real property tax purposes. (A.7554-A Tonko).

City School Districts: Chapter 447 provides that when a city school district exercises the option to allow taxpayers to pay taxes in installments pursuant to '1326 of the RPTL, all payments other than the initial payment will be subject to interest. Previously, in city school districts, interest could be charged only when an installment payment was late. (A.7928 Rules-Luster).

B. Bills that Passed Assembly Only

Judicial Review: This bill authorizes a real property taxpayer during the judicial review of an assessment to call the assessor who assessed the property as an adverse witness to explain how an assessment was determined. It also extends the time period within which a proceeding to review an assessment must be commenced from 30 to 60 days after the filing of the assessment roll. (A.4750 Harenberg, passed Assembly 6/21/99).

V. EXEMPTION ADMINISTRATION:

A. 1999 Chapter Laws

Persons with Disabilities: Chapter 238 amends the partial exemption for persons with disabilities and limited incomes, to increase the maximum income ceiling from the $18,500 to $19,500, which is the same as the maximum income ceiling in the Senior Citizens Exemption. (A.6538 Christensen).

B. Bills that Passed Assembly Only

Local Labor for Construction: This bill authorizes a county, city, town, village or school district to condition the granting of the business investment real property tax exemption on the use of local labor sources for construction, alteration, installation, or improvement of the real property. It also provides a local labor source shall mean the skilled or unskilled workers within the region as determined by the local legislative authority of the county where the property is located. (A.1939 Weisenberg).

Not-for-Profits: This bill grants a real property tax exemption to nonprofit organizations that purchase real property after the particular municipality's taxable status date if the organization files an application for exemption with the assessor within 30 days of the transfer of title. (A.2714 Abbate).

Voluntary Services: This bill exempts homes owned by members of a voluntary ambulance service, and homes owned by a member of a voluntary ambulance service from taxation if the governing body of a village, town or city adopts a local law, ordinance or resolution therefor. The total amount of the authorized exemption shall be limited to 5% of assessed valuation or a maximum of $3000. (A.3326-A Bragman).

First Time Home Buyers: This bill exempts primary residential property purchased by first-time home buyers in certain localities, at local option, from real property taxation. (A.6997 Harenberg).

Real Property Held in Trust: This bill authorizes tax exemption for real property held in trust for a minor child of a person or persons otherwise eligible for such exemption due to disability and provides that such property shall be eligible for such exemption during the lifetime of such person or persons with such disability. (A.8716 Rules-Weinsten).

C. Joint Real Property Tax and Education Hearing

    The Assembly Committees on Real Property Tax and Education held a joint hearing on May 12, 1999 in Albany. The focus of the hearing dealt with ideas pertaining to real property taxation relief in localities hosting public institutions of Higher Learning. The Committee's concern is that very often the presence of a tax exempt institution of higher learning causes a significant shift of the real property tax burden onto other property owners in the community. Small municipalities hosting large institutions are particularly adversely impacted.

    While the hearing provided the committees with helpful ideas and information, no specific legislation has been drafted to attempt to alleviate the problem. The Real Property Tax Committee, in conjunction with the Education Committee, Chaired by Assemblyman Sanders, looks forward to exploring these issues further in the future.

VI. OUTLOOK FOR 2000

    The Real Property Tax Committee will deal with many diverse and demanding issues in the 2000 Legislative Session. Initially, the Committee will be actively involved in the budget process as it pertains to Office of Real Property Services and real property tax administration.

Other areas that will involve the Committee include:

1. STAR Revisions: As was the case last year, there are number of issues related to the administration of the STAR program which remain to be addressed. This includes the facilitation of the reapplication process for seniors; improved verification systems for enhanced applications; determination of qualifying properties; and clarification of refund policies, among others.

2. NYC Multiple Dwellings: Another issue to be addressed is that of encouraging the construction or rehabilitation of affordable housing in various areas of New York City by allowing tax breaks for construction of luxury multiple dwellings in the borough of Manhattan if the developers agree to build or rehabilitate such affordable housing.

3. Conservation Easements: This is an issue that has come to the attention of both the Real Property Tax Committee as well as the Environmental Conservation Committee. In the first week of December, 1999 the Committees will attend a day long conference which will address concerns and suggestions with regard to conservation easements, and the RPT Committee expects to be involved in some way with ideas leading to legislation.

4. Not-for-Profit Exemption Reforms: This year the committee had to deal with another substantial number of individual retroactive not-for-profit exemptions that have become very controversial among the members of the committee. The Committee will be assessing alternative methods to retroactively confer this tax benefit on not-for-profit property owners.

5. School Financing: The Legislature may have to address any issues that arise from the Campaign for Fiscal Equity lawsuit which recently went to trial in federal court in NYC. While it is unlikely to be resolved soon, we should be prepared to address any real property tax issues that may be decided by the court.