The Matter of Highbridge Broadway v. Assessor of the City of Schenectady ( 2016 )

This opinion is uncorrected and subject to revision before
publication in the New York Reports.
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No. 49
In the Matter of Highbridge
Broadway, LLC,
Appellant,
v.
Assessor of the City of
Schenectady,
Respondent,
Schenectady City School District,
Respondent.
Brian D. Mercy, for appellant.
Jonathan P. Nye, for respondent Schenectady City School
District.
New York State School Boards Association, amicus
curiae.
DIFIORE, Chief Judge:
The issue on this appeal is whether a taxpayer who
files a petition challenging the amount of the ten-year business
investment exemption under Real Property Tax Law § 485-b must
file annual petitions while the initial petition is pending in
order to compel compliance with a resulting court order. We hold
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that there is no requirement to do so.
I.
RPTL 485-b provides a partial ten-year exemption for
certain improvements made to real property, which is known as the
business investment exemption. The amount of the exemption in
each of the ten years is calculated using an exemption base,
which is the difference between the pre-improvements value of the
property and the post-improvements value of the property, as
determined by a single assessment roll. For the first year, the
exemption base is multiplied by fifty percent to arrive at the
exemption amount. In each year thereafter, the exemption base is
multiplied by a decreasing percentage until zero is reached in
year eleven, marking the end of the exemption. RPTL 485-b (3)
provides that the exemption can be obtained by filing a single
application with the city assessor.
Petitioner applied for the business investment
exemption in March 2008. In July 2008, the city assessor
published the 2008 assessment roll, which valued petitioner's
property at $653,100 and granted petitioner an exemption of
$10,470. During this same month, petitioner timely filed a
petition to challenge both the assessed value of the property on
the 2008 assessment roll and the amount of the business
investment exemption that was granted. Petitioner argued that
the assessed value of the property was too high and that the
amount of the exemption was too low.
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The city assessor was the only respondent named in this
proceeding but, as required by RPTL 708 (3), petitioner served a
copy of the petition on the Schenectady City School District (the
School District), within which the property was located.
Although the School District could have intervened in the
proceeding as of right pursuant to RPTL 712 (2-a), it did not.
It is undisputed that the School District received timely notice
of the 2008 petition and that the School District knowingly
decided not to intervene in this proceeding.
In June 2011, Supreme Court granted summary judgment to
petitioner on the amount of the exemption and recalculated the
exemption for years 2008 through 2014. The court directed the
city assessor to issue refunds to petitioner for a portion of
previously paid taxes. Copies of the court's order were sent to
the city assessor and the School District. The order was not
appealed.
The city assessor complied with the order and the City
and County of Schenectady issued refunds to petitioner. The
School District, however, refused to issue refunds. Petitioner
then moved to hold the School District in contempt and for an
award of costs, sanctions and attorneys' fees.
Supreme Court refused to hold the School District in
contempt because the court's order directing refunds did not
specifically reference the School District. The court, however,
determined that the plain language of the statute established
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that only a single application was required to obtain the
business investment exemption.1 Therefore, the court concluded
that a single petition sufficed to challenge the exemption.
Thus, the court ordered the School District to issue refunds of
any excess taxes it collected during the 2009 through 2014
calendar years due to the prior incorrect calculation of
petitioner's exemption.2
Both petitioner and the School District appealed. The
Appellate Division modified, on the law, by reversing the portion
of the order that directed the School District to issue refunds
for the 2009, 2010 and 2011 assessment rolls (124 AD3d 1193 [3d
Dept 2015]).3 The Appellate Division concluded that, even though
only a single petition was required to apply for the business
investment exemption, unless petitioner filed annual challenges
to "the assessment" in 2009, 2010 and 2011, while the initial
2008 petition was pending, petitioner failed to preserve its
1
New York courts have consistently interpreted RPTL 485-b
as "a single 10-year exemption" (see e.g., Schulman Master Ltd.
Partnership I v Town/Village of Harrison, 162 AD2d 674, 675 [2d
Dept 1990], citing Matter of Twenty First Point Co. v Town of
Guilderland, 101 AD2d 407 [3d Dept 1984], affd 64 NY2d 954
[1985]).
2
The court excluded any taxes collected by the School
District in 2008 from this order because the court concluded,
based on the evidence presented, that the taxes collected by the
School District in 2008 used the 2007 assessment roll.
3
The Appellate Division order only addressed the 2008
through 2011 assessment rolls. Therefore, the portion of the
Supreme Court's order directing tax refunds for 2012 through 2014
was not disturbed.
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challenge. Since petitioner had failed to file these annual
challenges, the Appellate Division held that the court lacked
jurisdiction to order the School District to issue refunds for
these three assessment rolls. The Appellate Division relied on
Matter of Scellen v Assessor for City of Glens Falls (300 AD2d
979 [3d Dept 2002]) to support its determination.4
We granted petitioner leave to appeal the portion of
the Appellate Division order that vacated the Supreme Court order
directing the School District to issue tax refunds for the 2009,
2010 and 2011 assessment rolls (25 NY3d 1097 [2015]). We now
reverse, and reinstate the portion of the Supreme Court order
directing the School District to issue refunds on any taxes
collected in excess of the amount petitioner would have paid if
the properly calculated exemption had been applied to the 2009
through 2011 assessment rolls.
II.
As previously explained, the business investment
exemption is of ten years' duration and the amount of the
4
In Matter of Scellen, the Appellate Division held that, in
order for a judicially reduced assessment to be subject to the
three-year assessment valuation freeze under RPTL 727, petitioner
must file petitions challenging the assessment value in each of
the three years subject to the freeze. Recently, another
Appellate Division Department declined to follow Matter of
Scellen (see Matter of the Torok Trust v Town Bd. of Town of
Alexandria, 128 AD3d 97 [4th Dept 2015]). Notably, however,
neither of these decisions addresses RPTL 485-b, the statute at
issue here.
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exemption in each of the ten years is calculated using a single
assessment roll.5 Petitioner argues that the single petition in
2008 preserved its right to obtain tax refunds for 2009, 2010 and
2011. Petitioner contends that it would be "pointless" to
require a taxpayer to file annual petitions to challenge the
amount of the business investment exemption because the exemption
is determined by a single assessment roll -- here, the 2008
assessment roll.
The School District argues that petitioner is not
entitled to tax refunds for 2009, 2010 and 2011 because, in order
to receive refunds in article 7 tax certiorari proceedings,
separate tax certiorari proceedings must be filed each year in
which refunds are sought.
When petitioner filed this article 7 proceeding in 2008
and served it on the city assessor and the School District,
petitioner made two claims: (1) that the property assessment
5
The dissent takes issue with our assertion that the
exemption is calculated using a single assessment roll, claiming
"this will not always be the case" and citing to RPTL 485-b (2)
(a) (ii) (see dissenting op. at 12). RPTL 485-b (2) (a) (ii)
provides an automatic adjustment to the exemption amount when the
assessed value of the land increases or decreases by "fifteen
percent or more" in any year in which the exemption applies. As
the dissent does not and cannot deny, here, the assessed value of
the land never increased or decreased by fifteen percent or more,
so 485-b (2) (a) (ii) was never implicated. Of even greater
importance, the automatic adjustment under RPTL 485-b (2) (a)
(ii) applies regardless of whether a petition is filed to
challenge the exemption amount. Since this provision applies
with or without the filing of a petition, it has no bearing on
our analysis.
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listed on the 2008 assessment roll was overvalued and (2) that
the amount of the business investment exemption granted was
undervalued.6 As explained above, in the context of RPTL 485-b,
the specific assessment roll that is used to calculate the
exemption base is the only relevant assessment roll; once the
exemption base is determined, a statutory formula is applied to
calculate the business investment exemption amount for all ten
years.
Here, there is no dispute that the 2008 assessment roll
was used to calculate the exemption base. As Supreme Court
correctly concluded, the successful petition challenging the
mathematical calculation of the exemption amount for 2008 applied
in all subsequent years subject to the exemption. Supreme Court
determined, and we agree, that the plain language of RPTL 485-b
6
The dissent attempts to undercut the significance of the
fact that the petition was timely provided to the School District
in 2008, affording the School District not only the opportunity
to intervene, but to anticipate the potential impact if
petitioner's challenge to the exemption calculation was
successful. The dissent suggests the petition was ambiguous
because "[a]side from citing to RPTL 485-b, the petition provided
no indication that any assessments other than the 2008 assessment
were at issue" (dissenting op. at 2). School Districts are, of
course, deemed to be aware of the impact of an RPTL 485-b
exemption. In fact, RPTL 485-b (1) affords school districts the
opportunity to opt out of the business investment exemption,
which the School District had not done here. Because the
business investment exemption spans multiple years and is
calculated using a single assessment roll, it should have been
clear to the School District that a challenge to the calculation
of this exemption would change the exemption amount in all years
in which the exemption applied. Thus, the dissent's position is
belied by the very nature of the RPTL 485-b exemption.
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establishes that a single petition challenging the business
investment exemption suffices. Moreover, petitioner is correct
that to require petitions to challenge the business investment
exemption amount in 2009, 2010 and 2011 would serve no practical
purpose, since the exemption amounts at issue were all derived
from the 2008 assessment roll.
Indeed, to require a challenge in subsequent years
means that in each of 2009, 2010 and 2011, petitioner would have
had to challenge the value of the 2008 assessment roll and the
manner in which the statutory formula was applied to that
assessment roll. Both the value of the 2008 assessment roll and
the calculation of the exemption amount were, however, already
subject to court review in the 2008 petition. There was nothing
in the assessment rolls for 2009 through 2011 to challenge that
had not already been challenged by the 2008 petition. Since the
assessment rolls for 2009, 2010 and 2011 are irrelevant to the
calculation of the exemption, we will not require annual RPTL
485-b challenges to correct an error that was already identified
and addressed by a petition in an earlier year.
Put another way, when a computational error based on a
single assessment roll results in the miscalculation of the RPTL
485-b exemption, we hold that this error may be challenged by a
single petition at the time the error is discernible. It is a
waste of resources for all involved, including the courts, to
require a property owner to bring a challenge addressing the same
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error in each and every year the exemption applies.
The dissent argues that to preserve a taxpayer's right
to refunds, "it is necessary to commence a proceeding to
challenge each final assessment while the court's determination
of the taxpayer's challenge to such calculation is pending"
(dissenting op. at 6).7 At the same time, the dissent concedes
that "the relevant statutes do not expressly state that a
proceeding must be brought for every year in which a refund is
sought" (dissenting op. at 7-8). The dissent adopts the logic of
the Appellate Division, concluding that "'the statutory scheme
underlying RPTL article 7 evinces a clear legislative intent that
a separate proceeding be timely commenced to challenge each tax
assessment for which relief is sought'" (124 AD3d at 1194,
quoting Matter of Scellen, 300 AD2d at 980). We disagree and
7
Notably, none of the cases the dissent cites for this
proposition concern RPTL 485-b and its ten-year exemption. For
example, the dissent cites People ex rel. Hilton v Fahrenkopf
(279 NY 49, 52-53 [1938]) and Vantage Petroleum, Bay Isle Oil Co.
v Board of Assessment Review of Town of Babylon (61 NY2d 695, 698
[1984]) to the effect that "[e]ach annual proceeding is separate
and distinct from every other"; those cases therefore held that
res judicata does not apply from one year to the next because
each assessment is different. But precisely the opposite is true
with respect to the ten-year exemption provided under RPTL 485-b.
Because there is "only one tax exemption which is applied over a
10-year period," in Schulman Master Ltd. Partnership I v
Town/Village of Harrison (162 AD2d 674, 675 [2d Dept 1990]), in
which succeeding property owners attempted to challenge a RPTL
485-b exemption that their predecessors had unsuccessfully
challenged three years earlier, the Appellate Division found that
res judicata applied to defeat the subsequent action (id. at 675-
76).
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conclude that the statutory scheme with respect to RPTL 485-b
evinces no such intent.
In recognition of the significant resources courts
devote to tax certiorari proceedings, the legislature has enacted
measures to curb unnecessary litigation that drains the resources
of the courts. In 1995, the legislature created RPTL 727 --
which freezes a property's assessed value for three assessment
rolls after its value has been judicially adjusted by a court --
to curb the number of annual challenges and "spare all parties
the time and expense of repeated court intervention" (Governor's
Approval Mem, Bill Jacket, L 1995, ch 693).8 The legislature has
also taken steps to expedite tax certiorari proceedings by
creating mechanisms that accelerate the note of issue (see
Sponsor's Mem, Bill Jacket, L 1995, ch 693).
Significantly, the dissent ignores the legislative
history of the business investment exemption itself, which also
reflects the legislature's desire to preserve court resources.
The business investment exemption was made available in 1976 to
provide "partial tax exemptions for a 10-year period to encourage
8
The dissent's discussion of RPTL 727 misses our point
about this section, which is that it demonstrates the
legislature's desire to decrease the amount of tax certiorari
litigation. We agree with both petitioner and the School
District that it is unnecessary even to address RPTL 727 to
decide this appeal. We note, however, that the dissent's
interpretation of RPTL 727, which adopts that in Matter of
Scellen (300 AD2d 979), was recently rejected in Matter of the
Torok Trust v Town Bd. of Town of Alexandria (128 AD3d 97 [4th
Dept 2015]), as referenced above.
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the construction and expansion of commercial and industrial
facilities in the State" (Newsday, Inc. v Town of Huntington, 55
NY2d 272, 275 [1982]). Notably, this section originally provided
for the exemption to be recalculated by the assessor each year
based on annual increases in the assessed value of the improved
property. In 1985, RPTL 485-b was amended to alleviate the need
for the assessor to continually recalculate the assessed value of
the property for purposes of determining the exemption amount
(see L 1985, ch 512, Mem of Senator Charles D. Cook, 1985 Legis
Ann at 204). The amendment provided that the exemption be
calculated based on a single assessment roll -- thereby creating
greater certainty during the ten-year duration of the exemption
for taxpayers, assessors, and school districts alike, and
removing the need for annual challenges.
Lastly, the School District argues that it is not
permitted to set aside funds in reserve to cover potential
refunds in years in which a separate petition is not filed. If
the School District believes that the Education Law prohibits
reliance on a properly filed RPTL 485-b petition to set aside
funds in subsequent years subject to the exemption, and wishes to
be able to set aside such funds, the School District may seek
relief from the legislature.
Accordingly, the Appellate Division order insofar as
appealed from should be reversed, with costs, and the order of
Supreme Court reinstated.
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Matter of Highbridge Broadway, LLC v Assessor of the City of
Schenectady
No. 49
STEIN, J.(dissenting):
It has long been commonly understood that a taxpayer
who commences an RPTL article 7 proceeding challenging an
assessment in a specific tax year must commence annual
proceedings to protest subsequent assessments while the initial
proceeding is pending in order to preserve the right to a refund
for taxes paid in any additional years. The majority now
deviates from that rule in the context of a real property tax
exemption, despite the absence of any statutory language in RPTL
485-b compelling its conclusion. In my view, the majority's
holding is inconsistent with the statutory scheme set forth in
RPTL article 7 and the general principle that taxes must be paid
under protest in order for the taxpayer to be entitled to a
refund. In addition, I believe that the majority's holding will
prove to be unduly burdensome to school districts. Therefore, I
respectfully dissent.
Inasmuch as the majority accurately recounts, in some
detail, the facts and procedural history of the underlying
litigation, only a brief summary follows. Petitioner applied
for, and was granted, an RPTL 485-b partial tax exemption in 2008
based on the completion of certain improvements to its property
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in 2005.1 Petitioner then unsuccessfully filed a complaint with
the assessor challenging the 2008 tentative assessment valuation
and the assessor's calculation of the exemption (see RPTL 512).
After the final 2008 assessment roll was filed, petitioner
commenced an RPTL article 7 proceeding to review the 2008
assessment, again challenging the valuation and the exemption
amount. Aside from citing to RPTL 485-b, the petition provided
no indication that any assessments other than the 2008 assessment
were at issue. In 2011, Supreme Court granted petitioner's
subsequent motion for summary judgment to the extent that it held
that the assessor had incorrectly calculated the amount of the
exemption prospectively through 2014, thereby entitling
petitioner to a refund for the intervening years.
The Schenectady City School District -- which had been
notified of the proceeding pursuant to RPTL 708 (3), but had not
appeared (likely because the School District did not rely on the
2008 assessment to issue any tax bills) -- refused petitioner's
demands for a refund, maintaining that petitioner was not
entitled to refunds for those years for which it had not filed an
RPTL article 7 petition. Although Supreme Court denied
petitioner's ensuing motion to hold the School District in
1
Petitioner apparently did not apply for the exemption
until 2008, well beyond the one-year statutory deadline (see RPTL
485-b [3]). Because the exemption was granted nonetheless, and
no party argued in the courts below or in this Court that the
application was untimely, that issue is not before us.
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contempt, it held, in 2013, that the School District was required
to issue refunds for any years for which it had collected taxes
based on the erroneous exemption calculation. On the resulting
cross appeals, the Appellate Division modified Supreme Court's
order by vacating the direction that the School District issue
refunds to petitioner, and otherwise affirmed (124 AD3d 1193 [3d
Dept 2015]). The Appellate Division held -- correctly, in my
view -- that the School District could not be compelled to issue
refunds because "property owners must preserve their right to
relief through annual challenges to the assessment pending a
determination of the original assessment challenge," and
petitioner had not commenced a proceeding for any year other than
2008 (124 AD3d at 1195).
As noted by the majority, the partial tax exemption
afforded by RPTL 485-b is available for a period of 10 years, and
the amount of the exemption for each year is generally calculated
pursuant to a statutory formula that uses an "exemption base"
derived from the increase in the property's assessed value in the
first year to which the exemption applies (see RPTL 485-b [2] [a]
[i]).2 In order to obtain the exemption, a taxpayer is required
to file an application with the city assessor within one year of
2
However, in the event of a change in the property's
assessment equal to or greater than 15% during the exemption
period, the statute provides a separate formula and process for
calculating a new exemption base and, accordingly, a new
exemption amount (see RPTL 485-b [2] [a] [ii]).
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the completion of the improvements upon which the exemption is
based (see RPTL 485-b [3]). If the application is approved, the
assessor calculates the amount of the exemption, and then enters
the assessed value of the exemption on the assessment roll (see
RPTL 485-b [4]).
The majority concludes that "the plain language of RPTL
485-b establishes that a single petition challenging the business
investment exemption suffices" to compel a school district or
other entity to refund taxes -- for all years pending judicial
determination -- based on an improper exemption calculation
(majority op., at 8). To be sure, RPTL 485-b requires only a
single application for the exemption, itself. However, that
statute does not address the necessity of filing petitions to
challenge denials or calculations of exemptions; nor does it
otherwise govern judicial review of such issues (see RPTL 485-b
[3]). This is because proceedings challenging the denial or
calculation of an RPTL 485-b exemption in an assessment -- like
almost all real property tax certiorari proceedings -- are
governed by RPTL article 7, whereas RPTL 485-b merely sets forth
the manner in which an exemption may be requested, calculated,
and granted by the assessor (see RPTL 700 [1] ["A proceeding to
review an assessment of real property shall be brought as
provided in this article unless otherwise provided by law"]; RPTL
706 [1] ["The grounds for reviewing an assessment shall be that
the assessment to be reviewed is excessive, unequal or unlawful,
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or that real property is misclassified"]; RPTL 701 [4] [b] [an
assessment may be "excessive because the real property failed to
receive all or a portion of a partial exemption to which the real
property or owner thereof is entitled pursuant to the law
authorizing the partial exemption" (emphasis added)]). Indeed,
it is settled that, in circumstances such as those presented
here, an RPTL article 7 proceeding is a taxpayer's exclusive
remedy to redress the denial or miscalculation of a partial tax
exemption (see Kahal Bnei Emunim & Talmud Torah Bnei Simon Israel
v Town of Fallsburg, 78 NY2d 194, 204 [1991]; Hewlett Assoc. v
City of New York, 57 NY2d 356, 363 [1982]; Dun & Bradstreet, Inc.
v City of New York, 276 NY 198, 206 [1937]). Thus, we must look
to RPTL article 7, not RPTL 485-b, to determine whether a
taxpayer is required to file successive petitions while judicial
review is pending in order to preserve the right to a refund for
taxes paid in subsequent years.3
A close inspection of RPTL article 7 reveals that,
where successive assessments may be affected by judicial review,
proceedings must be commenced for each assessment upon which the
3
For this reason, the Legislature's amendment of RPTL
485-b (to provide that the exemption amount for each year be
derived from the exemption base established in the first year in
order to alleviate the assessor's burden of reassessing an
eligible property every year) is irrelevant to the question
presented here -- that is, whether a challenge to the computation
of the exemption, which may be applied to successive years,
necessitates successive proceedings during the pendency of the
challenge.
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petitioner intends to seek recovery. Throughout article 7, the
statutory provisions refer to court review of an "assessment,"
and require that the judicial proceeding to review an assessment
be brought within 30 days of the completion and filing of the
final assessment roll (RPTL 702 [2]). Manifestly, the very
nature of a yearly "assessment," as well as the time limitations
delineated in article 7, precludes the conclusion that multiple
years of assessments can routinely be challenged in the same
petition (see generally Matter of Sterling Estates v Board of
Assessors of County of Nassau, 66 NY2d 122, 126 [1985] ["(i)n
short, the taxpayer must tell the assessors what assessment he
(or she) protests and why it is wrong" (emphasis added)]). In
other words, RPTL article 7 plainly contemplates a separate
challenge to each yearly assessment. Moreover, it is clear that
the provisions of article 7 also govern challenges to the
calculation of exemptions (see RPTL 700 [1]; 701 [4] [b]; 706),
without qualifying or altering the general requirement that a
taxpayer must challenge the specific assessment that it seeks to
have reviewed and modified in order to obtain a refund of taxes
paid pending such review.
It logically follows, then, that where more than one
"assessment" is affected by an erroneous exemption calculation,
it is necessary to commence a proceeding to challenge each final
assessment while the court's determination of the taxpayer's
challenge to such calculation is pending, in order to preserve
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the taxpayer's right to a refund or refunds for the intervening
year(s). Indeed, RPTL 726 -- which governs entitlement to
refunds -- provides that a refund may be ordered if "it is
determined that the assessment reviewed was excessive, unequal or
unlawful, or that real property was misclassified" (RPTL 726 [1]
[emphasis added]). Consequently, where a taxpayer fails to
commence proceedings relative to subsequent assessments, RPTL 726
does not apply because such assessments have not been reviewed by
the court and, accordingly, the taxpayer is not entitled to a
refund based on such assessments.4
As the Third Department stated in Matter of Scellen v
Assessor for City of Glens Falls, the aforesaid statutory scheme
"evinces a clear legislative intent that a separate proceeding be
timely commenced to challenge each tax assessment for which
relief is sought" (300 AD2d 979, 980 [3d Dept 2002]). This
reasoning was recently adopted by the Second Department (see
Matter of Jonsher Realty Corp./Melba, Inc. v Board of Assessors,
118 AD3d 787, 789 [2d Dept 2014]), and I find it to be
persuasive. Moreover, while the relevant statutes do not
expressly state that a proceeding must be brought for every year
4
This underlying principle is similarly reflected in (1)
the Uniform Rules for the New York State Trial Courts, which
require that "a separate note of issue shall be filed for each
property for each tax year" (22 NYCRR 202.59 [d] [2]; 202.60 [e]
[2]), and (2) RPTL 710, which provides for easy consolidation of
RPTL proceedings to facilitate efficient and economical review of
related or successive petitions.
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in which a refund is sought, this has long been understood as the
governing rule. For example, the 1988 edition of a leading
treatise in real property assessment law states that "each tax
year requires a new proceeding, even if a previous proceeding is
still pending" (Harry O. Lee and Wiliford A. Leforestier, Review
and Reduction of Real Property Assessments in New York, § 1.01, p
6 [3d ed 1988]). The treatise explains,
"Because of the leisurely pace at which
certiorari proceedings are tried and the
length of time involved in preparing a case,
it is common for a certiorari proceeding to
review a tax assessment for one year to
remain on the calendar beyond the deadline
for the filing of papers for the following
year . . . . If such is the case, it is
imperative that the [taxpayer] file the
necessary complaint to reserve the right of
review for each year and then commence a new
judicial proceeding. A motion for
consolidation of the proceedings for two or
more unresolved years is then in order"
(Review and Reduction of Real Property Assessments in New York
§ 4.06, at 210-211).
The enactment of RPTL 727 -- which provision, as the
majority notes, is not directly at issue here -- did not alter or
abolish the rule that annual petitions must be filed with respect
to challenges to valuations or exemptions for intervening years.
Indeed, the freezing of a property's assessed value for three
assessment rolls after its value has been judicially adjusted, as
provided in RPTL 727, is aimed at reducing the need for court
intervention. However, this change was prompted, not by any
perceived burden in requiring a taxpayer to take the minimal
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steps necessary to file annual petitions while review is pending
but, rather, by the fact that "[t]here [was] no current provision
of . . . law restricting an assessor from increasing an
assessment in the year following a judicially ordered reduction"
(Sponsor's Mem, Bill Jacket, L 1995, ch 693 at 7). In other
words, the Legislature was concerned that, upon reduction of an
assessment by the court in an RPTL article 7 proceeding, an
assessor would inflate the following year's assessment value in
order to compensate for the reduction in taxes, which would then
require the taxpayer to fully litigate each increase. This
impetus is evidenced by the reference to RPTL 722, which provides
for an award to the taxpayer of certain monetary allowances if
the assessor is found to have increased the asssessed property
value without adequate cause (see Sponsor's Mem, Bill Jacket, L
1995, ch 693 at 7; RPTL 722 [2] [a]). In fact, the amendments to
the RPTL that included the enactment of RPTL 727 were
specifically designed to "provid[e] much-needed relief to the
school districts and local governments across the State, whose
finances have long been imperiled by the existing certiorari
process" that permitted taxpayers to accumulate multiple years
worth of tax refunds by allowing their proceedings to languish
the full four years before a note of issue was required to be
filed (Governor's Approval Mem, Bill Jacket, L 1995, ch 693 at
5). Thus, "the legislative history of RPTL 727 gives no
indication that the Legislature intended to relieve petitioner of
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[the] requirement [of filing annual petitions] in the case of
assessment rolls established during the pendency of a prior RPTL
article 7 proceeding" (Matter of Scellen, 300 AD2d at 980).
Nor does the rule that a taxpayer must file petitions
for intervening years follow solely from the fact that an
assessment may change from year to year, which is the basis upon
which petitioner and the majority seek to distinguish RPTL
proceedings challenging exemptions from RPTL proceedings
challenging assessments on other grounds. To be sure, we have
recognized the potential for an intervening assessment to change
with the passing years (cf. People ex rel. Hilton v Fahrenkopf,
279 NY 49, 52-53 [1938] ["Each annual proceeding is separate and
distinct from every other"]; see also Vantage Petroleum Bay Isle
Oil Co. v Board of Assessment Review of Town of Babylon, 61 NY2d
695, 698 [1984]), and this is a factor that supports my
conclusion that each and every assessment must be challenged
individually.5 More fundamentally, however, the requirement
implicit in article 7 that a taxpayer challenge the assessment
for each year in which a refund is sought is primarily a
corollary of the principle that taxes paid without protest -- as
were petitioner's property taxes for the years other than 2008 --
are generally unrecoverable (see Video Aid Corp. v Town of
5
Such factor is implicated with an RPTL 485-b exemption,
as well since, as previously noted, the exemption base derived
from the first assessment may be recalculated if the assessed
value fluctuates by 15% or more (see RPTL 485-b [2] [a] [ii]).
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Wallkill, 85 NY2d 663, 666 [1995]; City of Rochester v Chiarella,
58 NY2d 316, 323 [1983]; Mercury Mach. Importing Corp. v City of
New York, 3 NY2d 418, 425 [1957]; Adrico Realty Corp. v City of
New York, 250 NY 29, 32 [1928]). We have also recognized that
"the Legislature has specified that protest is a condition
precedent to a proceeding under Real Property Tax Law article 7
by providing that a petition seeking review 'must show that a
complaint was made in due time to the proper officers to correct
such assessment'" (Sterling Estates, 66 NY2d at 126, quoting RPTL
706 [2]; see RPTL 512). Yet, here, the majority ignores both
petitioner's failure to comply with the requirement of RPTL
article 5 that it grieve each assessment and petitioner's failure
to petition the court in protest of each assessment.
Again, while RPTL 485-b unquestionably requires only
one application for the exemption -- which, if properly granted
and calculated requires the taxpayer to take no further action to
receive the exemption for the duration of the statutory time
period -- where the taxpayer challenges the denial or calculation
of the exemption, the statutory scheme of RPTL article 7 governs.
Under article 7, by failing to file petitions for each year
during the pendency of the court's review, petitioner forfeited
his right to seek through the court a refund of taxes based on
assessments from those intervening years. For that reason,
although RPTL 726 (1) (c) provides that school districts are
bound by final orders directing the correction of an assessment
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on the assessment roll, the Appellate Division correctly
concluded that Supreme Court lacked jurisdiction to compel the
School District to issue refunds for any year for which a
petition was not filed.
I further disagree with the majority's conclusion that
"to require petitioner to file a petition to challenge the
. . . exemption amount [in each year] would serve no practical
purpose" because the exemption is granted upon a single
application and is typically derived at the outset from the
initial assessment (majority op., at 8). Although it is true
that the amount of the RPTL 485-b exemption at issue here appears
to be dependent upon only the 2008 assessment, this will not
always be the case (see RPTL 485-b [2] [a] [ii]). In any event,
"[i]t is scarcely necessary to recite the importance of the
assessment process to the fiscal operation of municipalities"
(Sterling Estates, 66 NY2d at 124; see Video Aid Corp., 85 NY2d
at 667). As evidenced by the various amendments to the RPTL
aimed at ensuring that school districts receive adequate
notification of, and the ability to participate in, tax
certiorari proceedings, the Legislature has repeatedly recognized
that such proceedings, and the refunds that may flow therefrom,
have a substantial impact on school district finances and
budgeting. For example, the School District points out that,
under Education Law § 3651 (1-a), it cannot withdraw funds from
its tax certiorari reserve fund to cover the costs of refunds for
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years subsequent to the year in which the monies are deposited
into such fund (see Education Law § 3651 [1-a]; 43 Ed Dept Rep 20
[Decision No. 14,904]). Petitioner's failure to commence
proceedings for each year has, therefore, impeded the School
District's ability to anticipate and adequately plan for the
reimbursement of tax monies that were received several years
earlier (see Education Law § 3651 [1-a], [6]).
The majority's ruling today imposes a substantial
burden on school districts by requiring them to speculate as to
which years' assessments may be implicated in each and every
petition relating to any of the numerous potential real property
tax exemptions (see generally RPTL article 4). Notably, the
difficulty inherent in accurately gauging the number of years in
which an exemption may be applied is evidenced by the very case
before us, where, although petitioner sought a 10-year exemption,
it waived several years of the exemption through its late
application. The administrative burden attendant to estimating,
in advance, the number of years and the amount of potential
refunds that may be at issue, without the benefit of successive
petitions, will be considerable.6
6
The majority presupposes that an exemption that could
potentially be applicable to multiple tax years will necessarily
be awarded for that entire period. However, it is entirely
plausible that there could be intervening years in which a
taxpayer does not seek a refund based on an exemption, resulting
in an overestimation and earmarking of funds for tax certiorari
refunds and an unnecessary reduction in the school district's
available resources. In the absence of petitions to signal each
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The majority's comment that the School District could
have chosen to participate in the proceedings below misses the
point. The School District's appearance in the 2008 proceeding
would not have alleviated the problems caused by petitioner's
failure to file successive petitions because it likely still
would not have known that petitioner would seek refunds for
subsequent years until petitioner first requested such relief in
its motion for summary judgment, made several years after the
proceeding was commenced. By contrast, had petitioner filed
separate petitions for review of the 2009 through 2011
assessments -- despite the fact that its objections may have been
identical to its challenge to the 2008 assessment -- the School
District would then have been alerted of the possibility that it
would owe petitioner a tax refund for each of those years and
could have planned accordingly.
Ultimately, the majority's holding undermines the
legislative intent behind the amendments to the RPTL permitting
school districts to decline to become a party to every tax
certiorari proceeding in recognition of the substantial time and
expense involved (see RPTL 712 [2-a]; L 1996, ch 503, § 2).
Pursuant to this decision, school districts will now be compelled
to spend their limited resources on appearances in tax certiorari
proceedings relating to assessments upon which they may not even
year for which a petitioner may seek a refund, the School
District's ability to appropriately respond is impaired.
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have relied. This is contrary to the very purpose of the RPTL
statutory scheme.
In sum, I would affirm the Appellate Division order and
hold that petitioner was not entitled, under RPTL article 7, to
refunds from the School District based on its failure to protest
any assessment other than the 2008 assessment.
* * * * * * * * * * * * * * * * *
Order insofar as appealed from reversed, with costs, and order of
Supreme Court reinstated. Opinion by Chief Judge DiFiore.
Judges Pigott, Rivera, Abdus-Salaam, Fahey and Garcia concur.
Judge Stein dissents and votes to affirm in an opinion.
Decided May 5, 2016
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