Judges： Gibbons, Titone
Filed Date： 7/27/1981
Status： Precedential
Modified Date： 11/1/2024
The resolution of the question presented here concerning the refusal of the Tax Assessor of the Town of Huntington to grant a tax exemption, pursuant to section 485-b of the Real Property Tax Law, entitled “Business investment exemption” (added L 1976, ch 278), must, at the outset, be approached by reference to the declared governmental purpose for the establishment of statutory tax exemptions as an incentive to stimulate business enterprises to invest their funds in the expansion of commercial, business and industrial facilities within the State and to thereby create new labor markets and improve its economy.
The State’s policy in this effort is described in the memorandum of the State Executive Department (McKinney’s Session Laws of NY, 1976, pp 2309-2310) as follows:
“Purpose of the bill
“To provide a real property tax incentive for the improvement of real property for commercial, business and industrial purposes.
“Summary of provisions of the bill
“The bill adds a new section to the Real Property Tax Law which will grant a real property tax exemption to the extent of 50 percent of the increase in assessed valuation attributable to construction, alteration, installation or improvement of such real property for specified industrial, business and commercial purposes.
“The exemption will be 50 percent for the first six years, 40 percent for the seventh year, 30 percent for the eighth year, 20 percent for the ninth year and 10 percent for the tenth year.
“The 10 year exemption shall cease in the event the property ceases to be used for eligible purposes.
“Any local government or school district is empowered to reduce the percentage of exemption allowed pursuant to this bill.
“The bill will take effect immediately and will be applicable to projects commenced subsequent to January 1, 1976 and completed subsequent to July 1,1976.
*247 “Statement in support of the bill
“This bill will provide the State of New York with another tool to encourage business development. It will encourage businessmen to improve obsolete facilities within the State. It will assist in reducing the competitive edge which other states presently have over New York State as a site for commercial, business or industrial expansion.
“Since the exemption relates only to the increase in assessed valuation, there is no loss of present tax revenues. Also, the exemption will not eliminate all increased revenue that would otherwise be available through increased assessed values. The bill, therefore, strikes a balance between the need to encourage development and the need for new local revenues.
“In order to eliminate the initial possibility of competition among units of local government within the State, the exemption is applicable originally statewide. However, the bill does contain a local option provision which counties, cities, towns, villages and school districts may exercise.”
This statute became effective on June 8, 1976 and, in its early developmental stages, it was discovered that, under subdivision 7 as originally enacted, the power conferred upon local municipalities and school districts to reduce or eliminate tax exemptions was completely without restriction, and was so worded that the exercise of such local option could terminate a tax exemption which had already been granted. The counterproductive effect of this language was soon recognized to be a deterrent to future business investment and expansion by removing the incentive after the owner had invested money to improve business property in reliance upon such incentive.
This destructive fault was corrected in the following term of the Legislature when subdivision 7 was amended by chapter 397 of the Laws of 1977 (eff July 6,1977) by adding the words “provided, however, that exemptions existing prior in time to passage of any such local law or resolution shall not be subject to any such reduction so effected.”
In furtherance of the policy enunciated in section 485-b of the Real Property Tax Law, the appellant school district,
A consideration of the ensuing events, in chronological order, produces the following factual background upon which our determination must be made.
The respondent Newsday, a daily Long Island publication, acquired about 33 acres of land located in the Town of Huntington and within the boundaries of the appellant school district for the purpose of erecting a modern publishing plant at a cost of about $6,500,000. On November 10, 1977 the Town of Huntington issued a building permit and the construction of the new facility was then commenced.
In September of 1978 a representative of the respondent Newsday inquired of the Assessor of the Town of Huntington in relation to the filing of an application for tax exemption for the new plant and was advised by him that such application was to be filed with his office by June 1,1979.
Construction of the plant continued; by April 9, 1979 it had been 90% completed, and on April 12, 1979 a temporary certificate of occupancy was issued to Newsday by the Town of Huntington.
However, on April 9,1979, three days before the issuance of the temporary certificate of occupancy, the appellant school district, in an attempt to exercise its local option to change its prior policy, as expressed in its above-mentioned resolution of November 22, 1976, adopted the following resolution by which it reduced the tax exemption to zero: “resolved that pursuant to Section 485B of the Real Property Tax Law the percentage of exemption is reduced to zero and be it further resolved that the aforementioned resolution of November 22,1976 is hereby rescinded in total
A copy of this resolution was sent to the Tax Assessor of the Town of Huntington and to the New York State Board of Equalization and Assessment.
On May 10,1979 respondent Newsday filed an application for tax exemption, pursuant to section 485-b of the Real Property Tax Law, with the Assessor of the Town of Huntington and mailed a copy to the State Board of Equalization and Assessment on May 31, 1979.
Thereafter, the assessor notified Newsday that its application was granted to the extent that it would have tax exemption with respect to town, county and special district taxes, but not with respect to school taxes because of the resolution adopted by the appellant school district on April 9,1979, reducing the tax exemption to zero.
Notwithstanding that as a general rule of law a tax exemption statute, being in derogation of the sovereign’s power to impose taxes, will be strictly construed against the taxpayer and any ambiguity or doubt will be resolved in favor of the sovereign (Matter of City of Lackawanna v State Bd. of Equalization & Assessment of State of N. Y., 16 NY2d 222), and that, absent any countervailing circumstances, the right of a taxing authority to terminate a tax exemption remains completely unfettered and may not be challenged by the taxpayer, as, for example, where a tax exemption was terminated as to the grantee of hospital premises which had previously enjoyed tax exemption (see Bronx Garment Center v City of New York, Dept, of Fin., Bur. of City Collections, 199 Misc 513, affd 279 App Div 1048, mot for lv to app den 280 App Div 890), there are, nevertheless, certain equally important and concomitant principles of law which are also required to be con
Concerning the rationale to be applied in interpreting a statute conferring a tax exemption, the Court of Appeals in Matter of Association of Bar of City of N. Y. v Lewisohn (34 NY2d 143, 153) held: “And while exemption statutes should be construed strictly against the taxpayer seeking the benefit of the exemption, an interpretation so literal and narrow that it defeats the exemption’s settled purpose is to be avoided. (People ex rel. Watchtower Bible & Tract Soc. v. Haring, 8 N Y 2d 350, 358.)” (Emphasis added.)
The concept of legislatively created real estate tax exemptions finds itself in numerous portions of title 2 of article 4 of the Real Property Tax Law in addition to the subject section 485-b dealing with land used for commercial, business and industrial activity. To name but a few, it should be noted that section 421-a confers such benefit on new multiple dwellings; section 477 grants such tax benefits for the establishment of industrial waste treatment facilities; section 485-a provides land tax exemption for real property used for the manufacture of steel; and section 489 grants such exemption from taxes for the alteration and improvement of multiple dwellings to eliminate fire and health hazards. These various tax incentive statutes have assumed a very important role in fostering the economic growth of domestic trade and commerce and the improvement of housing facilities and other benefits for the inhabitants of this State.
The limited and constricted interpretation adopted by our dissenting colleague permits the resolution of the appellant school district made on April 9, 1979, reducing the percentage of tax exemption to zero, to do violence to the purpose of this statute.
In construing section J51-2.5 of the Administrative Code of the City of New York, which affords tax exemption and
The obvious purpose of the enactment of subdivision 7 of section 485-b of the Real Property Tax Law is to afford a local municipality or school district, as stated in Matter of Association of Bar of City of N. Y. v Lewisohn (34 NY2d 143, 155, supra), the prerogative “to stem the erosion of municipal tax bases by permitting local governments to terminate exemptions”, where the circumstances warranted such cutoff in the interest of its financial well-being.
However, implicit in the granting of such power by the Legislature, there was engrafted the concomitant precept that it would be exercised in a reasonable manner compatible with the statutory purpose, and not in such way as to so undermine the underlying purpose of the statute as to, for all practical purposes, deter others from seeking the tax incentive offered by the statute.
The Legislature did not create the power of local option under subdivision 7 or amend it by adding the above-mentioned safeguards to create an instrumentality for inequity.
When the appellant school district passed its first resolution of November 22, 1976, it adopted the concept of tax exemption afforded by section 485-b of the Real Property Tax Law and, by its action, it invited the respondent News-day and perhaps others, to invest and make capital improvements for commercial, business and industrial growth within its borders and, to this extent, it joined in the hope that economic conditions of the State and the body politic would thereby benefit.
To now hold that, after almost $6,500,000 has been invested by Newsday in constructing this business facility over a period of one year and five months, the statute should
Prompted by its concern to stabilize existing tax exemptions, the Legislature, in 1977, amended subdivision 7 of section 485-b to provide protection for tax exemptions already conferred. This amendment represents a manifestation of its intent to encourage the improvement of real estate for business purposes and now furnishes an aid in the interpretation of how the statute should be construed in relation to the manner in which the local option to withdraw was intended to be exercised, and, particularly, with respect to those, as here, who, in good faith and in reliance on the continuance of such policy, had already made sizable expenditures to that end.
The only reasonable way by which the local option to decrease or terminate the tax exemption contemplated by section 485-b of the Real Property Tax Law may be exercised, in harmony with the statutory purpose, would be by a resolution or local law which provides for such result with respect to any construction, alteration or improvement to real property commenced after the effective date of such resolution or local law. The resolution of April 9, 1979 evinced an intent by the school district to “opt out” of the statutory tax exemption benefit only with respect to owners of “Real Property constructed, altered or improved after the date of this resolution” (emphasis added), and if construed to preclude the respondent’s application for tax exemption herein, it would be legally ineffectual for the reason above noted. Having already commenced and substantially completed construction of its business facility prior to the resolution of April 9, 1979, the respondent Newsday was, at that time, eligible to apply for tax exemption under section 485-b. The temporal fact that the school district’s resolution preceded the requisite filing of the application for tax
Contrary to the assertion expressed in the dissent, the resolution of the issue here does not depend on an improper application of the doctrine of equitable estoppel to justify the granting of tax exemption in this matter, but, rather, such result obtains for the reason that the resolution of April 9, 1979, by its language, construed in a manner compatible with the legislative purpose of section 485-b of the Real Property Tax Law, limited its exclusion of tax exemption to a class of property owners who had “constructed, altered or improved” real property after its effective date, and not to those who had, as the respondent Newsday, commenced such construction operations before its effective date. Under the circumstances herein, the Assessor of the Town of Huntington, in the performance of his ministerial duty of passing upon the respondent’s application for tax exemption, which was timely filed and otherwise sufficient, misconstrued the legal effect of the resolution of April 9, 1979 and improperly denied the application.
We note that appellants failed to assert before Special Term that the instant matter was improperly brought as a declaratory judgment action and instead should have been commenced pursuant to the provisions of article 7 of the Real Property Tax Law (see Cablevision Systems Dev. Co. v Board of Assessors of County of Nassau, 49 NY2d 866; Sikora Realty Corp. v City of New York, 262 NY 312, 317-318). Therefore, we do not pass upon the point or upon the possible use of CPLR 103 (subd [c]) to convert the action into its proper form. “Where * * * all parties to a litigation choose to do so, they may to a large extent chart their own procedural course through the courts (Matter of Malloy, 278 N. Y. 429)” (Stevenson v News Syndicate Co., 302 NY 81, 87). It is noted that the matter was fully contested at Special Term and no objection was made to the procedure adopted.