8 N.Y.3d 249 (2007)

Real Property Tax Law § 1805(1), which limits assessment increases on residential property in special assessing units, applies to fractional assessments, not full market value, and does not restrict a locality’s ability to adjust the fractional assessment rate to correct inequities within the residential class.

Summary

Homeowners in Nassau County challenged property tax increases following a county-wide revaluation, arguing that the increases violated Real Property Tax Law § 1805(1), which limits assessment increases to 6% annually and 20% over five years. The revaluation was mandated by a settlement in Coleman v. County of Nassau to address discriminatory assessment practices. The County lowered the fractional assessment rate to comply with the settlement, leading to higher full market values but fractional assessment increases within the statutory limits. The Court of Appeals affirmed the dismissal of the homeowners’ petitions, holding that the statute applies to fractional assessments, not full market values, and allows adjustments to the fractional assessment rate.

Facts

• Nassau County historically based residential property valuations on 1938 construction costs, not current market value.
• In 1997, plaintiffs sued the County in Coleman v. County of Nassau, alleging discriminatory property tax assessments.
• A settlement required the County to update its assessment rolls to reflect fair market value using a uniform fractional assessment.
• To comply with the settlement and RPTL 1805(1), the County lowered the fractional assessment rate to 1% of full market value.
• This resulted in significant increases in full market values but limited increases in fractional assessments.

Procedural History

• Homeowners filed proceedings challenging the tax increases.
• Supreme Court dismissed the petitions.
• The Appellate Division affirmed the dismissal.
• The Court of Appeals affirmed the Appellate Division’s order.

Issue(s)

1. Whether Real Property Tax Law § 1805(1) limits increases in full market value or fractional assessment in special assessing units like Nassau County.
2. Whether Nassau County’s adjustment of the fractional assessment rate to comply with a court-ordered revaluation violated RPTL § 1805(1).

Holding

1. Yes, because RPTL § 1805(1) applies to fractional assessments, which are the values directly used for tax calculations, not full market value.
2. No, because RPTL § 1805(1) does not limit changes in the fractional assessment rate and was not intended to prevent a special assessing unit from correcting inequities within the residential class through revaluation.

Court’s Reasoning

• The court reasoned that chapter 1057 of the Laws of 1981, which enacted RPTL Article 18, was primarily aimed at preventing tax shifts from businesses to homeowners, not limiting tax increases due to market forces within the residential class.
• The legislative history of RPTL Article 18 demonstrates that the statute was intended to stabilize the tax burden between businesses and homeowners, especially in Nassau County, which faced extensive tax certiorari litigation. The legislators were assured the County could continue its existing assessment methods.
• The term “assessment” in RPTL § 1805(1) refers to the fractional assessed value that appears on the assessment roll, not the full market value of the property. This interpretation aligns with the legislative intent and the historical context of the statute.
• The court distinguished between “assessed value” and “market value,” noting that the Real Property Tax Law uses both terms, implying they have different meanings. RPTL § 102(2) defines assessment as a determination of valuation, not full market value.
• The court rejected the argument that the County exploited a loophole, emphasizing that the revaluation aimed to correct long-standing tax disparities between wealthier and poorer residential areas without changing the overall tax burden of the residential class.
• The dissenting opinion argued that the majority’s interpretation eviscerates RPTL § 1805(1) by allowing the County to manipulate fractional assessments to circumvent the statute’s limits on tax increases. The dissent suggested that the statute requires a meaningful year-to-year comparison of assessments, which is impossible if the fractional assessment rate changes arbitrarily.