New York Law Review

Tag: Fractional Assessment

  • O’Shea v. Board of Assessors, 8 N.Y.3d 249 (2007): Interpreting Assessment Limits in Special Assessing Units

    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.

  • Matter of 860 Executive Towers, Inc. v. Board of Assessors, 43 N.Y.2d 769 (1977): Use of State Equalization Rates in Tax Assessment Challenges

    Matter of 860 Executive Towers, Inc. v. Board of Assessors, 43 N.Y.2d 769 (1977)

    In tax assessment review proceedings, a court-determined state equalization rate can be used as proof of the ratio between assessed value and full value, and such a determination can collaterally estop future challenges to that rate by the county.

    Summary

    This case addresses the use of state equalization rates in challenging property tax assessments in Nassau County, New York. The Court of Appeals held that a prior determination of the applicable state equalization rate could be used as proof of the fractional assessment rate and that Nassau County was collaterally estopped from re-litigating the validity of that rate in subsequent proceedings. The court emphasized that the proceeding is bifurcated, first establishing the assessment ratio and then determining the property’s fair market value. The decision clarifies the procedural effect of determining the equalization rate and its impact on subsequent assessment challenges. This case also addresses the application of legislative changes enacted during the pendency of the appeal.

    Facts

    860 Executive Towers and other property owners in Nassau County challenged their property tax assessments, arguing they were unfairly high compared to other properties. The petitioners sought to use State equalization rates as evidence of the fractional assessment rate used by Nassau County. Special Term found that Nassau County was not required to comply with full valuation and that the applicable ratio between assessed and full value was the State equalization rate. The County challenged the use of the State equalization rates.

    Procedural History

    The case began at Special Term, which found in favor of the property owners regarding the use of State equalization rates. Both sides cross-appealed to the Appellate Division. The Appellate Division affirmed the Special Term’s decision, holding that the State equalization rate was the appropriate ratio. The case then went to the New York Court of Appeals. The Court of Appeals affirmed the Appellate Division’s order as modified, finding the determination of the state equalization rate was correct and operated as an interlocutory judgment.

    Issue(s)

    Whether a court’s determination of the applicable State equalization rate in a tax assessment review proceeding constitutes an interlocutory judgment, thereby allowing petitioners to proceed to prove their property was over-assessed.

    Holding

    Yes, because a tax review proceeding is bifurcated; the first part establishes the applicable ratio of assessment, and the second determines the fair market value of the property. The grant of partial summary judgment fixing the appropriate percentage of full value at the level set by the State Board of Equalization and Assessment adjudicates the issue of ratio and is in the nature of an interlocutory judgment.

    Court’s Reasoning

    The Court of Appeals reasoned that tax review proceedings are inherently bifurcated. The first stage involves determining the appropriate assessment ratio, and the second involves determining the fair market value of the property. Once the court determines the assessment ratio (in this case, the State equalization rate), it operates as an interlocutory judgment. This allows the property owner to then prove that their property was assessed at a higher percentage of its fair market value than the established rate. Furthermore, the Court held that the county is collaterally estopped from challenging the validity of the state equalization rate in subsequent proceedings once its validity has been adjudicated. The Court explicitly references 860 Executive Towers v Board of Assessors of County of Nassau, 53 AD2d 463, 475, stating that its affirmance means “once the validity of the State equalization rate has been adjudicated, the county is collaterally estopped in other proceedings from further challenges of that rate.” The Court also addressed the applicability of a new legislative subdivision limiting the use of state equalization rates, finding it did not apply retroactively to the present proceeding where a hearing had been concluded and an interlocutory judgment had been entered. The Court stated that “[w]hatever may be the current and prospective applicability of new subdivision 3 to other pending proceedings, we hold that in the present proceeding in which the hearing with respect to assessment ratios has been concluded and an interlocutory judgment has been entered determining the rate of fractional assessment in Nassau County for the years in question, new subdivision 3 has no application.”

  • Hellerstein v. Assessor of the Town of Islip, 37 N.Y.2d 1 (1975): Mandating Full Value Assessments for Future Property Taxes

    Hellerstein v. Assessor of the Town of Islip, 37 N.Y.2d 1 (1975)

    Real property must be assessed at its full market value for taxation purposes as required by Real Property Tax Law § 306, but courts may delay the implementation of this requirement to avoid significant disruption to existing tax procedures.

    Summary

    Hellerstein, a property owner, challenged the legality of Islip’s property tax assessments, arguing they violated Real Property Tax Law § 306 by assessing properties at a fraction of their full market value. While acknowledging the widespread practice of fractional assessments, the Court of Appeals held that § 306 mandates assessments at full market value. However, recognizing the potential for fiscal chaos, the court deferred the implementation of the full value requirement, allowing the town a reasonable time, not exceeding December 31, 1976, to transition to the new assessment method. This decision affirmed the statutory requirement for full value assessments while mitigating the immediate disruptive effects of changing long-standing practices.

    Facts

    Petitioner Hellerstein, a property owner in the Town of Islip, initiated a proceeding under Article 7 of the Real Property Tax Law, asserting that the town’s entire assessment roll was void. Her claim was based on the argument that assessments were not made in accordance with Section 306 of the Real Property Tax Law, which mandates that all real property be assessed at its full value. It was conceded that the assessments throughout the township were based on a percentage of market value, rather than full market value.

    Procedural History

    The Supreme Court, Suffolk County, dismissed Hellerstein’s petition. The Appellate Division, Second Department, affirmed the dismissal, citing McAlevey v. Williams as binding precedent, though noting cases from other states supporting the prohibition of fractional assessments. The case then reached the New York Court of Appeals by leave of the Appellate Division.

    Issue(s)

    Whether Real Property Tax Law § 306 requires that real property be assessed at 100% of its full market value, and if so, whether a court must immediately invalidate an assessment roll that does not comply with this requirement, potentially causing fiscal disruption.

    Holding

    Yes, because Real Property Tax Law § 306 mandates that all real property in each assessing unit be assessed at its full value, which means market value. However, the order directing the township to assess at full value should not go into effect immediately; the township should be allowed a reasonable time, not later than December 31, 1976, to make the transition.

    Court’s Reasoning

    The court acknowledged the long-standing, nearly 200-year-old, practice of fractional assessments in New York State, despite the statutory requirement for full value assessments. The court reviewed prior cases criticizing fractional assessments, such as Van Rensselaer v. Witbeck and People ex rel. Board of Supervisors v. Fowler, which condemned the practice as a violation of the statute and assessors’ oaths. However, the court also addressed cases like C.H.O.B. Assoc. v. Board of Assessors, which seemed to endorse fractional assessments by focusing on uniform percentages. The court rejected the argument that the creation of the State Equalization Board implied legislative approval of fractional assessments, emphasizing the Board’s role in ensuring equality among taxing units, not within them.

    Quoting Matter of Wendell v. Lavin, the court stated, “[P]lain and clear provisions of a Constitution require no such aid; they are to be enforced and brought to life early or late, and must not be smothered by the accumulation of customs or violations.” The Court recognized the potential for fiscal chaos if it immediately invalidated the assessment roll. Citing Matter of Andresen v. Rice, the court stated it should not act “so as to cause disorder and confusion in public affairs even though there may be a strict legal right.”

    Balancing the need to enforce the statute with the practical consequences, the court directed the township to implement full value assessments by December 31, 1976. This allowed the township time to adjust its procedures and avoid immediate disruption. In the interim, assessments could continue under the existing practice, and related tax levies, liens, foreclosures, and transfers would not be subject to challenge based on non-compliance with § 306.