New York Law Review

Tag: Payments in Lieu of Taxes

  • Matter of County of Suffolk v. New York State Bd. of Equalization & Assessment, 91 N.Y.2d 51 (1997): Transition Assessments and Payments in Lieu of Taxes

    91 N.Y.2d 51 (1997)

    When state law mandates both transition assessments and payments in lieu of taxes (PILOTS) following a state takeover of property, both apply; PILOTS are subtracted from state aid calculated for transition assessments, unless the legislature explicitly states otherwise.

    Summary

    This case addresses whether transition assessments under RPTL 545 apply to revenue decreases from the Long Island Power Authority (LIPA) takeover and decommissioning of the Shoreham nuclear power plant. The Court of Appeals held that RPTL 545 does apply because the LIPA Act doesn’t explicitly supersede it, and transition assessments are consistent with LIPA’s PILOT obligations under Public Authorities Law § 1020-q. The court emphasized that both statutes can be harmonized: PILOT payments are simply deducted from any transition assessment aid. The Appellate Division’s order was reversed and the matter remitted for further proceedings.

    Facts

    In 1987, the LIPA Act was enacted to replace LILCO with LIPA as owner of the Shoreham plant. Shoreham was transferred to LIPA on February 29, 1992. Public Authorities Law § 1020-q requires LIPA to make PILOTS, initially equal to the taxes the taxing jurisdictions would have received without the state takeover. These PILOTS decrease by 10% annually until they equal the taxes on Shoreham in an inoperative state. Several taxing jurisdictions applied for transition assessments under RPTL 545 due to the shortfall from declining PILOTS.

    Procedural History

    The SBEA initially certified a zero transition assessment, then later certified approximately $53 million for the 1993-1994 tax year. After the Appellate Division’s decision in a related PILOT litigation case, the SBEA rescinded both certifications, claiming RPTL 545 didn’t apply. Appellants commenced an Article 78 proceeding, which the Supreme Court dismissed. The Appellate Division affirmed, holding that SBEA’s decision was rational, that declining PILOTS reflected Shoreham’s inoperative condition, and that the Legislature intended PILOTS to compensate for revenue loss. This appeal followed.

    Issue(s)

    1. Whether RPTL 545 applies to LIPA’s acquisition of Shoreham.

    2. If RPTL 545 applies, whether the LIPA Act supersedes the transition assessment provisions of RPTL 545.

    Holding

    1. Yes, RPTL 545 applies because Shoreham was acquired by a state agency (LIPA), became tax-exempt due to the acquisition, and constituted more than 2% of the total taxable assessed valuation.

    2. No, the LIPA Act does not supersede RPTL 545 because the LIPA Act does not explicitly repeal RPTL 545, and the two statutes can be read harmoniously, with PILOTS reducing the amount of state aid calculated for transition assessments.

    Court’s Reasoning

    The Court of Appeals determined that RPTL 545, a statute of general applicability, applies when the State or its agency acquires property that becomes exempt, meeting certain valuation thresholds. The court emphasized that the statute contains no exemptions preventing it from applying to the LIPA takeover. Regarding whether the LIPA Act supersedes RPTL 545, the court stated that repeals by implication are disfavored and require a finding that the statutes are in irreconcilable conflict. The court noted, “Generally, a statute is deemed impliedly repealed by another statute only if the two are in such conflict that it is impossible to give some effect to both. If a reasonable field of operation can be found for each statute, that construction should be adopted.” The court found that RPTL 545(6) already accounts for PILOTS by requiring transition assessments to be reduced by the amount of PILOTS paid. Therefore, the statutes are consistent. The court rejected the SBEA’s argument that the Legislature intended to displace all other laws with the LIPA Act, finding no unequivocal declaration to that effect. The Court explicitly stated that absent a legislative directive otherwise, they cannot disturb the manner of balancing state aid as explicitly stated in RPTL 545.

  • Long Island Power Authority v. Shoreham-Wading River Central School District, 88 N.Y.2d 503 (1996): Determining Payments in Lieu of Taxes (PILOTs) After Property Acquisition

    88 N.Y.2d 503 (1996)

    When a public authority acquires property previously subject to taxation, the obligation to make payments in lieu of taxes (PILOTs) begins when the property is officially removed from the tax rolls, and the authority is entitled to seek refunds for overpayments of PILOTs based on challenges to the property’s assessed valuation.

    Summary

    This case addresses the effective date for Long Island Power Authority’s (LIPA) obligation to make payments in lieu of taxes (PILOTs) after acquiring Long Island Lighting Company’s (LILCO) Shoreham Nuclear Power Plant. The court also determined whether PILOTs should continue indefinitely and whether LIPA could seek refunds on past PILOTs based on court challenges to the plant’s assessed valuation. The Court of Appeals held that the PILOT obligation begins when the property is removed from the tax rolls and that LIPA can seek refunds for overpayments. PILOTs continue in perpetuity but can be reduced based on a proper assessment of the plant in its nonoperative state.

    Facts

    In February 1989, LIPA and LILCO entered into a settlement agreement for LIPA to acquire the Shoreham plant. The actual transfer of title occurred on February 29, 1992. Prior to the transfer, LILCO had challenged the assessed valuation of the Shoreham plant through tax certiorari proceedings. Before the transfer, LILCO paid half of the approximately $82 million in taxes due for the 1991-1992 tax year. Disputes arose regarding the effective date of LIPA’s PILOT obligations and the amount of PILOTs owed.

    Procedural History

    LIPA initiated an action seeking a declaration regarding its PILOT obligations. The defendant taxing jurisdictions counterclaimed. Supreme Court declared that LIPA’s PILOT responsibility began upon the transfer of the Shoreham plant, that LIPA was entitled to refunds for excess PILOTs, and that the plant was nonoperative prior to transfer. The Appellate Division affirmed. The Court of Appeals granted leave to appeal.

    Issue(s)

    1. Whether LIPA’s PILOT obligation superseded LILCO’s real property tax liability immediately upon the February 29, 1992, date of transfer?

    2. Whether LIPA’s obligation to pay PILOTs on the Shoreham plant terminates entirely after the first year following LIPA’s acquisition?

    3. Whether LIPA is precluded from seeking refunds on past PILOTs for the taxable years following the Shoreham acquisition?

    Holding

    1. No, because under the Suffolk County Tax Act, the tax status date determines tax liability for the entire ensuing taxable year; therefore, LILCO was responsible for the taxes through November 30, 1992.

    2. No, because the statute directs gradual reduction of the size of PILOTs until they reach a floor level of taxes and assessments equivalent to tax levies on a nonoperative facility, which then continue in perpetuity.

    3. No, because the plain language of Public Authorities Law § 1020-q(3) does not prohibit an action by LIPA to recover PILOT overpayments based on inflated assessed valuations after the LIPA Act’s enactment; the law was intended to relieve taxing jurisdictions from liability for past taxes, not prospective PILOTs.

    Court’s Reasoning

    The Court reasoned that the tax status date determines tax liability for the entire year, citing People ex rel. Luther v McDermott, 265 NY 47, 51. Because Shoreham was not removed from the tax rolls until July 1, 1992, LILCO was responsible for taxes until the end of the 1991-1992 taxable year. The Court found no legislative intent to override this general rule. The Court rejected LILCO’s argument that PILOTs should terminate after one year, holding that the statute only limits the decreases in PILOTs, not the continuation of payments. The Court emphasized the purpose of the LIPA Act: to provide a substitute stream of revenue for municipalities. Regarding refunds, the Court found that Public Authorities Law § 1020-q(3) only bars refunds for past taxes challenged by LILCO, not for prospective PILOTs. The Court stated, “[t]hat section also bars recovery of any refund from any such taxing jurisdiction of taxes previously paid, which refund may have become due as a result of a ‘judicial determination that the Shoreham plant assessment was excessive, unequal or unlawful for any of the years from [1976] to the effective date of this title’.” The Court interpreted legislative history to mean that the Legislature did not intend to permit local taxing jurisdictions to inflate PILOTs without judicial review. The court noted “with respect to the real property on which the Shoreham Nuclear Plant is located, in lieu payments are required in amounts which phase-down their inordinate and inequitable size“.