We are writing to inform you of legislation concerning commercial property assessment disputes in Nassau County that was recently passed by the New York State Legislature and sent to the Governor for his consideration.

Currently, if a commercial property owner brings a proceeding to challenge the assessed value of his/her property, the owner pays real property taxes based upon the current assessment of the property and the school district receives taxes based upon that assessment. If the owner ultimately wins the proceeding and the assessment is reduced, the County pays the owner a refund, but the school district is held harmless pursuant to the County Guaranty discussed in our prior memoranda. If the owner loses and it is determined that the assessment is correct, then nothing happens because the owner has already paid based upon the correct value.

For example, if the assessed value of a commercial property is $10,000, then the real property taxes owed are based upon that $10,000 assessment and the school district will receive school taxes based upon that amount regardless of whether the owner challenges the assessed value or ultimately prevails.

If the Governor signs the new legislation into law then, beginning with the 2016-2017 tax roll, the scenario above would be altered as follows: If the commercial property owner brings a timely proceeding to challenge the assessed value of the property, the assessment would automatically be reduced by the amount sought in the proceeding, but only up to 10% of the current assessed value.[1] The owner would then make the following two payments, which would be listed as separate items on the tax bill:

(1) taxes based upon the reduced assessed value of the property; and

(2) a disputed assessment charge equal to the dollar amount by which the assessed value of the property was decreased multiplied by the applicable tax rate. Payments of this charge would be placed in a new special revenue fund called the disputed assessment fund (“the Fund”). The Fund would be maintained by the County Treasurer.

The school district would then receive school taxes based upon the reduced assessment. If the owner wins and the assessment is reduced, the owner would be paid a refund from the Fund. If it is determined that the original assessment was correct, then the amount of the disputed assessment charge would be distributed from the Fund pro rata to the County and applicable school district, town and special districts.

For example, if the assessed value of a commercial property is $10,000 and the property owner timely commences a tax certiorari proceeding claiming that the value should be decreased by 10% to $9,000, then the assessed value of the property would automatically be reduced to $9,000. The owner would then be required to pay: (1) real property taxes based upon the reduced assessment of $9,000; and (2) a disputed assessment charge equal to $1,000 multiplied by the applicable tax rate. The school district would receive school taxes based upon the new $9,000 assessment (not the original $10,000 assessment). If the property owner wins the proceeding, then he/she would be paid a refund from the Fund. It the owner loses, then the disputed assessment charge would be distributed from the Fund pro rata to the County and applicable school district, town and special districts.

It appears that the purpose of the Fund is to provide a reserve for the County from which to pay tax refunds that result from erroneous assessments made by the County’s tax assessors (as required by the County Guaranty). Another consequence of the Fund, however, is that school districts will only receive taxes based upon the reduced assessment amount of approximately 90% of the County’s original assessment when, pursuant to the current law, they receive 100%.

We will let you know if and when the Governor signs this legislation into law. Until then, please let us know if you have any questions regarding this new legislation or its potential impact upon your district.

THIS MEMORANDUM IS MEANT TO ASSIST IN GENERAL UNDERSTANDING OF THE CURRENT LAW. IT IS NOT TO BE REGARDED AS LEGAL ADVICE. THOSE WITH PARTICULAR QUESTIONS SHOULD SEEK THE ADVICE OF COUNSEL.

© Lamb & Barnosky, LLP 2014

[1] The assessed value of the property can be decreased by more than 10% if the Assessor, in his/her discretion based upon reasonable evidence, determines that it would be in the best interest of the County.