Is Property Tax Reform Finally Coming to New York?

by Bond Schoeneck & King PLLC
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In November 2013, Governor Cuomo released the Final Report of the New York State Tax Reform and Fairness Commission regarding tax reform. One week later, the New York State Senate Republican Conference Tax Policy Review & Reform Initiative issued a Preliminary Report regarding the same issue. Among other tax reforms, each report recommended action to reform New York’s real property tax system.

It should come as no surprise that there is widespread agreement that property tax reforms are necessary. The real property tax system in New York ranks among the lowest of the 50 states. For example, New York is among the last remaining states that do not require assessments to be periodically updated and that do not provide a single set of valuation standards to be applied to all properties. Further, New York has almost 1,000 different assessing units - more than other states its size. For these reasons, both reports conclude that New York’s real property taxation system lacks fairness and transparency of administration.

To address the issues of fairness and transparency, both studies propose similar recommendations. First, the legislature must establish a clear, statutory standard for assessment to apply to all properties. Second, assessment updates should be required in no less than five year increments. Third, the legislature should provide for state assessment of complex properties, such as power plants. Such a system, which is already used for special franchise properties such as utilities and telecommunications, would reduce the burden of assessment on local governments.

Each report also contains unique recommendations. For example, the Tax Reform and Fairness Commission proposes modifying state aid programs to promote efficiency, such as the sharing of assessment resources at the county level. The Republican Conference Tax Policy Review & Reform Initiative proposes re-instating STAR rebate checks and making the tax cap permanent, avoiding the possibility of it lapsing in 2016.

In his State of the State address, Governor Cuomo proposed property tax credits for manufacturers and a conditional two-year freeze on homeowner’s property taxes that would transition into a circuit breaker system. To qualify for the property tax freeze, local governments must stay within the 2 percent tax cap in the first year and take concrete steps toward consolidating or sharing services with other local governments in the second year. Cuomo also proposed a refundable property tax credit for manufacturer’s equal to 20 percent of its annual real property taxes. Critics of the Governor’s proposal likened it to “voodoo economics” noting that tax breaks for businesses and the wealthy do not help the middle class and that if the state really wants to reduce property taxes, it should adequately fund schools and municipal services.

Although it is encouraging that these issues are being discussed, it remains uncertain whether there is political will to enact these reforms. Many assessing units may oppose mandated assessment updates because the financial burden would fall on them. In addition, some landowners will oppose an assessment update because such action will shift the relative valuation among similarly constructed properties, perhaps raising their assessment.

We will continue to monitor whether the recommendations in these reports move forward through the legislature.

Image courtesy of Stuart Miles / FreeDigitalPhotos.net

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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