Volume 8 - Opinions of Counsel SBEA No. 12
Veterans exemption; alternative veterans exemption (retention of eligible funds exemption) - Real Property Tax Law, §§ 458, 458-a:
A veteran who has elected to receive the alternative veterans exemption on his or her residence may not retain any eligible funds veterans exemption on other real property.
A question has been raised in regard to the alternative veterans exemption (RPTL, § 458-a; added L.1984, c.525; amended L.1984, c.995). Specifically, a veteran, who currently owns three separately assessed parcels, is receiving an eligible funds veterans exemption (RPTL, § 458(1)) on a vacant lot and another parcel used for commercial purposes but not on his residence. We are asked whether the veteran may receive the alternative exemption on his residence and at the same time retain his eligible funds veterans exemptions on his other (non-residential) parcels.
Both sections 458 and 458-a provide a real property tax exemption in recognition of a veteran’s military service. Section 458 provides a fixed dollar exemption (not to exceed $5,000 subject to the pro rata provision of § 458(5)), based on the purchase of real property with “eligible funds” by a veteran or someone else designated in the statute as being eligible to receive the exemption (e.g., the veteran’s spouse). The exemption may be granted on any type of real property (e.g., residential, commercial, vacant) and, subject to the maximum dollar limitation, the exemption may be split among several parcels (1 Op.Counsel SBEA No. 35). The maximum may continue indefinitely if there is no change in property ownership.
The alternative veterans exemption, however, is based on a percentage of assessed value and may be granted only to the primary residence of the veteran (with certain exceptions, not relevant here). Because a person may have but one primary residence (see, 2 Op.Counsel SBEA No. 57), an alternative veterans exemption cannot be split between or among parcels. Moreover, except for the exemption for service connected disability, the alternative exemption may be granted for only a ten year period.
The eligible funds veterans exemption (RPTL, § 458(1)), first enacted in 1897, has long been subject to criticism and acknowledged as inequitable, both as among veterans and as between veterans (as a class) and other classes of property owners. {1} One of the acknowledged inequities of section 458 is that veterans of different eras have had markedly different amounts of eligible funds made available to them. For example, unlike World War II veterans, Korean and Vietnam veterans received no bonus monies, making this source of eligible funds unavailable to them. A second serious inequity is caused by the fixed dollar provision of the statute coupled with the practice of fractional assessing. Simply stated, two veterans with the same military service and the same amount of eligible funds who own homes having the same market value can receive decidedly different benefit from their exemptions as a result of the level of assessment chosen by their respective assessors. For example, an eligible funds exemption in a town assessing at 10% of value is worth 10 times the same eligible funds exemption in a town which assesses at full value.
Section 458-a was added to the RPTL as an alternative to section 458. It addresses the two major inequities of section 458 by providing the same benefit formula to all wartime veterans based on a percentage, so that the effect of the exemption is neither enhanced nor diminished by the chosen level of assessment. In an apparent effort to provide maximum flexibility to both municipalities and veterans, the new law provides each with an option to retain the eligible funds exemption.
First, each county, city, town and village was given the option to preclude the availability of the alternative exemption by timely adoption of a local law. Where a municipal corporation did so, section 458-a will have no effect, and new eligible funds exemptions (§ 458) may be granted indefinitely. However, where the municipal corporation did not “opt out”, no new eligible funds exemptions may be granted for purposes of that municipality’s taxes on an assessment roll with a taxable status date of March 2, 1986 or later (RPTL, § 458(6)(a)(i)). {2}
The second option is given to each veteran currently receiving an eligible funds exemption. A veteran who receives an eligible funds exemption as of December 31, 1985, may opt to retain that exemption even though his municipality permits the alternative exemption. Thus, in the absence of a municipal election to “opt out”, the new statute permits the individual veteran to choose between the two exemptions in order to retain whichever exemption provides the veteran with greater benefits.
Of particular importance in this case is section 458(6)(b) which provides as follows:
(b) In lieu of receiving an exemption pursuant to this section, the owner may apply for an exemption pursuant to section [458-a] of this chapter. If an exemption is granted pursuant to such section [458-a], the owner may not thereafter receive an exemption pursuant to this section, unless the owner sells the property receiving exemption and uses the proceeds of sale to purchase property in a municipality that has enacted and has in effect a local law as provided in subdivision four of section [458-a] of this chapter. In such event, the owner may again receive exemption pursuant to subdivision one of this section. [Emphasis added].
A plain reading of the emphasized clause of the above-quoted paragraph is that a veteran (or other eligible owner) receiving exemption pursuant to section 458 must exchange all of his eligible funds exemptions (i.e., Statewide) in order to receive an alternative veterans exemption on his residence. Any other reading would ignore the phrase “in lieu of” which “means ‘in place of’, ‘‘instead of’, ‘‘in substitution for’. . .” (Massachusetts Bonding & Ins. Co. v. Rutley Const. Co., 159 Misc. 392, 287 N.Y.S. 662, 666 (Munic. Ct, N.Y.C. 1936)).
The fact that the Legislature chose to give the property owner the option to exchange or retain exemptions is consistent with the personal nature of the veterans exemption which has been referred to as a “personal or transitory exemption” (Town of Huntington v. State Board of Equalization and Assessment, 53 A.D.2d 6, 385 N.Y.S.2d 389, 391 (3d Dept., 1976), mot. lv. app. den., 40 N.Y.2d 805, 389 N.Y.S.2d 1025 (1976)). Once the owner opts for the section 458-a exemption, an eligible funds exemption may not again be granted to that residential parcel (§ 458(6)(b)). However, if the owner sells that residence and uses the proceeds of sale to purchase another residence in a municipality that has opted to preclude the alternative exemption, the owner may again receive an eligible funds exemption, this time on the replacement residence.
We believe that this interpretation is most consistent with the Legislature’s intent in enacting chapter 525 of the Laws of 1984. From an administrative viewpoint, we recognize that assessors may find it difficult to verify that an applicant for an alternative exemption has terminated his eligible funds exemptions received elsewhere in the State. However, the law provides a remedy for willful false statements (Penal Law, § 175.35). We also recognize that, given the similar ownership requirements of both exemptions (§§ 458(1), 458-a(l)(c)), intra-familial transfers of title to property may nevertheless result in qualification for both exemptions in some cases. However, we believe that our conclusion is consistent with both the plain statutory language and the fundamental axiom that tax exemptions are to be strictly construed (City of Lackawanna v. State Board of Equalization and Assessment, 16 N.Y.2d 222, 212 N.E.2d 42, 264 N.Y.S.2d 528 (1965)).
Therefore, it is our opinion that where a veteran chooses to accept the new exemption authorized in section 458-a, eligible funds exemptions on other parcels of real property which he or she owns must terminate.
February 15, 1985
{1} See, e.g., 1979 Governor’s Approval Memorandum No. 19 (L.1979, c.134); “The Veterans’ Exemption in New York State: An Informational Report” (Temporary State Commission on the Real Property Tax, Feb. 1980); “Veterans Real Property Tax Exemptions in New York State” (State Board of Equalization and Assessment, May 1982).
{2} Most towns will have a March 1, 1986 taxable status date (RPTL, § 302(1); L.1984, c.379).
NOTES:
- This Opinion has been revised to incorporate changes to § 458(6)(b) made by L.2000, c.316, which removed language that had indicated that the § 458-a exemption was of limited duration (while there originally was a 10-year limit on alternative veterans exemptions, that limitation was removed by L.1990, c.903).
- This Opinion does not mention school districts because when it was written, veterans exemptions did not apply to school district taxes. However, a series of subsequent statutory amendments gave school districts the option to offer these exemptions (see, L.2013, c.518 [for the alternative veterans exemption]; L.2016, c.253 [for the cold war veterans exemption, RPTL, § 458-b, which did not exist when this Opinion was written]; and L.2017, c.376 [for the eligible funds veterans exemption]). We believe the analysis set forth in this Opinion and in 10 Op. Counsel SBRPS No. 49 may generally be extended to school districts that have opted to offer these exemptions, subject to the following qualifications:
a. In a school district that offers the alternative (or cold war) exemption, but does not offer the eligible funds exemption, a veteran who is receiving an eligible funds (or cold war) exemption for non-school purposes (i.e., for county, city, town and/or village purposes) may apply for and receive the alternative (or cold war) exemption for school purposes without giving up his or her eligible funds exemption for non-school purposes. That is because: (i) none of the amendments that extended these options to school districts suggested in any way that a veteran must surrender any existing benefits in order to take advantage of this new benefit; and (ii) the provision that requires veterans to give up any eligible funds exemptions when seeking alternative exemptions is only found in the eligible funds exemption statute (§ 458(6)(b)), which doesn’t apply in school districts that have not opted to offer that exemption.
b. If a school district opts to offer the alternative (or cold war) exemption, and it later opts to offer the eligible funds exemption as well, a veteran who has been receiving the alternative (or cold war) exemption for school purposes may choose to switch to the eligible funds exemption, assuming he or she meets the eligibility requirements. This would not be subject to the provisions of § 458(5)(b), since the veteran had never received the eligible funds exemption for school purposes in the first instance.