Chapter 24 - Taxes and Assessments

I. Purpose and Nature of Property Taxation

Real estate taxes, also known as ad valorem taxes (Latin for "according to value"), are the primary source of revenue for local governments and school districts in New York.

• Why Tax Real Property? Unlike sales or income tax, property is a fixed asset that is predictable, hard to conceal, and has a historic relationship to wealth.

• What is Taxed: Both the Land and the Improvements (the house, garage, etc.) are included in the tax calculation.

• Exempt Properties: Certain properties are "wholly exempt" and pay $0 in property taxes, including those owned by religious organizations, government entities, and charitable institutions.

II. Calculation of Real Estate Taxes

To determine a tax bill, you must understand the relationship between three numbers: Market Value, Assessed Value, and the Tax Rate.

• Assessed Value: This is a percentage of the property's Market Value.

• Assessment Ratio (Level of Assessment): The uniform percentage used by a municipality (e.g., if the ratio is 10%, a $500,000 home is assessed at $50,000).

• Tax Rate: Often expressed as a "Mill Rate" (the tax amount per $1,000 of assessed value). It is determined by the local budget.

Sample Math Formula:

1. Assessed Value = Market Value × Assessment Ratio

2. Tax Bill = (Assessed Value ÷ 1,000) × Mill Rate

III. Assessments and Re-assessments

Assessments must be equitable. However, certain actions can trigger a change:

• Building Permits: When a homeowner gets a permit for an improvement (like a new pool or finished basement), the Building Department notifies the Assessor, which typically leads to a re-assessment.

• Selective Assessment (Illegal): It is illegal in NY to re-assess a property only because it was recently sold while leaving neighboring properties at older levels.

• Community-wide Re-assessment (Legal): A legal process where every property in the municipality is updated to current market value at the same time.

IV. Exemptions (Reducing the Bill)

New York provides several exemptions that lower the "Taxable Assessed Value":

• STAR Program (School Tax Relief): The most common exemption for a primary residence.

• Basic STAR: Available to anyone who owns and lives in their home (Income limit $500,000).

• Enhanced STAR: For seniors (65+) with limited incomes.

• Other Exemptions: Available for Veterans, the Disabled, and the Elderly. These reduce the assessed value before the tax rate is applied.

V. Protesting Your Assessment (Grievance)

If a property owner believes their assessment is too high, they can "grieve" the assessment. Note: You cannot grieve the tax rate; you can only grieve the assessed value.

1. Administrative Review (Board of Assessment Review - BAR):

• Filed on Grievance Day (typically the 4th Tuesday in May).

• Grounds for Review: 1. Unequal Assessment: Your property is assessed higher than similar properties. 2. Excessive Assessment: The assessment is higher than the actual market value. 3. Unlawful Assessment: The property should be exempt. 4. Misclassification: The property is listed as commercial but is residential.

2. Judicial Review (If Grievance is Denied):

• SCAR (Small Claims Assessment Review): A low-cost ($30) informal hearing for residential owner-occupants of 1-3 family homes.

• Tax Certiorari Proceeding: A formal lawsuit in NY Supreme Court used primarily for commercial properties and apartment buildings.

⚠️ EXAM ALERT: QUICK FACTS

• Ad Valorem: This is a Latin term for "According to Value." Property taxes are ad valorem taxes.

• Tax Lien Priority: Real estate taxes are a Superior Lien. They are paid first in a foreclosure, even before the bank's mortgage.

• Special Assessment: A tax for a specific project (like new sewers or streetlights) that only affects the owners who directly benefit from the improvement.

• State vs. Local: New York State does not collect real estate taxes. All property taxes are collected at the local level (County, Town, City, Village, School).

• Equalization Rate: A number used to "level the playing field" between different towns so that county and school taxes are distributed fairly.

KEY TERMS

Ad Valorem Taxes: Real estate taxes that are calculated "according to value," meaning the tax amount is based on the assessed value of the property. 

Appropriation: The formal legislative act by a government body (such as a town board or city council) that authorizes the expenditure of public funds for specific purposes and provides the legal basis for a tax levy. 

Assessed Value: The dollar value assigned to a property by the local assessor for the purpose of determining its share of the local property tax burden. 

Assessing Unit / Approved Assessing Unit: An Assessing Unit is a local government (such as a city, town, or village) that has the legal authority to assess real property. An Approved Assessing Unit is one that has completed a certified revaluation in conformance with state standards, allowing it to use different tax rates for homestead and non-homestead properties. 

Assessment: The official determination of value placed upon a piece of property by the local government for taxation purposes. 

Assessment Review Board (Board of Assessment Review): A quasi-judicial administrative body, independent of the assessor, that hears and decides on formal property owner complaints regarding their assessments (often on "Grievance Day"). 

Homestead / Non-Homestead: A tax classification system used in approved assessing units where Homestead properties (residential 1–3 family dwellings, condos, and vacant land) are taxed at a lower rate than Non-Homestead properties (commercial, industrial, and large apartment buildings). 

In Rem: A Latin term meaning "against the thing"; in taxation, an in rem foreclosure is a legal proceeding brought directly against the property itself to recover unpaid taxes, rather than against the owner personally. 

Levy: The actual process of imposing or collecting a tax; the total amount of money a government body needs to raise through property taxes after accounting for other revenue sources. 

Lien: A legal claim placed against a property as security for the payment of a debt; a tax lien takes priority over most other liens and allows the government to sell the property to satisfy unpaid taxes.

Special Assessment: A specific tax or surcharge levied against only those properties that receive a unique and direct benefit from a particular public project, such as new sidewalks, streetlights, or sewers. 

Special Assessment Districts: Designated geographic areas created by a municipality to fund specific local improvements through special assessments paid by the owners within that district.