chapter 26 taxes and assessments

In our tax rate example on the previous screen, we calculated a tax rate of $50 for each $1,000 of assessed value. So let's continue with an example using that tax rate. A home valued at $100,000 is assessed at a uniform percentage rate of 15 percent. The assessed value of that home would be $15,000. Using the tax rate of $50 per $1,000 of value, the tax bill for the home would be $750. The $750 results from dividing the assessment of $15,000 by $1,000 to get $15 (because the tax rate is based on each $1,000 of assessed value). Then, the $15 is multiplied by the tax rate to get the tax bill of $750.

$15,000 / $1,000 = $15 x $50 = $750 (tax bill)

Sally's home is valued at $150,000. The home is assessed at 100 percent of its value. The tax rate is $30 per $1,000 of assessed value. What is Sally's annual tax bill?

$150,000 ÷ $1,000 = $150 $150 x $30 = $4,500

old vs new construction

Some types of construction projects are more likely than others to prompt a reassessment. These types of projects might include: Finishing a basement into a family room or other living quarters. Adding a garage. Installing an in-the-ground swimming pool. If the assessor sees that these renovations are not in the current tax record, he or she will reassess the property to include those changes.

country and local gov establish tax districts to collect funds for providing specific services

The boundaries of such districts typically do not coincide with municipal boundaries. The major tax district in most areas is the school district. Other important tax districts are those for fire protection, community colleges, and parks.

Where does a property owner file an assessment complaint?

With either the assessor or the board of assessment review in the city or town where the property is located.

Special assessments are usually paid in installments over a number of years. However,

taxpayers generally have the option of paying the tax in one lump sum or otherwise accelerating payment.

It does not matter what percentage is used. What is important is

that every property is assessed at the same uniform percentage within one assessing unit.

tax levy

the amount of money the municipality must raise through the property tax.

If, for example, a town levy is $2,000,000, and the town has a taxable assessed value (the sum of the assessments of all taxable properties) of $40,000,000, the tax rate would be $50 for each $1,000 of taxable assessed value.

$2,000,000 / $40,000,000 = .050 x $1,000 = $50 (tax rate)

Greg's home is valued at $250,000. The home is assessed at 80 percent of its value. The tax rate is $2.25 per $100 of assessed value. What is Greg's annual tax bill?

$250,000 x .80 = $200,000 $200,000 ÷ $100 = $2,000 $2,000 x $2.25 = $4,500

Each year, State Law requires assessors to sign an oath that states what?

The community assessments represent a uniform percentage of market value.

The property's assessment is

a percentage of its fair market value, which is the amount the property would sell for in the current market.

assessing unit

is a city, town, county or village that has the power to assess real property.

purpose of taxation

raise funs for municipal services

The International Association of Assessing Officers (IAAO) guidelines state that assessors

should conduct a physical review of properties at least every four to six years, including an on-site verification of property characteristics.

What does ad valorem mean?

taxes are based on the assessed value of prop

What is the tax levy?

The tax levy is the amount of money the municipality must raise through the property tax.

General property taxes are levied on an ad valorem basis, meaning

based on the assessed value of the property

Susan's home is valued at $300,000. The home is assessed at 90 percent of its value. The tax rate is 5 percent. What is Susan's annual tax bill?

$300,000 x .90 = $270,000 $270,000 x .05 = $13,500

Jim's home is valued at $350,000. The home is assessed at 40 percent of its value. The tax rate is 25 mills. What is Jim's annual tax bill?

$350,000 x .40 = $140,000 $140,000 x 0.025 = $3,500

exempt prop

Properties owned by governments and religious organizations are wholly exempt. Other exemptions exist for agricultural and forest property. Exemptions may also be granted to not-for-profit educational and charitable groups.

New York State law provides that all property in a municipality be assessed at the same uniform percentage of value (except in Nassau County and NYC where class assessing is authorized).

That percentage can be 5 percent, 10 percent, 50 percent, or any other percentage not exceeding 100 percent. It does not matter what percentage is used. What is important is that every property is assessed at the same uniform percentage within one assessing unit.

community wide reassessment

If the assessment does increase, it doesn't mean that the taxes will automatically increase. In some cases, a municipality will go from a fractional level of assessment to 100 percent. If the original level of assessment was 10 percent, and the current level of assessment is 100 percent, the assessed value could go from $9,000 to $90,000, and the property owner might not see any increase in taxes. In addition, if the assessment increases, but the assessments of most other properties increase more, that owner's share of the taxes could decrease. For instance, if one owner's assessment increased by 3 percent, but most other property owners saw increases of 5 percent, the homeowner with the 3 percent increase will likely see a decrease in taxes (assuming the school and municipal budgets remain stable and the tax levy does not increase).

Unlike most states, there is no personal property tax in New York.

Instead of taxing items such as jewelry and vehicles, only real property is taxed.

Local taxing authorities find taxing land to be beneficial. Which of the following is one of those benefits?

Property taxes raise more revenue than income and sales taxes.

formula for calculating the tax rate is:

Rate = Tax dollars needed ÷ Taxable assessed value

How often must equalization rates be established?

The Real Property Tax Law requires that state equalization rates be established annually for each county, city, town and village.

Possible Outcomes After the assessment review board has completed its hearing, they will make one of three decisions:

Full denial of the claim Full reassessment of the property Partial reassessment of the property

2 parts to STAR

1. basic star exemption is available for owner-occupied, primary residences regardless of the owners' ages or incomes. Basic STAR works by exempting the first $30,000 of the full value of a home from school taxes. 2. enhanced star exemption is available for the primary residences of senior citizens (age 65 and older) with yearly household incomes not exceeding the statewide standard. For qualifying senior citizens, the Enhanced STAR program works by exempting the first $60,100 of the full value of their home from school property taxes (beginning in the 2009-2010 school year). For property owned by a husband and wife, or by siblings, only one of them must be at least 65 years of age as of December 31 of the year in which the exemption will begin to qualify for the Enhanced exemption. Their combined annual income, however, must not exceed the STAR income standard.

A property has an assessed value of $155,500. The property is taxed at 80 percent of its assessed value at a rate of $2.10 per $100 of value. The annual property taxes would be $2,612.40.

155,500 x 80% = $124,400 $124,400 x 2.10/100 = annual taxes $124,400 x 0.021 = $2,612.40

A home is assessed at $90,000. If the tax rate is 30 mills, the tax will be $2,700.

30 mills is equal to 0.030 $90,000 x 0.030 = $2,700

Bart's home is valued at $100,000 and assessed at 60% of its value. If the tax rate is 15 mills, how much is Bart's tax bill?

900

Note, however, that if the property is receiving an exemption under the low-income senior citizens exemption, it cannotalso receive an exemption under this law for the same municipal tax purpose.

A property eligible for the persons with disabilities exemption, however, can receive other exemptions, such as those for School Tax Relief (STAR), veterans, etc.

As we said earlier, general property taxes are based on the assessed value of the property.

A property's assessment is based on its market value. Market value is how much a property would sell for under normal conditions.

What is a special assessment?

A special assessment is a tax levied against specific properties that will benefit from a public improvement.

Who may and who may not represent a taxpayer in a tax certiorari proceeding?

A taxpayer can be represented by an attorney or may represent himself or herself, but may NOT designate a non-attorney to represent him or her in an Article 7 proceeding, as is possible in an administrative review.

What are the two levels of formal review available?

Administrative review via the grievance process conducted in each assessing unit Judicial review via a Supreme Court trial or Small Claims Assessment Review (SCAR)

STAR is New York State's School Tax Relief Program that includes a school property tax rebate program and a partial property tax exemption from school taxes

All New Yorkers who own and live in their home - whether it's a one- to three-family home, condominium, cooperative apartment, manufactured home, farm dwelling, apartment building or mixed-use property - are eligible for the STAR exemption on their primary residence.

Exempt Properties

All real property in New York is subject to assessment. Both residential properties and commercial properties, including vacant land are assessed. All real property in New York is also subject to taxation, unless specific legal provisions grant it exempt status.

Equalization rates do not indicate the degree of uniformity among assessments within a municipality.

An equalization rate of 100 means that the municipality is assessing property at 100 percent of market value. An equalization rate of less than 100 means that the municipality's total market value is greater than its assessed value. An equalization rate of greater than 100 means that the total assessed value for the municipality is greater than its total market value.

tax liens: The local official can bring a legal action, called an in rem legal proceeding, to collect the taxes.

An in rem proceeding is one that is directed against a thing, rather than against a person. Typically, this involves a forced sale of the property.

New York State real property tax law mandates the calculation of Residential Assessment Ratios (RARs) annually.

The assessors use RARs as a general measure of assessment equity. Taxpayers use RARs in board of assessment review grievances and/or small claims hearings.

why assessments differ

value of the properties are different. But they can also differ if they are not regularly updated. If a property in a certain neighborhood increases in value but is not reassessed, over time it will become under-assessed.

Municipalities can choose to express the tax rates differently, such as:

Dollars per hundred ($3 per $100) Dollars per thousand ($30 per $1,000) Mills - one-tenth of a cent (30 mills per $1) Percentage (3 percent)

Which of the following statements is TRUE?

Appropriation is setting aside funds for a specific purpose.

Calculating Real Estate Taxes formula for calculating prop taxes

Assessed value x tax rate = annual taxes

Aside from apportionment of taxes among municipal segments of school districts and counties, and distribution of State Aid for Education, there are other uses of equalization rates, including:

Establishment of tax and debt limits. Allocation of costs, such as for jointly-operated hospitals among participating localities or an injury to a volunteer firefighter. Determination of state assessments (special franchise) or approval of local assessments (state-owned land). Determination of ceilings (railroad and agricultural values) and exemptions. Determination of level of STAR exemptions (We'll talk about the STAR program later in this chapter). Apportionment of sales tax revenues and joint indebtedness. As evidence in court proceedings on the issue of assessment inequity and small claims assessment review hearings.

a prop tax bill might include tax levies from such districts as the following

Bridge and highway Nursing home Storm water management Township Fire district School district Retirement fund Health services Historical museum Sanatorium Forest preserve/land management Public library district Park district Community college district

the real property tax is an ad valorem tax, or a tax based on the value of property. Two owners of real property of equal value should pay the same amount in property taxes.

By the same token, the owner of more valuable property should pay more in taxes than the owner of less valuable property.

The assessment creates a specific lien against the property until it is paid.

Common examples are assessments for sidewalks, water service and sewers. Special assessments are based on the cost of the improvement and apportioned on a pro rata basis among benefiting properties according to the value that each parcel will receive from the improvement.

After a property's total assessment is determined, its taxable assessed value is computed. The taxable assessed value is the total assessment minus any applicable property tax exemptions.

Exemptions are typically either whole or partial. We'll talk more about specific exemptions later in this chapter.

If a taxpayer is not satisfied with the decision of the SCAR hearing officer, what options does he or she have?

His or her only option is to commence an Article 78 proceeding. Persons who file for a small claims assessment review waive their rights to a tax certiorari proceeding in the state Supreme Court.

If a taxing entity initiates an assessment, the assessment creates an involuntary tax lien.

If property owners initiate the assessment by requesting the local government to provide the improvement, the assessment creates a voluntary tax lien.

What does the senior citizens' exemption do?

It reduces the taxable value of residential property owned by qualifying seniors by 50%.

Approved assessing units may establish different tax rates for homestead and non-homestead real property, thereby allowing some tax relief for owners of homestead properties. The NYS Office of Real Property Services defines the homestead class as:

One-, two-, or three-family residential dwellings. Owner-occupied and separately-assessed mobile homes. Residential condominiums. Parts of parcels primarily used for farming purposes, which accommodate farm dwellings and improvements exclusively used for residential purposes. All vacant land parcels, not exceeding 10 acres, which are located in an assessing unit which has a zoning law or ordinance in effect. These parcels must be located in a zone that allows only a residential use for one-, two- or three-family residential real property. Land used in agricultural production and all farm buildings and structures located on such land.

What kinds of construction projects might trigger a property's reassessment "off schedule?"

Renovations that might increase the value of that property, such as finishing a basement into a family room or other living quarters, adding a garage or installing an in-the-ground swimming pool.

calc real estate taxes

Tax bills are calculated based on two items of information: The assessment of the property The tax rates of the tax district in which the property is located

What should a taxpayer do who feels that he or she is not being fairly assessed?

Taxpayers who feel they are not being fairly assessed should meet with their assessor before the tentative assessment roll is established, so the assessor can explain how the assessment was determined and the rationale behind it.

Whose property is eligible for the alternative veterans' exemption?

The alternative veterans' exemption is available only for residential property of veterans who served during wartime or received a medal.

ex: The assessed value of a property is $70,000. The tax rate is $1.25 per $100 of value. So the annual taxes would be $875.

The assessed value of a property is $70,000. The tax rate is $1.25 per $100 of value. So the annual taxes would be $875.

total assessment is calculated by multiplying the market val by the uniform percentage for the municipality

The percentage of full or market value at which properties are assessed is called the level of assessment or LOA. For example, an LOA of 25 percent means that assessments in that unit are one-fourth of the market value. So a home with a market value of $100,000 would be assessed at $25,000.

filing (SCAR)

The petition must be filed with the Clerk of the county in which the real property is located, within 30 days of the filing of the final assessment roll for that assessing unit. The petition must be accompanied by a $30 filing fee with supporting statements, records, and other relevant information to support the petition.

The tax districts we talked about on an earlier screen generate the annual revenues they require by levying taxes on their tax base. The tax rate, or millage rate, determines how much of a tax levy the tax base will receive.

The tax rate for each tax district is calculated by dividing the amount of revenue required by the tax base. This rate is then applied to the taxable value of each individual real property to determine its tax levy.

Real property tax exemptions are granted on the basis of many different criteria, including the following:

The use to which the property is put The owner's ability to pay taxes The desire of the state and local governments to encourage certain economic or social activities

legal vs illegal reassessment

There are certainly legitimate reasons for an assessor to change the assessment on a property. But if a property owner believes that a change in the assessment is unfair or unlawful, he or she has the right to protest the change

Why is equalization necessary in New York?

There is no fixed percentage at which property must be assessed. Not all municipalities assess property at the same percentage of market value. Taxing jurisdictions, such as most school districts, do not share the same taxing boundaries as the cities and towns that are responsible for assessing properties.

Equalization seeks to measure the relationship of locally-assessed values to an ever-changing real estate market. Equalization is necessary in New York for several reasons:

There is no fixed percentage at which property must be assessed. Municipalities can set their own percentages. Not all municipalities assess property at the same percentage of market value. One city may assess its property at 80 percent of value, while the city next door may assess at 10 percent of value. So in two geographically close cities, properties with the same market values may have significantly different assessed values. Taxing jurisdictions, such as most school districts, do not share the same taxing boundaries as the cities and towns that are responsible for assessing properties. Most of the state's more than 700 school districts distribute their taxes among segments of several municipalities, many of which have different levels of assessment. This method of setting aside funds for a specific purpose is known as appropriation. The number of municipal segments in a school district can range from one to fifteen or more.

What is the purpose of taxation?

To raise funds to pay for municipal services, such as local government and area schools.

At its simplest, an equalization rate is the state's measure of a municipality's level of assessment (LOA). This is the ratio of total assessed value (AV) to the municipality's total market value (MV). The municipality determines the AV. The state estimates the MV. The equalization rate formula is:

Total Assessed Value (AV) ÷Total Market Value (MV) = Equalization Rate

What are the four grounds for assessment review?

Unequal assessment Excessive assessment Unlawful assessment Misclassification

back taxes

Unpaid property taxes, often referred to as back taxes, are usually paid at closing when the title transfers. In most cases, unpaid taxes do not affect a property's reassessment. However, if a new owner takes title to a property that has not yet been assessed when the owner takes possession, when the property is fully assessed, the municipality will not be entitled to any back taxes.

reassessment upon sale

Usually, the assessment of a property does not change when the property is sold. For example, if Peter Jones buys a home in Alexandria, New York for $300,000 and the home is currently assessed at $200,000, the home must still be compared equitably to other similar homes. If the Alexandria assessor raises Peter's assessment to $300,000 - which may be the fair market value of the home, technically-speaking the assessor must increase the assessment on the other homes that are similar. Due to the volume of home sales in any given time period, increases in assessments will probably not happen right away.

Many different types of exemptions are available to qualifying property owners. The most common real property exemptions are for:

Veterans Low-income senior citizens Farmers Clergy and non-profit educational, religious and charitable organizations

The NYS Office of Real Property Services defines the non-homestead class as

all real property that is not included in the homestead class. This would include commercial, industrial and utility properties as well as some vacant land.

The Real Property Tax Law requires that state equalization rates be established

annually

reassessment

are reassessed for tax purposes on a regular schedule that is established by statute. But reassessments also occur under other circumstances. Reassessments can be done "off schedule" when a property owner makes improvements to the property. Assessors are not allowed to do what are called "spot" reassessments on an individual parcel of property unless it is obvious or it has been reported that a material change was made to the property. Renovations to property often increase the value of that property. The assessor needs to do an evaluation to see if that is the case and, if so, increase the assessment of the property.

assessments are determined by the

assessor, an elected or appointed local official who independently estimates the value of real property in an assessing unit.

prop taxes are levied on an ad volorem basis meaning that they are

based on the assessed val of the prop

Assessed value is determined according to state law, usually by

county or township assessor or appraiser. In New York, the real property tax is based on a property's fair market value.

The State-funded School Tax Relief (STAR)

exemption program is available to all homeowners in New York State, as long as the property is their primary residence.

Assessed value is determined according to state law, usually by a county or township assessor or appraiser.

in NY the real property tax is based on a property's fair market value.

special assessment

is a tax levied against specific properties that will benefit from a public improvement.

A third exemption, known as the Cold War veterans' exemption

is available only for residential property of veterans who served during the Cold War period. Counties, cities, towns and villages have the option of granting a reduction in the amount of property taxes paid by veterans who qualify for this exemption. The basic exemption is limited to 10 years, but there is no time limit for the disabled portion of this exemption. In both instances, the exemption is limited to the primary residence of the veteran and is applicable only to general municipal taxes, not to school taxes or special district levies. This exemption is not available to those veterans currently receiving either the eligible funds or alternative veterans' exemption. must file

alternative veterans' exemption,

is available only for residential property of veterans who served during wartime or received a medal. Each county, city, town and village was given the option of deciding not to grant this alternative exemption.

small claims assessment review (SCAR)

is only available to owner-occupants of one, two or three family dwellings which are used exclusively for residential purposes, or the owners of vacant land that is not of sufficient size to contain a one, two or three family dwelling. Persons not eligible to file include: Cooperative owners Apartment renters Condominiums owners, EXCEPT those owner-occupied condominiums used exclusively for residential purposes that are located in Nassau County and designated as "Class One" property and condominiums that have been designated in the "homestead" class in any approved assessing unit Non-residential building owners Large vacant lot owners Farm building owners Commercial property owners

what is an approved assessing unit?

is tax district that has been certified by the NYS Office of Real Property Services as having completed a property revaluation program, which implements a system of real property tax administration that would be eligible for State assistance.

approved assessing unit

is tax district that has been certified by the NYS Office of Real Property Services as having completed a property revaluation program, which implements a system of real property tax administration that would be eligible for state assistance.

If a local taxing authority allows exemptions for historic barns, a barn can be exempted if

it was at least partially constructed before 1936.

why tax land?

land prop is stable taxes are hard to conceal, they are directly tied to the prop people tend to pay the taxes rather than suffer the potential consequences of non-payment. More than 95 percent of the levied taxes on real property are paid, especially since most lenders require that the property taxes be paid into an escrow account monthly. historic relationship to wealth and land productivity

prop taxes are based on assessed value

of the property. These values are also used to calculate the amount of state aid for education.

excessive assessment

overvaluation, incorrect partial exemption, excessive transition

The figures below show the sources from which a town's annual budget revenue could be generated:

prop tax 54.84% non-prop tax .92% federal aid 5.15% state aid 34.66% all other 4.44%

alternative exemption provides: a

property tax exemption of 15% of assessed value to veterans who served during wartime and an additional 10% to those who served in a combat zone. The law also provides an additional exemption to disabled veterans equal to one-half of their service-connected disability ratings.

disability exemption

reduction- taxes paid by qualifying persons with disabilities.

veterans' exemption

rovides a partial exemption where property owned by a veteran or certain other persons designated in the law has been purchased with pension, bonus, or insurance monies, referred to as "eligible funds."

assessing units

such as counties, cities and municipalities, townships and special assessment districts levy taxes on real property to raise funds, as we said, for providing local services.

An approved assessing unit is

tax district that has been certified by the NYS Office of Real Property Services as having completed a property revaluation program, which implements a system of real property tax administration that would be eligible for State assistance.

In order for a municipality to qualify for state Aid in New York,

the municipality must implement a program to physically inspect and re-appraise each property at least once every six years.

an assessor can estimate the market val of a prop based on

the sale prices of similar properties

In New York State, the property tax is a local tax, raised and by assessing units in the counties, cities, towns and villages. While the state itself does not collect or receive any direct benefit from the property tax,

this tax is still of major importance as the largest single revenue source for the support of municipal and school district services.