In an attempt to circumvent Nassau County’s unsuccessful litigation challenging its obligation to “guaranty” School and other municipal taxes despite successful assessment challenges, the County has sponsored legislation, signed today by the Governor, that will have commercial (Class IV) property owners paying their own property tax refunds.

In essence, any commercial property owner that files an assessment challenge will pay taxes on 90%[1] of their property’s tax assessment[2]. The legislation authorizes the taxing authorities to use 90% of the challenged assessment to calculate the applicable tax rate, and creates a disputed assessment escrow fund utilizing the remaining additional 10%[3]. The fund charge is calculated by applying the applicable tax rate to the difference between 90% of the property’s assessment and the assessment on the final assessment roll[4]. A successful claimant will receive their refund from this escrow account, up to a 10% reduction.   Any reduction over the 10% would seemingly be taken from Nassau County’s operating budget, or bonded (as happens today – with the result being multiyear delays in taxpayers receiving court ordered refunds, even after resolution). An unsuccessful claimant will have its monies returned to the taxing jurisdictions pro-rata. What the taxing authorities are permitted to do with these monies is unclear – reduce a future tax rate? Create a windfall? What happens if all the escrow money is depleted for a particular School District and there are more refunds to be made from the escrow account? Since the school district guaranty remains in place, might the non-assessing taxing jurisdictions raise rates ab initio to offset the lower assessment basis, such that taxpayers could actually pay more than they otherwise would have paid without the legislation in place?

There is an inherent unfairness for commercial property owners who now will not only pay their own refunds but those attributable to the other three (3) classes, as well.

There are many areas where it is unclear how the statute will operate. It is highly likely that litigation will result from this legislation. The statute would first apply to real property taxes and other amounts levied and extended based upon the 2016/17 tax roll (January 2, 2015 tentative roll).

[1]   May be even less if in Assessor’s opinion, based upon reasonable evidence, he/she determines that it is in County’s best interest to levy and extend taxes on a lesser assessment.

[2]   A commercial property who does not challenge will have 100% of their assessment from the final roll utilized for both setting of tax rates and their tax bill.

[3]   It is questionable whether 90% + 10% = 100% in this situation due to calculation of tax rates on less than 100% of full assessment.

[4]   Legislation does not distinguish between taxable assessment and full assessment on the final roll.