| Matter of County of Sullivan v Town of Tusten |
| 2010 NY Slip Op 03524 [72 AD3d 1470] |
| April 29, 2010 |
| Appellate Division, Third Department |
| In the Matter of County of Sullivan, Appellant, et al., Petitioner, vTown of Tusten et al., Respondents. |
—[*1] Jeffrey P. Clemente, Narrowsburg, for Town of Tusten and others, respondents. Duval & Stachenfeld, L.L.P., New York City (David G. Samuels of counsel), for GurdjieffFoundation, Inc. and another, respondents.
Lahtinen, J. Appeal from a judgment of the Supreme Court (Cahill, J.), entered March 2,2009 in Sullivan County, which dismissed petitioners' application, in a proceeding pursuant toCPLR article 78, to, among other things, review a determination of respondent Town of TustenGrievance Board of Assessment Review classifying certain real property owned by respondentGurdjieff Foundation, Inc. as tax exempt.
Respondent Gurdjieff Foundation, Inc. is a not-for-profit corporation with tax exempt statusunder the Internal Revenue Code. Gurdjieff owns real property in the Town of Tusten, SullivanCounty. Although the real property had been classified as tax exempt pursuant to RPTL 420-a,Gurdjieff had nonetheless made annual $6,000 payments—characterized as voluntarycontributions—to respondent Town of Tusten for about 10 years. In May 2008, ostensiblyin response to concerted pressure from Sullivan County officials, the Town's assessor changedthe classification of Gurdjieff's property on the tentative assessment roll to taxable, with a valueof [*2]slightly over one million dollars.
Gurdjieff filed a timely grievance and presented various information to respondent Town ofTusten Grievance Board of Assessment Review supporting its contention that its property wasentitled to tax exempt status. An agreement was authorized to resolve the controversy, whichwas executed in June 2008 by Gurdjieff, the Town assessor and the acting chair of the GrievanceBoard. The agreement provided, in relevant part, that Gurdjieff's property would be reclassifiedback to tax exempt status, Gurdjieff would make an annual "contribution in lieu of taxes" to theTown of $10,000 for five years, and the property would remain exempt during those five yearsso long as the ownership and usage did not change.
While the agreement resulted in the Town receiving about the same amount it would havereceived in taxes on Gurdjieff's property, petitioners received no payment.[FN1]Hence, petitioners commenced this proceeding contending, among other things, that the Townlacked legal authority to enter into the June 2008 agreement (which petitioners characterized as apayment in lieu of taxes) and that the agreement should be voided. Supreme Court dismissed thepetition, holding that the property was, in fact, tax exempt and, accordingly, since no taxes weredue, the terms of the June 2008 agreement did not provide for a payment in lieu of taxes.Petitioner County of Sullivan appeals.
The County challenges the validity of the agreement used by the Town to settle theunderlying tax dispute. "[T]he Legislature has declared that '[a]ll real property within the stateshall be subject to real property taxation . . . unless exempt therefrom by law' "(Kahal Bnei Emunim & Talmud Torah Bnei Simon Israel v Town of Fallsburg, 78 NY2d194, 201 [1991], quoting RPTL 300), and most of the recognized exemptions are set forth inRPTL article 4 (see generally 13-133 Warren's Weed New York Real Property §133.06 ["Taxes Affecting Real Property"]; see also NY Const, art XVI, § 1). Thestate has delegated to local municipalities the authority to make initial decisions regarding thevalue of real property for purposes of taxation, including determining which property is exempt(see RPTL 102 [1], [2], [3]; see generally RPTL art 5). In exercising thedelegated power implicating taxation, a local municipality "may not act in excess of the powersconferred upon it by the Legislature" (Rose v Eichhorst, 42 NY2d 92, 95 [1977]; seeCastle Oil Corp. v City of New York, 89 NY2d 334, 338-339 [1996]). Accordingly, effortsto carve out settlements of real property tax disputes in fashions not falling within the statutoryframework are invalid (see People ex rel. Beard's Erie Basin, Inc. v Sexton, 247 App Div754, 754-755 [1936]; Troy Union R.R. Co. v City of Troy, 227 App Div 351, 354-356[1929], affd 253 NY 597 [1930]; Matter of North Country Sav. Bank v Nunziato,123 Misc 2d 502, 506-507 [1984]; 10 Ops Counsel SBRPS No. 110 [2000]).
Here, it is undisputed that, for real property taxation purposes, petitioners depend on theTown's determination of value of property located in the Town, including the Town's decision asto which property is exempt. The Town has not set forth any statutory authority for the type ofagreement it used to resolve this tax dispute. The June 2008 agreement clearly does not fallwithin the parameters of a statutorily authorized payment in lieu of taxes program (seegenerally [*3]General Municipal Law art 18-A; 13-133Warren's Weed New York Real Property § 133.06 [5] ["Taxes Affecting RealProperty"]).[FN2]Nor does the agreement constitute a judicially approved resolution of an RPTL article 7proceeding since there was neither a pending article 7 proceeding nor judicial involvement.While we ascribe no ill intent to the Town in this case, we note that the type of agreement it usedopens the door for potential abuse, such as, among others, a governmental authority wielding theweighty power of taxation to commandeer "contributions" from entities that are exempt fromreal property taxes, or a municipality negotiating an agreement to its benefit at the expense ofother taxing jurisdictions. The power to bestow the benefit of an exemption from taxation is anarea where malfeasance may occur (see generally Matter of Dudley v Kerwick, 52 NY2d542, 547-548 [1981]). The agreement used here finds no support in the statutory taxingframework and also implicates a potential for abuse. In short, it was not an authorized way toresolve the tax dispute, and it is void.
We do, however, note that the County has limited its request on appeal to a determination ofthe legality of the June 2008 agreement and has not pursued a challenge to the underlyingdetermination that Gurdjieff was entitled to exemption under RPTL 420-a. Accordingly, there isno reason for revisiting the exemption issue or the issue of taxes for any past years up to thepresent; however, the local assessor must follow—without regard to the June 2008agreement—the statutory mandate of annually making those determinations related tovalue and taxation (including exemptions) required of that office.
Peters, J.P., Malone Jr., Stein and Garry, JJ., concur. Ordered that the judgment is modified,on the law, without costs, by reversing so much thereof as dismissed that part of the petitionseeking to invalidate the June 2008 agreement; petition granted to said extent; and, as somodified, affirmed.
Footnote 1: If the property had not receivedtax exempt status, petitioner County of Sullivan would have reportedly received about $9,000and petitioner Sullivan West Central School District approximately $22,000.
Footnote 2: It merits noting that, unlike theagreement crafted by the Town, a payment in lieu of taxes program provides for notice and inputfrom each affected tax jurisdiction (seeMatter of Steel Los III/Goya Foods, Inc. v Board of Assessors of County of Nassau, 10NY3d 445, 455-456 [2008]), as well as proportional sharing of the payment (seeGeneral Municipal Law § 854 [17]).