Newsday, Inc. v. Town of Huntington

• Decision Date: 27 July 1981
• Citation: 441 N.Y.S.2d 689,82 A.D.2d 245
• Parties: NEWSDAY, INC., Respondent, v. TOWN OF HUNTINGTON et al., Defendants; Half Hollow Hills Central School District of Huntington et al., Appellants.
• Court: New York Supreme Court — Appellate Division

Page 689

441 N.Y.S.2d 689

82 A.D.2d 245

NEWSDAY, INC., Respondent, v. TOWN OF HUNTINGTON et al., Defendants Half Hollow Hills Central School District of Huntington et al., Appellants.

Supreme Court, Appellate Division Second Department.

July 27, 1981.

Ingerman, Smith, Greenberg & Gross, Northport (Bernard C. Smith, Northport, of counsel), for appellants.

Faruolo, Caputi & Weintraub, Huntington (Frank J. Faruolo, Jr., and Gary N. Weintraub, Huntington, of counsel), for respondent.

Robert L. Beebe, Albany (Henry E. Wyluda, Albany, of counsel), for New York State Bd. of Equalization and Assessment, amicus curiae.

Before TITONE, J. P., and GIBBONS, GULOTTA and MARGETT, JJ.

GIBBONS, Justice.

The resolution of the question presented here concerning the refusal of the tax assessor of the Town of Huntington to grant a tax exemption, pursuant to section 485-b of the Real Property Tax Law, entitled "Business investment exemption" (added L. 1976, ch. 278), must, at the outset, be approached by reference to the declared governmental purpose for the establishment of statutory tax exemptions as an incentive to stimulate business enterprises to invest their funds in the expansion of commercial, business and industrial facilities within the State and to thereby create new labor markets and improve its economy.

The State's policy in this effort is described in the Memorandum of the State Executive Department (McKinney's Session Laws of New York, 1976, pp. 2309-2310) as follows:

"Purpose of the bill

"To provide a real property tax incentive for the improvement of real property for commercial, business and industrial purposes.

"Summary of provisions of the bill

"The bill adds a new section to the Real Property Tax Law which will grant a real property tax exemption to the extent of 50 percent of the increase in assessed valuation attributable to construction, alteration, installation or improvement of such real property for specified industrial, business and commercial purposes.

"The exemption will be 50 percent for the first six years, 40 percent for the seventh year, 30 percent for the eighth year, 20 percent for the ninth year and 10 percent for the tenth year.

"The 10 year exemption shall cease in the event the property ceases to be used for eligible purposes.

"Any local government or school district is empowered to reduce the percentage of exemption allowed pursuant to this bill.

"The bill will take effect immediately and will be applicable to projects commenced subsequent to January 1, 1976 and completed subsequent to July 1, 1976.

"Statement in support of the bill

"This bill will provide the State of New York with another tool to encourage business development. It will encourage businessmen to improve obsolete facilities within the State. It will assist in reducing the competitive edge which other states presently have over New York State as a site for commercial, business or industrial expansion.

"Since the exemption relates only to the increase in assessed valuation, there is no loss of present tax revenues. Also, the exemption will not eliminate all increased revenue that would otherwise be available through increased assessed values. The bill, therefore, strikes a balance between the need to encourage development and the need for new local revenues.

"In order to eliminate the initial possibility of competition among units of local government within the State, the exemption is applicable originally statewide. However, the bill does contain a local option provision which counties, cities, towns, villages and school districts may exercise."

This statute became effective on June 8, 1976 and, in its early developmental stages, it was discovered that, under subdivision 7 as originally enacted, the power conferred upon local municipalities and school districts to reduce or eliminate tax exemptions was completely without restriction, and was so worded that the exercise of such local option could terminate a tax exemption which had already been granted. The counterproductive effect of this language was soon recognized to be a deterrent to future business investment and expansion by removing the incentive after the owner had invested money to improve business property in reliance upon such incentive.

This destructive fault was corrected in the following term of the Legislature when subdivision 7 was amended by chapter 397 of the Laws of 1977 (eff. July 6, 1977) by adding the words "provided, however, that exemptions existing prior in time to passage of any such local law or resolution shall not be subject to any such reduction so effected."

In furtherance of the policy enunciated in section 485-b of the Real Property Tax Law, the appellant school district, on November 22, 1976, adopted a resolution under which it endorsed the rationale of the section and gave full force and effect to this tax exemption enactment in the following language:

"BE IT RESOLVED, that pursuant to Chapter 278 of the Laws of 1976, entitled 'An Act to amend the real property and tax law in relation to providing a partial exemption for certain business improvements outside the City of New York' the percentum of exemption for certain increases in assessed valuation for business, commercial and industrial real property authorized by the above described law, shall be that established by said law."

A consideration of the ensuing events, in chronological order, produces the following factual background upon which our determination must be made.

The respondent Newsday, a daily Long Island publication, acquired about 33 acres of land located in the Town of Huntington and within the boundaries of the appellant school district for the purpose of erecting a modern publishing plant at a cost of about $6,500,000. On November 10, 1977 the Town of Huntington issued a building permit and the construction of the new facility was then commenced.

In September of 1978 a representative of the respondent Newsday inquired of the Assessor of the Town of Huntington in relation to the filing of an application for tax exemption for the new plant and was advised by him that such application was to be filed with his office by June 1, 1979.

Construction of the plant continued; by April 9, 1979 it had been 90% completed, and on April 12, 1979 a temporary certificate of occupancy was issued to Newsday by the Town of Huntington.

However, on April 9, 1979, three days before the issuance of the temporary certificate of occupancy, the appellant school district, in an attempt to exercise its local option to change its prior policy, as expressed in its above-mentioned resolution of November 22, 1976, adopted the following resolution by which it reduced the tax exemption to zero "RESOLVED that pursuant to Section 485B of the Real Property Tax Law the percentage of exemption is reduced to zero and be it further resolved that the aforementioned resolution of November 22, 1976 is hereby rescinded in total as it applies to any Real Property constructed, altered or improved subsequent to this date, it being the intention of this Board to deny the Real Property tax exemption provided under Chapter 278 of the laws of 1976 to any Real Property constructed, altered, or improved after the date of this resolution. A copy of this resolution is to be delivered to the State Board of Equalization and Assessment and to the Assessors of the Towns of Huntington and Babylon." (Emphasis added.)

A copy of this resolution was sent to the Tax Assessor of the Town of Huntington and to the New York State Board of Equalization and Assessment.

On May 10, 1979 respondent Newsday filed an application for tax exemption, pursuant to section 485-b of the Real Property Tax Law, with the Assessor of the Town of Huntington and mailed a copy to the State Board of Equalization and Assessment on May 31, 1979.

Thereafter, the Assessor notified Newsday that its application was granted to the extent that it would have tax exemption with respect to town, county and special district taxes, but not with respect to school taxes because of the resolution adopted by the appellant school district on April 9, 1979, reducing the tax exemption to zero.

Notwithstanding that as a general rule of law a tax exemption statute, being in derogation of the sovereign's power to impose taxes, will be strictly construed against the taxpayer and any ambiguity or doubt will be resolved in favor of the sovereign (Matter of City of Lackawanna v. State Bd. of Equalization & Assessment of State of N. Y., 16 N.Y.2d 222, 264 N.Y.S.2d 528, 212 N.E.2d 42), and that, absent any countervailing circumstances, the right of a taxing authority to terminate a tax exemption remains completely unfettered and may not be challenged by the taxpayer, as, for example, where a tax exemption was terminated as to the grantee of hospital premises which had previously enjoyed tax exemption (see Bronx Garment Center v. City of N. Y., Dept. of Finance, Bur. of City Collections, 199 Misc. 513, 106 N.Y.S.2d 720, affd. 279 App.Div. 1048, 113 N.Y.S.2d 257, mot. for lv. to app. den. 280 App.Div. 890, 115 N.Y.S.2d 524), there are, nevertheless, certain equally important and concomitant principles of law which are also required to be considered and applied in dealing with the question of tax exemption in general, as the same is presented in this matter and, particularly, with respect to the construction of that part of subdivision 7 of section 485-b which confers the power of local option upon municipalities and school districts to withdraw from the granting of tax exemptions under this statute and the manner of exercising such option compatible with the purpose of the statute.

Concerning the rationale to be applied in interpreting a statute conferring a tax exemption, the Court of Appeals in Matter of Association of Bar of City of N. Y. v. Lewisohn, 34 N.Y.2d 143, 153, 356 N.Y.S.2d 555, 313 N.E.2d 30, held:

"And while exemption statutes should be...