Report: NY Property Tax Exemptions Top $450 Billion
Real Estate In-Depth | March 2018
ALBANY—New York State Comptroller Thomas P. DiNapoli issued a report recently that highlighted recent trends in property tax exemptions in New York State outside of New York City and the impact they have on local governments and school districts.
“Property tax exemptions can be a valuable tool to improve housing affordability or fuel economic growth,” said DiNapoli. “Since exemptions result in other taxpayers generally bearing financial responsibility for the offset in tax burden, it is vital that exemptions be carefully considered and periodically revaluated to determine their effectiveness.”
In 2016, 2.7 million properties in the state outside of New York City (58.3%) were eligible for some type of tax exemption, according to DiNapoli’s report. The value of these exemptions totaled $457 billion, approximately 30% of total property value ($1.5 trillion). When compared to 2006, this represents a 5% decrease in both the number of properties eligible for exemptions (2.9 million in 2006) and their total value ($479 billion).
The largest exemption category in New York, both in total dollars and number of exemptions, is the “residential” category. In this category, the state’s School Tax Relief program (STAR), which applies to a large portion of owner-occupied primary residences in the state outside of New York City, represents the majority share. STAR accounted for 2.4 million partial exemptions in 2016, worth $141 billion, or 31% of all exempted value. However, unlike other exemptions, STAR creates no direct additional burden on other local property taxpayers, since the school tax on the exempt amount is reimbursed by the state.
The next largest categories of exemptions are for local government and school district exemptions ($103.6 billion, 23% of all exemptions); non-profit organizations such as hospitals, education institutions and churches ($66.1 billion, 14%); and state-owned property ($44.8 billion, 10%).
The report also revealed the number of business investment property exemptions and their value has dropped steadily over the past decade, from $2.5 billion in 2006 to $938 million in 2016. As of June 2017, almost 650 local governments and school districts have either reduced the percentage or disallowed this exemption entirely.
For Fiscal Year Ending 2015, 109 Industrial Development Agencies reported they had granted $1 billion in property tax exemptions that were offset by $500 million in payment-in-lieu-of-tax agreements.
To offset the loss of property tax revenue, some local governments charge user fees to not-for-profit organizations to help pay for services such as water, sewer and refuse pick-up. They have also arranged for voluntary payments to defray the cost of other municipal services such as police and fire protection.