Many property owners have not even noticed that 10% of their school tax bill is essentially “deferred” to their January General Bill. This is because many school tax rates have risen by 10% or more to account for their respective school budget’s shortfall. In January, property owners will have to pay the amount of their school tax bill that has been allocated to the Disputed Assessment Fund or “DAF,” plus their general tax bill at its increased rate. This is a burden that will unduly task expenses that have already been pushed to the brink.
Now, just as property owners are preparing to adjust to the new tax rates caused by DAF, the county has announced that they are implementing penalties for noncompliance with the Annual Survey of Income and Expenses or “ASIE.” Nassau County amended its local law at its December 27, 2013 legislative session, changing a $500 penalty for noncompliance to a percentage of a property’s market value.
Nassau County consistently ranks amongst the counties with the highest property tax rates in the nation. While owners have always found their property tax burden onerous, they also recognize the benefits of doing business in one of the country’s most affluent counties. Whether it’s a retail property predicting higher sales to counteract a higher tax burden or an office owner banking on top school systems attracting a strong talent pool to work in the region, owners perform a cost-benefit analysis of these high taxes and have historically found the benefits of doing business in Nassau County exceed the costs. However, these latest developments threaten to push property owners past the breaking point.
As the tax burden rises each year, prospective purchasers in Nassau County are frequently passing on investments in the region and buying elsewhere. Those who do move forward and choose to own commercial property in Nassau have become increasingly meticulous about their expenses in recent years. They know that a miscalculation of these items can quickly change a profit and loss statement from black to red.
To their credit, Nassau County has stopped performing annual revaluations, thus eliminating fluctuations in assessed value each year. However, the tax rate continues to increase each year and property owners must budget more money annually to keep up with rate increases.
This task has become much harder for the 2016/17 tax year as tax rates have spiked across the board due to the county’s implementation of the DAF. The DAF program takes anywhere from 10% to as much as 35% of a commercial property owner’s tax payments and deposits them in a fund. While this fund is hoped to ultimately eliminate the need to bond and borrow for Nassau County’s tax grievance refunds, the immediate impact is that tax rates must rise to allow schools and towns to fill budget gaps caused by sending their annual funding to an entirely inaccessible separate account.
By imposing penalties for ASIE noncompliance, Nassau County has been said to be modeling a system similar to New York City’s RPIE requirement. However, New York City’s penalty is much less than what could be imposed by Nassau County. While Nassau County has offered 25% amnesty on the penalty, there are legitimate issues as to the legality of the law. State law affords New York City different rights than Nassau County and there are significant due process concerns.
Both the Disputed Assessment Fund and the Annual Survey of Income and Expense Statements penalties are fraught with legal issues. However, it is the policy behind both laws that could ultimately be the downfall of Nassau County. The intent to raise additional revenue through commercial property owners has the potential to be the largest deterrent of future investment in the county. At a time when Nassau County is seeing young residents move off Long Island, they have now added costs that will deter businesses from investing in the community to keep and attract young residents who will be the affluent consumers of tomorrow.
For those who own in Nassau County, these new changes must be dealt with and addressed with counsel in order to minimize their impact. In regards to long term goals of growth and prosperity on Long Island, the County should move in the opposite direction and find ways to attract businesses and investments rather than developing a reputation of taxing and penalizing them.
Brad Cronin, Esq., and Sean Cronin, Esq., are partners at Cronin & Cronin Law Firm, PLLC, Mineola, N.Y.
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