Requires grounds for increasing assessment

4 Co-sponsors

• Patrick M. Gallivan
• George D. Maziarz
• Thomas F. O'Mara
• Michael H. Ranzenhofer

BILL NUMBER:S799

Title of bill

An act to amend the real property tax law, in relation to the lease or conveyance of oil and gas rights in lands and grounds for increasing assessments

Purpose or general idea of bill

The purpose of this legislation is to codify a recent directive issued by the Office of Real Property Tax Services sent to local assessors advising that oil and gas leases signed by property owners should not be included in land values for purposes of real property assessments.

Summary of specific provisions

Section 1: Subdivision 2 of section 596 of the real property tax law is amended.

Section 2: Effective date.

Justification

According to the Office of Real Property Tax Services (ORPS), there are several reasons why local assessors should not include oil and gas leases signed by landowners when assessing real property.

First, they point out that the leases are speculative and are premised upon the Department of Environmental Conservation issuing a drilling permit.

ORPS also points out that while it is possible to separately assess oil and gas rights, they strongly recommend against doing so. Separate assessments would require that a short duration in lease be entered on an assessment roll. Further, should the lease appear as a parcel and taxes are not paid, the normal enforcement process would then take place. Given the length of time involved in foreclosure, the foreclosing authority would necessarily be foreclosing against the remaining term of the lease, which could be of very short duration. Separately assessing the lease would also require the assessor to determine what the value of the lease. A one time payment for these rights does not establish the value of the lease itself. According to ORPS, "it would be unsound appraisals practice to assume that this onetime payment establishes the value of the land subject to the lease in an open market transaction. It would be even more unsound to assume these payments establish the market value of other properties."

Finally, ORPS does advise local assessors to continue to closely monitor land sales to see if these leases are having an effect on sales prices, which would then justify an increase in property assessments.

ORPS, further advises that New York State currently has a program in place to incorporate oil and gas production into the local property

tax. Local governments and school districts can assess an ad valorum tax on production of local gas and oil wells.

Prior legislative history

2010: S.8362/A.11544 Referred to Rules

Fiscal implications

This legislation will have no fiscal implications for the state.

Effective date

This act shall take effect immediately.