Attention: Commercial Property Owners and their Attorneys
The following article appeared in Today’s Newsday by Robert Brodsky
Commercial properties must pay into an escrow fund when they grieve taxes
County says program will end the need for borrowing to pay refunds
Nassau will begin informing 14,000 area business owners this week of a new state law that officials say will result in tax hikes for all commercial properties but will end the county’s need to borrow about $80 million annually for commercial property tax refunds.
The law, which was passed by the state legislature in 2014 and goes into effect with the 2016/17 tax roll, requires business owners who contest their assessments to place up to 10 percent of the assessed value of their property in an escrow account. Funds from that account will be used to pay commercial property tax refunds if the business wins its challenge.
County Executive Edward Mangano said the Disputed Assessment Fund would create “incentives” for commercial businesses to quickly resolve their property tax claims.
“Practically speaking, they are not harmed,” Mangano says of the commercial property owner. “If they are correct they will pay their fair share of taxes … and they will get their money back rapidly.”
To compensate for the money held in escrow, all commercial properties would see a tax rate increase, officials said.
Donald Leistman, head of the tax challenge division of the Nassau County Bar Association, said businesses will have “sticker shock” when they see their bills.
“The burden is shifting from the county as a whole to solely on the commercial property owners,” Leistman said.
For decades, Nassau paid out about $100 million annually for residential and commercial property tax refunds, Mangano said.
In 2011, Mangano instituted a residential settlement program to decide challenges before tax bills are issued. The program largely eliminated residential refunds, which averaged between $20 and $30 million per year, county officials said.
The new commercial program, Mangano said, would “significantly” reduce the county’s remaining liability.
If the court were to grant a commercial business owner a property tax refund exceeding 10 percent, Nassau would pay that additional amount from its operating budget, Mangano said.
The deadline for filing tax protests for the 2016/17 tax roll is May 2. Commercial property owners have until July 22 to reach a settlement with the Department of Assessment before the county imposes its escrow charge.
The county can grant assessment reductions while challenges continue. In rare circumstances, such as when a property has significant environmental problems, the amount in escrow could exceed 10 percent, Mangano said.
That assessment roll would be used by schools, towns and other taxing jurisdictions to set tax rates. School tax bills go out in October and county, town and general tax bills go out in January.
At that point, the county will bill commercial property owners for the difference in taxes calculated by using the old disputed assessment multiplied by the new tax rates.
That money will be put in escrow. If the property owner wins an assessment reduction, the escrow fund will be tapped to pay the refund. If the business owner loses, the money paid into the fund would go to the taxing districts.