Submission Date:
Question:
We are an association library that receives about 75% of our operating budget from a tax levy approved by school district voters via a [New York State Education Law Section] 259 ballot proposition. In 2019 the school informed us that they had settled a case with a local resident about the assessed value of their property and how much was paid in taxes in 2018 and 2019. The assessment was changed, and the school owed him a refund. The district proposed to deduct the library’s amount of the refund from our 2019-20 tax levy. We were advised at the time that the district had no standing to do this, and that the law did not provide a recourse for refund of association library taxes.
Now we’ve received a demand for refund from the attorney of a different resident who had been disputing their assessment every year since 2018 (covering tax years 18/19, 19/20, 20/21, 21/22, 22/23 and 23/24). We’ve received no communication from the town or the school - just a letter from the attorney. It was settled in court, yet we had no idea it was happening. The town and the school district were represented and part of the negotiation, but not the library.
We have three questions:
1) Do we need to pay refunds to tax levies received in prior years?
2) If we’re not obligated to pay the refund, would the school district have to pay it on our behalf as the tax collector? and
3) Are we subject to settlements that we weren’t involved in, nor aware of?
Any other advice you have on proactively managing this issue going forward would be much appreciated!
Answer:
Let’s give short, punchy answers to the questions and then drill down with further information about each answer.
- Do we need to pay refunds to tax levies received in prior years?
If the library was not a party to the settlement (which it wasn’t), NO.
- If we’re not obligated to pay the refund, would the school district have to pay it on our behalf as the tax collector?
If the district entered into the settlement without the library being notified, YES.
- Are we subject to settlements that we weren’t involved in, nor aware of?
There is no case law on this point (yet) but a wise position to adopt is NO (while being ready to be told MAYBE).
Okay, let’s break this down a bit more:
First, let’s remember how we got here: in 2021, the State Assembly amended Real Property Tax Law Section 729, enabling school districts to collect from the library any lost revenue from taxpayer challenges to property assessments. A recap and commentary on that law, which went live in 2022, is posted at https://wnylrc.org/raq/return-school-district-tax-levy-money.
In that earlier answer, I wrote: “There are about fifty more pages I could write on this topic, but that’s the Big Picture, and the Big Takeaways are: 1) it can happen; 2) it is good to prepare for it; and 3) if it happens, review the details before agreeing to it.”[1]
This issue—settlements of assessment challenges covering multiple years, including years before the law was changed—is a big chunk of those fifty pages! But we’ll keep this answer short.
So, to dive in a bit more:
Why do I say there is no obligation to pay refunds for tax levies from prior years (before 2022) if the library was not a party to the settlement?
I say this, because it is a prudent first position to take. Agreeing to pay a settlement when your library wasn’t notified or invited to the table is dicey. Agreeing to pay the money for years when there was no obligation to pay it is even more dicey! It is wise to be circumspect and assess the claim before paying it.
Why do I say that, if a library is not obligated to pay a refund, the school district would still have to pay it? Because the law doesn’t allow the taxpayer to collect the refund from the library directly; it allows the district to collect the money from the library after repayment to the taxpayer. In this case, while the district might only be able to collect part of the payment from the library, it will still owe the full amount of the refund to the taxpayer.
Finally, why did I say it is wise to reject that your library is obligated by a settlement it wasn’t involved in nor made aware of, but that your library “maybe” should be ready to be told otherwise?
Whenever the law changes, there is a period of trying to figure out the new boundaries and implications of the change. While the resolution of an assessment challenge is often a judicial order, with thousands of dollars at stake, it is good to take a hard look at what is being demanded and make sure the district demanding it is clearly entitled to it.
So, when a refund is demanded, it is a good idea to demand ALL the paperwork related to the assessment challenge, the negotiations, the settlement, and the final order, to make sure your library is both following the law and not handing over more than it has to.
And on a final note: all that said, every aspect of a tax assessment challenge and refund must be handled with extreme tact and diplomacy. After all, the library must maintain a positive and collaborative relationship with the people involved in the deliberations, so, when assessing potential refunds and requesting paperwork, feel free to pour as much sugar as you want into the request.
Sample language for this is: “Of course the library wants to issue a refund in any amount required by law. Please provide us with copies of the documentation related to the assessment challenge, any settlement, and the final order, and our treasurer will assess this as soon as possible so we can issue the correct amount.”
When your library has received the documentation, have your local attorney take a look it, and issue a written opinion as to what is owed.
Once the board has the complete picture and any advice it needs, it can vote to issue the refund, and then make sure it is considering the financial implications of the amount.
Thank you for a nuanced and very important question!
[1] Is there anything more grandiose than quoting oneself? I feel as smug as King George in Hamilton.
