Source: https://www.tax.ny.gov/pubs_and_bulls/orpts/legal_opinions/v11/78.htm
Timestamp: 2018-04-26 09:41:17
Document Index: 323875259

Matched Legal Cases: ['§ 425', '§ 467', '§ 425', '§ 425', '§ 467', '§ 332', '§ 425', '§ 467']

Volume 11 - Opinions of Counsel SBRPS No. 78
School tax relief [STAR] exemption (income) (dividends); Senior citizens exemption (income requirement) (dividends - ordinary and qualified dividends) - Real Property Tax Law, §§ 425, 467:
Since ordinary dividends are included in federal adjusted gross income, they are considered income for purposes of the enhanced STAR exemption.
Ordinary dividends are income for purposes of the senior citizens exemption, but qualified dividends, a subset of ordinary dividends, should not be counted separately in determining income eligibility.
We have received an inquiry concerning the definitions of income for purposes of the senior citizens exemption (Real Property Tax Law, § 467(3)(a)) and the enhanced school tax relief [STAR] exemption (RPTL, § 425(4)(b)(ii)). The specific inquiry concerns dividend income. The taxpayer received IRS Forms 1099-DIV from companies in which she had investments, the forms indicating her receipt of both “Total ordinary dividends” (box 1a) and “Qualified dividends” (box 1b). On her Federal income tax return (IRS Form 1040), she entered both her ordinary dividends (on line 9a) and her aggregate qualified dividends (on line 9b).
In determining her eligibility for the two exemptions, the town assessor suggested that her interest, total dividend income, qualified dividend income, social security benefits, and capital gains be added. The addition of the qualified dividend income would render the applicant ineligible for the senior citizens exemption, although she would still receive an enhanced STAR exemption. The taxpayer argues that her qualified dividends are a “subset” of her ordinary dividends and that including them results in improper double counting of the same moneys. We agree.
To begin, we note that the income requirements of the two statutes are not identical. {1}
Income for enhanced STAR is defined as “‘adjusted gross income’ for federal income tax purposes as reported on the applicant’s federal or state income tax return for the applicable income tax year, subject to any subsequent amendments or revisions, reduced by distributions, to the extent included in federal adjusted gross income, received from an individual retirement account and an individual retirement annuity . . .” (RPTL, § 425(4)(b)(ii)). Depending on one’s income, some of one’s social security may be taxable and therefore included in federal adjusted gross income. {2}
On the other hand, income for purposes of the senior citizens exemption includes, in relevant part, “social security and retirement benefits, interest, dividends, [and] total gain from the sale or exchange of a capital asset which may be offset by a loss from the sale or exchange of a capital asset in the same income tax year . . .” (RPTL, § 467(3)(a)). Based on this definition, in our opinion, the applicant’s net social security benefit is properly includable unless her municipality permits the exclusion of unreimbursed medical expenses in which case Medicare premiums may be deducted (10 Op.Counsel SBRPS No. 28).
For federal income tax purposes, while the amount of ordinary dividends listed on line 9a is included in adjusted gross income, the amount of qualified dividends listed on line 9b is not. Consequently, only the ordinary dividends are income for STAR purposes.
For purposes of determining eligibility for the senior citizens exemption, dividends are defined as “income” by statute (3 Op.Counsel SBEA No. 98). It seems clear, however, that qualified dividends are indeed a subset of ordinary dividends (“Qualified dividends are the ordinary dividends that are subject to the same 5% or 15% maximum tax rate that applies to net capital gains” (IRS Publication 550 (for 2004 Returns), p.20; see also, 33A Am Jur2d, Federal Taxation (2005) par.10763-65 and 47A CJS, Internal Revenue, §§ 332, 391). So, while there is no question but that dividends are income for purposes of section 467(3)(a), they should, of course, be counted only once. In our opinion, only the amount of ordinary dividends should be considered as income for purposes of the senior citizens exemption since “qualified dividends” are a subset thereof.
{1} It is true that a recipient of a senior citizens exemption automatically qualifies for an enhanced STAR exemption (RPTL, § 425(6)(c)), the presumed legislative rationale being that a person who qualifies for the senior citizens exemption, which has a much lower income limit than enhanced STAR (contrast §§ 467(3)(a) and 425(4)(b)(i)), easily qualifies for the latter benefit, and that a separate STAR application is therefore unnecessary.
{2} Here, based on her total income, a portion of the applicant’s social security benefits were taxable and therefore included in her federal adjusted gross income.