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.