New York State Property Tax Rebate Program

The 2006-07 New York State Budget initially produced an unusually contentious standoff between the New York State Legislature and Governor Pataki. In March, the legislature enacted a bipartisan budget that included over $4.1 billion in tax cuts. In response to this budget, Governor Pataki issued approximately 207 executive vetoes that cut over $3 billion in tax savings. Undaunted, the legislature overrode that majority of these vetoes and restored the budget’s more significant tax cuts, including a property tax rebate for all homeowners. Finally, Governor Pataki stated he would ignore the property tax rebate program because he considered it unconstitutional.

The original construction of the property tax rebate program called for a property tax rebate equal to approximately 30 percent of a homeowner’s STAR exemption. Because the rebate structure required the executive branch to make an appropriation, Governor Pataki considered the provision unconstitutional under New York’s constitutionally prescribed budget process. In order to avoid a protracted court battle, the legislature amended the program, adding a tax credit component to the legislation. Because tax credits do not require an appropriation, they escape any potential constitutional infirmity.

The amended program still contains a rebate component. Homeowners would receive a rebate check in the fall of 2006 and each year thereafter. As in the original legislation, the rebate checks would be equal to approximately 30 percent of a homeowner’s current STAR benefit. Rebate amounts would range from $200 to $800. However, if an appropriation for the payment of the rebates is not made in a given tax year, homeowners would be entitled to claim a refundable personal income tax credit equal to the amount of the rebate.

Taxpayers in New York City, who generally pay lower property taxes but pay a city income tax, would receive an enriched personal income tax credit in 2006 totaling $230 (up from $125 in 2005) for joint filers and $115 (up from $62.50 in 2005) for all others.

Governor Pataki has indicated he will sign the amended legislation into law. Thus homeowners can expect increased tax savings in the form of either a rebate or a tax credit later this year.

Web Links:

For the text of the original New York State Budget visit:
http://assembly.state.ny.us/leg/?bn=A09560

For the text of the New York State Assembly bill amending the program visit:
http://assembly.state.ny.us/leg/?bn=A11804&sh=t