The valuation, assessment and taxation of golf courses has been headline news lately due in part to the publicity surrounding any and all real property owned by United States President Donald Trump. For example, in May, New York State Assemblywoman Sandy Galef (D-Ossining), announced her plan to introduce legislation that would change the methodology used to value golf courses. The legislation is intended as a response to tax assessment filings, including property in her district—Trump National Golf Club. Residents of her district believe the pro-forma demand for a 90% reduction in the assessment for Trump National Golf Club will lead to cuts in services and higher taxes for all other residents. The potential legislation has included a proposed methodology that focuses on the gross revenues generated by the business operations of the golf course.
Although no details are yet available concerning the proposed legislation and methodologies, there are serious flaws in the basis for the proposal, which will be addressed below.
First, New York State Law requires that only real property be valued for assessment and tax purposes. Pursuant to New York Real Property Tax Law section 300,
All real property within the state shall be subject to real property taxation, special ad valorem levies and special assessments unless exempt therefrom by law. Notwithstanding any provision of this chapter or of any other general, special or local law to the contrary, personal property, whether tangible or intangible, shall not be liable to ad valorem taxation.
In New York, the income approach method of valuation has been sanctioned by courts across the state. This methodology involves establishing a real estate rental income for the real property alone and capitalizing that rental income to determine the fair market value of the property for assessment and tax purposes. For more detailed discussions on the methodology, please see Hempstead Country Club v. Bd. of Assessors, 112 A.D.3d 123 (2d Dep’t 2013) and Hampshire Recreation, LLC v. Bd. of Assessors, 137 A.D.3d 1029 (2d Dep’t 2016), leave to appeal denied, 28 N.Y.3d 908 (2016).
Assemblywoman Galef’s potential proposal presents a conflict with the current law and may also violate the New York State Constitution on valuation of real property. If the proposed methodology focuses on the revenues generated from the business operations of the course and not the real estate alone, the legislation will be in direct conflict with the statute explicitly regulating assessment and taxation to real property. If real property is to be assessed and taxed on the value of the business operating on it, this would throw the assessment and taxation process into chaos. Failing businesses (or golf courses in this instance) would result in lower assessments and lower tax revenue, and lead to the conclusion that the real estate is less valuable. This is illogical. Simply because a business is not operating profitably does not automatically mean that the value of the real estate decreases. If this applies to golf courses, it similarly should apply to all businesses.
Second, a demand for a 90% reduction is an industry standard used to protect the interests of the property owner against any facts unknown at the time of filing that could affect the value of the property at the time of valuation. For example, such unknowns could be damage or environmental contamination that the property owner is not aware of at the time, but is inherent in the property as of the taxable status dates. According New York Real Property Tax Law section 720(1)(b) and a plethora of appellate division cases, including the Fourth Department’s decision in Radisson Cmty. Ass’n v. Long, 3 A.D.3d 135 (4th Dep’t 2003), a taxpayer may not seek a reduction in tax assessment below that requested in its administrative complaint. The process was changed after the Court of Appeals overruled decades of case law that prohibited a petitioner from retroactively conforming the petition to the proof with the court’s permission. The Legislature rejected this change and amended Real Property Tax Law § 720 to bar the reduction of assessments to an amount less than that requested by the petitioner in its petition or amended petition. See N.Y. Real Prop. Tax Law § 720 (McKinney). This statute has also been interpreted to limit any reduction to the amount requested in the complaint before the board of assessment review. Radisson Cmty. Ass’n, Inc., 3 A.D.3d at 139. The demand for reduction is to preserve the right to reduce the assessment to the amount proved.
The amount of the demand in the administrative grievance and/or in the judicial petition is rarely, if ever, the value and assessment that are agreed upon in settlement or determined at trial. Moreover, the income approach methodology presently utilized by golf course valuation experts and adopted by the courts may not result in such a drastic reduction as requested in the grievance or petition.
According to the New York State Court of Appeals, “[t]he ultimate purpose of valuation, whether in eminent domain or tax certiorari proceedings, is to arrive at a fair and realistic value of the property involved so that all property owners contribute equitably to the public fisc. Any fair and nondiscriminating method that will achieve that result is acceptable.” Allied Corp. v. Town of Camillus, 80 N.Y.2d 351, 356 (1992) (emphasis added) (internal citations omitted). The potential proposed litigation flies in the face of New York statutes requiring that only real property be assessed and taxed and would result in a disproportionate contribution to the public fisc.
 See e.g. N.Y. Const. art. XVI, § 2 (“Assessments shall in no case exceed full value.”); N.Y. Const. art. I, § 6 (“No person shall be deprived of life, liberty or property without due process of law.”); N.Y. Const. art. I, § 11(“No person shall be denied the equal protection of the laws of this state or any subdivision thereof.”).