Matter of Adult Home at Erie Sta., Inc. v Assessor & Bd. of Assessment Review of City of Middletown, 6 N.Y.3d 212 (2005)
Property used primarily to provide housing and care to low-income individuals qualifies for a real property tax exemption under RPTL 420-a(1)(a), even if fair market rent is collected, provided the property serves a charitable purpose and benefits the residents.
Summary
This case addresses whether two property owners, AHESI and RECAP, qualify for real property tax exemptions under New York Real Property Tax Law § 420-a(1)(a) as charitable organizations. AHESI operates an adult home for long-term residential care, accepting residents who pay reduced rates based on their limited income and assets. RECAP provides transitional housing to participants in its social work programs aimed at combating homelessness and substance abuse. The Court of Appeals held that both AHESI and RECAP were entitled to tax exemptions because their properties were used exclusively for charitable purposes, benefiting low-income individuals and furthering social welfare goals, respectively.
Facts
AHESI operated an adult home, providing long-term residential care. Only about 10% of its residents paid market rates. Over half were eligible for Supplemental Security Income (SSI), and about 30-40% were “contract occupants” paying reduced fees determined by their assets and income. AHESI never turned away a resident due to inability to pay the market rate.
RECAP is a social work organization that owned homes where participants in its “Community Re-Entry Program” lived temporarily. RECAP received rent comparable to market rates, paid partly by government agencies and partly by the tenants.
Procedural History
The City of Middletown denied both AHESI’s and RECAP’s applications for property tax exemptions. AHESI sought judicial review under Article 7 of the Real Property Tax Law, with the Supreme Court initially ruling against them, a decision reversed by the Appellate Division. RECAP filed a CPLR Article 78 proceeding, which was denied by the Supreme Court and affirmed by the Appellate Division. The Court of Appeals granted leave to appeal in both cases.
Issue(s)
1. Whether AHESI’s property is “used exclusively” for charitable purposes, thereby entitling it to a real property tax exemption under RPTL 420-a(1)(a), when it provides housing to the elderly, some of whom pay below-market rates based on their limited income and assets.
2. Whether RECAP’s properties are “used exclusively” for charitable purposes, thereby entitling it to a real property tax exemption under RPTL 420-a(1)(a), when it provides transitional housing to participants in its social work programs, even though it receives market rents.
Holding
1. Yes, because AHESI provides housing to poor people at below-market rates, which is a charitable purpose.
2. Yes, because providing housing to participants in social work programs is “reasonably incident” to RECAP’s charitable goals of helping them overcome their struggles, regardless of whether market rents are received.
Court’s Reasoning
The Court reasoned that AHESI’s provision of housing to individuals with limited assets and income, who would otherwise be unable to afford care, constituted a charitable purpose, distinguishing it from cases where housing was provided to non-impoverished individuals at market rates. The court explicitly rejected the argument that only SSI recipients could be considered poor enough to be objects of charity, noting that AHESI required contract occupants to contribute nearly all their assets and income towards their care, leaving them with minimal resources.
Regarding RECAP, the Court distinguished its activities from mere rental housing, emphasizing that the housing was an integral part of RECAP’s social work programs, providing a supportive environment for individuals overcoming homelessness, addiction, and other challenges. Drawing an analogy to Matter of St. Luke’s Hosp. v Boyland, the Court held that the residential use of RECAP’s property was “reasonably incident” to its charitable purposes. The Court stated, “The issue is not whether RECAP benefits, but whether the property is ‘used exclusively’ for RECAP’s charitable purposes.” It further clarified that receiving fair market value for the properties does not negate the charitable use, as the apartments are provided solely to program participants. The court explicitly disapproved of Matter of Nassau County Hispanic Found. (Board of Assessors), which held otherwise.