Merry-Go-Round Playhouse, Inc. v. Assessor of the City of Auburn, 24 N.Y.3d 365 (2014)
A not-for-profit theater company is entitled to a real property tax exemption under RPTL 420-a for apartment buildings it owns and uses exclusively to house its actors and staff when such housing is reasonably incidental to the theater’s primary exempt purpose of promoting the arts.
Summary
Merry-Go-Round Playhouse, a not-for-profit theater, sought a tax exemption for two apartment buildings it purchased to house its actors and staff. The assessor denied the exemption, arguing the housing was not exclusively for an exempt purpose. The Court of Appeals reversed the lower court’s decision, holding that providing housing was reasonably incidental to the theater’s primary purpose of promoting the arts. The court reasoned that the housing helped attract talent, fostered a sense of community among the artists, and enabled the theater to operate effectively, thus furthering its exempt purpose. The limited commercial aspect of charging admission did not negate the tax-exempt status.
Facts
Merry-Go-Round Playhouse, a not-for-profit theater company, operated a summer stock theater and a year-round youth theater. To attract qualified actors and staff, Merry-Go-Round historically provided housing. In 2011, Merry-Go-Round purchased two apartment buildings (14 and 16 units respectively) exclusively for its actors and staff, deriving no income from the properties. The theater argued that this arrangement reduced the burden of securing housing and cultivated a creative community, with staff spending off-hours collaborating on theater-related activities.
Procedural History
Merry-Go-Round’s applications for real property tax exemptions were denied by the assessor and the City of Auburn’s Board of Assessment Review. Merry-Go-Round then commenced an RPTL article 7 proceeding. Supreme Court denied Merry-Go-Round’s motion for summary judgment. The Appellate Division reversed and granted the petition insofar as it sought tax exemptions. The Court of Appeals granted leave to appeal and affirmed the Appellate Division’s order.
Issue(s)
Whether real property owned by a not-for-profit theater corporation and used exclusively to house its staff and summer stock actors is exempt from taxation under RPTL 420-a.
Holding
Yes, because the provision of housing is reasonably incidental to the theater’s primary purpose of encouraging appreciation of the arts through theater, and the theater demonstrated it is entitled to an RPTL 420-a tax exemption.
Court’s Reasoning
The Court of Appeals applied RPTL 420-a(1)(a), which exempts real property owned by organizations operated exclusively for religious, charitable, hospital, educational, or moral/mental improvement purposes and used exclusively for those purposes. The court noted that the taxpayer bears the burden of establishing entitlement to the exemption. The court determined that Merry-Go-Round was organized exclusively for an exempt purpose: promoting the arts and providing education and moral/mental improvement to the community. The court cited Matter of Symphony Space v Tishelman, 60 NY2d 33, 38-39 (1983), noting that a “’commercial patina’ alone is not enough to defeat tax-exempt status.” The Court then considered whether the property was used exclusively for an exempt purpose, applying the test of whether “the particular use is reasonably incidental to the primary or major purpose of the facility,” citing Matter of Yeshivath Shearith Hapletah v Assessor of Town of Fallsburg, 79 NY2d 244, 250 (1992). The court found the apartment buildings furthered Merry-Go-Round’s purpose. Providing housing attracted talent, fostered community, and enabled staff to collaborate, all furthering the theater’s mission. Referencing Matter of St. Luke’s Hosp. v Boyland, 12 NY2d 135 (1962), the court analogized this situation to tax exemptions granted to hospitals and universities for staff and faculty housing. The court stated that “the statute does not elevate one exempt purpose over another.” The court concluded that Merry-Go-Round met its burden of demonstrating entitlement to the tax exemption.