New York Law Review

Tag: Charitable Exemption

  • Matter of Adult Home at Erie Sta., Inc. v Assessor & Bd., 6 N.Y.3d 212 (2005): Property Tax Exemption for Charitable Purposes

    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.

  • Nesbitt v. St. John’s Episcopal Homes, Inc., 47 N.Y.2d 761 (1979): Religious Institutions Not Automatically Exempt from Rent Stabilization

    Nesbitt v. St. John’s Episcopal Homes, Inc., 47 N.Y.2d 761 (1979)

    A statute exempting housing accommodations owned by charitable or educational institutions from rent stabilization does not extend that exemption to religious institutions unless their functions are primarily charitable and the rental income is devoted exclusively to charitable purposes.

    Summary

    Tenants of an apartment building owned by St. John’s Episcopal Church challenged the landlord’s attempt to raise rents above rent-stabilized levels. The landlord claimed exemption from rent stabilization under a provision of the Emergency Tenant Protection Act of 1974 that exempted housing owned by charitable or educational institutions. The New York City Conciliation and Appeals Board (CAB) agreed with the landlord, but the lower court reversed. The Appellate Division reversed again, finding the terms “religious” and “charitable” interchangeable. The New York Court of Appeals reversed the Appellate Division, holding that the statute’s specific enumeration of charitable and educational institutions impliedly excluded religious institutions, absent a demonstration that the institution operated primarily for charitable purposes and devoted rental income exclusively to those purposes.

    Facts

    St. John’s in the Village, a religious institution, owned and operated approximately 60 residential apartments. These apartments had initially been subject to rent stabilization but were decontrolled under a vacancy decontrol law. Tenants Nesbitt and Eaton subsequently occupied apartments and entered into renewal leases at rents consistent with the Emergency Tenant Protection Act of 1974, which restored rent stabilization to previously decontrolled apartments. In 1979, the landlord informed the tenants that their apartments were exempt from rent stabilization, claiming the exemption for institutions operated exclusively for charitable purposes on a non-profit basis. The landlord then sought to raise rents above the stabilized levels.

    Procedural History

    The tenants filed complaints with the New York City Conciliation and Appeals Board (CAB), which dismissed the complaints, holding that the premises were exempt from rent regulation. The tenants then commenced Article 78 proceedings seeking annulment of CAB’s determinations. Special Term reversed CAB’s decision. The Appellate Division modified, reversing the Special Term’s judgment. The tenants then appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether Section 5(a)(6) of the Emergency Tenant Protection Act of 1974, exempting housing accommodations owned by charitable or educational institutions from rent stabilization, also applies to housing accommodations owned by religious institutions.
    2. Whether the landlord’s refusal to offer renewal leases at rent-stabilized terms constituted a failure to perform a covenant or agreement under the lease, entitling the tenants to attorneys’ fees.

    Holding

    1. No, because the statute specifically enumerates charitable and educational institutions, implying the exclusion of religious institutions unless they operate primarily for charitable purposes and devote rental income exclusively to those purposes.
    2. The issue is remitted to Special Term for further consideration.

    Court’s Reasoning

    The Court of Appeals emphasized the principle of statutory interpretation that the intent of the legislature should be effectuated, and where the language is clear, the plain meaning of the words should be given effect. The court stated that, “where the statute describes the particular situations to which it is to apply ‘an irrefutable inference must be drawn that what is omitted or not included was intended to be omitted or excluded’.” The court found no language in the statute that would permit an interpretation providing a similar exemption for institutions operated for religious purposes. The court also noted that the statutory reference to monastery or convent does not serve to define religious institutions generally. The court found no constitutional infirmity in the statute. The court noted that the record did not disclose that the apartments were owned or operated by an institution operated exclusively for charitable purposes or that the income derived from the rental property was devoted exclusively to charitable purposes. Finally, the issue regarding attorneys’ fees was remitted to Special Term to determine whether the landlord’s actions constituted a failure to perform a covenant or agreement, as required for the application of Section 234 of the Real Property Law.

  • Mohonk Trust v. Board of Assessors, 47 N.Y.2d 476 (1979): Property Tax Exemption for Conservation and Charitable Purposes

    Mohonk Trust v. Board of Assessors, 47 N.Y.2d 476 (1979)

    Real property owned by a trust and used for environmental and conservation purposes, open to the public, qualifies for a charitable tax exemption under New York Real Property Tax Law § 421(1)(a).

    Summary

    The Mohonk Trust challenged the Town of Gardiner’s assessment of real property taxes on its 1,801 acres of wilderness land, arguing it was exempt under Real Property Tax Law § 421(1)(a). The Trust, dedicated to charitable, religious, scientific, literary, or educational purposes, maintained the land for conservation and public enjoyment. The Court of Appeals reversed the lower courts, holding that a trust can be considered an “association” under the statute, and the land’s use for environmental and conservation purposes qualifies as a charitable use, thus entitling the Trust to a tax exemption. The court emphasized the public benefit derived from preserving wilderness areas.

    Facts

    The Mohonk Trust was created in 1963 to devote property exclusively for charitable, religious, scientific, literary, or educational purposes. The Trust owns 5,000 acres of undeveloped wilderness in the Shawangunk Mountains. The land is used for environmental, conservation, educational, and recreational purposes. The Trust maintains trails, provides guides, and protects plant and animal life. Schools and universities use the land for field trips in geology, biology, zoology, forestry, and ecology. The public can access the land for activities like rock climbing, camping, and nature hikes for a fee. A nearby hotel, Lake Mohonk, pays the Trust an annual fee so its guests can access the Trust property without paying the daily fee. Prior to 1974, the Trust’s lands were listed as exempt property.

    Procedural History

    The Town of Gardiner began assessing real property taxes on the Trust’s land in 1974. The Trust challenged the assessments for 1974, 1975, and 1976. The Supreme Court, Ulster County, initially ruled against the Trust, holding the property wasn’t primarily used for exempt purposes, and that a trust could never qualify for exemption under RPTL 421. The Appellate Division affirmed the judgments, and the Trust appealed to the Court of Appeals.

    Issue(s)

    1. Whether a trust can be considered a “corporation or association” within the meaning of Real Property Tax Law § 421(1)(a), thus making its property eligible for tax exemption.
    2. Whether the use of real property for environmental and conservation purposes, open to the public, constitutes a charitable use exempt under Real Property Tax Law § 421(1)(a).

    Holding

    1. Yes, because the term “association” in tax exemption statutes is broad enough to include trusts, indicating that the organization need not be incorporated.
    2. Yes, because environmental and conservation purposes that benefit the public fall within the scope of “charitable, educational, [and] moral improvement of men, women or children” purposes under Real Property Tax Law § 421(1)(a).

    Court’s Reasoning

    The Court reasoned that tax exemption statutes should be construed strictly against the taxpayer, but not so narrowly as to defeat the exemption’s purpose. Citing previous cases like Matter of Graves and People ex rel. Untermyer v McGregor, the Court held that the term “association” in tax exemption statutes is broad enough to include trusts. The Court stated that the primary purposes of the Mohonk Trust are charitable, religious, scientific, literary, or educational. The Court found that the Trust’s preservation of wilderness areas for public benefit aligns with charitable and educational purposes, referencing People ex rel. Untermyer v McGregor, noting that such uses fall within the meaning of “religious, charitable, hospital, educational, moral or mental improvement of men, women or children or cemetery purposes” (Real Property Tax Law, § 421, subd 1, par [a]). The court emphasized the Legislature’s power to define tax exemptions, noting that because the Legislature has not excluded environmental and conservation purposes from the broad category of charitable, educational, or mental/moral improvement, these purposes are exempt. The Court dismissed concerns about the nearby hotel benefiting from the Trust’s presence, stating, “in the absence of any indication that the Trust is merely a device used to shield a profit-seeking enterprise…the fact that nearby landowners in fact do benefit by the existence and operation of the Trust is irrelevant to its tax-exempt status.”

  • Valeria Home, Inc. v. Board of Assessors of Town of Cortlandt, 28 N.Y.2d 391 (1971): Charitable Exemption Requires Adherence to Stated Purpose

    Valeria Home, Inc. v. Board of Assessors of Town of Cortlandt, 28 N.Y.2d 391 (1971)

    An organization seeking a real property tax exemption as a charitable or benevolent institution must operate in accordance with the purpose defined in its founding documents; deviation from that purpose can disqualify it from receiving the exemption.

    Summary

    Valeria Home, Inc. sought a declaration that its real property was exempt from taxation under New York’s Real Property Tax Law § 420, which exempts properties owned by corporations organized exclusively for charitable and benevolent purposes. The home, founded through a testamentary trust to provide a recreation and convalescent home for educated middle-class individuals, operated primarily as a recreation establishment. The Town of Cortlandt argued that the home’s operation deviated from the testator’s intent and that its profit-generating investments offset operational losses, negating its charitable status. The New York Court of Appeals affirmed the lower courts’ denial of the exemption, holding that the home’s operation did not align with the testator’s intended purpose of providing a convalescent home.

    Facts

    Jacob Langeloth’s will bequeathed his residuary estate to establish a corporation to found and maintain “Valeria Home” as a recreation and convalescent home for educated, refined individuals unable to afford typical health resorts. Valeria Home, Inc. was subsequently incorporated. The home expanded to include numerous recreational facilities and served approximately 6,000 middle-class individuals annually. Admission requirements mandated that guests be ambulatory, not require special diets or treatments, and need no nursing or medical attention. The home operated primarily as a recreational facility, with convalescent services being incidental.

    Procedural History

    Valeria Home, Inc. initiated a proceeding in the Supreme Court (Special Term) seeking a declaration that its real property was exempt from taxation. The Supreme Court ruled against Valeria Home. The Appellate Division (Second Department) affirmed the Supreme Court’s decision, dismissing the petition. Valeria Home, Inc. appealed to the New York Court of Appeals.

    Issue(s)

    Whether Valeria Home, Inc.’s operation conformed to the purposes set forth in Jacob Langeloth’s will and the incorporating statute, thereby entitling it to a real property tax exemption as a charitable or benevolent institution under Real Property Tax Law § 420.

    Holding

    No, because Valeria Home, Inc. operated primarily as a recreational facility rather than a convalescent home as intended by the testator, Jacob Langeloth, and memorialized in the incorporating statute.

    Court’s Reasoning

    The Court of Appeals focused on the testator’s intent as expressed in his will. The will indicated that the home was intended to provide a place for people recovering and convalescing from periods of ill health, noting that Langeloth had “observed that homes of this character have been organized for the benefit of the very poor…while no provision seems to have been made for people of education and refinement belonging to the middle classes”. The court found that the operation of Valeria Home contradicted this intent, as individuals with any significant health issues were generally disqualified from admission. The court emphasized that Valeria Home’s counsel conceded the home was primarily a resort hotel, not a convalescent home. Because of this concession, the court did not need to determine whether a deviation from testamentary purpose would always disqualify an organization from a tax exemption if it otherwise functioned charitably. The court noted, however, that the manner in which the home was run would likely preclude it from meeting the definition of a charitable and benevolent institution under generally understood principles. The Court cited Manresa Inst. v. Town of Norfolk, 61 Conn. 228, to support this point. The court affirmed the order denying the tax exemption.