University Auxiliary Services at Albany, Inc. v. Smith, 54 N.Y.2d 986 (1981)

To qualify for a real property tax exemption under New York law for a corporation organized for educational purposes, the property in question must be used primarily for carrying out the educational purposes of the organization.

Summary

University Auxiliary Services (UAS), a not-for-profit corporation providing auxiliary services to SUNY Albany, sought a real property tax exemption for its “Mohawk Campus,” used for recreation, workshops, and seminars. The assessors of the towns of Halfmoon and Clifton Park denied the exemption. The New York Court of Appeals affirmed the Appellate Division’s decision, which granted the exemption, holding that the primary use of the property was reasonably incidental to UAS’s educational purpose and thus tax-exempt. The dissent argued that the recreational use was unstructured and lacked a direct connection to the university’s educational programs, thus not justifying an exemption.

Facts

UAS is a not-for-profit corporation organized for educational purposes. It provides services such as dormitory food service, a cafeteria, a bookstore, and laundry facilities for SUNY Albany. UAS sought a tax exemption for the “Mohawk Campus,” located in the Towns of Halfmoon and Clifton Park. The campus was used for recreational activities, workshops, conferences, and seminars. The assessors of the two towns denied the requested tax exemption, arguing that the property was not used exclusively for educational purposes.

Procedural History

UAS commenced proceedings under Article 7 of the Real Property Tax Law to challenge the assessments. The Supreme Court dismissed the petitions, finding that UAS failed to prove it was entitled to a tax exemption. The Appellate Division reversed, holding that the primary use of the property was reasonably incidental to UAS’s educational purpose and should be granted tax-exempt status. The Court of Appeals affirmed the Appellate Division’s order.

Issue(s)

Whether the “Mohawk Campus,” owned by a corporation organized for educational purposes but used primarily for recreation, workshops, and seminars, is used exclusively for carrying out the educational purposes of the organization, and thus qualifies for a real property tax exemption under § 421(1)(a) of the Real Property Tax Law.

Holding

Yes, because the primary use of the property is reasonably incidental to the petitioner’s main educational purpose.

Court’s Reasoning

The Court of Appeals, in affirming the Appellate Division, agreed that the primary use of the property was reasonably incidental to UAS’s educational purpose. The majority relied on precedent such as St. Joseph’s Health Center Props. v. Srogi, 51 N.Y.2d 127 (holding that a not-for-profit corporation operated solely to carry out the purposes of an exempt corporation can qualify for a tax exemption), and Faculty-Student Assn. of the State Univ. Coll. at Oswego v. Sharkey, 29 N.Y.2d 621 (holding that a nonprofit corporation organized to promote and assist a State University College in its educational activities can qualify for a tax exemption).

The dissent argued that tax exemption statutes are to be construed strictly against the party claiming the exemption. It contended that UAS failed to demonstrate that the primary use of the Mohawk Campus was educational. The dissent emphasized that the recreational activity on the campus was unstructured and lacked a direct connection to the university’s athletic or other programs. “The statute clearly does not contemplate an exemption for all property held by a qualifying organization. Thus, the primary use of the property for an exempt purpose not having been established by petitioner as educational, I would not grant a tax exemption in this case.” The dissent distinguished the cited cases, arguing that the properties in those cases had uses integral to the institutions’ operations, while the Mohawk Campus’s recreational use was independent and unstructured.