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Volume 1 - Opinions of Counsel SBEA No. 89

Opinions of Counsel index

Nonprofit organizations, exemptions (vacation residence for New York City teachers) - Real Property Tax Law, § 421:

Real property owned by an association of retired teachers and used to provide a vacation residence in a rural atmosphere for “active and retired” New York teachers is not entitled to tax exemption since the purposes of the organization are not exclusively charitable or benevolent.

Our opinion has been requested as to the taxable status of property owned by Cromwell Manor, Inc. consisting of 11 acres of land on which a colonial mansion and cottage are located. The property was formerly owned by the Association of Retired Teachers of the City of New York, Inc. and was conveyed to Cromwell Manor, Inc. on February 9, 1971. Whether any consideration was paid for the transfer is not known.

          In 1970 the Association requested our opinion as to whether the property was entitled to an exemption. By letter dated October 21, 1970, we concluded it was not on the grounds that (1) the Association was not organized exclusively for exempt purposes, and (2) the property was not being used exclusively for exempt purposes. The question now presented is whether the organization is exclusively organized for exempt purposes.

The certificate of incorporation states the purpose of the organization to be as follows:

“The sole and exclusive purpose for which it is formed is to own and operate a vacation residence in a rural atmosphere . . . to accommodate active and retired members of the teaching profession of the City of New York at a charge for room and board which is below the actual cost thereof, and at no cost whatsoever to any such persons who cannot afford to pay, with voluntary contributions from active and retired teachers of said City making up the annual deficits resulting from such operation; and to acquire by lease, gift, devise or purchase real estate for such purpose, provided, however, that nothing herein shall authorize this corporation, directly or indirectly, to engage in or include among its purposes any of the activities mentioned in section 404 of the Not-For-Profit Corporation Law or section 35 of the Social Services Law.”

          We note that among the purposes set forth in section 404 of the Not-For-Profit Corporation Law (i.e., purposes which this organization cannot engage in) is that of “the establishment or maintenance of any . . . home, aged care accommodation, or institution for convalescent, invalid, aged or indigent persons . . .”

A perusal of the exempt purposes set forth in section 421 of the Real Property Tax Law indicates to us that this organization can qualify only if it is organized exclusively for “charitable” or “benevolent” purposes.

In our opinion the purposes of this organization are not exclusively charitable or benevolent.

The sole purpose of this corporation is to provide a vacation residence in a rural atmosphere for “active and retired” New York City teachers. It is self-evident that an institution engaged in the operation of a vacation and recreational home for “active” teachers - that is, persons earning a salary in the practice of a profession is not a “charitable” or “benevolent” institution in the accepted sense (Matter of Valerie Home v. Cook, 22 N.Y.2d 388, 239 N.E.2d 631, 292 N.Y.S.2d 882).

Rather, the purpose of the organization is to operate what was described in the case of Manresa Institute v. Town of Norwalk (61 Conn. 228, 23 A. 1088), as “a place of resort for a certain privileged class in the vacation periods, for purposes of rest and recreation”. In this case, (which was cited with approval in the Valeria Home case, supra) professors of religious colleges were among those using the vacation home. It was held that the home was not being used for benevolent purposes.

Furthermore, the fact that deficits in the operation of the home are made up by contributions from the “class” benefited gives it the character of a “mutual benefit” association rather than an institution which sustains its “charitable” or “benevolent” activities from contributions made by persons who receive no benefit from the organization’s activities (In re Kennedy’s Estate, 240 App. Div. 20, 269 N.Y.S. 136, aff’d, 264 N.Y. 691, 191 N.E. 629).

The purpose for which Cromwell Manor, Inc. is organized is clearly distinguishable from that of corporations organized to maintain homes exclusively for indigent persons. Then the fact that only a certain “class” may enter the homes becomes immaterial (American-Russian Aid Ass’n. v. City of Glen Cove, 41 Misc.2d 622, 246 N.Y.S.2d 123, aff’d, 260 N.Y.S.2d 589).

January 18, 1972

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