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Volume 10 - Opinions of Counsel No. 46

Opinions of Counsel index

Nonprofit organizations exemption (hospital) (leased office space) - Real Property Tax Law, § 420-a:

Where a portion of property owned by a hospital is leased to physicians for their private practices, that portion is not entitled to a nonprofit organizations exemption pursuant to section 420-a of the Real Property Tax Law.

Our opinion has been requested concerning the eligibility of what was formerly a commercial mall for a nonprofit organizations exemption (Real Property Tax Law, §420-a), when a local hospital purchases the property and converts a portion thereof for private physicians’ offices.

Section 420-a provides an exemption to property owned by a nonprofit organization organized or conducted exclusively for one or more of the purposes listed therein (e.g., hospital), provided the property is used exclusively for exempt purposes. The issue here, of course, is one of exclusive use.

In 1 Op.Counsel SBEA No. 64, a 1972 opinion, we opined that a portion of an addition to a hospital that is rented to physicians for their private practices is not entitled to the exemption now found in section 420-a, because that portion of the property may not be said to be used “exclusively” for nonprofit, hospital purposes. Subsequently, a series of judicial decisions has reached the same conclusion (Little Falls Hospital v. Board of Assessors, 75 Misc.2d 731, 348 N.Y.S.2d 856 (Sup.Ct., Herkimer Co., 1973); Community-General Hospital of Greater Syracuse v. Town of Onondaga, 80 Misc.2d 96, 362 N.Y.S.2d 375 (Sup.Ct., Onondaga Co., 1974); Julia K. Butterfield Memorial Hospital v. Town of Philipstown, 48 A.D.2d 289, 368 N.Y.S.2d 852 (2d Dept., 1975); Genesee Hospital v. Wagner, 47 A.D.2d 37, 364 N.Y.S.2d 934 (4th Dept., 1975), aff’d, 39 N.Y.2d 863, 352 N.E.2d 133, 386 N.Y.S.2d 216 (1976)). In the last cited case, the court stated a succinct rule: “[W]here physicians lease suites from the hospital, either in the hospital or adjoining thereto, and carry on their own private practice there, such suites are not entitled to tax exemption [citations omitted]” (364 N.Y.S.2d at 943).

Should the assessor determine that a portion of the property is used for exempt purposes, he or she should grant tax exempt status to that portion of the property (RPTL, §420-a(2)). In such a situation, when a portion of property is deemed exempt and another portion non-exempt, the taxable portion may be separately assessed (see, RPTL, §502). If, however, it is not practical to separately assess the exempt and non-exempt portions, the property should be entered on the taxable portion of the assessment roll, and the assessed value should be apportioned between the taxable and exempt portions (Trustees of Sailors’ Snug Harbor in City of New York v. Tax Commissioner City of New York, 26 N.Y.2d 444, 259 N.E.2d 906, 311 N.Y.S.2d 486 (1970); 3 Op.Counsel SBEA No. 77).

October 23, 1997

Updated: