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Volume 10 - Opinions of Counsel SBRPS No. 72

Opinions of Counsel index

Nonprofit organizations exemption (educational) (artists’ retreat) - Real Property Tax Law, § 420-a:

The retreat of a nonprofit artists’ foundation may receive exemption pursuant to section 420-a of the Real Property Tax Law if it is used exclusively for exempt purposes. While some public accessibility to the property is seemingly necessary if exemption is to be allowed, access may be limited so as not to cause the retreat to fail of its purpose. Unused portions of the property may also receive exemption if their use for exempt purposes is contemplated in good faith.

Our opinion has been requested concerning the eligibility of an artists’ foundation [hereafter foundation] for a nonprofit organizations real property tax exemption (Real Property Tax Law, 420-a) on its artists’ retreat. Only portions of the property are open to the public, and some portions of the property are not currently in use.

Section 420-a of the RPTL provides an exemption for the real property of a nonprofit corporation or association organized or conducted exclusively for certain specified exempt purposes (e.g., educational, moral or mental improvement) and used exclusively to carry out such purposes, so long as no officer, member or employee of the corporation or association is eligible to receive pecuniary profit in excess of reasonable compensation. The term “exclusive” has been defined in this context, to mean “principal” or “primary” (Association of Bar of the City of New York v. Lewisohn, 34 N.Y.2d 143, 313 N.E.2d 30, 357 N.Y.S.2d 555 (1974)).

Turning first to the question of the foundation’s purposes, in People ex rel. Corporation of Yaddo v. Freeman, 259 N.Y. 620, 182 N.E. 207 (1932), the Court of Appeals affirmed the lower courts’ grant of tax exempt status (pursuant to a statutory predecessor of current RPTL, 420-a) to an organization the certificate of incorporation of which provided it was “‘to maintain a residence and retreat for persons actually and usefully engaged in artistic and creative work’” (259 N.Y. at 620-21). Thereafter a little theater corporation was also held be exempt (Little Theatre of Watertown v. Hoyt, 7 Misc.2d 907, 165 N.Y.S.2d 292 (Sup. Ct., Jefferson Co., 1956), aff’d, 4 A.D.2d 853, 167 N.Y.S.2d 240 (4th Dept., 1957)). {1}  More recently, the Court of Appeals held that a theater corporation which was not organized to make a profit or to compete commercially with other theaters, but which “provide[d] the general public with access, otherwise limited, to the various aspects of the performing arts, including the unique opportunity to create, perform, learn and otherwise be involved in the wide spectrum of activities that are housed in the theater” was exempt (Symphony Space, Inc. v. Tishelman, 60 N.Y.2d 33, 39, 453 N.E.2d 1094, 466 N.Y.S.2d 677, 680 (1983)). As the initial trier of fact, the assessor will need to determine if the foundation’s purposes fit within these judicially-made guidelines.

While section 420-a also requires “exclusive use,” again, the courts have determined that this means principal or primary use (Association of the Bar, (supra)). Use is commonly the most difficult issue in determining any claim for exemption under section 420-a.

Here, there is some question regarding public access to the foundation’s property. Clearly, the Court of Appeals focused on public use in Symphony Space (supra). It would seem, therefore, that some public accessibility is essential although it could be argued that such access may be limited lest the organization fail of its purpose, here, an artistic retreat (see, North Manursing Wildlife v. City of Rye, 48 N.Y.2d 135, 140, 397 N.E.2d 693, 422 N.Y.S.2d 1 (1979); see also, Adirondack Land Trust v. Town of Putnam, 203 A.D.2d 861, 611 N.Y.S.2d 332 (3d Dept., 1994) and St. Barbara’s Roman Catholic Church v. City of New York, 243 App. Div. 371, 277 N.Y.S. 538 (2d Dept., 1935)).

Finally, there seems to be some question as to the foundation’s current lack of use of some of its property. It is possible for a nonprofit organization to receive an exemption on certain of its unused property. Section 420-a(3) of the RPTL provides that,

[S]uch real property from which no revenue is derived shall be exempt though not in actual use therefor by reason of the absence of suitable buildings or improvements thereon if (a) the construction of such buildings or improvements are in progress or is in good faith contemplated by such corporation...

It has been held that the assessor may ask the applicant for proof of its “intention to make concrete and definite plans for utilizing and adopting the property for exempt purposes within the foreseeable future” (Economic Opportunity Commission v. Hempstead, 148 A.D.2d 570, 539 N.Y.S.2d 39, 41 (2d Dept., 1989), lv. to app. den., 74 N.Y.2d 608, 543 N.E.2d 747, 545 N.Y.S.2d 104 (1989); Inward House Corp. v. Frey, 227 A.D.2d 845, 642 N.Y.S.2d 400 (3d Dept. 1996)). Where an assessor grants an exemption on such basis, he or she is expected to review the exempt status from year to year and make an annual determination if there is continued good faith to bring the organization’s planned use into fruition. {2} 

December 24, 1998


{1}  Relying on Little Theatre, another court exempted a theater complex owned by Syracuse University (Application of Syracuse University, 59 Misc.2d 684, 300 N.Y.S.2d 129 (Sup. Ct., Onondaga Co., 1969)). We too have concluded that arts programs are consistent with an organization’s educational purposes (2 Op.Counsel SBEA No. 63).

{2}  The State Board prescribed forms for renewal of the nonprofit organizations exemption (RP-420-a/b-Rnw-I and Rnw-II) should be useful in determining continued good faith contemplated use.

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