Volume 10 - Opinions of Counsel SBRPS No. 96
Nonprofit organizations exemption (educational) (catering hall) - Real Property Tax Law, § 420-a:
A college-owned catering hall available for rental to and regularly used by the public at large is not entitled to the nonprofit organizations exemption. If, on the other hand, the usage by non-college personnel is merely incidental to its use by college personnel, such property is likely exempt.
Our opinion has been requested as to the eligibility of a portion of a college-owned catering hall for a nonprofit organizations exemption (Real Property Tax Law, § 420-a). State Supreme Court has determined that the catering hall is a permitted use under town zoning.
There are essentially three tests which must be satisfied if property is to receive exemption pursuant to section 420-a: nonprofit status, organizational purpose and property use. We assume that there is no question as to the college’s satisfaction of the first two criteria and that the sole question is as to the use of the catering hall.
Although the statute requires that property must be “used exclusively” for exempt property if it is to receive exemption (RPTL, § 420-a(1)(a)), the courts have routinely held that this means that the property must be used “principally” or “primarily” for such purpose, or, put another way, that an incidental use for non-exempt purposes will not defeat the exemption (e.g., Association of the Bar of City of New York v. Lewisohn, 34 N.Y.2d 143, 313 N.E.2d 30, 356 N.Y.S.2d 555 (1974)). While a court asked to review such taxable status might choose to take cognizance of the zoning determination, that decision would not seem determinative of the issue of use for tax exemption purposes. There are, however, several precedents of relevance to the taxable status issue.
In Young Women’s Christian Association v. City of New York, 217 App. Div. 406, 216 N.Y.S. 248 (1st Dept. 1926), aff’d, 245 N.Y. 562, 157 N.E. 858 (1927), the court held to be taxable:
portions of the premises . . . used as a restaurant and a kitchen for the purpose of furnishing meals, not solely to the occupants of the building, but also to the public. The patronage of the public was openly and evidently successfully solicited, and it resulted in more than fifty per cent of the restaurant service which was paid for in cash and on which a profit was made or attempted to be made. The profits were not used directly for the benefit of the “young women,” whose advancement was the object specified in the charter of the plaintiff corporation. That the money so obtained was subsequently used for accomplishing the corporate purposes, does not bring the plaintiff corporation within the exemption of the statute. [citation omitted]
The patronage of the restaurant in the plaintiff’s premises was not merely occasional, sporadic or an emergency use, but it was the daily practice. Nor can it be considered merely an incidental use for the purposes defined in the plaintiff’s charter. It was a practice conducted by the plaintiff corporation for the purpose of securing revenue, undoubtedly for the laudable purpose of subsequent use by the corporation in accomplishing their very praiseworthy aims and purposes. Nevertheless, the making of profit by conducting a restaurant for the public is clearly not within the corporate purposes of the plaintiff’s charter (217 App. Div at 409-410, 216 N.Y.S. at 252).
In Matter of Pace College v. Boyland, 4 N.Y.2d 528, 151 N.E.2d 900, 176 N.Y.S.2d 356 (1958), the State’s highest court exempted a college cafeteria the use of which was restricted to students, faculty and staff (accord: People ex rel. Buffalo Turn Verein v. Assessors, City of Buffalo, 257 App. Div. 902, 12 N.Y.S.2d 170) (4th Dept. 1939). Similarly, in Shrine of Our Lady of Martyrs of Auriesville v. Board of Assessors of the Town of Glen, 40 A.D.2d 75, 337 N.Y.S.2d 786 (3d Dept. 1972), aff’d, 33 N.Y.2d 713, 304 N.E.2d 563, 349 N.Y.S.2d 993 (1973), the court exempted the shrine’s dining facilities. The court found:
similar facilities available in the surrounding towns, the nearest of these is five miles away, and many of the public restaurants have business hours which would conflict with shrine activities, and many are limited in space. In addition many of the pilgrim visitors have no individual transportation but rather come by bus and there would be great difficulty in transporting these persons to and from the surrounding towns in time to participate in the religious and historical activities. It is, therefore, clear that the efficacy of the appellant’s primary purpose would be seriously undermined without the benefits of these incidental material facilities (40 A.D.2d at 77, 337 N.Y.S.2d at 788).
Based on these precedents, we believe the taxable status of the portion of the property in question will be determined in accordance with the degree of use by persons not affiliated with the college. If, for example, the catering hall is available for rental to and is regularly used by the public at large, {1} then the YWCA decision (supra) would seem determinative. If, on the other hand, the usage by non-college personnel is merely incidental, the portions of the property would likely be held to be exempt.
January 24, 2000
{1} The assessor may wish to review any public advertisements for the catering service.
