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Volume 2 - Opinions of Counsel SBEA No. 22

Opinions of Counsel index

Nonprofit organizations exemption (religious) (parking lot) - Real Property Tax Law, § 421:

A parking lot owned by a church and used primarily for the purpose of deriving income is subject to taxation.

Our opinion has been requested as to the taxable status of a parking lot owned by the First Baptist Church. The parking lot is leased to a professional building for doctors for its daily use from 9:00 a.m. to 6:00 p.m., and is also used by members of church organizations who attend evening functions which may take place at the church.

An exemption from real property taxation for church-owned real property would be granted pursuant to section 421 of the Real Property Tax Law, and the requirements of that section can be summarized as follows:

1. The real property must be owned by an organization which is organized exclusively for one or more of the purposes listed in section 421(1).

2. The real property must be used exclusively for carrying out one or more of the purposes listed in section 421(1). Any portion of the property which is not so used is subject to taxation.

3. No officer, member or employee of the organization may be entitled to receive any pecuniary profit from its operations, except reasonable compensation for services performed in furtherance of the corporate purposes.

4. No exemption shall be granted if the organization is a guise or pretense for directly or indirectly making any other pecuniary profit for such organization or for any of its members or employees.

In determining whether a property satisfies the requirements of section 421, it must be borne in mind that statutes exempting real property from taxation must be strictly construed, and that no exemption will be granted by any doubtful implication. In other words, the right to the exemption must be clearly established according to the statutory provision, and if a doubt exists, then that doubt should be resolved in favor of taxation (Lawrence-Smith School, Inc. v. City of New York, 280 N.Y. 805, 21 N.E.2d 693).

The First Baptist Church would certainly satisfy the organizational and nonprofit requirements of section 421. However, real property owned by a church must also satisfy the requirement that it be used exclusively for religious purposes.

The statute clearly provides that the real property owned by an exempt corporation or institution to be entitled to exemption must be “used exclusively for carrying out thereupon” one or more of the exempt purposes. The courts have consistently upheld the principle that, “[t]o entitle a corporation to exemption of its property, it is necessary for it to show that the property is used exclusively for carrying out thereupon one or more of the purposes of its incorporation” (People v. Sayles, 32 App. Div. 197, 53 N.Y.S. 67, aff’d 157 N.Y. 677, 51 N.E. 1093; Pratt Institute v. City of New York, 99 App. Div. 525, 91 N.Y.S. 136, aff’d 183 N.Y. 151, 75 N.E. 1119; People ex rel. Mizpah Lodge v. Burke, 228 N.Y. 245, 126 N.E. 703).

In determining whether the property so owned is “used exclusively” as the statute directs, the courts have held that when the property is used in the furtherance of the exempt purposes so as to constitute an integral or coordinate part in carrying out the overall corporate purposes, it is exempt. It must be made to appear that the use and need of the property by the corporation or institution “is necessary or fairly incidental to the maintenance of the institution for the carrying out of the purposes for which it was organized” (People ex rel. Blackburn v. Barton, 63 App. Div. 581, 71 N.Y.S. 933; People ex rel. Academy of The Sacred Heart v. Commissioners of Taxes and Assessments, 6 Hun 109, aff’d 64 N.Y. 656; People ex rel. Seminary of Our Lady of Angels v. Barber, 42 Hun 27, 3 St. R. 367, aff’d 106 N.Y. 669, 13 N.E. 936; Y.W.C.A. v. City of New York, 144 Misc. 120, 259 N.Y.S. 62, aff’d 236 App. Div. 665, 257 N.Y.S. 1032; In Application of Thomas S. Clarkson Memorial College of Technology, 274 App. Div. 732, 87 N.Y.S.2d 491, aff’d 300 N.Y. 595, 89 N.E.2d 882).

However, where an exempt corporation or association uses its exempt real property for nonexempt or foreign purposes, such as for the purpose of producing income therefrom, then the property so used is not entitled to an exemption, as it violates the “exclusive use” provision of the statute as quoted above.

It was so held in People ex rd. Adelphi College v. Wells, 97 App. Div. 312, 89 N.Y.S. 957, aff’d 180 N.Y. 534, 72 N.E. 1147, where an athletic field owned by the college and used during the scholastic year by the students thereof, was in the summer hired out, for a fee, for various sports events unconnected with the college. The court, in denying exemption, stated (89 N.Y.S. 957, 958), “Here, however, it appears that the property is utilized as a source of pecuniary income by renting it to outside parties for contests in which the Adelphi College students do not participate, and over which the college officers have no control. I am unable to see how such use can be regarded as exclusively for carrying out an educational purpose, within the meaning and intent of the statute.”

In People v. Sayles, supra, (53 N.Y.S. 67, 70, 71) the court held that “[i]t is the exclusive use of the real estate for carrying out thereupon one or more of the purposes of the incorporation of the relator which confers the right of exemption, and not the benefits accruing to it and its useful work from the income derived from others in consideration of their use of the real estate for their purposes.” Again, in People ex rd. Society of Free Church of St. Mary the Virgin v. Feitner, 168 N.Y. 494, 61 N.E. 762, the court stated at page 498: “the ‘exclusive use’ mentioned in the statute means exclusive business for which relator was incorporated.”

In our opinion, the ownership and use by a church of a parking lot primarily for the purpose of the production of income is clearly inconsistent with the “exclusive use” requirement of section 421. Such real property is, in our opinion, subject to taxation.

June 23, 1972

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