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Volume 3 - Opinions of Counsel SBEA No. 16

Opinions of Counsel index

Nonprofit organizations exemption (religious) (residence for elderly) - Real Property Tax Law, § 421:

The operation of a facility for the residency or care of aged persons is not a religious activity. Therefore, the fact that the facility is owned by a church is not determinative of its taxable status, and the critical questions which must be asked are how is the facility operated and what is its primary purpose.

Our opinion has been requested as to the taxable status of a nursing home which is owned by a religious sect. Apparently it is not necessary to be a member of the religious sect in order to gain admittance to the home, but religious services are held every day. The operation is one which is nonprofit.

First, we assume that the religious sect is organized exclusively for one or more of the purposes listed in section 421 of the Real Property Tax Law. More particularly, the purposes listed in the corporate charter may not include activities which are not enumerated in section 421. If it is determined that the corporation is organized exclusively for exempt purposes, then it must be determined whether the property is also used exclusively for one of the purposes listed in the statute.

The operation of a facility for the residence or care of aged persons (or both) is not a religious activity. Therefore, the fact that the facility is owned by a church is not determinative of its taxable status, and the critical questions which must be analyzed are how is the facility operated and what is its primary purpose.

The operation of a housing project for the aged is not per se a charitable purpose. If this were so, the provision of section 422 which grants a tax exemption to the property of certain nonprofit regulated companies (limited-profit housing companies and housing development fund companies) used to provide housing for the aged of low income would have been unnecessary (see, Educational Alliance Corp. v. Wagner, 28 App.Div.2d 832, 282 N.Y.S.2d 923).

Whether or not a particular housing facility is operated for charity depends upon the facts of each case. For example, if fees charged the elderly tenants are sufficient to cover all or most of the costs of the facility (including acquisition costs), there could be in our opinion no “charity”. On the other hand, where substantial deficits are incurred which are made up by contributions, subsidies from the owning organization and the like, and most of the tenants are unable to afford regular rental rates charged in comparable commercial apartments, then a charitable use would probably be found even though some fees are charged (American-Russian Aid Ass’n. v. City of Glen Cove, 41 Misc. 2d 622, 246 N.Y.S.2d 123, aff’d, 23 App.Div.2d 966, 260 N.Y.S.2d 589).

Gradations in the relevant factors present in any given fact situation make it extremely difficult to judge whether an exclusive charitable purpose is present. A recent American Law Reports annotation (37 A.L.R. 3d 565) treats exhaustively the weight given the various factors in the many recent cases decided throughout the United States.

In some cases it may be argued that a residential facility of this type is a “benevolent” activity and thus qualified for exemption. However, it is our opinion that the term “benevolent”, while not meaning charity, must be construed to be a rather extraordinary activity which is meant to aid or assist persons who are clearly in need of such aid or assistance. We believe that if a facility can be termed as “benevolent” then the residents must receive something which is of greater value than that which they contribute and there must be a showing of benefit to the general public welfare (Bernal v. Baptist Fresh Air House Soc., 275 App.Div. 88, 87 N.Y.S.2d 458, aff’d, 300 N.Y. 486, 88 N.E.2d 720; Webster Apartments, Inc. v. City of New York, 118 Misc. 91, 193 N.Y.S. 650, aff’d, 206 App.Div. 759, 200 N.Y.S. 956; National Navy Club v. City of New York, 122 Misc. 89, 203 N.Y.S. 114).

Therefore, if a residential home for the aged is not charitable in nature, then we have serious doubts that it can qualify for the exemption under section 421, and most certainly it will not qualify if the town exercises the option authorized by paragraph (b) of subdivision 1 and makes “benevolent” property subject to taxation.

          However, real property which is owned by a corporation or association organized exclusively for religious purposes and used exclusively for hospital or infirmary purposes, or both, is entitled to an exemption pursuant to section 421 of the Real Property Tax Law. Inspection of the premises should provide the information necessary to determine whether a hospital or infirmary actually exists. Our caveat is that if the corporation claims that its property is being used for a hospital or infirmary, then the incidences of such a facility must be present. These include patients in need of full time medical attention, trained medical personnel in attendance, and adequate and complete health care facilities and equipment. The assessor should be certain that the home is not in fact a recreational facility or a home which is merely operated as a residence for healthy ambulatory aged persons (Valeria Home, Inc. v. Cook, 22 N.Y.2d 391, 239 N.E.2d 631, 292 N.Y.S.2d 882).

July 3, 1973

Updated: