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Volume 3 - Opinions of Counsel SBEA No. 55

Opinions of Counsel index

Nonprofit organizations exemption (hospital) (parking garage) - Real Property Tax Law, § 421:

Where a parking garage is for the exclusive use of hospital staff and visitors, its services being available for a “nominal” fee, such facility is entitled to tax exempt status pursuant to this section. The parking facility should be restricted to employees, staff, patients and visitors, and not be available to the general public. The charging of a “nominal” fee for the service will not defeat the exemption if the motivation for the operation of the facility is not for pecuniary profit.

We have received an inquiry concerning the taxable status of a parking garage owned and operated by a hospital. The parking facility is allegedly for the exclusive use of hospital staff and visitors, its services available for a “nominal” fee, and is located to the immediate rear of the hospital. The question is whether this facility should receive an exempt status pursuant to section 421(1) of the Real Property Tax Law.

The applicable language of section 421 provides, in part, as follows:

1. (a) Real property owned by a corporation or association organized or conducted exclusively for . . . hospital . . . purposes, and used exclusively for carrying out . . . such purposes . . . shall be exempt from taxation as provided in this section.

The pertinent question as presented by the above facts is, therefore, whether hospital parking facilities can be considered property “used exclusively for carrying out . . . [hospital] . . . purposes.”

This specific question was considered in Ellis Hospital v. Fredette, 27 App. Div.2d 390, 279 N.Y.S.2d 925, the court concluding that a parking lot, operated by a hospital and maintained for visitors and staff, can be said to be “reasonably incident to the major purpose of the hospital, and therefore exempt from real property taxation.” (See also, People ex rel. Watchtower Bible and Tract Society, Inc. v. Haring, 8 N.Y.2d 350, 170 N.E.2d 677, 207 N.Y.S.2d 673.)

The parking facility should be restricted to employees, staff, patients and visitors and not be available to the general public, and some care should be taken to restrict the availability of the facility to those for whom it is intended.

The charging of a “nominal” fee for use of services will not defeat the exempt character of the parking garage. “[T]he fact that a fee [is] charged to help defray the cost of construction and operation of the lot or even that a surplus was realized from its operation does not affect the exemption [if] . . . the motivation for the operation of the facility [is] clearly not oriented toward pecuniary profit but rather toward providing necessary services and facilities” (Ellis Hospital v. Fredette, 27 App. Div.2d at 392, 279 N.Y.S.2d at 927). The assessor should determine whether fees charged meet these criteria.

It is our opinion, in light of the presented facts, that the parking garage owned by the hospital would be entitled to exempt status.

March 7, 1974

Updated: