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Volume 4 - Opinions of Counsel SBEA No. 28

Opinions of Counsel index

Nonprofit organizations exemption (religious) (leased property) (profit making nursery school) - Real Property Tax Law, § 421:

Property owned by a religious corporation and rented to a profit making nursery school or kindergarten is not qualified for real property tax exemption under section 421 of the Real Property Tax Law.

Our opinion has been requested concerning the taxable status of real property which is owned by a religious corporation and rented to a profit making nursery school or kindergarten.

An exemption from real property taxation for real property owned by a religious corporation is available if the property and organization satisfy the requirements of section 421 of the Real Property Tax Law. The requirements 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 purpose listed in section 421.
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 shalt 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 real 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 second requirement of section 421 is that the property must be used exclusively for the exempt purposes of the statute. Subdivision (2) of section 421 provides, in part, as follows:

2. If any portion of such real property is not so used exclusively to carry out thereupon one or more of such purposes but is leased or otherwise used for other purposes, such portion shall be subject to taxation and the remaining portion only shall be exempt; provided, however, that such real property shall be fully exempt from taxation although it or a portion thereof is used (a) for purposes which are exempt pursuant to this section . . . (b) for purposes which are exempt pursuant to section four hundred eight of this chapter . . . [school districts and boards of cooperative educational services].

Nursery schools and kindergartens which are operated for profit are not entitled to an exemption from real property taxation under either section 421 or section 408. Therefore, it would be our opinion that the use for such activity of a portion of property owned by a religious organization would disqualify that portion of the property from the exemption authorized by section 421 (Winter v. Board of Assessors of County of Nassau, 63 Misc.2d 451, 311 N.Y.S.2d 684).

Where real property, which was wholly exempt from taxation, ceases to be exclusively used for exempt activities, the Court of Appeals has held that the assessor may apportion the assessed value between the exempt and nonexempt portions of the building and enter the taxable assessed value of the real property on the taxable portion of the assessment roll, with the exempt assessed value being entered in the column for such exemptions (Trustees of Sailors’ Snug Harbor in the City of New York v. Tax Commissioner of the City of New York, 26 N.Y.2d 444, 259 N.E.2d 918, 311 N.Y.S.2d 486).

November 16, 1973

Updated: