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Volume 5 - Opinions of Counsel SBEA No. 92

Opinions of Counsel index

Nonprofit organizations exemption (religious) (purposes of organization) - Real Property Tax Law, § 421:

For real property belonging to a religious organization to receive an exemption pursuant to section 421 of the Real Property Tax Law, the organization must be organized exclusively, in the sense of primarily and principally, for religious purposes.

We have received an inquiry concerning the taxable status of a two-story frame building for which a religious exemption from real property taxation is sought under section 421 (i.e., 420) of the Real Property Tax Law. On the ground floor of the building are two former stores which are connected and used as meeting halls. The second floor contains two apartments. One apartment is occupied by the “minister” of the church, the other is leased to a private individual.

In determining whether real property satisfies the requirements for exemption of section 421 of the Real Property Tax Law, it must be understood that statutes exempting real property from taxation are strictly construed. No exemption will be granted by doubtful implication. In other words, the right to the exemption must be clearly established according to the statutory provisions, 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).

Section 421 of the Real Property Tax Law authorizes an exemption from taxation for real property owned by certain nonprofit organizations. The requirements of that section can be summarized as follows:

1. The real property must be owned by a corporation or association organized exclusively for one or more of the purposes 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. 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 a pecuniary profit from its operations, except reasonable compensation for services performed in furtherance of 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.

The first requirement of the exemption is that the association be “organized exclusively” for one or more of the enumerated purposes (i.e., for religious, charitable, hospital, or educational, ... or cemetery purposes, or for two or more such purposes. . .”). This is determined by examining purposes and objects in the certificate of incorporation or charter, if any (Great Neck Section, etc. v. Board of Assessors, 21 Misc.2d, 142, 189 N.Y.S.2d 623; American-Russian Aid Association v. City of Glen Cove, 41 Misc.2d 622, 246 N.Y.S.2d l23, aff’d. 260 N.Y.S.2d 589). In examining the charter purposes (as in judging the availability of an exemption), the provisions must be construed strictly against the applicant. The result of this principle is that the charter must be a precise and a definite instrument; it cannot provide for purposes so vague or so broad that the exempt activities are not necessarily exclusive. If any of the purposes recited in the certificate of incorporation are not specified in the statute, the corporation fails to meet the “organized exclusively” requirement and real property owned by such corporation is not entitled to this exemption.

In a recent decision by the New York Court of Appeals, Matter of American Bible Society v. Lewisohn, Finance Administrator of the City of New York, 40 N.Y.2d 78, 351 N.E.2d 697, 386 N.Y.S.2d 49, the court discussed some of the elements that make up qualifications for exemption for religious organizations under the “organized exclusively” requirement. The court denied the application of the American Bible Society for exemption using the following language:

We conclude that within the contemplation of subdivision 1 of section 421 the American Bible Society is “exclusively” (in the sense of principally or primarily) organized and conducted for bible purposes and not for religious or educational purposes. It is true that foreseeably and inevitably the consequence of its corporate activities may be the advancement of the Christian religion; indeed the Holy Bible is the abecedarium of Christianity. There is, however, no reference in the Society’s charter documents to Christianity or to religion; to the contrary, the expressed purpose to publish and circulate “without note or comment” precludes alignment with any doctrinal or denominational interpretations or positions. The promotion of religion in a broad or generic sense is the by-product of the accomplishment of the Society’s corporate Bible purpose. In this sense, we distinguish Watchtower Bible Soc. v. Lewisohn, (35 N.Y.2d 92, 358 N.Y.S.2d 757, 315 N.E.2d 801). In that case, the corporation was the governing body of the religious group known as Jehovah’s Witnesses, thus, “the ecclesiastical governing body of a recognized religious denomination with its own beliefs and form of organization” (at p. 97, 358 N.Y.S.2d p. 760, 315 N.E.2d p. 803). In the present case there is no corporate affiliation between the American Bible Society and any denomination, sect, or organization having as its avowed purpose the furthering of a recognized religion, nor is the publication and distribution of the Bible by it directly associated with any denomination or sect, or with any such organization (40 N.Y.2d at 85, 386 N.Y.S.2d at 53). (emphasis supplied)

The above-quoted language clearly indicates that the Court of Appeals requires that an organization be organized primarily and principally for religious purposes to be exempt. Corporate activities which merely advance the Christian denomination are not considered sufficient for exemption. There is further language to indicate that a religious organization should be affiliated with a recognized religious denomination which has its “own beliefs and form of organization.”

The “organized exclusively” requirement is only one of several requirements which must be fulfilled in order to qualify a particular parcel of property for exemption under section 421 of the Real Property Tax Law. Attention must also be given to requirements 3 and 4 listed above which mandate that no officer, member or employee of the organization be entitled to profit either directly or indirectly. The assessor may require financial evidence from the organization claiming exemption as to whether these criteria are met. The remaining requirement, that real property owned by the organization be “used exclusively” for carrying out exempt purposes presents certain difficulties.

The information provided with the inquiry indicates that the ground floor of the subject parcel contains two former stores which are interconnected and are presently used as meeting halls ostensibly for religious purposes. The second floor consists of two apartments, one of which is occupied by the “minister” while the other apartment is leased to a private individual. In several prior opinions (2 Op.Counsel SBEA No. 49, 3 Op.Counsel SBEA Nos. 77 and 119), we thoroughly outlined our position as to property leased by an organization which claims an exemption under section 421 of the Real Property Tax Law. Our conclusion in these opinions is that property owned by a tax exempt organization will lose its exempt status if leased to private individuals.

The major issue still remaining is whether or not the property in question satisfies the “used exclusively” requirement under section 421 of the Real Property Tax Law. In his inquiry, the assessor states that he has been unable to gain entrance to the property to determine the actual use to which the property in question is being put. Such an investigation is a necessary prerequisite to granting a tax exemption under section 421 as there is no other possible way in which an assessor may gain knowledge of the actual use to which property is put. Numerous cases have held that the burden of proof is on the organization seeking exemption to provide to the satisfaction of local assessment officials, or the courts, that property is used for exempt purposes (see, e.g., Faculty Student Association of Harpur College v. Dawson, 57 Misc.2d 112, 292 N.Y.S.2d 216).

Based on the information provided, it would seem that the property in question is, in fact, not primarily used for religious purposes but rather is still primarily devoted to residential and commercial use with only incidental religious activities. Referring to American Bible Society v. Lewisohn (supra), property, in order to enjoy exemption, must be exclusively, in the sense of principally or primarily, organized and used for a religious purpose to qualify for exemption. Especially in light of the owner’s refusal to allow the assessor access to the subject property, the assessor would seem to be correct in denying an exemption pending receipt of further evidence as to actual use of the property.

August 11, 1976

Updated: