Volume 6 - Opinions of Counsel SBEA No. 30
Nonprofit organizations exemptions (religious) (required financial information) - Real Property Tax Law, § 420:
In determining eligibility of a religious organization for a real property tax exemption under section 420 of the Real Property Tax Law, an assessor has the right to require documentation, including financial information, relevant to the requirements of the statute.
An applicant claiming exemption on the basis of ownership and use of property for religious purposes has questioned the assessor’s right to certain information. The assessor has stated that the organization originally purchased property in the town in December of 1973. Prior to taxable status date in 1974, a representative of the organization requested that the assessor grant a real property tax exemption pursuant to section 420 of the Real Property Tax Law. The assessor informed the representative that he required a copy of the organization's charter and a financial report before considering the request. The assessor was already in possession of a letter from the applicant’s attorney to the effect that the organization had formed a Class B, Not-for-Profit Corporation for religious purposes. The assessor sought information from several New York State agencies, the United States Bureau of Internal Revenue, New York State Council of Churches and local agencies to assist in his review of the applicant's eligibility for tax exemption, however, no useful information was received.
Clearly, the assessor was not exceeding his authority in asking that the applicant provide him with certain documents to support the request for tax exemption. The first requirement for an exemption pursuant to section 420 of the Real Property Tax Law is that the owner of the property be a corporation or association organized exclusively for one or more of the purposes set forth in the statute. This is determined by examining the purposes and objects in the certificate of incorporation or charter, if any (see, Great Neck Section v. Board of Assessors, County of Nassau, 21 Misc.2d 142, 189 N.Y.S.2d 623).
The mere fact that an organization calls itself a church or incorporates as a religious society under an appropriate state statute is not sufficient ground for granting an exemption under section 420. For example, application for exemption was denied in Matter of Religious Society of Families v. Assessor, Town of Carroll, Chautauqua County, 73 Misc.2d 923, 343 N.Y.S.2d 159. The court noted:
The mere fact that it incorporated itself under the Religious Corporations Law is not determinative; its tenets and practices are. Some of its tenets are illegal...[73 Misc.2d 923, 343 N.Y.S.2d at 161].
Among the tenets the court found as illegal was an advocacy of suicide as the normal death process. In addition, the court held the Society not to be a “religious organization” within section 420 since it denied the existence of God and relied totally upon human reason.
Hence, the assessor has not only the right but the duty to examine the applicant's charter or certificate of incorporation in order to determine the eligibility of the organization for exempt status. Failure to supply the requested documentation is a sufficient ground for denying the application for exemption (since the assessor would lack the most basic information needed before an exemption could be granted).
The request for a corporate financial report was necessary relative to the provision of section 420 that real property of nonprofit organizations is not entitled to exemption,
if any officer, member or employee of the owning corporation or association shall receive or be lawfully entitled to receive any pecuniary profit from the operations thereof, except reasonable compensation for services in effecting one or more such purposes, or as proper beneficiaries of its strictly charitable purposes.
Without the requested report, the assessor would be without means to determine if the applicant organization satisfied this requirement of the law.
Even had the aforementioned documents been supplied, and even had they indicated that the organization met the aforementioned requirements, the assessor would still have been required to examine the actual use of the property to determine whether the property was exclusively used for exempt purposes. Apparently, however, since the necessary documentation was not provided, the assessor never reached the point of having to examine the use of the property.
April 5, 1977
NOTE: The State Board has prepared an application form for use by organizations seeking tax exempt status pursuant to section 420. It requires the submission of much of the information discussed above.