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Volume 7 - Opinions of Counsel SBEA No. 1

Opinions of Counsel index

Municipal corporations exemption (building leased to veterans’ organization) - Real Property Tax Law, § 406:

A building owned by a village and leased to a veterans’ organization for use as a social and meeting hall is not being “held/or a public use,” as that phrase is used in section 406(1) of the Real Property Tax Law, and is, therefore, not entitled to exemption pursuant to that subdivision.

A veterans’ organization sold its meeting hall to a village. The village then leased the hall back to the veterans’ organization for a monthly rental of $300. A tavern with eating facilities which is open to the public is operated on the premises. The question concerns the taxable status of the property.

Subdivision 1 of section 406 of the Real Property Tax Law exempts from taxation and certain special ad valorem levies and special assessments real property owned by a municipal corporation located within its corporate limits when the property is “held for a public use.” The leading case construing this subdivision is Town of Harrison v. County of Westchester, 13 N.Y.2d 258, 196 N.E.2d 240, 246 N.Y.S.2d 593 (1963), wherein the Court stated:

Subdivision 1 of section 406 of the Real Property Tax Law provides that property owned by a municipal corporation within its corporate limits is exempt from taxation only if “held for a public use". Although what comprises “a public use” within the meaning of the statute “has never been defined with exactitude” and “must necessarily depend upon the peculiar circumstances of each case”, it has been said, and most appropriately, that “‘Held for a public use,’ in this connection, means that the property should be occupied, employed, or availed of, by and for the benefit of the community at large, and implies a possession, occupation and enjoyment by the public, or by public agencies.” (County of Herkimer v. Village of Herkimer, 251 App. Div. 126, 128, 295 N.Y.S. 629, 634, affd, 279 N.Y. 560, 18 N.E.2d 854.) (13 N.Y.2d at 263).

It is clear from the Harrison case and others that the performance of activities on public property by private organizations does not necessarily remove the right to exemption pursuant to section 406(1), provided that the private party using the property is performing a municipal function which a State law authorizes the owning municipality to perform (Town of Harrison v. County of Westchester, supra [operation of an airport]; People ex rel. Mayor v. Board of Assessors, 111 N.Y. 505, 19 N.E. 90 (1888) [operation of a ferry]; People ex rel. I.R.T. Co. v. State Board of Tax Commissioners, 126 App. Div. 610, 110 N.Y.S. 577 (3d Dept., 1908) [operation of a subway]; see also, Fallica v. Town of Brookhaven, 69 A.D.2d 572, 419 N.Y.S.2d 102 (2d Dept., 1979) concerning “public use”).

From the by-laws of the veterans’ organization, and the lease between it and the village, it appears that the primary use of the property, following the transfer of title to the village, is the same as it was prior to the transfer, viz., a social and meeting hall for veterans’ organizations. In our opinion, this is not “a public use” as that term is used in section 406(1) of the Real Property Tax Law, and the property is therefore not entitled to exemption pursuant to that subdivision.

May 20, 1980

Updated: