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Volume 7 - Opinions of Counsel SBEA No. 18

Opinions of Counsel index

Nonprofit organizations exemption (general) (foreign corporation) -  Not-For-Profit Corporation Law, §  305; Real Property Tax Law, § 420:

Real property of a foreign nonprofit corporation, which corporation has filed for authority to conduct activities in New York, is entitled to exemption pursuant to section 420 of the Real Property Tax Law, provided the requirements of that section are satisfied.

Our opinion has been requested as to whether real property belonging to a nonprofit corporation, which was incorporated in the State of Delaware, but otherwise satisfies the requirements for exemption pursuant to section 420 of the Real Property Tax Law may receive exemption pursuant to that section. The corporation in question has applied for authority to conduct activities in. this State by filing an application pursuant to section 1304 of the Not-For-Profit Corporation Law (hereinafter N-PCL).

The requirements for the exemption pursuant to section 420 of the Real Property Tax Law can be summarized as follows:

1. The real property must be owned by an organization which is organized or conducted exclusively for one or more of the exempt purposes listed in that section.

2. The real property must be used exclusively for carrying out thereupon one or more of the listed exempt purposes.

3. No officer, member or employee of the organization may be entitled to receive any pecuniary profit from its operation, except reasonable compensation, for services performed in furtherance of the corporate purposes.

4. No exemption can be granted if the corporation is a guise or pretense for directly or indirectly making any other pecuniary profit for the organization or for any of its members or employees.

We have been cited to an opinion of the State Comptroller (23 Op.State Compt. 103), wherein he concluded that real property within the State of New York owned by Harvard University was not entitled to exemption because the University was a foreign corporation. The Comptroller relied on two New York cases: People ex rel. Andrews v. Cameron, 140 App.Div. 76, 124 N.Y.S. 949 (3d Dept., 1910), aff’d, 200 N.Y. 585, 94 N.E. 1098 (1911), and Hunter College Student Social Community and Religious Club Association v. City of New York, n.o.r., 63 N.Y.S. 337 (S. Ct., N.Y. Co., 1946).

In Cameron, the court concluded that Yale University, a corporation organized under the laws of the State of Connecticut, was not entitled to the benefit of the tax exemption provided by subdivision 7 of section 4 of the Tax Law (an antecedent to Real Property Tax Law, §420). The court made special note that the real property in question had not been used exclusively, or even in part, for carrying out thereupon any of the exempt purposes specified by the statute.

In Hunter College, the court relied solely on Cameron, concluding that the real property tax exemption could be granted only to corporations organized and existing under New York State law (63 N.Y.S.2d at 346).

Despite the foregoing, it is our opinion that real property of a foreign nonprofit corporation which has filed for authority to conduct activities in New York State (and which otherwise satisfies the criteria of §420) may receive exemption pursuant to section 420 of the Real Property Tax Law.

Pursuant to section 1305 of the N-PCL, once a foreign corporation has filed its application for authority under section 1304, it “shall be authorized to conduct in this state any activities set forth in the application.” Moreover, section 1306 of the N-PCL provides that, “An authorized foreign corporation shall have such powers as are permitted by the laws of the jurisdiction of its incorporation but no greater powers than those of a domestic corporation.” It should be noted that the failure of a foreign nonprofit corporation to seek authority to conduct activities pursuant to section 1304 subjects it to an action by the Attorney General to restrain its activities (N-PCL, §1303) and precludes it from maintaining any actions or special proceedings in the State (N-PCL, §1313), presumably including a proceeding seeking tax exempt status.

In Williams Institutional Colored Methodist Episcopal Church v. City of New York, 275 App.Div. 311, 89 N.Y.S.2d 300 (1st Dept., 1949), aff’d, 300 N.Y. 716, 92 N.E.2d 58 (1950)), a church was held entitled to a real property tax exemption pursuant to section 4(6) of the Tax Law (direct antecedent to Real Property Tax Law, §420) although title to the church was in the applicant’s parent church, which was organized under the laws of Arkansas. The court distinguished Cameron, supra, on the ground that the property in that case was concededly not used for exempt purposes, whereas in the case before it, the opposite was conceded to be so.

The court also distinguished two other cases regarding foreign corporations which had been relied upon by Special Term in denying the exemption (Matter of Prime’s Estate, 136 N.Y. 347, 32 N.E. 1091 (1893); and Matter of Balleis’-Estate, 144 N.Y. 132, 38 N.E. 1007 (1894)), on the ground that neither concerned real property tax exemption. The court stated that, “where the exemption in the statute is express, as it is here, an institution within the exemption is mandatorily exempt and the courts may not insert qualifying clauses or add conditions not contained in the Act...” (89 N.Y.S.2d at 304). The Court of Appeals quoted this language approvingly in Erie County Agricultural Society v. Cluchey, 40 N.Y.2d 194, 200, 352 N.E.2d 552, 386 N.Y.S.2d 366, 369 (1976).

Of special relevance to this inquiry is the United States Supreme Court decision in WHYY, Inc. v. Borough of Glassboro, 393 U.S. 117, 89 S.Ct. 286, 21 L.Ed.2d 242 (1968). In that case a Pennsylvania corporation, registered and qualified to transact business in New Jersey, sought a real property tax exemption as a nonprofit organization, which request was denied, solely on the basis of the foreign incorporation of the applicant. The corporation claimed that it had been denied equal protection of the laws in violation of the 14th Amendment to the United States Constitution. The Supreme Court agreed, stating “while a State may impose conditions on the entry of foreign corporations to do business in the State, once it has permitted them to enter, ‘the adopted corporations are entitled to equal protection with the state’s own corporate progeny, at least to the extent that the property is entitled to an equally favorable ad valorem tax basis’” (393 U.S. at 119, 89 S.Ct. at 287).

Accordingly, it is our opinion that where a foreign nonprofit corporation has filed for authority to carry out its activities in New York State, its real property may receive a tax exemption pursuant to section 420 of the Real Property Tax Law provided the requirements of that statute are satisfied.

August 6, 1980

Updated: