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Volume 10 - Opinions of Counsel SBRPS No. 125

Opinions of Counsel index

Business investment exemption (scope) (adult home for patients with dementia) - Real Property Tax Law, § 485-b:

An adult home for patients with dementia may receive a business investment exemption if its primary use is to provide medical services rather than accommodations.

Our opinion has been requested concerning eligibility for the business investment exemption (Real Property Tax Law, § 485-b). The applicant is an adult home which plans to construct a new wing to accommodate patients with Alzheimer’s Disease and related dementia.

Section 485-b of the RPTL provides, in general, that real property constructed, altered or improved subsequent to July 1, 1976, or such later date as may be specified by local law or resolution, for the purposes of commercial, business or industrial activity, may receive a partial exemption from taxation and most special ad valorem levies for a 10 year period. However, subdivision five of section 485-b expressly provides:

The provisions of this section shall apply to real property used primarily for the buying, selling, storing or developing goods or services, the manufacture or assembly of goods or the processing of raw materials. This section shall not apply to property used primarily for the furnishing of dwelling space or accommodations to either residents or transients other than hotels or motels (emphasis added).

Thus, the issue presented is whether the addition in question will be “used primarily” to provide “dwelling space or accommodations” to its occupants. If it is, the exemption must be denied, since the planned addition is not a hotel or motel (see, 9 Op.Counsel SBEA No. 24).

In Glengariff Corp. v. Board of Assessors of Nassau County, 128 A.D.2d 872, 513 N.Y.S.2d 793 (2d Dept., 1987), the Court considered the eligibility of a “health related facility.” The County had denied the exemption, arguing that such a facility, by its very nature, “can never be subject to the exemption because its basic function is to provide accommodations to its residents” (128 A.D.2d at 873, 513 N.Y.S.2d at 795). The Second Department expressly rejected this position, holding that “the issue of entitlement must be determined on a case-by-case basis, and the party seeking the exemption must bear the burden of demonstrating that the facility is not used primarily for dwellings and accommodations” (id.). The court concluded that the primary use of such a facility is a question of fact, to be determined by taking evidence relating to such issues as “the level of care required by the majority of the residents and the extent of services actually provided by the [provider]” (128 A.D.2d at 874, 513 N.Y.S.2d at 795). The court also suggested that it might be instructive to review the financial statements of the facility, to determine “how much of the operating expenses are allocated to accommodations as compared to medical services” (id.).

Accordingly, in light of the Glengariff decision, we can offer no definitive opinion as to whether an adult home does or does not qualify for the 485-b exemption. Rather, it appears that the applicant must provide to the assessor evidence showing the primary use of the property in question. If the assessor determines that the primary use of the property is to provide medical services rather than accommodations, the exemption may be granted. Otherwise, the exemption should be denied; however, the applicant may seek administrative and judicial review of such determination.

February 1, 2001