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Volume 10 - Opinions of Counsel SBRPS No. 90

Opinions of Counsel index

Religious corporations exemption (ownership requirement) (property leased from one religious corporation to another); Nonprofit organizations exemption (religious) (leased property - parsonage) - Real Property Tax Law, §§ 420-a, 462:

Where one religious corporation leases its property to another religious corporation and the second corporation uses the property as the residence of its officiating clergyman, the property is not entitled to exemption pursuant to section 462 or 420-a of the Real Property Tax Law.

Our opinion has been requested concerning the nonprofit organizations exemption (Real Property Tax Law, §§ 420-a, 420-b) and the so-called parsonage exemption (RPTL, § 462). A property owned by a religious corporation [Corp. 1], which has been receiving an exemption pursuant to section 462, is now being leased to a second religious corporation [Corp. 2], a religious corporation separate and distinct from Corp. 1 (though both are of the same religious denomination). The property is the residence of Corp. 2’s officiating clergyman. The question is if the property is still entitled to exemption. We think not.

Section 420-a provides an exemption to property owned by nonprofit organizations organized or conducted exclusively for certain exempt purposes (e.g., religious) provided the property is used exclusively for exempt purposes. Pursuant to section 420-a(2), one such nonprofit organization may lease its property to another such entity and still receive an exemption provided the lessee would be entitled to an exemption if it owned the property and provided further that the rent paid does not exceed the carrying, maintenance and depreciation charges of the property (see, 10 Op.Counsel SBRPS No. 88).

However, as we stated in 10 Op.Counsel SBRPS No. 38:

It has long been our opinion that the taxable status of rectories and parsonages is established primarily by section 462, not section 420-a, because residential use is neither a religious use nor necessarily incidental to a religious use (see, 5 Op.Counsel SBEA No. 122 and cases cited therein; accord: St. Agnes Church v. Daby, 148 A.D.2d 31, 543 N.Y.S.2d 208 (3d Dept., 1989)).

In part, section 462 provides, “In addition to the exemption provided in section [420-a] of this article, property owned by a religious corporation while actually used by the officiating clergymen thereof for residential purposes shall be exempt from taxation” (emphasis added). The two emphasized portions of this statement appear to conflict.

That is, it might be argued that the introductory phrase of section 462 should be read to incorporate section 420-a(2), so that a lease from Corp. 1 to Corp. 2 should not defeat the exemption, provided the rent is limited. However, the Court of Appeals has referred to that phrase as being only “purely conjunctive” and “vestigial” (Congregation Kollel Horabonim v. Williams, 48 N.Y.2d 301, 306, 307, 398 N.E.2d 515, 422 N.Y.S.2d 909, 910, 911 (1979)). Given that reference and the fact that “thereof” clearly refers to the owning religious corporation, in our opinion, Corp. 1 cannot receive an exemption pursuant to section 462 when it is Corp. 2’s officiating clergy who is residing in Corp. 1’s property. {1}

September 22, 1999

{1}  It has been suggested that since both churches are of the same denomination, the exemption should be allowed. In our opinion, however, section 462 requires ownership and use by a single religious corporation. Given that Corp. 1 and Corp. 2 are separate corporations, this criterion is not satisfied despite their affiliation with the same denomination. We recognize that the result could differ given a different ecclesiastical hierarchy. For example, where a Roman Catholic diocese owns a rectory adjacent to Church A, it might possibly choose to assign the priest of Church B to reside therein; the statutory exemption criteria of section 462 would seem to be satisfied.