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Volume 2 - Opinions of Counsel SBEA No. 63

Opinions of Counsel index

Nonprofit organizations exemption (educational) - Real Property Tax Law, § 421(1):

The exempt status of a country day school will not be impaired by its holding of “weekend impact programs in communications and the arts” where such programs contain a comprehensive study of fine arts. The association of the program with a business corporation will not deprive the school of its exemption where the school has complete control over the program.

We have received an inquiry requesting our opinion as to whether proposed weekend impact programs in communications and the arts will affect the tax exempt status of a country day school.

By way of example, assume that a country day school, chartered by the Board of Regents of the University of the State of New York, was granted an exemption from real property taxation by a county board of assessment review. This exemption was granted pursuant to section 421 of the Real Property Tax Law, which contains the following requirements:

1. The real property must be owned by an organization which is organized exclusively for one or more of the purposes listed in section 421(1), education being among such purposes.

2. The real property must be used exclusively for carrying out one or more of the purposes listed in section 421(1). Any portion of the property which is not so used is subject to taxation.

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

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

Assume that the weekend impact program will function as follows:

“Adults enrolled in the course will attend sessions totaling seven hours over two days, the purpose of which will be to involve them in an impact program in creative drama and dance, painting, multi-media, music improvisation, piano, photography, etc., utilizing the faculty, equipment and facilities of the school at its campus.”

The program includes a comprehensive study of the fine arts. Such study is most certainly included in the broad and comprehensive purpose of “education” in section 421 (1) (see, Application of Syracuse University, 59 Misc.2d 684, 300 N.Y.S.2d 129).

The relatively short duration of the course of study is not a traditional form of education, but at this point it would appear to be a valid theoretical method of teaching. The course outline contains the following statement of explanation:

“Because of the marathon nature of the program the objective will be to make a deep penetration in terms of concepts, philosophy and very basic techniques.”

This theory, in conjunction with the participation and supervision of a reputable school and faculty would appear to merit acceptance as a valid form of education. The purpose of section 421 is “to promote education, not academic degrees” (Application of Syracuse University, supra), and the courts are quite liberal in their acceptance of methods and means of teaching (Little Theatre of Watertown, Inc. v. Hoyt, 7 Misc.2d 907, 165 N.Y.S.2d 292).

The contemplated association of this program with a business corporation does not affect the school’s exempt status. The corporation will not have any administrative authority in the program; the country day school will have complete control over the program and its operation. The course will be open to the general public; it will not be a function of the corporation.

The minimum fee to be guaranteed to the country day school by the corporation for weekends on which the corporation requests that the course be offered does not necessarily affect the school’s exempt status since all of the requirements of section 421 can still be satisfied.

Provided that the actual operation of the program corresponds to its theoretical operation, the exempt status of the country day school should not be impaired.

It must be remembered that the final determination of any application for exemption is one which must be made by the local assessors. Our opinion is based essentially on a hypothetical situation, and actual facts can very readily alter these conclusions.

August 17, 1970