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Volume 2 - Opinions of Counsel SBEA No. 92

Opinions of Counsel index

Nonprofit organizations exemption (YMCA) - Real Property Tax Law, §§ 102(13-a), 421, 498:

An exemption for housing owned by the YMCA is available only when the residence is clearly an integral part of the activity of the organization. The service charge law, when it becomes effective, will apply to YMCA property.

We have received an inquiry requesting our opinion as to the taxable status of a dwelling located within a YMCA camp. Specifically, the question is whether the residence is subject to taxation, and whether it is subject to the so-called service charge law (Real Property Tax Law, § 498).

First, the exemption available to the YMCA is that contained in section 421 of the Real Property Tax Law, and the requirements of that section can be summarized as follows:

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).

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.

In determining whether real property satisfies the requirements of section 421, it must be borne in mind that statutes exempting real property from taxation must be strictly construed, and that no exemption will be granted by any doubtful implication. In other words, the right to the exemption must be clearly established according to the statutory provision, and if a doubt exists, then that doubt should be resolved in favor of taxation (Lawrence-Smith School, Inc. v. City of New York, 280 N.Y. 805, 21 N.E.2d 693).

The taxable status of housing owned by exempt organizations is, in our opinion, a particularly difficult issue. There are two competing policies involved in the determination of these problems. On one hand, there is a strong state policy to foster the activity to which the exemption applies, and exemption statutes should not be interpreted so strictly as to defeat this purpose (Plattsburgh College Benevolent and Educational Association v. Board of Assessors of Town of Peru, 43 Misc.2d 741, 252 N.Y.S.2d 229). On the other hand, there is an obvious necessity for tax revenue, and the depletion of taxable real property will obviously increase the private taxpayers’ tax burden. Therefore, exemptions are to be construed strictly against the party claiming them (Lawrence-Smith School, Inc. v. City of New York, supra).

These considerations are basic to the reasoning of an opinion of the State Comptroller in which it is stated that University owned residences not located on or contiguous to the campus are not exempt from taxation when rented to or provided for faculty administrators (1 Op.State Compt. 106).

It is our opinion that if this type of real property is to be exempt pursuant to section 421 of the Real Property Tax Law, there must be a more direct relationship to the exempt institution than is present in the situation in which the real property is used as a residence by persons who are not essential to the continual operation of the real property on which the residence is located. In the case of Application of Thomas S. Clarkson Memorial College of Technology, 274 App. Div. 732, 87 N.Y.S.2d 491, aff’d 300 N.Y. 595, 89 N.E.2d 882, the court notes that “essentially we here have for determination the question whether dwellings or apartments owned and maintained by a college but assigned to its teachers or administrators as private dwellings at a stated periodic rental, but without requirement that the same be open for public or semi-public educational or administrative activities, constitute such a part of the articulated educational system of the college as to permit their exemption from taxation.” It is our opinion that such real property is essentially a private residence under the dominion and control of its occupant; it is equivalent to any other private residence in the municipality, such residences being private homes in which the family unit carries on typical familial activities.

It is the opinion of this office that an exemption for such housing is available only when the residence is clearly an integral part of the activity of the organization entitled to exempt status. Within this category would be included property occupied by officials and personnel who must be readily available for the supervision of students and maintenance of school buildings. Also includable within this category would be the homes of school officials who are required to entertain and/or lodge guests on behalf of the school on a regular basis.

The above facts do not permit a complete analysis of the taxable status of this property. If the residence were occupied by a caretaker during the operation of the camp and then remained unoccupied during the remainder of the year, then we would consider the residence to be exempt. In addition, we believe that an exemption should be granted upon a strong showing by the organization that it is necessary for the safety and maintenance of the camp that the residence be occupied on a year round basis. However, we would also be of the opinion that where a residence is occupied on a year round basis by individuals who are not otherwise required to be on the property, then, such residence is subject to taxation.

As to the second question, the service charge law (L.1971, c. 417) was postponed for one year by the 1972 Legislature (L.1972, c.966). Therefore, although we are of the opinion that the service charge of sections 102 (13-a) and 498 of the Real Property Tax Law will apply to YMCA property, the law is not in effect, and it will not be effective at the time of the 1973 tax levy.

December 7, 1972

NOTE:  The service charge law was repealed in 1981 (Chapter 105), after repeated postponements.