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Volume 4 - Opinions of Counsel SBEA No. 105

Opinions of Counsel index

Nonprofit organizations exemption (educational) (barbershop quartet singing society) - Real Property Tax Law, § 421:

A barbershop quartet singing society which does not engage in any sort of formalized system of instruction and is not registered with the Commissioner of Education or chartered by the Board of Regents as an educational institution is not entitled to an exemption pursuant to section 421 of the Real Property Tax Law.

Our opinion has been requested as to the taxable status of a building owned by a barbershop quartet singing society used as a club room and also to conduct practice sessions. The building has been leased out under agreement to other organizations for the cost of operation.

As a general rule of construction, statutes exempting real property from taxation must be strictly construed against the real property owner seeking such exemption (Lawrence-Smith School, Inc. v. City of New York, 166 Misc. 856, 2 N.Y.S.2d 752, aff’d, 255 App. Div. 762, 7 N.Y.S.2d 486, aff’d, 280 N.Y. 805, 21 N.E.2d 693). Section 421 of the Real Property Tax Law authorizes an exemption from real property taxation on real property owned by certain nonprofit organizations. The requirements of that section can be summarized as follows:

1. The real property must be owned by a corporation or association organized exclusively for one or more of the purposes listed in section 421 of the Real Property Tax Law.

2. The real property must be used exclusively for carrying out one or more of the purposes listed in section 421. 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 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.

The first requirement for the exemption is that the association be “organized exclusively” for one or more of the enumerated purposes (i.e., “. . . for religious, charitable, hospital, educational, . . . or cemetery purposes, or for two or more such purposes . . .”) . This is determined by examining purposes and objects in the certificate of incorporation or the charter, if any (Great Neck Section v. Board of Assessors, 21 Misc.2d 142, 189 N.Y.S.2d 623; American-Russian Aid Association v. City of Glen Cove, 41 Misc.2d 622, 246 N.Y.S.2d 123, aff’d, 260 N.Y.S.2d 589). In examining the purposes of the certificate of incorporation (as in judging the availability of an exemption) , the provisions must be construed strictly against the applicant. The result of this principle is that the certificate of incorporation must be a precise and definite instrument; it cannot provide for purposes so vague or so broad that the exempt activities are not necessarily exclusive. If any of the purposes recited in the certificate of incorporation are not specified in the statute, the corporation fails to meet “the organized exclusively” requirement, and real property owned by such corporation is not entitled to this exemption.

In examining the submitted certificate of incorporation, we find that the only purpose listed among the organization’s goals which could possibly fit within those purposes enumerated in section 421 of the Real Property Tax Law is “to encourage and promote the education of the public in music appreciation . . .”. The meaning of the word “educational” within section 421, although not categorically defined by the courts, has generally been interpreted in a limited and restricted sense in prior decisions of the courts. It has been held that the meaning of the term “educational” relates to formal education, basically instructional in nature (People ex rel. Board of Trustees and Mount Pleasant Academy v. Metzger, 98 App. Div. 237, 90 N.Y.S. 488, aff’d, 181 N.Y. 511, 73 N.E. 1130; Matter of Syracuse University, 214 App. Div. 375, 212 N.Y.S. 253) . Thus, it has been held that educational organizations, to be exempt as such, must maintain a curriculum, schedule of classes, and a roster of qualified instructors, and an otherwise somewhat formalized system of instruction. Without such restrictions the exemption might become available to an infinite number of organizations and organized pressure groups which the Legislature never intended to exempt.

In addition, a recent case, Crusade for Christ, Inc. v. Town of New Lebanon, 36 App.Div.2d 247, 320 N.Y.S.2d 164, aff’d, 31 N.Y.2d 765, 290 N.E.2d 440, 338 N.Y.S.2d 440, indicates that an organization which claims an exemption as an educational corporation must be properly registered with the Commissioner of Education, or chartered by the Board of Regents.

The facts enclosed in this correspondence indicate that these barbershop singing societies do not engage in any sort of “formalized system of instruction,” neither is there any indication of registration by these organizations with the Commissioner of Education or chartering by the Board of Regents as educational institutions. Furthermore, the educational aspect of this organization as indicated by the purposes set out in the certificate of incorporation is collateral to the primary purpose of the organization which is the encouragement of barbershop harmony and fellowship among the members of the organization. Since an organization, to be qualified under section 421 of the Real Property Tax Law for exemption from real property taxation, must be organized exclusively for an exempt purpose, it is apparent on the face of the certificate of incorporation that the society does not qualify.

Since this is the case, it is not necessary to review the organization’s qualifications under the other tests for tax exemption under section 421.

March 21, 1975