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Volume 4 - Opinions of Counsel SBEA No. 52

Opinions of Counsel index

Nonprofit organizations exemption (religious) (woodlot) - Real Property Tax Law, § 421:

A fifty acre woodlot owned by a church, which is unused by such organization, is not entitled to exemption pursuant to section 421 of the Real Property Tax Law unless the church can show that there are plans to put the property to use for exempt purposes in the near future, or unless the church holds title upon condition that the title will revert in case any building not intended or suitable for one or more exempt purposes shall be erected upon the premises or some part thereof.

We have received an inquiry concerning the taxable status of a fifty acre woodlot owned by a church. The deed to the property does not reveal the use to which the property is put by the church, and the assessor has been unable to see the charter of the church. He seeks our advice.

In New York State an exemption from taxation on real property owned by certain nonprofit corporations and associations is provided for in section 421 (i.e., § 420) of the Real Property Tax Law. In order to be entitled to this exemption, the real property must be owned by a corporation or association organized exclusively for one or more of the exempt purposes specified in the statute, and the real property must be used exclusively for one or more such purposes, with any portion of the property not so used being subject to taxation. In addition, 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.

We assume that the church is organized exclusively for one or more of the exempt purposes enumerated in this statute (e.g., for religious purposes). The next requirement of this statute is that the property be “used exclusively” for such exempt purposes. An opinion as to this requirement is rendered difficult because each case must necessarily be decided on its own merits. The assessor must investigate the actual use of the property and satisfy himself that the property is being used exclusively for exempt purposes.

The courts in this State have held that property is so used when it is used in the furtherance of the exempt purposes so as to constitute an integral or coordinate part in carrying out the overall corporate purposes. It must be made to appear that the use and need of the property by the corporation or institution “is necessary or fairly incidental to the maintenance of the institution for the carrying out of the purposes for which it was organized.” People ex rel. Blackburn v. Barton, 63 App. Div. 581, 583, 71 N.Y.S. 933, 935. (See, also, People ex rel. Academy of the Sacred Heart v. Commissioner of Taxes and Assessments, 6 Hun 109, aff’d, 64 N.Y. 656; St. Luke’s Hospital v. Boyland, 12 N.Y.2d 135, 187 N.E.2d 769, 237 N.Y.S.2d 308.)

If only a portion of the property is used exclusively for carrying out the exempt purposes, then the property is exempt only to the extent of the value of the portion so used, and the remaining portion is taxable (§ 421(2)). In People ex rel. Blackburn v. Barton, supra, the property in question, 467 acres of land located in Cattaraugus County, was owned by an association organized exclusively for religious purposes. Of this acreage some forty percent thereof was not cleared but rather was covered with different kinds of timber; it was put to no use and lay idle and therefore the court concluded it was taxable, saying (71 N.Y.S., at 936):

It is quite clear, upon the facts shown here, that the only portion of the property which is actually used for the purposes of the institution is the 80 acres of plow and meadow land, and the land upon which the stock is pastured. The remainder is not used at all, except perhaps the 50 acres from which wood is cut; and it clearly does not come within the exemption of the statute, and is subject to taxation. (emphasis supplied)

In a subsequent case, People ex rel. Missionary Sisters of Third Order of St. Francis v. Reilly, 85 App. Div. 71, 83 N.Y.S. 39, a court held that a 13 acre tract of timber land of which the owner made no use “. . . except to take lumber therefrom for improving the other portions of the grounds when occasion requires”, (83 N.Y.S., at 44) was not “used exclusively” for educational purposes and therefore was not exempt from taxation.

Thus, it would appear from the above cases that where woodlands, owned by a religious organization are allowed to go unused by such organization, those woodlands would not be entitled to this exemption from real property taxation. However, there is one statutory exception to the general rule that vacant or unused lands are not entitled to the exemption provided for by section 421. This exception is in subdivision 3 of section 421 which provides that such real property (from which no revenue is derived) is exempt though not in actual use therefor by reason of the absence of suitable buildings or improvements thereon if:

(a) the construction of such buildings or improvements is in progress or is in good faith contemplated by such corporation or association; or;

(b) such real property is held by such corporation or association upon condition that the title thereto shall revert in case any building not intended and suitable for one or more such purposes shall be erected upon such premises or some part thereof.

“Contemplation in good faith”, within the meaning of paragraph (a) above, means concrete and definite plans for utilizing and adapting the property for exempt purposes within the reasonably foreseeable future. Some evidence of such plans might be the start of or preparation for a fund raising campaign (see, e.g., In re Miriam Osborne Memorial Home Ass’n., 140 N.Y.S. 786), or the retention of an architect or other consultants relating to the development and use of the property for exempt purposes. As a general rule of construction, exemption statutes are strictly construed against the taxpayer seeking exemption (Herkimer County v. Village of Herkimer, 251 App. Div. 126, 295 N.Y.S. 629, aff’d, 279 N.Y. 560, 18 N.E.2d 854), and the burden of proving that property is being used for exempt purposes and is not lying idle, with no plans to use it for exempt purposes in the reasonably foreseeable future, is upon the person or organization claiming the exemption. Thus, in this case, the burden is on the church to show that the 50 acres of woodland are being “used exclusively” for exempt purposes, or at least that there are plans to put the property to such use in the not too distant future. Assuming it could not do so, the property would be taxable (1 Op.Counsel SBEA No. 16; 2 Op.Counsel SBEA No. 81).

January 20, 1975