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Volume 4 - Opinions of Counsel SBEA No. 69

Opinions of Counsel index

Nonprofit organizations exemption (incidental use) (moral or mental improvement) (Boy Scouts) - Real Property Tax Law, § 421:

Real property owned by the Boy Scouts of America for a camp is entitled to exemption pursuant to section 421. The posting of such land, and the charging of fees to outsiders who wish to park on or cross the land, so as to limit the use of such land by outsiders, will not disqualify it for exemption assuming that the parking lot and the charging of land crossing fees are not run as highly profitable commercial ventures.

We have received an inquiry concerning the taxable status of a Boy Scout camp in a town. The Scouts are charging fees to persons who wish to park on their land, and to those who wish to cross their land in order to climb a nearby mountain which is located on state owned lands. They have also posted their property, seeking to keep individuals from fishing and the like on camp property. The question is whether or not these practices constitute violations of their exempt status.

Section 421 (i.e., § 420) 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 are 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.

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 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.

We have previously stated that land owned and used by the Boy Scouts of America as a camp is exempt from real property taxation to the extent that the land is actually and exclusively used for “scouting” purposes (1 Op.Counsel SBEA No. 10).

The New York Court of Appeals has declared that an exemption pursuant to section 421 of the Real Property Tax Law will not be impaired as long as the property is devoted to exempt purposes, even though incidentally some income is derived therefrom (People ex rel. Watchtower Bible and Tract Society v. Haring, 8 N.Y.2d 350, 170 N.E.2d 677, 207 N.Y.S.2d 673). There are several cases in New York concerning the question of whether land, otherwise exempt from real property taxation pursuant to section 421, on which a parking lot is operated by the nonprofit organization, remains entitled to such an exemption.

In Ellis Hospital v. Fredette, 27 App. Div.2d 390, 279 N.Y.S.2d 925, it was held that, although the hospital parking lot could be used by persons other than patients, employees and visitors upon payment of a nominal fee, and although the operation of the lot resulted in a net profit, the parking lot was nevertheless exempt from real property taxation, in view of the fact that signs at the parking lot entrance clearly indicated that the lot was not for general public use and that some care was taken to limit the public use of the lot. The fee was charged to help defray the cost of construction and operation of the lot and the court found that “. . . whatever surplus there proved to be was put into the hospital general operating budget where it formed a miniscule portion of a $6,000,000 total budget” (279 N.Y.S.2d, at 926). Citing Watchtower Bible, supra, the court decided that the important question was whether the operation of the parking lot was reasonably incident to the major purpose of its owner.

In the next case, Application of Syracuse University, 59 Misc.2d 684, 300 N.Y.S.2d 129, the court held that where a parking lot was owned by a university, and was for the most part closed off and used by the public, and was not regularly used by anyone connected with university activities, the university was not entitled to a tax exemption for such property.

However, this same case held that where parking lots are used basically for a university purpose, with a very minimal use by the public (the court acknowledging the difficulty of policing such properties), an exemption from real property taxation should be granted.

Finally, in Shrine of Our Lady of Martyrs of Auriesville v. Board of Assessors of the Town of Glen, Montgomery County, 40 App. Div.2d 75, 337 N.Y.S.2d 786, aff’d, 33 N.Y.2d 713, 304 N.E.2d 563, 349 N.Y.S.2d 993, the court decided that the nonprofit corporation which operated the religious shrine in question was entitled to an exemption from real property taxation for a parking lot and food and lodging facilities, where the nearest public facilities were five miles away and inadequate to serve shrine visitors.

Similar cases have occurred in other states. The general holdings of these cases are summarized in 33 A.L.R.2d 938, where it is reported (at 941) that:

The fact that fees are charged for use of the facilities [i.e., parking lots] has generally been held to not bar the exemption, even where an operating surplus was realized. The courts so holding take care to point out, however, that the purposes of such fees were not to earn profits for the institution, but were to provide funds to operate the facilities in question, and possibly to construct new facilities, or to regulate the use of the facilities, as by denying use thereof to all except those with such an interest in the institution as to be willing to pay a fee to enter. (emphasis supplied)

The seemingly key issue in the New York cases is the necessity of the use of the parcel in question to the major purpose of the owner-organization.

As previously stated, real property owned by the Boy Scouts of America for a camp is entitled to an exemption from real property taxation as property owned by an association organized for the moral or mental improvement of young men. It is the opinion of this office that the regulation of the use of such lands to limit their use by outsiders is a function “reasonably incident” to the proper operation of the Boy Scout camp. Assuming the parking lot in question is not run as a highly profitable commercial venture (i.e., with nominal fees charged, designed to limit the use of the property to those with such an interest in the Boy Scouts as to be willing to pay a fee to enter on lands owned by the Scouts), the organization would be entitled to an exemption from real property taxation on the parking lot.

The same rationale would apply with regard to fees charged to individuals seeking to cross the camp in order to get to the nearby mountain.

However, should it be determined that a highly successful commercial venture is being operated on this property, subdivision 2 of section 421 provides that where “. . . any portion of such real property is not so used exclusively to carry out thereupon one or more of such purposes but is . . . used for other purposes, such portion shall be subject to taxation and the remaining portion only shall be exempt.” Therefore, even if the parcel on which the parking lot is located is taxable, the remainder of the camp would apparently still be tax exempt.

The fact that the camp lands are posted to deter outsiders from fishing and the like on the camp grounds would not appear to be a reason for denying the exemption.

June 28, 1974