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Volume 5 - Opinions of Counsel SBEA No. 17

Opinions of Counsel index

Nonprofit organizations exemption (moral or mental improvement) (homeowners association) - Real Property Tax Law, § 421:

Real property of a homeowners’ association is not entitled to an exemption under section 421 of the Real Property Tax Law, where the association is organized in part to promote the social and recreational purposes of its members and its property is used for such purposes.

Our opinion has been requested as to the taxable status of certain real property owned by an incorporated property owners association.

The real property in question has been set aside by the homeowners’ association for the social and recreational purposes of the residents of the association. The certificate of incorporation of the association includes a purpose clause which, in part, reads as follows:

The purposes for which the corporation is formed are: To function, take over, carry on, continue the affairs, property, obligations and business of the . . . Property Owners Association, and to have the following purposes and objectives, to wit: To promote the moral, mental and physical improvement and recreation of men and women, their families and friends residing in and about the development of . . . and to develop for them better social recreational relationships and representation and advancement of any and all common and related interest derived from and being related to property owners in the area aforesaid; . . .

All real property in New York State is subject to taxation unless specifically exempted therefrom by statute (Real Property Tax Law, § 300). The only possible exemption statute of which we are aware which might apply to the property in question would be section 421 of the Real Property Tax Law. Said statute provides for both mandatory and optional exemptions from taxation for real property owned by corporations or associations organized for one or more of the purposes listed in the statute when such property is in fact used exclusively for one or more such purposes.

In our opinion, the only possible classifications listed in section 421 which might have application to the situation presented are those designated as “moral or mental improvement of men, women or children” or “public playground.” However, because the use of the real property in question is limited to members of the homeowners’ association, we do not believe that the “public playground” classification is applicable, and, therefore, we are concerned primarily with the possible application of the classification “moral or mental improvement of men, women or children.”

In determining the circumstances under which an organization may be classified as being within one of the categories listed in section 421, it has been the policy of the judiciary and those charged with administration of our tax laws to examine closely and carefully any corporation which seeks to obtain such exemption (see, e.g., Matter of the Association of the Bar of the City of New York v. Lewisohn, 34 N.Y.2d 143, 313 N.E.2d 30, 356 N.Y.S.2d 555; Pace College v. Boyland, 11 Misc.2d 387, 179 N.Y.S.2d 38). In other words, the right to the exemption must be clearly established according to the statutory provision, and if a doubt exists, then such doubt should be resolved in favor of taxation (Lawrence-Smith, Inc., v. City of New York, 280 N.Y. 805, 21 N.E.2d 693; 1 Op.Counsel SBEA No. 31).

The classification of “moral or mental improvement of men, women or children” has been limited in its application to organizations which are directed to character development and the molding of socially beneficial attitudes. Furthermore, it has been our opinion that this category should be limited specifically to the YMCA, Boy Scouts and analogous organizations. A predecessor statute of section 421 was amended to include this purpose subsequent to a decision holding the YMCA to be outside the scope of such predecessor statute (YMCA v. City of New York, 113 N.Y. 187, 21 N.E. 86). The term “moral or mental improvement of men or women” was taken directly from the YMCA purpose clause, and it was clearly the intent of the Legislature (L 1893, c.498) to include that organization within the exemption statute. We believe that organizations such as the YMCA are distinguished by their combination of benevolent, religious and charitable aspects. It is this type of organization to which the term “moral or mental improvement of men, women or children” was meant to apply and the term should not be extended to include every organization which purports in its charter to accomplish, “moral or mental improvement of men, women or children” as a nebulous long-range objective.

Accordingly, while the dedication and reservation of a parcel of property for purposes of open space preservation and community social and recreational activities is certainly a laudable action, the ownership and use of the property is not within one of the designated categories which entitle property to an exemption pursuant to section 421 of the Real Property Tax Law. The purpose clause of the homeowners’ association in question includes social and recreational activity, and, as such, it clearly authorizes activities which extend beyond the scope of section 421 and the exemption which it authorizes (Great Neck Section, National Council of Jewish Women v. Board of Assessors, 21 Misc.2d 142, 189 N.Y.S.2d 613; Goodwill Club of Amsterdam v. City of Amsterdam, 31 Misc.2d 1096, 222 N.Y.S.2d 896; and American-Russian Aid Association v. City of Glen Cove, 41 Misc.2d 622, 246 N.Y.S.2d 123, aff’d, 23 App. Div.2d 966, 260 N.Y.S.2d 589). These cases and others (In re Kennedy’s Estate, 240 App. Div. 20, 269 N.Y.S. 136 and National Navy Club v. City of New York, 122 Misc. 89, 203 N.Y.S. 114) clearly establish that corporations organized for social, fraternal or recreational purposes are not organized for any of those purposes enumerated in section 421. Of course, satisfaction of the requirements of section 421 includes both the organization of the owner of the property and; the actual use of the property, for one or more of the exempt purposes specified in the statute.

June 30, 1975