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Volume 5 - Opinions of Counsel SBEA No. 71

Opinions of Counsel index

Nonprofit organizations exemption (educational) (moral and mental improvement) (vocational training center for mentally disabled - vacant land) - Real Property Tax Law, § 421:

Where 100 acres of vacant land owned by a nonprofit vocational training center for the mentally handicapped is used for the training of such individuals in meaningful forestry, game and fish farming and agricultural pursuits so as to better enable the handicapped individuals to obtain employment, the parcel may receive a tax exemption pursuant to section 421 of the Real Property Tax Law.

However, no exemption may be granted where the property is used by others than the mentally handicapped or where any agricultural products produced on the farm portion of the parcel are sold in a profit-making venture.

Our opinion has been requested concerning the taxable status of 100 acres of land donated to an incorporated, nonprofit vocational training center.

The certificate of incorporation shows that the object and purpose for which the corporation was formed is as follows:

To provide vocational rehabilitation and training of moderately, mildly and borderline retarded adults, both male and female, with the ultimate goal of achieving sufficient self-adequacy and personal independence; and to be able to achieve either gainful employment, or appropriate sheltered workshop employment.

Consent to the filing of the certificate of incorporation was granted by the Commissioner of Education. This consent was required by section 216 of the Education Law and section 404, subdivision (d) of the Not-For-Profit Corporation Law, both of which provide that every certificate which includes a purpose for which a corporation could be chartered by the Regents must have the approval of the Commissioner.

At present, the corporation owns no property but leases property in which it provides a laundry workshop, a vocational workshop and other activities designed to promote the occupational therapy of the mentally retarded. Approximately 55 adults use the facility. The present activities are supported primarily by contributions made by the parents or relatives of the mentally retarded who are using the facilities.

The 100 acres in question has been donated to the corporation to provide therapy and vocational development for mentally handicapped and retarded individuals presently enrolled at nearby schools. According to one of the principals of the corporation, it is intended that about 25 retarded adults will engage in the various programs planned for the acreage. The property consists of two parcels, one of which is 20 acres upon which game and fish farms might possibly be developed. The remaining 80 acres has about 40 acres of tillable fields and 40 acres of forest lands. An attempt will be made to develop agricultural skills of the retarded persons (i.e., perhaps even the operation of tractors) by growing crops on the tillable fields and forestry skills by learning to tend the forest lands. It is noted, however, that at present the corporation does not have teachers with these skills.

It is clear to us that the corporation is organized exclusively for an exempt purpose under section 421 (i.e., § 420) of the Real Property Tax Law; namely, the vocational rehabilitation and training of retarded adults, an educational purpose. The fact that the Education Commissioner consent was necessary also shows the educational purposes of the organization.

The crucial question then becomes, will the 100 acres be used exclusively for exempt purposes, another requirement of said section 421.

It is very difficult to render an opinion on “exclusive use” on the basis of hypothetical facts, particularly where the property consists of presently “unused” vacant land. The reason, of course, is that the actual facts on use could drastically affect the opinion which would have been rendered. Thus, what follows is our opinion given several factual situations.

Should all of the 100 acres be actually used for training the retarded individuals in the manner described above, in meaningful forestry, game and fish farming and agricultural pursuits, so that at least some of them can achieve employment, then it would be our opinion the acreage would be entitled to a tax exemption. However, should it develop that all of the acreage is not in reality being used for training purposes, or that it is used by the retarded more for recreational purposes then for training, then only a portion of the parcel, if that, will be eligible for exemption (see, § 421(2)).

Also, no part of the property can be leased or used by others than the mentally retarded. In addition, any agricultural products produced on the farming portion cannot be sold in a profit-making venture.

The cases cited below which were concerned with the subject of exempting farm lands owned and operated by nonprofit organizations implicitly hold that these lands are not exempt if they are primarily used for the production of farm products which are sold to the general public. People ex rel. Watchtower Bible and Tract Society, Inc. v. Mastin, 191 Misc. 899, 80 N.Y.S.2d 323; New York Conference Ass’n of Seventh Day Adventists v. Schenck, 275 App. Div. 742, 87 N.Y.S.2d 10%, aff’d, 304 N.Y. 706, 107 N.E.2d 654; related case, Application of New York Conference Ass’n of Seventh Day Adventists, 111 N.Y.S.2d 329, aff’d, 279 App. Div. 845, 109 N.Y.S.2d 774; People ex rel. Watchtower Bible and Tract Society, Inc. v. Haring, 8 N.Y.2d 350, 170 N.E.2d 677, 207 N.Y.S.2d 673.

To give an example, in the first case cited above, the court found that farm lands used to produce dairy products, fruits and vegetables which were in turn systematically offered for sale to the public “in open and immediate competition with taxpaying farmers” were not being used for an exempt purpose. Yet this farm was apparently held exempt about 10 years later (in the last case cited above) where proof showed that only about 4 percent of the produce was sold to the public, the remainder being used to feed employees of the nonprofit organization and students of its bible school.

April 12, 1976