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Volume 6 - Opinions of Counsel SBEA No. 101

Opinions of Counsel index

Nonprofit organizations exemption (historical) (educational) (Historic Track at Goshen); Agricultural societies exemptions; Historical societies exemption -  Agriculture and Markets Law, § 286; Not-For-Profit Corporations Law, § 1408; Real Property Tax Law, §§ 420, 444, 450:

The Historic Track at Goshen, Inc. is not entitled to an exemption from taxation pursuant to either section 1408 of the Not-For-Profit Corporations Law or section 450 of the Real Property Tax Law. It is a factual issue as to whether it is organized or conducted exclusively for educational or historical purposes and whether all or a portion of its property is used exclusively for such purposes so as to entitle some or all of its property to an exemption pursuant to section 420 of the Real Property Tax Law.

The Goshen Historic Track, Inc. is seeking tax exempt status pursuant to section 420 of the Real Property Tax Law as an educational and historical |organization. Its property is used to house a race track, at which no parimutuel betting is allowed, and related uses (e.g., grandstand, horse stalls). Our opinion concerning the taxable status of this property is requested.

We have previously set forth the requirements for exemption pursuant to section 420 (6 Op.Counsel SBEA No. 24). The first of these requirements is that the organization be “organized or conducted exclusively” for exempt purposes (§ 420(1)). As we have noted in 6 Op.Counsel SBEA No. 87, until recently determining satisfaction of this requirement necessitated examination of the organization’s certificate of incorporation or by-laws (American- Russian Aid Association v. City of Glen Cove, 41 Misc.2d 622, 246 N.Y.S.2d l23, aff’d, 23 A.D.2d 966, 260 N.Y.S.2d 589; Great Neck Section, Nat. Council of Jewish Women v. Board of Assessors, Nassau Co., 21 Misc.2d 142, 189 N.Y.S.2d 623; Corporation of Yaddo v. City of Saratoga, 216 App.Div. 1, 214 N.Y.S. 523). Where a certificate of incorporation included purposes not specified in the statute, no exemption could be allowed (Great Neck Section, etc., supra). Recently, however, the Court of Appeals emphasized the words “or conducted” in the first test for exemption and concluded that “the determination of an organization’s primary purpose may turn upon the extent to which it pursues the various purposes for which it was created and is not necessarily dependent solely upon the language of the document pursuant to which the organization operates” (Mohonk Trust v. Board of Assessors of the Town of Gardiner, 47 N.Y.2d 476, 392 N.E.2d 876, 418 N.Y.S.2d 763, 767).

As the Court noted in Mohonk, it has long been held by the courts that the word “exclusively” in section 420 should be read as “principally” or “primarily” (Matter of 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). As such, in this case where the organization’s certificate of incorporation includes the purpose of conducting harness racing (not and exempt purpose within § 420), its inclusion does not in and of itself defeat a claim for exemption. Rather, the assessor must decide the primary purpose of the organization, presumably by determining if it is conducted primarily for one or more exempt purposes.

The organization has claimed to be educational in its application for exemption, and its certificate of incorporation includes the purpose “[t]o cooperate and participate in any and all educational functions at Historic Track” (certificate of incorporation, paragraph 3(g)). The Boards of Cooperative Education of Orange and Ulster Counties use the facility for training horse grooming and offer a standardbred horsemanship course there.

The Court of Appeals has described “education” for purposes of section 420 as follows:

We think education, at least within the contemplation of subdivision 1 of section 421, refers to the development of faculties and powers and the expansion of knowledge by teaching, instruction or schooling. We distinguish the very much broader process of the communication of facts and ideas . . . [T]he foundation was not chartered by the Board of Regents and it is not classified as an educational institution by the Department of Education (Swedenborg Foundation, Inc. v. Lewisohn, 40 N.Y.2d 87, 94-95, 351 N.E.2d 702, 386 N.Y.S.2d 54, 58).

Nothing in the materials submitted indicates a charter having been granted by the Board of Regents, but it is a factual determination to be made by the assessor in the first instance, subject to administrative and judicial review, as to whether education is the primary purpose of the organization or is only incidental.

The organization also claims to be historical, another exempt purpose (§ 420(1)(b)). It should be noted that paragraph 3(k) of the organization’s certificate of incorporation states that the organization is not authorized to maintain or operate an historical society. Section 444 of the Real Property Tax Law provides that real property owned by an historical society acquired for the preservation and erection of monuments shall receive the exemption provided in the Not-For-Profit Corporations Law (N-PCL).

Section 1408(a) of the N-PCL authorizes historical societies to preserve historic sites, up to six acres in a locality, for other than business purposes, and exempts the property from taxation. Since this organization is not an historical society, this exemption is not available to it. In addition, the property herein comprises at least twelve acres.

Given the above-quoted language of the Court of Appeals in Mohonk, this provision of the certificate of incorporation would seemingly not, in and of itself, defeat a claim for exemption as an historical organization under section 420(1)(b) of the Real Property Tax Law. We can offer little guidance to assessors regarding historical organizations, since there is a dearth of judicial or administrative opinions concerning this exemption category. In the context of the transfer tax, the Court of Appeals has differentiated between educational and historical organizations (Matter of DePeyster, 210 N.Y. 216, 104 N.E. 714):

An exclusively historical society does not gather books, manuscripts, pictures and antiquities simply to hoard them. Its purpose is not alone to discover and preserve things and facts of historical value, but to keep and record them that they may be seen, read and studied, that greater knowledge may be attained from them. The legislature in including educational corporations or associations in the first part of the statute quoted, intended corporations or associations engaged in something more than the incidental education which is necessarily derived from corporations organized exclusively for scientific, literary, library, patriotic or historical purposes. (210 N.Y. at 221)

Since words in statutes are to be given their regular and ordinary meaning (Polhemus v. Fitchburg R. Co., 123 N.Y. 502, 26 N.E. 31), and the organization’s certificate of incorporation indicates that one of its purposes is to “preserve the Historic Track,” if the assessor finds that this is the primary purpose of the organization, it will have satisfied the organization purpose test of section 420. (Of course, it must be noted that “historical” is one of the categories of exempt purposes and uses in section 420(1)(b) that may be made taxable by local option (3 Op.Counsel SBEA No. 20).)

Further complicating the assessor’s decision is subdivision 4 of section 286 of the Agriculture and Markets Law (added by L.1979, c.317) which subdivision provides that the “not-for-profit corporation organized for the purpose of preserving the Historic Track at Goshen, New York and engaged in the conduct of a harness race meeting at such track . . . shall be treated as a county agricultural society” for purpose of Article 24 of the Agriculture and Markets Law and sections 38 and Article 4 of the Pari-Mutuel Revenue Law (L. 1940, c.254, as amended). Since the corporation is deemed an agricultural society only for specified purposes, not including section 450 of the Real Property Tax Law, which section exempts certain agricultural society property from taxation, no exemption is available to the applicant pursuant to that section.

However, since the organization is clearly an agricultural society for some purposes, it cannot be said to be organized exclusively for other purposes, such as historical. This factor should be considered by the assessor in deciding whether the organization is principally or primarily educational or historical. That is, if the organization is more than incidentally an agricultural society, it cannot be primarily educational or historical.

If the assessor decides that the organization purpose test is satisfied, he must next decide if the parcel use test is satisfied. Here, it appears that a portion of the property is used for BOCES purposes. Assuming this is the primary use of this portion of the property, it would be entitled to exemption. That portion of the property that is used to house horses or train them for competition at commercial race tracks does not appear to be an exempt use of the property. Once again, it is a factual question as to the primary use of the property. If only a portion of the property is used “exclusively” for exempt purposes, only that portion may be exempted, and the remainder is taxable (Real Property Tax Law, § 420(2); see also, Sailors’ Snug Harbor in City of New York v. Tax Commission of City of New York, 26 N.Y.2d 444, 259 N.E.2d 910, 311 N.Y.S.2d 486).

March 25, 1980