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Volume 9 - Opinions of Counsel SBEA No. 76

Opinions of Counsel index

Nonprofit organizations exemption (application) (proof of exempt status); (generally) (judicial review of denial of exemption - statute of limitations); Correction of errors (unlawful entry) (wholly exempt property) - Real Property Tax Law, §§ 420-a, 550, 556; Civil Practice Law and Rules, Article 78:

An assessor may not grant the nonprofit organizations exemption without proof, consisting of either (1) the application forms prescribed by the State Board, (2) other written evidence, or (3) the assessor’s personal inspection of the property and conclusion, certified in writing, that the organization is eligible for the exemption. A nonprofit organization which does not choose to submit such proof to the assessor, while the assessor has jurisdiction over the roll, may commence a judicial action and submit its proof of exempt status to the court. However, any such judicial action must be commenced within four months of the filing of the final assessment roll. The nonprofit organization may also seek correction of an “unlawful entry,” provided that (1) the assessor concurs in writing that exemption is warranted and (2) the application for such correction is made within three years of the annexation of the warrant to the tax roll.

We have received a request for our opinion concerning the right of a Village to a refund of taxes it paid on certain property. In 1923, a Scenic and Historic Preservation Society (“Society”) acquired the property which consists of nine acres of largely undeveloped land on which an observatory cottage and six other cottages are located. Because of financial difficulties, the Society entered into lease agreements whereby the cottage tenants agreed to pay most charges attendant to the cottages in exchange for reduced rent. The Society nevertheless became unable to maintain its property or even pay its taxes. The Village eventually acquired the property and paid $132,000 to satisfy outstanding tax liens. The Village is now seeking a refund of taxes paid for tax years 1987-1990 in accordance with the provisions of section 556 of the Real Property Tax Law, based on the contention that the Society should have received tax exempt status during the years in question pursuant to section 420-a of the RPTL.

According to the Town Assessor, the Village took title in May 1989, which was before the Town’s June 1, 1989 taxable status date (Westchester Co. Admin. Code, § 283.141(1)). The Assessor further stated that, beginning with the Town’s 1989 tentative assessment roll, the property has received an exemption as municipally owned property held for a public use (RPTL, § 406(1)). The issue, therefore, appears to be the taxable status of the property in previous years, when the Society was still the owner.

Pursuant to section 420-a of the RPTL, real property owned by a nonprofit organization organized or conducted exclusively for one or more specific purposes (e.g., religious) is entitled to tax exempt status if such property is used exclusively for exempt purposes. For purposes of this Opinion, we assume that the Society may have been able to claim an environmental or conservation related purpose and use. While these two purposes are not included in the text of section 420-a, they have been judicially held to be so included (Mohonk Trust v. Board of Assessors, Town of Gardiner, 47 N.Y.2d 476, 392 N.E.2d 876, 418 N.Y.S.2d 763 (1979); North Manursing Wildlife Sanctuary, Inc. v. City of Rye, 48 N.Y.2d 135, 397 N.E.2d 693, 422 N.Y.S.2d 1 (1979); see also, 9 Op.Counsel SBEA No.68). We shall further assume that if the Society had duly applied for the exemption, it would have been eligible for exemption pursuant to section 420-a, at least as to a portion of the property.

To be exempt on a particular assessment roll, the property must be owned by the nonprofit organization as of the taxable status date applicable to that roll (Semple School for Girls v. Boyland, 308 N.Y. 382, 126 N.E.2d 294 (1955); Young Israel of Far Rockaway v. City of New York, 33 A.D.2d 561, 305 N.Y.S.2d 432 (2d Dept. 1969)). Here, title was in Society as of the Town’s June 1 taxable status date in 1987 (and earlier).

For many years, the State Board’s Rules (9 NYCRR 190-1.4(c)) have required that for each exemption listed on the assessment roll, the assessor must have a properly completed application form on file (if the State Board has prescribed a form for a particular exemption). As to section 420-a only, if the assessor received no such form, the assessor could nevertheless grant the exemption, if he or she examined the property for which exemption was sought and the assessor certified in writing that the property qualified for exemption (9 NYCRR 190-1.4(c)(2); see also, RPTL, § 202(1)(h)). Otherwise, the assessor was to deny the exemption (8 Op.Counsel SBEA No. 51).

This rule was modified following a July 1, 1991 decision of the Court of Appeals. {1}  In its decision (Kahal Bnei Emunim and Talmud Torah Bnei Simon Israel v. Town of Fallsburgh, 78 N.Y.2d 194, 577 N.E.2d 34, 573 N.Y.S.2d 43), the Court of Appeals held that section 202(1)(h) of the RPTL and 9 NYCRR 190-1.4(c) did not give the State Board “the authority to require the execution and filing of such [exemption application] forms as a condition to entitlement to an exemption as of right under section 420-a . . .” (523 N.Y.S.2d at 47). The Court, however, did not invalidate the rule. Instead, it held that the rule “constitutes an illegal addendum to the statute,” but only “[t]o the extent that the SBEA regulation . . . purports to impose such a” jurisdictional filing requirement (523 N.Y.S.2d at 48). The nonprofit organization therefore has the choice of submitting proof to the assessor, while the assessor still has jurisdiction over the assessment roll, or submitting proof of exempt status to the court. {2}

However, the Kahal Court also held that, although a nonprofit organization seeking wholly exempt status pursuant to section 420-a may challenge the assessor’s decision in a CPLR, Article 78 proceeding or in a declaratory judgment action, that proceeding or action must be commenced within four months of the date the taxable assessment becomes final (573 N.Y.S.2d at 49). In this case, assuming the 1988 final assessment roll was timely filed, the 1988 assessment of the property in issue became final on or before September 15, 1988 (West. Co. Admin. Code, § 283-121)). Based on Kahal, Society (or Village as its grantee) had four months from that date to seek judicial review of its taxable status. Assuming no such action was commenced, it is now too late to do so.

Although the Village is now without legal recourse, it still has an administrative remedy if the assessor concurs that the parcel satisfied the eligibility criteria, when the Society owned the parcel. The assessor can execute a statement “substantiating that [he or she] has obtained proof that the parcel which is the subject of the application should have been granted tax exempt status. . . .” In that event, the Village may seek a refund pursuant to RPTL, section 556(2), on the grounds that the taxes are attributable to an “unlawful entry” as defined by section 550(7)(a) of the RPTL. Application for correction of such errors, when accompanied by the necessary assessor’s statement, may be filed up to three years from the annexation of the warrant to the tax roll (§ 556(1)). The extent of any refund to which the Village is entitled will be limited by this provision. To the extent 8 Op.Counsel SBEA No. 51 is inconsistent with this Opinion, it is superseded.

January 24, 1992
Revised August 1992

{1}  This modification allows the assessor to grant the exemption without the State Board form if he or she has “other written evidence to support eligibility for the exemption.”

{2}  Chapter 261 of the Laws of 1992, effective June 30, 1992 and applicable to exemption applications filed for assessment rolls with taxable status dates occurring on or after January 2, 1993, amends section 202 and several sections of Article 4 of the RPTL in relation to the State Board’s authority to issue application forms for exemptions. As to the nonprofit organizations exemption, the statute has been amended to conform to the State Board’s Rule (9 NYCRR 190-1.4(c)). Applicants must either make an adequate showing to the assessor that they are entitled to exemption or seek their exemption from the courts.