We’re starting off our new blog season after a bit of a break with a recap of two key exemption cases that will be making waves again soon. Specifically, on October 21, 2014 the New York Court of Appeals heard oral arguments in two cases that could alter the landscape of tax exemptions under Real Property Tax Law § 420-a: Maetreum of Cybele, Magna Mater, Inc. v. McCoy and Merry-Go-Round Playhouse, Inc. v. Assessor of City of Auburn.
As we previously reported, the Maetreum of Cybele case involves a newly-founded pagan religion’s application for a complete tax exemption pursuant to RPTL § 420-a. The property at issue in this case is a three-acre parcel improved by a large, 12-bedroom main house which is used for religious rituals, a cottage with space for spiritual seekers and guests, an outdoor temple and walking paths. At trial, members of the religion testified that nearly the entire property (from the grounds to the bedrooms) was used for various regular religious activities including, among other things, celebrations of the equinoxes and solstices, religious counseling, and various other pagan and community gatherings. Because three of this sect’s seven total adherents lived at this property full time (with the others spending weekends there on a monthly basis), the town argued that the property was used primarily to house the religion’s members and their friends, thus not primarily or principally for religious purposes. The trial court sided with the town, finding no exemption should be granted because the property’s residential use, not religious use, was ”primary”. On appeal, however, the Third Department reversed the lower court’s decision, holding that the exemption should be granted because the applicant was able to prove a religious use of the property. The town then appealed the Third Department’s ruling.
The second case, Merry-Go-Round Playhouse, Inc., involves an apartment building owned and used by a not-for-profit seasonal theater to house its staff and actors. At the trial court level, the petitioner argued that the building was “used to further an exempt [charitable] purpose” because housing actors together promoted “countless hours of volunteer work,” including informal rehearsals and collaboration. The trial court, however, upheld the city’s denial of the petitioner’s exemption, and the petitioner appealed. The Fourth Department reversed the decision of the trial court and held that the property should be exempt. Like in the Maetreum case, the municipality appealed this reversal.
In both of these interesting cases, the Court of Appeals will have to decide how firm the link must be between an exempt purpose and housing. These decisions will likely have major impacts on the treatment of these types of organizations that blur the lines between residential and religious/charitable uses and, at the same time, will also affect our tax base. Should every such organization be able to own property to house its workers, volunteers and congregation members? What would happen if large charitable organizations (consider, for example, the Catholic Church or the Red Cross) decided to use this doctrine to avoid residential real property taxes for its membership? We all will find out soon.
Recordings of the arguments should be available on the Court of Appeals website starting after noon on Monday, October 27, 2014:
(Image courtesy of www.autismspeaks.org)