Tax Assessment & Condemnation Report

Tax Assessment & Condemnation Report

One State Explores Imposing Real Property Tax on Nonprofits

Posted in Assessments, Exemptions

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In states such as New York, where local governments and public schools are funded by taxes on real property, exemptions are often highly scrutinized by assessors and taxpayers alike.  However, the exemption provided to nonprofit corporations serving the public welfare, such as colleges and universities, hospitals and churches, always appeared inviolate.  The logic is really quite simple – imposing real property taxes on a nonprofit corporation (particularly one with large land holdings such as a university) would increase its costs and diminish the level of services it could provide, thereby harming the public welfare. 

However, in Maine, the Governor is proposing a budget that would allow communities to tax certain larger not-for-profits with valuations greater than $500,000, such as colleges, universities and hospitals.  Specifically, the proposal would permit communities to tax nonprofit organizations at 50 percent of the property tax rate for assessed value above $500,000.  If passed, the proposal would have broad effects.   First, communities would be required to determine the actual fair market value of the real property owned by these nonprofit institutions.  Since these properties have always been exempt, assessors did not always analyze the numbers.  This process alone would likely lead to significant litigation separate and apart from any litigation challenging the legality of the proposal itself.  Second, the proposal could damage relationships between these institutions and their host communities.  For example, many colleges and universities make volunteer “host community” payments to the municipalities in which they are located, and changes such as this would certainly end those.  Finally, the proposal would impact the level of services provided by the nonprofits – to what extent remains unknown, but there would be an impact.

No doubt that those states who rely on property taxes, such as New York, and nonprofits everywhere, will be watching this play out in Maine.  Only time will tell the breadth of the fallout.

High Court Affirms Theater, Church’s Entitlement to State’s “Mandatory” Property Tax Exemption

Posted in Assessments, Assessors, Exemptions, Real Property Tax Refund

The Court of Appeals, New York’s highest court, recently published decisions in the Maetreum of Cybele v. McCoy and Merry-Go-Round Playhouse, Inc. v. Auburn cases.  In these decisions, the Court affirmed that the exemptions provided to religious and charitable organizations by RPTL Section 420-a apply to residential property owned and used to house the organizations’ congregation members or employees.  The long-standing rule for this type of exemption stands: so long as the residential use advances the non-profit organization’s charitable or religious purpose, the residential real property is tax exempt.

In a unanimous decision, the Court of Appeals upheld the Maetreum of Cybele’s RPTL 420-a exemption.  As we have previously reported, the petitioner, a religious entity, applied for and was denied an exemption on a homestead property that it claimed was used in furtherance of its religious purposes.  Among the religious uses occurring on site (rituals, meditations, services), the property was also used as a residence for the sect’s priestesses and the Holy Mother herself.  The Town of Catskill argued that the religious use of the property was not primary, instead claiming that the property was primarily used as affordable cooperative housing.  The Court ultimately sided with the petitioner, finding that it had established that the property was used in furtherance of its religious purposes.  The Court’s decision appears to have given little weight to the Town’s defense – commenting only that the Town called no witnesses at trial.  The lesson is this: if a nonprofit property owner proves that it uses its property primarily in furtherance of its stated nonprofit purposes, a residential component will not defeat the exemption.

The Court found that the RPTL 420-a test was also met in the Merry-Go-Round Playhouse case.  The case involved a theatre which owned and used two nearby apartment buildings to house its full time staff and temporary performers.  In a longer, eight-page decision, Chief Judge Lippman compared the facts of the Merry-Go-Round Playhouse case to the long-standing judicial precedent in which courts granted real property tax exemptions to: (1) property owned and used by hospitals to house physicians, nurses and hospital staff; and (2) property owned and used by colleges and universities to house faculty members.  Here, as with the Maeteum of Cybele case, the Court found that the nonprofit property owner proved that it used its property in furtherance of its nonprofit, charitable purposes.  Therefore, the Court sustained the exemption.

One parting thought: would a nonprofit organization be entitled to the exemption if it earned rental income by leasing a portion of its residential properties?  Judge Graffeo raised this issue in oral argument, asking “if [Merry-Go-Round Playhouse] were to rent these apartments during the year when there were not actors or staff [present] . . . would that change the equation.”  The Court did not fully address the issue in these cases because neither petitioner derived any rental income.  The answer to this question will certainly depend on the facts of the case.  However, in our opinion, the relevant inquiry is not whether rental income is collected, but rather is whether the rental of property is connected with one of the exempt purposes for which the nonprofit is organized.  Nevertheless, uncertainty on this point remains.

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High Court Hears A Pair of RPTL § 420-a Cases on October 21, 2014

Posted in Assessments, Assessors, Exemptions, Uncategorized

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:

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Fourth Amendment precludes Inspection of Private Property even in Assessment Review Litigation

Posted in Assessments, Assessors, Valuation

Image courtesy of Stuart Miles /

Recently there has been increasing debate regarding if and when assessing jurisdictions, or its agents, can invade the privacy of New York residents. Even New York’s governor has been impacted by this issue. Last week, the Appellate Division, Second Department weighed in on the very issue of privacy and taxation.

Specifically, the issue in Jacobowitz v. Board of Assessors of Cornwall was whether a homeowner who commenced a property tax assessment review proceeding under Article 7 of the Real Property Tax Law, could preclude the Town from inspecting the interior of a private residence for the purpose of preparing an appraisal to defend the assessed value. The Second Department held that the property owner had a right under the Fourth Amendment of the United States Constitution to be free from unreasonable searches; and although such a search might be warranted in these types of cases, the burden fell on the Town to demonstrate that the inspection was reasonable and that there was probable cause to issue a warrant for the inspection. The Town utterly failed to satisfy its burden in this case.

In reaching its conclusion, the Court balanced the government’s interests against the property owner’s right to privacy. The Court noted that the property owner placed the property at issue by initiating the Article 7 proceeding and that the government had a strong interest in ensuring that each property owner contributes equitably to the public fisc. However, the Court ultimately held that the privacy concerns outweighed the governmental interests presented in the case. According to the Court, less intrusive means were available to estimate value, including an assessment of “the improvements found in similar homes.”

Thus, following the Second Department’s decision, this issue remains controversial, leaving New Yorkers conflicted between their right to privacy and their expectation of fairness in the real property tax system. Guidance from New York’s Court of Appeals would be helpful in resolving this controversy. We will continue to monitor developments in this area.

High Court Will Hear Religious Exemption Case

Posted in Assessments, Assessors, Exemptions

As reported in an earlier post, entitled New York Pagan Phryganium Wins Real Property Tax Assessment Appeal,  the Third Department recently held that the Town of Catskill improperly denied a pagan religious group a real property tax exemption under 420-a.  See Maetreum of Cybele, Magna Mater, Inc. v. McCoy 975 N.Y.S.2d 251.

 In our previous post, we noted that the time for appeal had passed.  However, we have learned that the New York Court of Appeals granted the Town’s motion for leave to appeal.  Appellants raised three issues on appeal, namely:  (1) was it an abuse of discretion to reverse the trial courts “specific, fact-based findings as to the lack of credibility of witness and the lack of religious activity at the subject residence;” (2) was it an abuse of discretion to reverse the trial court’s holding that the “primary use” of the property was residential, rather than religious; and (3) is there is an “identifiable quantum of religious activity” that would entitle the property to satisfy the requirement under Real Property Tax Law § 420-a that a property be “used exclusively” for carrying out the religious purpose of a religious corporation.

We will continue to follow this case and will provide updates.


Nassau County’s Tax Assessment Dilemma: The High Court Invalidates Local Law

Posted in Real Property Tax Refund

In Matter of Baldwin Union Free School District v. Nassau County, the New York Court of Appeals recently struck down a Nassau County (the “County”) law adopted to shift the obligation to pay real property tax refunds onto individual taxing jurisdictions (i.e. schools, towns, etc.).  This decision was a great relief to local school districts, but will have a continued impact on the County’s deteriorating fiscal condition.

This legal battle involved almost a century of real property tax legislation.  In the 1930s, the County adopted a system of tax assessment where the County would maintain the tax rolls and pay all refunds resulting from assessment errors.  In 1948, at the County’s request, its obligation to pay refunds was codified by amending the County Administrative Code and State law (the “County Guaranty”).

In 1958, the New York State Legislature enacted Real Property Tax Law § 726, which authorized counties to charge refunds back to individual taxing jurisdictions.  Virtually every county has been charging refunds back to individual taxing jurisdictions for decades.  However, the County Guaranty prohibited Nassau County from charging back refunds.

Although there has always been some opposition to the County Guaranty, an increase of tax assessment litigation at the turn of the century led to increased awareness of this unique law.  In 2010, it was estimated that the County Guaranty cost taxpayers at least $80 million annually, with the debt servicing of past refund payments exceeding $150 million annually.  Accordingly, the County Legislature passed Local Law 18 – titled the “Common Sense Act of 2010” – attempting to repeal the County Guaranty and requiring the County to “act in accordance with the provisions of the Real Property Tax Law with respect to the correction of assessment rolls and tax rolls.”

Upon review of Local Law 18, the Court of Appeals was not persuaded that “common sense” equated to constitutionality.  In a 29-page opinion, the Court struck down Local Law 18 as an unconstitutional attempt to override State powers.  In short, the Court of Appeals concluded that because the County Guaranty was codified in a 1948 State law, the County was prohibited from unilaterally taking action inconsistent with that law.

Obviously, this decision does not bode well for Nassau County’s fiscal situation.  It remains uncertain whether the County will attempt to solve this dilemma by appealing the recent decision to the United States Supreme Court.  Even if there is no further appeal by the County, the Court noted that the County could submit a “home rule message” asking the State Legislature to repeal the County Guaranty.  Considering that other counties have benefited from charge backs for decades, equity may favor extending the right to Nassau County.  However, it remains uncertain whether school districts, municipalities, taxpayers or other special interest groups would organize to block such a proposal.

For more information about the related legal disputes surrounding this issue, see New York Telephone Co. v. Supervisor of the Town of North Hempstead (2d Dept. 2010) and Steel Los III/Goya Foods, Inc. v. Board of Assessors of County of Nassau (N.Y. 2008).

Public Information Session Held on the Alternative Veterans’ Exemption

Posted in Exemptions, School Districts

Image courtesy of Stuart Miles /

We recently posted about the Legislature’s recent amendment to the RPTL 458-a Alternative Veterans’ Exemption. From what we have seen and heard, most school districts statewide have determined not to pass the law by March 1, 2014 so that it would have been effective for the 2014/15 assessment and tax season. The reason for the delay generally is that districts feel they were not given enough time to fully investigate the financial impact of this exemption on other non-exempt property owners or to obtain a true picture of whether a majority of the taxpayers within their district support the exemption and would be willing to foot the tax increase that would likely follow.

The North Syracuse Central School District recently asked us to prepare a presentation for an informational session on the exemption. A copy of the presentation is available at  News reports of that presentation can be found on twcnews and 9wsyr.




Is Property Tax Reform Finally Coming to New York?

Posted in Assessments, Valuation

Image courtesy of Stuart Miles /

In November 2013, Governor Cuomo released the Final Report of the New York State Tax Reform and Fairness Commission regarding tax reform. One week later, the New York State Senate Republican Conference Tax Policy Review & Reform Initiative issued a Preliminary Report regarding the same issue. Among other tax reforms, each report recommended action to reform New York’s real property tax system.

It should come as no surprise that there is widespread agreement that property tax reforms are necessary. The real property tax system in New York ranks among the lowest of the 50 states. For example, New York is among the last remaining states that do not require assessments to be periodically updated and that do not provide a single set of valuation standards to be applied to all properties. Further, New York has almost 1,000 different assessing units - more than other states its size. For these reasons, both reports conclude that New York’s real property taxation system lacks fairness and transparency of administration.

To address the issues of fairness and transparency, both studies propose similar recommendations. First, the legislature must establish a clear, statutory standard for assessment to apply to all properties. Second, assessment updates should be required in no less than five year increments. Third, the legislature should provide for state assessment of complex properties, such as power plants. Such a system, which is already used for special franchise properties such as utilities and telecommunications, would reduce the burden of assessment on local governments.

Each report also contains unique recommendations. For example, the Tax Reform and Fairness Commission proposes modifying state aid programs to promote efficiency, such as the sharing of assessment resources at the county level. The Republican Conference Tax Policy Review & Reform Initiative proposes re-instating STAR rebate checks and making the tax cap permanent, avoiding the possibility of it lapsing in 2016.

In his State of the State address, Governor Cuomo proposed property tax credits for manufacturers and a conditional two-year freeze on homeowner’s property taxes that would transition into a circuit breaker system. To qualify for the property tax freeze, local governments must stay within the 2 percent tax cap in the first year and take concrete steps toward consolidating or sharing services with other local governments in the second year. Cuomo also proposed a refundable property tax credit for manufacturer’s equal to 20 percent of its annual real property taxes. Critics of the Governor’s proposal likened it to “voodoo economics” noting that tax breaks for businesses and the wealthy do not help the middle class and that if the state really wants to reduce property taxes, it should adequately fund schools and municipal services.

Although it is encouraging that these issues are being discussed, it remains uncertain whether there is political will to enact these reforms. Many assessing units may oppose mandated assessment updates because the financial burden would fall on them. In addition, some landowners will oppose an assessment update because such action will shift the relative valuation among similarly constructed properties, perhaps raising their assessment.

We will continue to monitor whether the recommendations in these reports move forward through the legislature.

Part II: Is a Public Hearing Mandatory Pursuant to the Eminent Domain Procedure Law?

Posted in Condemnation/Eminent Domain

Image courtesy of David Castillo Dominici /

Our first installment in this series on condemnation procedures detailed a key element of the process found in the New York Eminent Domain Procedure Law (“EDPL”) – the public hearing. While the condemnation process generally begins with a public hearing, the EDPL provides exemptions that allow the condemnor to bypass the public hearing requirement under certain circumstances.

As we discussed previously, the purpose of holding a public hearing is to inform the public of the details of a proposed project, to review the public use to be served, and to review the impacts of the project on the environment and on the residents of the locality where the project will be constructed. Where a public hearing considering the above listed factors was held to comply with another law, that public hearing may be used to satisfy the EDPL Article 2 hearing requirement and alleviate the condemnor’s need to hold another public hearing.

A separate exemption covers situations where a condemnor is required to submit information concerning the above factors to another governmental agency, board or commission prior to the acquisition of a license, permit, certificate of public convenience or necessity, or other similar approval. Similarly, a condemnor may be exempt from the public hearing requirement if it previously obtained a certificate of environmental compatibility and public need pursuant to the Public Service Law.  Finally, de minimis takings or takings necessary to address an emergency may be exempt from the public hearing requirements.

Our next installment in this series will discuss the use of eminent domain for economic development.