Tax Assessment & Condemnation Report

Tax Assessment & Condemnation Report

Profits vs. Prophets – WItA Examines the RPTL 420-a Exemption

Posted in Exemptions, Uncategorized
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New York’s innovative group, known as Women In (tax) Assessment (WItA) held its 6th Annual Symposium in August which focused on the RPTL 420-a exemption. The group was extremely fortunate to have panelists that represented both sides of various issues that RPTL 420-a presents, and as an added feature, the Symposium included an informative perspective concerning Illinois’ property tax treatment of wholly exempt organizations.

During a Powerpoint presentation prepared by WItA’s co-founders (Rebecca Speno, Esq. and Erin O’Brien, Esq.), Rev. Viktoria Whittaker, priestess of the Maetreum of Cybele, Magna Mater, spoke about the Maetreum’s struggle to obtain the 420-a exemption on their property – a former 12 bedroom inn that was converted into the main place of worship and residence for the sect’s faithful (see, Matter of Maetreum of Cybele, Magna Mater, Inc. v. McCoy).  Rev. Whittaker focused on her experiences with the Town of Catskill and the judicial system in relationship to the Maetreum’s quest for the exemption.

In addition, Shannon Jones, Esq., Assistant Corporation Counsel for the City of Syracuse, provided insight as to the applications received by the City and what factors they consider when reviewing them. Drawing from her recent experience in the Matter of Crouse Heath Sys., Inc. v. City of Syracuse case that she recently argued before New York’s Appellate Division, Fourth Department, Ms. Jones emphasized that there is a rather large “gray area” when it comes to the “exclusive use” requirement of RPTL 420-a.

To conclude the symposium, Nora Doherty, Esq., described the different approach that the State of Illinois takes with respect to properties that may qualify for a complete tax exemption. Specifically, Ms. Doherty identified that a property may still be exempt if: 1) a nonexempt use can be described as “merely incidental;”  2) an “identifiable portion” is used for exempt purposes notwithstanding that a nonexempt use is more than merely incidental, and 3) the owner is not a qualified entity, but the use furthers an exempt purpose.

As usual, regardless of point of view, WItA’s Symposium was a collective gathering of intelligent minds, working cooperatively to bring transparency and effectiveness to a system that, we can all agree, is a work in progress. WItA has grown exponentially over the years, with regular attendance at annual events north of 60 women from across the state and beyond.


Co-Authored by: Erin O’Brien, Esq. and Rebecca Speno, Esq.

Court of Appeals Decides “Greater Jamaica” RPTL 420-a Case

Posted in Uncategorized

parking_garage_entrance3We reported in February on an Appellate Division, Second Department case that held that public parking garages can qualify as tax exempt under Real Property Tax Law § 420-a. On July 1, the Court of Appeals overturned that decision.

The case, Matter of Greater Jamaica Dev. Corp. v. N.Y.C. Tax Commn., 2015 NY Slip Op 05620, involved a not-for-profit organization, Greater Jamaica, whose purpose was to promote the cultural and economic development of downtown Jamaica in New York City. The organization owned and operated five parking facilities which it used to offer parking to the public at below-market rates. Their goal in this endeavor was to help lure visitors, customers and businesses to the area by providing cheap parking. Any profit generated by the operation of the parking lots was used for the organization’s other charitable purposes.

The Appellate Division held that the parking facilities furthered the charitable purposes of the organization and qualified as tax exempt under Real Property Tax Law Section 420-a. The Court below relied in part on the fact that the organization was federally tax exempt under the Internal Revenue Code Section 501(c)(3). In a long line of cases dating to 1984 (e.g., D’Betlan v. Shandaken, 100 A.D.2d 641, 642), New York courts have used the IRS tax exemption as a guide for determining whether the organization qualified for purposes of this exemption. Any federally tax exempt organization was presumed to qualify under New York real property law if the owner had achieved IRC Section 501(c)(3) status.

In coming to its decision, the Court closely examined the tests for federal and state tax exemptions and found that they were too different. The IRS looks at whether a corporation is organized and operated for an exempt purpose as a whole. New York, on the other hand, looks at who owns the property and how it is used. New York’s test is less holistic and focuses on the specific property at issue. Additionally, Internal Revenue Code § 501(c)(3) provides a broad definition of “charitable,” while New York provides no definition at all. The Court reasoned that if New York legislatures had intended for “charitable” to be defined broadly, they would have referenced the 501(c)(3) definition or explicitly included it in the statute.

The Court also noted that there is a key difference between federal income tax and real property tax. Real property taxes are a significant source of revenue for local governments. The Court found that such a dissimilar test does not translate to determinations of real property tax exemptions. While there is no longer a presumption based on § 501(c)(3), the Court did note that it can still be considered as a factor.

The Court went on to examine the organization’s use of the parking facilities. While purposes such as spurring economic development and “the lessening of the burdens of Government” may qualify an organization for federal tax exemption, they fall short of § 420-a’s new, more exacting standard. The Court found that the benefit of cheap parking flows to local businesses, customers, and the general public. While that is a laudable goal, it is not charitable under § 420-a.

The Court was not persuaded by the line of cases (e.g., Matter of Merry-Go-Round Playhouse, Inc. v. Assessor of City of Auburn, 24 N.Y.3d 362) that allow exemptions for uses that are incidental to a charitable purpose. The Court found instead that cases like Matter of Vassar Bros. Hosp. v. City of Poughkeepsie (97 A.D.3d 756) were more on point. Vassar Bros. held that parking spaces owned by a non-profit that were set aside for private parties did not qualify as incidental to the primary purpose of the non-profit. The Court found the same reasoning applies here.

Finally, the fact that the parking facilities generated a profit neither helped nor hurt Greater Jamaica. Tax exempt status was not denied because there was a commercial element to the use of the parking facility. A property that is profitable is not automatically denied this exemption. Greater Jamaica argued that the facilities’ profitability bolstered their claim for tax exemption because all proceeds went to the organization’s other charitable purposes. The Court again focused on the use to rebuff Greater Jamaica. In that regard the use could best be described as merely a money-maker for Greater Jamaica, which, without a more charitable purpose, does not qualify it for this exemption.

(Thanks to Luke O’Brien, contributing author)

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Part 2: …But In the Fourth Department, Repeat Filings Are Not Required?

Posted in Assessments, Settlement, Uncategorized, Valuation

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In Part 1 of this discussion, we highlighted the Appellate Division, Third Department’s holdings on RPTL’s “freeze” provision in the Highbridge Broadway, LLC v City of Schenectady and Scellen v City of Glens Falls cases. As you’ll recall, these Third Department cases held that property owners must annually file a grievance and petition to preserve their right to an assessment reduction (and any refunds) for the additional years that accrue until the case is resolved. Practically speaking, this rule has attorneys on both sides of the “v” preparing and filing documents to fight assessment issues that, really, are already before the court. 

Despite these holdings, at the end of March 2015 the Appellate Division, Fourth Department came to the opposite conclusion in Torok Trust v. Town Board of the Town of Alexandria.  Here, the Court held that the petitioner’s failure to file additional challenges on its property for each subsequent assessment year that came and went without settlement or a judgment did not undermine its right to an assessment reduction or refund for those later years. The Court reasoned that these subsequent years were governed by RPTL § 727’s three-year “freeze” provision (i.e., the reduced assessment holds for that last year tried plus the next three), so there was no need for the repetitive/protective annual filings.  The Fourth Department further declared that RPTL § 727 was intended to reduce the need for repeated litigation, and further, that RPTL § 726 (refund, credit of taxes) provided assessors with a mechanism to make any assessment or tax roll corrections. In other words, one Court does not think there is any need to file cases year after year on the same property to preserve petitioners’ rights  to a reduction or refund.  Apparently, this Court finds that one year of filing is enough, with RPTL § 727’s “freeze” provision operating to reduce the assessment on that property in the next (at least 3) years to the value determined by the court for the last year at issue. 

So now New York’s Appellate Division courts are divided as to whether “protective” annual tax certiorari filings are necessary.  This begs the question: will the Court of Appeals decide whether the assessments are frozen so as to resolve subsequent filings – or will they just let it go?


Part 1: In the Third Department, Annual Filings Are Required

Posted in Assessments, Real Property Tax Refund, School Districts


As we dig out from under an unusually cold and snowy winter, we can’t help but ponder the efficacy of our statutory freeze provision, especially in light of two 2015 Appellate Division cases that seem to have completely opposite holdings on the subject.

Take the Real Property Tax Law (“RPTL”) mandate that taxpayers must commence separate tax assessment proceedings for each and every assessment per tax year that such taxpayer desires to challenge (see, RPTL §§ 702, 704 and 706).  And even when tax assessment litigation is commenced, in the Third Department at least, the property owner must continue to file a grievance and petition for each and every year on that same property until the case is resolved – even though under RPTL § 727 post-judgment assessment reductions are “frozen” for three years. This is part of what makes assessment litigation an expensive endeavor when one adds up the attorney time to prepare the documents, court filing fees and costs associated with service of process.  On January 29, 2015 the Third Department affirmed this general practice in Highbridge Broadway, LLC v. Assessor of the City of Schenectady, reversing a decision that would have required the Schenectady City School District to pay an additional $8,000 in refunds had it not been upheld.

Specifically, in Highbridge Broadway, LLC, the property owner/developer filed a tax assessment challenge in July 2008 for the 2008 assessment year only.  The challenge alleged that the property was entitled to a RPTL § 485-b tax exemption. (RPTL § 485-b provides a real property tax exemption for real property that is “constructed, altered, installed or improved . . . for the purpose of commercial, business or industrial activity.”)  The RPTL § 485-b exemption requires a single application.  This means that once granted the exemption lasts for ten years, no annual recertification or renewal is required.  Relying on this statutory provision within the exemption statute, the developer determined that challenges to assessment roll years 2009, 2010, and 2011 were unnecessary even though the exemption had not been applied in those years, either.

In 2011, the Supreme Court ruled that the developer was entitled to the RPTL § 485-b exemption in 2008 through 2011 and ordered refunds to be paid by the town, county and school district for each of these years.  However, Intervenor-respondent Schenectady City School District refused to pay refunds for assessment roll years 2009 through 2011 because the developer did not file separate proceedings in those years, so the District appealed the Supreme Court’s decision.

In January, the Third Department held in favor of the School District stating that no refunds were required for 2009, 2010, or 2011.  The Court stated a property owner must preserve their right to an assessment reduction by filing repeated challenges each year.  Moreover, the Court determined that RPTL § 727’s “freeze” provision could not save the developer. This technical deficiency saved the school district approximately $8,000 in refunds, and reiterated the burden that befalls all taxpayers to file repeated challenges until the case is “closed.”

The practical implications of this decision could not be more clear. Under this line of cases, a petitioner must file an assessment challenge each and every year until the case is resolved; moreover, RPTL § 727’s “freeze” cannot circumvent this requirement.

But wait, there’s more…see our post later this week for a decision out of the Fourth Department that holds onto the meaning of the word “frozen”… and perhaps there will be some clarity later, in the summer.

New York State Amends Real Property Tax Law to Allow School Districts to “Charge Back” Tax Refunds to School District Public Libraries

Posted in Assessments, Real Property Tax Refund, School Districts

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Governor Cuomo recently signed a law granting school districts the authority to “charge back” real property tax certiorari refunds to school district public libraries. Prior to the adoption of this law, school districts that levied real property taxes on behalf of school district public libraries were required to pay tax refunds on behalf of both the school and library and lacked the ability to charge the library for their share of the refunds (even if the tax money was remitted to the public library). Under the new law, school districts will be able to recoup this expense.

For those unfamiliar with this issue, the process of refunding school district public library taxes is summarized as follows. Many school districts levy and collect tax on behalf of a school district public library. The amount of the levy is based on the real property’s tax assessment. These school districts are required to remit the tax levied on behalf of the school district public library to that public library after collection. However, if a property owner challenges and obtains a reduction of its property tax assessment, school districts have had to pay tax refunds to the successful owner on behalf of both the school district and the school district public library. Until December 2014, New York law did not allow school districts to recoup this expense from the public library.

Effective January 1, 2015, school districts that levy taxes on behalf of school district public libraries are authorized to “charge back” to such public libraries the portion of tax refunds due on an assessment reduction that are attributable to the public library tax levy. The new “charge back” law applies only to school district public libraries.

There is one important caveat regarding the new authority to “charge back” refunds to school district public libraries. Specifically, the new law appears to be limited to tax refunds payable as a result of only tax certiorari proceedings and small claims assessment review proceedings commenced under Real Property Tax Law (“RPTL”) Article 7. The law does not authorize school districts to “charge back” refunds for corrections to assessment or tax rolls made pursuant to RPTL Article 5. Accordingly, it appears that school districts will still bear the burden of paying refunds on behalf of school district public libraries when there is a correction of an assessment or tax roll. It is unclear whether the legislature will address this issue in the future.

New York’s Property Tax Cap Wins Again

Posted in Exemptions, Exemptions, Property Tax Freeze, Uncategorized
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In 2013 we reported on NYSUT‘s lawsuit which claimed that New York’s recently-enacted property tax “cap” was unconstitutional. The thrust of NYSUT’s 2013 arguments against the cap were that it (1) harmed school districts that serve low-income areas by creating an “education gap” which perpetuates inequalities between wealthy and poor districts; (2) violated the state’s “education clause” which guarantees every child in New York the right to a basic education; and (3) violated the equal protection clause by allowing the cap to be overridden by super-majority vote. NYSUT’s 2014 lawsuit launched these same arguments against the cap as well as the recent amendment to the cap law that toughened it by providing incentives in the form of rebates to homeowners when their home municipality and school district stayed within the cap. Both lawsuits have now been dismissed. We note that while the tax cap is set to expire next year, Albany plans to make the cap permanent. Read the NYSUT case decision here.



New York Amends Agriculture and Markets Law To Provide Real Property Exemption For Silvopasture

Posted in Assessments, Exemptions
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For the first time, New York will classify silvopasture as agricultural land for the purpose of real property tax exemptions. This new classification could result in substantial tax savings for any livestock owner that uses partially-wooded land for livestock grazing.

Silvopasturing is the managed production of livestock and timber (or other forest products) on the same land over an extended period of time. Silvopasturing is now being used by farmers to enlarge grazing acreage while simultaneously providing added income from timber production. Silvopasturing has also been praised as an environmentally-friendly farming method that provides better habitat, diet, and lifestyle for livestock.

Previously, silvopasture was classified as “farm woodlands.” New York law limits real property tax exemptions on farm woodlands to 50 acres. Each additional acre of silvopasture was not entitled to a real property tax exemption.

Effective January 1, 2015, New York law provides a more generous tax exemption on silvopasture. Silvopasture will now be classified as “agricultural land,” rather than “farm woodlands”. Rather than capping silvopasture tax exemptions at 50 acres, exemptions are now determined by the number of livestock being raised on the property. Each large livestock animal (i.e. cattle, horses) entitles the property owner to tax exemptions on 10 acres of silvopasture. Each small livestock animal (i.e. sheep, hogs, goats, poultry) entitles the property owner to tax exemptions on 5 acres of silvopasture. Silvopasture must be fenced to be eligible for this exemption.


Another NY Appellate Division Holds that Appraisers have “No Right” to Inspect a Private Residence under the Fourth Amendment

Posted in Assessments
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We previously reported on a Second Department case that held a municipal agent (including a private appraiser hired by a municipality) is not automatically entitled to an inspection of a private residence to prepare an appraisal report in a real property tax assessment review proceeding. As the holding indicates, the issue requires a balancing of an individual’s right to privacy against a municipality’s ability to obtain the information appraisers and assessors arguably “need” to determine a property’s fair market value.

The issue came up again, this time before the Appellate Division, Fourth Department, in February 2015 in Matter of Aylward v. Assessor, City of Buffalo. Here, as in the Second Department case, the Fourth Department denied the City’s motion to compel an interior inspection of the petitioners’ private homes. Like the Second Department case, the Court in Aylward balanced the property owners’ Fourth Amendment right to privacy against the City’s alleged need for the interior inspection. The Court ultimately concluded that the municipality failed to meet the high threshold required to warrant an interior inspection based on the testimony of the property owners’ appraiser that interior conditions do not significantly affect residential value and the admission by the City’s appraiser that, while he believed that such conditions do affect property value, professional appraisal standards do not require such an inspection. The City of Buffalo promises to appeal the decision. We’ll keep you posted as the matter progresses to the Court of Appeals.

In the meantime, it’s key to note that as of March 2015, two separate Judicial Departments in New York have held that interior property inspections of private homes will not be permitted in tax assessment matters unless the municipality can show the balancing test weighs in their favor. The burden is squarely on the municipality. Is this fair? Appraiser John Zukowski, MAI, from ENPM, Inc., who testified in the Aylward case for the City of Buffalo, says that this ruling puts an unfair burden on the municipalities and makes the appraiser’s job that much harder. Zukowski believes that proper inventory is key to proper assessing and proper appraisal practices. But is the interior home inspection necessary to determine an opinion as to the market value of a residential property? Other appraisers disagree with Zukowski and the City, believing that the decisions in these two cases will streamline the residential assessment appraisal process. Both sides have good points. It will be interesting whether or when the Court of Appeals will rule on this issue, but until then, municipalities are under a greater burden to weigh how much difference internal home inspections make in terms of actual tax dollars and cents as compared to the privacy rights of their citizens.

Can Public Parking Garages Be Tax Exempt In New York? The Second Department Says “Yes”

Posted in Exemptions

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In the recent decision in Matter of Greater Jamaica Dev. Corp. v. New York City Tax Commn., 111A.D.3d 937, 975 N.Y.S.2d 749 (2d Dep’t 2013), the Appellate Division, Second Department held that five public parking garages owned and operated by a not-for profit entity whose purpose was to promote the cultural and economic development of the “downtown” area of Greater Jamaica in New York City were fully tax exempt as a part of a “charitable organization” under Real Property Tax Law §420-a.  These parking facilities charged lower rates than other public garages, but still obviously generated profits for the not-for profit entity.

At first blush, this holding may seem at odds with other recent New York cases, including the Court of Appeals in Matter of Lackawanna Community Dev. Corp. v. Krakowski, 12 N.Y.3d 578, 883 N.Y.S.2d 168 (2009), in which the Court held that property owned by a Community Development Corporation and leased out to a for-profit company to help raise dollars for its tax exempt economic development activities was nonetheless not tax exempt because it was not being used exclusively for the organization’s tax exempt purposes.  See also Matter of Miriam Osborn Mem. Home Ass’n v. Assessor of City of Rye, 80 A.D.3d 118, 909 N.Y.S.2d 493 (2d Dep’t 2010), and Matter of Lake Forest Senior Living Community, Inc. v. Assessor of City of Plattsburgh, 72 A.D.3d 1302, 898 N.Y.S.2d 369 (3d Dep’t 2010), both of which held that not-for-profit housing entities lost their tax exempt status when too high a percentage of their residents were affluent and were charged market rates in order to support a small percentage of needy residents.

However, other New York Courts have begun to extend tax exempt status to activities of non-for-profit organizations that realize income specifically for the organization’s tax exempt purposes.  For example, in Congregational Rabbinical Coll. v. Town of Ramapo, 72 A.D.3d 869, 900 N.Y.S.2d 103 (2d Dep’t 2010), the Court held that land leased to a for-profit corporation to operate a religious summer camp was still tax exempt because the lease was to be of a limited duration, the religious entity participated substantially in the operation of the camp, and the money it was raising from the for-profit was to be used for the subsequent construction of a religious college on the site.

New York Courts have even hedged on the tax exempt status of parking garages owned by not-for-profits but partially leased to for-profit entities, granting a partial tax exemption for the not-for-profit portion of the use.  Matter of Vassar Bros. Hosp. v. City of Poughkeepsie, 97 A.D.3d 756, 948 N.Y.S.2d 403 (2d Dep’t 2012); Ellis Hosp. v. Assessor of Schenectady, 288 A.D.2d 581, 732 N.Y.S.2d 659 (3d Dep’t 2001).

The Court in Greater Jamaica decided not to walk such a fine line on the tax exempt status of the not-for-profit’s parking garages. First, the Court held that even an economic development purpose could be considered “charitable” under RPTL §420-a because of its intent to “relieve poverty” and “advance governmental purposes.”  The Court also relied upon the fact that the Internal Revenue Service had ruled that this entity was tax exempt.  The Court then went on to determine that the purpose of operating these cheaper garages furthered the not-for-profit’s “charitable purpose” to improve the economic development of Jamaica’s business district.  Interestingly, what did not factor in the Court’s decision was the economic success of these garages and how much revenue they generated for the not-for-profit entity – an indication that the courts recognize that revenue generation by a not-for-profit is irrelevant to a determination of whether the property is owned and used by a not-for-profit in furtherance of its exempt purposes.  The Court of Appeals has granted leave to appeal.  The briefs have been filed but no argument date has been set.  It will be interesting to see how the Court of Appeals deals with this case.

How low can you go? Here’s a Clue: RPTL 720(1)

Posted in Assessments, Valuation

  As The Desmond Hotel & Conference Center was gearing up for it’s New Year’s Eve celebration, on December 31, 2014, the Appellate Division (Third Department) handed down a decision in  Village Square of Penna, Inc. v Board of Assessment Review/Town of Colonie. This decision stemmed from the trial court’s September 2013 order granting Petitioner’s (aka, The Desmond Hotel & Conference Center) application to reduce its property tax assessments, as well as a trial court order that granted the hotel’s motion to amend its Article 7 Petition post-trial.

During the nonjury trial before the trial court, Petitioner’s appraiser testified that he used the income capitalization approach to establish the value of the hotel property. Petitioner’s appraiser relied primarily upon the actual financial performance of the hotel. The Respondents’ appraiser also relied upon the income capitalization approach, but he relied more heavily on market expectations and performance as opposed to the actual performance of The Desmond.

Ultimately, the trial judge found the testimony of Petitioner’s appraiser (who used actual income data) to be more persuasive than Respondents’ use of market data and, so, adopted Petitioner’s valuation. But here’s the twist: the values that the Court adopted were below the values Petitioner alleged in its BAR Complaints and Article 7 Petitions.  Under the rule of RPTL 720(1), Respondents moved to modify the trial Court’s judgment, arguing that it was an error to reduce the assessment below Petitioner’s grieved/petition values. In response, Petitioner moved to amend its Article 7 Petitions to conform with the proof  adduced at trial.  The trial court granted Petitioner’s motion to modify the Petitions.

The Respondents’ appealed. On appeal, the Appellate Division was loathe to set aside the Trial Court’s determination that the hotel property was over-assessed and went through a detailed analysis as to why Petitioner’s actual income, occupancy rate and expenses, as opposed to market expectations and competitor hotels performance, was a rational method of valuing the hotel property.

Notwithstanding, the Appellate Division modified the Trial Court’s judgment to the extent that it valued the subject property below the amount requested in the grievances and Article 7 petition.  So, to answer the question, “How Low Can You Go?”: even if the proof at trial establishes that the subject property is over-assessed, a petitioner’s reduction in it’s assessed value is limited to what is set forth in its Article 7 Petition under RPTL 720(1).