Tax Assessment & Condemnation Report

Tax Assessment & Condemnation Report

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).

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

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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.