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Volume 1 - Opinions of Counsel SBEA No. 12

Opinions of Counsel index

Religious exemption (property held for investment purposes) - Real Property Tax Law, § 421:

A church-owned dwelling being held for investment purposes is not exempt from taxation even though the income from such dwelling is used for church purposes.

Section 421 of the Real Property Tax Law directs that “[r]eal property owned by a corporation . . . organized . . . exclusively for religious . . . purposes . . . and used exclusively for carrying out thereupon one or more of such purposes . . . shall be exempt from taxation . . . ”.

Assuming that a certain church is organized exclusively for religious purposes, one of the conditions of exemption under section 421 is that the property which it owns be used exclusively to carry out these religious purposes. The courts have consistently upheld the principle that in order to entitle a corporation to exemption of its property, it is necessary that the property be used “exclusively for carrying out thereupon one or more of the purposes of its incorporation” (People ex rel. Mitzpah Lodge v. Burke, 228 N.Y. 245, 126 N.E. 703).

In determining whether property is “used exclusively”, as the statute directs, the courts have held that when the property is used in the furtherance of the exempt purposes so as to constitute an integral or coordinate part in carrying out the overall corporate purposes, it is exempt. It must be made to appear that the use and need of the property by the corporation or institution “is necessary or fairly incidental to the maintenance of the institution for the carrying out of the purposes for which it was organized” (People ex rel. Blackburgh v. Barton, 63 App. Div. 581, 583, 71 N.Y.S. 933, 935). Where the property of an exempt corporation is used for nonexempt purposes, that property is not entitled to exemption as it violates the exclusive use provision of the statute.

In People ex rel. Unity Congregation Society of City of New York v. Mills et al. (189 Misc. 774, 71 N.Y.S.2d 873), the court stated:

“Property of a tax exempt corporation is not exempt from taxation where it is held as an investment only, even though the income be used for a corporate purpose.”

It was also so held in People ex rel. Adelphi College v. Wells (97 App. Div. 312, 89 N.Y.S. 957, aff’d 180 N.Y. 534, 72 N.E. 1147) where an athletic field owned by the college and used during the school year by the students thereof, was, in the summer, hired out for a fee for various sports events unconnected with the college. The court, in denying the exemption, stated:

“Here, however, it appears that the property is utilized as a source of pecuniary income by renting it to outside parties for contests in which the Adelphi College students do not participate, and over which the College officers have no control. I am unable to see how such use can be regarded as exclusively for carrying out an educational purpose, within the meaning and intent of the statute.”

In People ex. rel. Church of St. Mary v. Feitner (168 N.Y. 494, ment in City of Albany v. Sayles et al. (32 App. Div. 197, 53 N.Y.S. 67, aff’d. 157 N.Y. 677, 51 N.E. 1093), the court held:

“It is the exclusive use of the real estate for carrying out thereupon one or more of the purposes of the incorporation of the relator which confers the right of exemption, and not the benefits accruing to it and its useful work from the income derived from others in consideration of their use of the real estate for their purposes.”

In People ex rel. Church of St. Mary v. Feitner (168 N.Y. 494, 61 N.E. 762) the court stated that:

“The ‘exclusive use’ mentioned in the statute means exclusive business for which relator was incorporated.”

In addition, although subdivision 3 of section 421 authorizes an exemption for the real property of an exempt organization when that organization has plans to construct suitable buildings or improvements which will qualify for an exemption, this subdivision does not apply to property from which revenue is derived.

Accordingly, a church-owned dwelling being held for investment purposes is not exempt from taxation even though the income from such dwelling is used for church purposes.

November 26, 1969

Updated: