Volume 2 - Opinions of Counsel SBEA No. 103
Nonprofit organizations exemption (transfers of real property) - Real Property Tax Law, §§ 421, 494:
If real property exempt pursuant to section 421 of the Real Property Tax Law is conveyed to a nonexempt owner after taxable status date, section 494 of the Real Property Tax Law (applicable in New York City and Westchester County) requires that such property will immediately become subject to taxation and will be taxed pro rata for the remainder of the fiscal year. However, if the grantee is entitled to exempt status pursuant to section 421, then section 494 is not operative because the transfer of the real property does not affect the exempt status of such property.
We have received a request for an opinion relating to the taxable status of real property owned and formerly owned by the New York Cardiac Center and located in the City of Yonkers.
It appears that prior to August 1972, the New York Cardiac Center (hereafter “Cardiac Center”) owned approximately 25 acres of land in the City of Yonkers. The Cardiac Center operated a cardiac care facility on this property, and the City granted an exemption from taxation pursuant to section 421 of the Real Property Tax Law.
In the Spring of 1971 the Cardiac Center phased out its in-patient care operation and subsequently offered the property for sale. Between the summer of 1971 and the summer of 1972 the property was used for the administrative offices of the Cardiac Center.
On August 31, 1972, the Cardiac Center sold the buildings and approximately three acres of land to the Richmond Children’s Center, an organization which provides care for severely brain damaged children. The Cardiac Center retained title to approximately 22 acres of unimproved land, but by a license agreement (dated December 29, 1972) the Cardiac Center granted to the Richmond Children’s Center the right to use the 22 acre tract for the presumed tax exempt purposes of the Richmond Children’s Center.
In December 1972, the City of Yonkers transmitted to the Cardiac Center a tax bill retroactive to July 1, 1972. Following an exchange of correspondence between the Cardiac Center and the City, the Cardiac Center, on March 30, 1973, made a partial payment under protest based upon its estimate of the portion of the total tax attributable to the 22 acre tract to which it had retained title.
The Cardiac Center has commenced a legal proceeding to cancel the taxes for the 1972-1973 fiscal year, and it has also filed a petition pursuant to Article 7 of the Real Property Tax Law to remove the assessment of the 22 acre tract from the taxable portion of the 1973 assessment roll (which will become the tax roll for the 1973-74 fiscal year).
Our opinion and analysis of the various issues presented by this situation have been requested.
First, when the Cardiac Center ceased its patient care operations, the taxable status of the real property owned by the Cardiac Center remained unaffected until the next taxable status date. Taxable status is determined annually on the basis of the condition and ownership of the property as of a fixed date, and such taxable status is controlling for the ensuing fiscal year with several significant exceptions. These exceptions include a transfer prior to lien date to the Federal or State government, and in New York City or Westchester County, a transfer of ownership or possession to a nonexempt owner (Real Property Tax Law, section 494). In that these exceptions are not applicable to the status of the property between the 1971 and 1972 taxable status dates (January 31), it is our opinion that the entire assessed valuation of the real property was exempt from taxation on the assessment roll prepared in 1971.
The information supplied to us by both parties is that the property was actively offered for sale during the latter part of 1971, and that it was eventually sold in August, 1972. During this period the City requested our opinion as to the possible change in the taxable status of the property because it was being offered for sale. At that time we indicated that if the property was no longer being used for exempt purposes and in addition was being offered for sale, then its assessed value should be entered on the taxable portion of the next assessment roll. However, the actual use of the property is a question of fact to be determined in the first instance by the assessor, and it is certainly possible that the use of the property for Cardiac Center administrative purposes would qualify at least a portion of the property for exempt status (Sailors’ Snug Harbor v. Tax Commission of the City of New York, 26 N.Y.2d 444, 259 N.E.2d 910, 311 N.Y.S.2d 486).
Therefore, the use of the real property as of the 1972 tentative assessment roll (based on its condition and ownership as of January 31, 1972) certainly may have entitled the real property to exemption from taxation. We are assuming that the real property was in fact entered on the exempt portion of the 1972 assessment roll, and that as of the commencement of the 1972-1973 fiscal year (i.e., July 1, 1972) the property was exempt from taxation.
The second issue is the possible application of the provisions of section 494 of the Real Property Tax Law. The pertinent portion of this section provides “[w]henever any person, association or corporation not entitled to an exemption from taxation acquires title to or possession of property which is exempt from taxation, such property shall immediately become subject to taxation and shall be taxed pro rata for the unexpired portion of the taxable year”. Title to a portion of the real property in question was transferred on August 31, 1972. If the grantee, the Richmond Children’s Center, was not entitled to an exemption from taxation, then certainly the provisions of section 494 should have been invoked as to the entire original parcel. This conclusion follows because title to one portion of the parcel would be in a nonexempt owner and possession of the other portion of the parcel would be in the same nonexempt owner.
Incidentally, if it was determined that the real property was subject to taxation and section 494 was invoked, then the resulting liability would be limited to the pro rata portion of the unexpired taxable (i.e., fiscal) year. Such pro rata tax would be for approximately ten-twelfths of the total potential tax liability, and it therefore appears that the supplementary tax bill issued by the City is erroneous.
However, by the same token, if the Children’s Center was entitled to an exemption from taxation, then certainly the provisions of section 494 would not have been applicable to any portion of the real property. Neither title to nor possession of any portion of the original parcel would have been transferred to a nonexempt owner, and the taxable status of the property would be that which was entered on. the 1972 assessment roll.
Also, note that we have not considered the possible issue of apportionment because it is our opinion that the entire original parcel was either wholly exempt or wholly taxable.
Finally, the taxable status of the two separate parcels as of January 31, 1973 depends upon the assessor’s determination as to the taxable status of both the Cardiac Center and the Richmond Children’s Center. Namely, if the Richmond Children’s Center is entitled to an exemption pursuant to section 421 of the Real Property Tax Law and if the property in question is being used exclusively for the purposes of the Children’s Center, then obviously the parcel was entitled to the exemption as of January 31, 1973 (as entered on the assessment roll tentatively completed on that date). Likewise, because the use and possession of the 22 acre tract owned by the Cardiac Center is in the Richmond Children’s Center pursuant to the licensing agreement, then pursuant to subdivision 2 of section 421, that parcel may also be entitled to exempt status. This will be the case if the assessor determines that the Cardiac Center continues to be organized exclusively for exempt purposes and that the Children’s Center is entitled to the exemption.
May 29, 1973