Volume 4 - Opinions of Counsel SBEA No. 95
Nonprofit organizations exemption (miscellaneous) (business and professional association) - Real Property Tax Law, § 421:
A professional interest group devoted primarily to the improvement of professional engineers cannot be classified as a corporation organized exclusively for charitable or benevolent purposes so as to qualify real property owned by such an organization for exemption pursuant to section 421 of the Real Property Tax Law.
Our opinion has been requested concerning the taxable status of two parcels of real property owned by an engineers’ foundation, a not-for-profit corporation. The corporation is seeking an exemption on this property claiming that it is organized exclusively for charitable and benevolent purposes.
In New York State an exemption from taxation on real property owned by certain nonprofit corporations and associations is provided for in section 421 (i.e., § 420) of the Real Property Tax Law. In order to be entitled to this exemption the real property must be owned by a corporation or association organized exclusively for one or more of the exempt purposes specified in the statute, and the real property must be used exclusively for one or more such purposes, with any portion of the property not so used being subject to taxation. In addition, no officer, member or employee of the organization may, be entitled to receive any pecuniary profit from its operation, except reasonable compensation for services performed in furtherance of corporate purposes.
We assume that the foundation satisfies the ownership requirement of this statute. The next requirement of section 421 is that the association or corporation be “organized exclusively” for one or more of the exempt purposes enumerated therein. This is determined by examining the purposes and objects in the certificate of incorporation or charter, if any (Great Neck Section, etc. v. Board of Assessors, 21 Misc.2d 142, 189 N.Y.S.2d 623; Goodwill Club of Amsterdam, New York v. City of Amsterdam, 31 Misc.2d 1096, 222 N.Y.S.2d 896; American-Russian Aid Association v. City of Glen Cove, 41 Misc.2d 622, 246 N.Y.S.2d 123) . The purposes for which this particular corporation was organized are found in paragraph 3 of its certificate of incorporation. Subparagraph (a) of paragraph 3 states the following:
3. The purposes for which the corporation is to be formed are:
(a) to aid the progress of the profession of Engineering and Professional Engineers generally; and without limiting the generality of the foregoing, to advance the theory and practice of engineering and the allied arts and sciences; to enhance the status of the engineer; to increase the usefulness of the organized engineering and technical societies, and in furtherance of such accomplishments to encourage research, and the preparation of papers, documents and reports on engineering topics; to develop standards, codes, recommended practices and the enlargement of and greater usefulness of Engineering Societies’ Libraries; to establish laboratories and work shops for research and education in the engineering field; to endeavor to maintain high technical and cultural standards for the legal right to practice professional engineering and to require high standards of ethical practice by members of the Society; to foster the study of Engineering and encourage the personal and professional development of young engineers; to support activities for the employment of engineers; to cooperate with other engineering and technical societies, and to advance public relations with governmental agencies and the public in general.
The language cited above clearly indicates that this corporation is not organized exclusively for one or more of the purposes enumerated in section 421. The claim raised by this organization is analogous to that raised by the Bar Association of the City of New York in the case of Association of the Bar of the City of New York v. Lewisohn, 34 N.Y.2d 143, 313 N.E.2d 30, 356 N.Y.S.2d 555. In that case, the City Bar Association, whose purposes included “cultivating the science of jurisprudence, promoting reforms in the law, facilitating the administration of justice, elevating the standard of integrity, honor and courtesy in the legal profession and cherishing the spirit of brotherhood among the members thereof” was held not to be organized and conducted exclusively for charitable or educational purposes and therefore its property was not entitled to an exemption under section 421. The Court of Appeals explained as follows (356 N.Y.S.2d, at 562):
It [i.e., the Bar Association] is an association of professionals organized for traditional bar association purposes and primarily concerned with the professional interests of its members. While it has functions and attributes properly characterizable as educational and, to a somewhat lesser extent, as charitable, these are incidental and peripheral only. By way of example, its educational activities, while not reserved to professionals, are predominantly professional in nature and orientation and designed to advance the interests and the standing of its members. Nor does the Association’s extensive library, important and valuable as it is, alter its essential character. (emphasis added)
It is the opinion of this office that the Bar Association case is directly in point and that the emphasized language above applies equally to a group organized for professional engineering purposes as it does to the City Bar Association. While it is probably true that the engineering foundation provides a very definite public benefit, as noted in the Bar Association case, “. . . public benefit is not the test of qualification for exemption” (356 N.Y.S.2d, at 563) . While this foundation may indeed carry on some charitable or benevolent functions, it cannot be said that it was organized exclusively for charitable and benevolent purposes as those terms are understood in the traditional sense.
Charity has been defined as “. . . any act done without expectation of profit which alleviates the condition of the handicapped or unfortunate, or tends to forward the progress of mankind . . .” (Green v. Javits, 7 Misc.2d 312, 166 N.Y.S.2d 198, aff’d, 4 App. Div.2d 869, 167 N.Y.S.2d 431) . As was noted in In re Altman’s Estate, 87 Misc. 255, 149 N.Y.S. 601, at 605:
Charity always connotes the public generally or the public at large, or at least an indefinite section of it . . . and not, I think, a definite section of it; or, in other words, not certain beneficiaries in a particular employment, who are only uncertain because their names do not happen to be known to a charitable donor. . . . The test of a charitable gift or use and the test of a charitable corporation are in law the same. . . . [Each] must be for persons as uncertain as the public at large or some general section of it, such as the poor or the needy.
Similarly, benevolence, is “. . . the doing of a kind, helpful action toward another under no obligation except an ethical one . . .” (State v. Dunn, 134 N.C. 663, 46 S.E. 949).
It seems readily apparent from the foregoing that the foundation in question cannot be classified as a corporation organized exclusively for charitable or benevolent purposes as those terms are ordinarily construed. It is rather a professional interest group devoted primarily to the improvement of the lot of professional engineers.
The assessor also indicates that the property in question consists of a large vacant building and a paved lot adjoining said building suitable for parking. The courts have generally held that in order to be exempt from real property taxation, the use of the property by the corporation or association must be “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. Blackburn v. Barton, 63 App. Div. 581, 583, 71 N.Y.S. 933, 935). When property is vacant or unused, in order to be entitled to an exemption pursuant to section 421, subdivision 3 of said section provides that either construction of buildings or improvements devoted to the exempt purpose be in progress or “in good faith contemplated” or that such real property be held by such corporation or association whereby title will revert in case any building not intended or suitable for one or more of the exempt purposes is erected upon the premises. “Contemplation in good faith” within the foregoing means concrete and definite plans for utilizing and adapting the property for exempt purposes within a reasonably foreseeable future. Some evidence of such plans may be the start of or preparation of a fund raising campaign (see, e.g., In re Miriam Osborne Memorial Home Association, 140 N.Y.S. 786) , or the retention of an architect or other consultants relating to the development and use of the property for exempt purposes. The burden of proving that the property is being used for exempt purposes and is not lying idle is upon the person or organization claiming the exemption. (See, e.g., 1 Op.Counsel SBEA No. 16; 2 Op.Counsel SBEA No. 22).
Statutes granting exemptions from taxation must be strictly construed against the taxpayer seeking such exemption (Herkimer County v. Village of Herkimer, 251 App.Div. 126, 295 N.Y.S. 629, aff’d, 279 N.Y. 560, 18 N.E.2d 854). It is the conclusion of this office that the engineering foundation herein is not “organized exclusively” for one or more of the purposes enumerated in section 421 and that therefore its property is not entitled to the exemption provided for in that section.
January 17, 1975
