Volume 5 - Opinions of Counsel SBEA No. 99
Nonprofit organizations exemption (moral or mental improvement) (Boy Scouts - sponsoring organization) - Real Property Tax Law, § 421:
Where a Boy Scout troop is sponsored by another organization, which owns the real property used by the Boy Scouts and for which exemption is sought pursuant to section 421 of the Real Property Tax Law, the sponsoring organization must also be organized for exempt purposes if an exemption is to be granted. If the purpose of the sponsoring organization is solely the sponsorship of the troop, no exemption can be granted unless the powers of the organization with respect to their property is limited so as to insure compliance with the requirements of section 421.
Our opinion has been requested regarding a real property tax exemption for property belonging to the Alumni Association of a Boy Scout troop pursuant to section 421 (i.e., § 420) of the Real Property Tax Law. The organization owns 15.40 acres of real property in a town and is seeking a real property tax exemption thereon.
We have examined the statement of facts submitted, the accompanying complaint, and the Certificate of Incorporation of the Alumni Association. Also the charter of the troop and that of the governing regional council of the Boy Scouts of America furnished additional relevant facts. Based on the information provided, we can outline the issues and principles we deem pertinent to a determination of exempt status of this property.
In order to be entitled to the exemption from taxation and from special ad valorem levies and special assessments provided by section 421, the real property for which exemption is sought must satisfy the following specific requirements. The real property must be owned by a corporation organized exclusively for one or more of the exempt purposes specified in section 421. Furthermore, the property must be used exclusively for exempt purposes or for purposes which are necessary thereto. Also, no officer, member or employee may be entitled to any pecuniary profit from the operation of the organization except reasonable compensation for services rendered.
Upon examination of the available information, it appears that the property has been and is currently used for exempt purposes. However, while use of real property may be some indication of its taxable status, other requirements must be satisfied for exemption. The organization’s purposes, as set out in the certificate of incorporation or other instrument, as well as the organization’s financial status must satisfy the requirements of section 421. Consequently, close scrutiny must be given to whether the organizational and nonprofit requirements of section 421 are fulfilled.
Generally, Boy Scout troops are sponsored by another organization such as a church or a civic group. The sponsoring organization usually owns the real property of the troop. Here, unlike a church or civic group which may itself be organized for exempt purposes, the sole purpose of the sponsoring organization is the sponsorship of the troop, which in itself may not be an exempt purpose.
In order to say with certainty that the sponsoring entity is organized exclusively for one or more exempt purposes set forth in section 421, it must appear that the powers of the corporation are sufficiently restrictive to prevent the use of the property for other than troop purposes. Without such restrictions the corporation might at any time decide to sell the property and distribute the proceeds to the members of the corporation. To this extent, the members of the corporation may be entitled to receive a pecuniary profit from the arrangement in violation of the nonprofit requirement of 421.
The troop operates under a charter granted by a regional council of the Boy Scouts of America. It has been our experience that troop charters do not restrict the use of the property and that actual use is also beyond the control of the regional council. Therefore, control over the use of the property is solely exercised by the sponsoring organization. The failure of the certificate of incorporation of the sponsoring group to restrict the use of the property would be significant in this respect. Upon examination of the certificate of incorporation of the Alumni Association, we find no language restricting the use of the property in question in the manner outlined above. Therefore, unless the charters of the troop or regional council contain such restrictive language, we believe that an exemption pursuant to section 421 of the Real Property Tax Law is unwarranted.
The factors which in our opinion militate most strongly against exemption are unlimited authority in the sponsoring organization to manage and dispose of the property, which could result in sale and distribution of the proceeds as profit to the members of the corporation, and the fact that the property may be used for non-troop purposes with benefits inuring to the members of the corporation.
October 26, 1976