ALTHOUGH THE BUILDING IS OWNED BY A NOT-FOR-PROFIT CORPORATION WHICH RAISES FUNDS FOR HEALTHCARE SERVICES, THE BUILDING IS LEASED TO A FOR-PROFIT CORPORATION WHICH PROVIDES DIALYSIS; THE LEASED BUILDING, THEREFORE IS NOT EXEMPT FROM PROPERTY TAX PURSUANT TO RPTL 420-A (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Rivera, over a three-judge dissenting opinion, determined the property at issue, which is leased by a for-profit corporation, is not entitled to exemption from property taxes pursuant to Real Property Tax Law (RPTL) 420-a:

Petitioner Samuel and Bertha Schulman Institute for Nursing and Rehabilitation Fund, Inc. (Schulman), is a federally tax-exempt, New York not-for-profit corporation, which fundraises and manages assets in support of the healthcare purpose of non-parties Schulman and Schachne Institute for Nursing and Rehabilitation, Inc., and Brookdale Hospital Medical Center. Starting in 1995, Schulman leased to petitioner Brookdale Physicians’ Dialysis Associates, Inc. (Brookdale Dialysis) portions of a building Schulman owns in New York City. Brookdale Dialysis is a for-profit New York corporation that used the building to provide dialysis services for a fee. Under the lease Brookdale Dialysis paid $24,217.08 per month in rent to Schulman and was responsible for any property taxes that might become due during the tenancy. * * *

Petitioners argue that the property is exempt under RPTL 420-a (1) (a) because the building is used exclusively for its intended charitable purposes in that its dialysis services are vital and necessary to the charitable missions of Schulman and non-parties Brookdale Hospital and the Nursing Institute. However, the exempt purpose at issue here is that of the property owner—Schulman—and its purpose is to raise funds, not to provide dialysis services, or even medical services more generally. It is true that Brookdale Hospital and the Nursing Institute provide health care services, but still, the exemption is for Schulman’s property. And to the extent Schulman supports the health care efforts of these two entities it does so by fundraising, not by providing direct health care services. If Schulman engaged in its fundraising efforts in the building, then the exemption would apply to any portion so used, but Schulman vacated the premises during Brookdale Dialysis’ tenancy. Matter of Brookdale Physicians’ Dialysis Assoc., Inc. v Department of Fin. of the City of N.Y., 2024 NY Slip Op 01583, CtApp 3-21-24

Practice Point: A building owned by a not-for-profit corporation but leased to a for-profit corporation is not exempt from property tax pursuant to RPLT 420-a.