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NON-PROFIT RETREAT ENTITLED TO REAL PROPERTY TAX EXEMPTION FOR ENTIRE PROPERTY, NOT JUST THE DEVELOPED PORTION.

The Second Department, reversing Supreme Court, determined the owner of a retreat (Greentree, a non-profit) )was entitled to a real property tax exemption for the entirety of the property, not just the developed portion:

On this appeal, the record supports the conclusion that Greentree is organized exclusively for an exempt purpose within the meaning of RPTL 420-a(1)(a), and that its conference center was used for that exempt purpose during the tax year 2013/2014 … . Indeed, the Assessors do not dispute this conclusion. Rather, the Assessors contend that undeveloped portions of the property are not integral to the use of the structures on the property as a retreat and conference center, and thus, the entire subject property is not “used exclusively” for carrying out Greentree’s exempt purpose as required by RPTL 420-a(1)(a).

The term “exclusively,” in the context of RPTL 420-a, “is not to be read literally” … , and “has been broadly defined to connote principal or primary such that purposes and uses merely auxiliary or incidental to the main and exempt purpose and use will not defeat the exemption” … . “Thus, whether property is used exclusively’ for purposes of section 420-a is dependent upon whether the primary use’ of the property is in furtherance of permitted purposes” … .

Here, Greentree demonstrated that the entire property should be considered as a single unit and that it is used exclusively for tax exempt purposes. More specifically, Greentree offered proof that the undeveloped area is an integral part of the property, regardless of the frequency of use, because it served to preserve the character of the remaining property and, thus, is entitled to exemption … . Matter of Greentree Found. v Assessor & Bd. of Assessors of County of Nassau, 2016 NY Slip Op 05861, 2nd Dept 8-24-16

 

REAL PROPERTY TAX LAW (NON-PROFIT RETREAT ENTITLED TO REAL PROPERTY TAX EXEMPTION FOR ENTIRE PROPERTY, NOT JUST THE DEVELOPED PORTION)/TAX EXEMPTION (REAL PROPERTY, NON-PROFIT RETREAT ENTITLED TO REAL PROPERTY TAX EXEMPTION FOR ENTIRE PROPERTY, NOT JUST THE DEVELOPED PORTION)

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TAX CERTIORARI PROCEEDING DISMISSED FOR FAILURE TO TIMELY NOTIFY THE SCHOOL DISTRICT CANNOT BE RECOMMENCED PURSUANT TO CPLR 205 (a).

The Court of Appeals, in a full-fledged opinion by Judge Fahey, determined that a Real Property Tax Law (RPTL) proceeding (challenging a tax assessment) which is dismissed for failure to provide timely notice to the school district cannot be restarted pursuant to CPLR 205 (a). Standard statutory-construction analysis led to the result:

By amending RPTL 708 (3), the legislature allowed school districts to reserve funds to satisfy judgments in tax certiorari proceedings. That right of reservation, however, extended only to the extent funds reserved “might reasonably be deemed necessary to [pay] anticipated judgments and claims” (Education Law § 3651 [1-a]). A school district of necessity must know of a proceeding in order to be able to estimate the amount it is permitted to set aside. The notice requirements the legislature included in RPTL 708 (3) act to balance the strictures of the Education Law. A petitioner who ignores the mailing requirements of RPTL 708 (3) and simultaneously denies a school district the opportunity to economically address a tax certiorari proceeding is not permitted to recommence a proceeding dismissed based upon such noncompliance. To do so would be to undermine the aims of fairness and efficiency that prompted the amendments to RPTL 708 (3) … . Matter of Westchester Joint Water Works v Assessor of City of Rye, 2016 NY Slip Op 04438, CtApp 6-9-16

REAL PROPERTY TAX LAW (TAX CERTIORARI PROCEEDING DISMISSED FOR FAILURE TO TIMELY NOTIFY THE SCHOOL DISTRICT CANNOT BE RECOMMENCED PURSUANT TO CPLR 305 (a))/EDUCATION-SCHOOL LAW (TAX CERTIORARI PROCEEDING DISMISSED FOR FAILURE TO TIMELY NOTIFY THE SCHOOL DISTRICT CANNOT BE RECOMMENCED PURSUANT TO CPLR 305 (a))/CIVIL PROCEDURE (TAX CERTIORARI PROCEEDING DISMISSED FOR FAILURE TO TIMELY NOTIFY THE SCHOOL DISTRICT CANNOT BE RECOMMENCED PURSUANT TO CPLR 305 (a))

PETITIONER NEED NOT CHALLENGE THE REAL PROPERTY TAX ASSESSMENT EVERY YEAR TO BE ENTITLED TO BUSINESS INVESTMENT EXEMPTION REFUNDS FOR THOSE YEARS.

The Court of Appeals, in a full-fledged opinion by Judge DiFiore, over a dissent, reversing the Appellate Division, determined petitioner need not challenge the real property tax assessment every year to be entitled to business-investment-exemption refunds for the years following the year the assessment and exemption were challenged. Real Property Tax Law 485-b provides a partial ten-year exemption for certain improvements made to real property:

… [T]he business investment exemption is of ten years' duration and the amount of the exemption in each of the ten years is calculated using a single assessment roll … . * * *

… [W]hen a computational error based on a single assessment roll results in the miscalculation of the RPTL 485-b exemption, we hold that this error may be challenged by a single petition at the time the error is discernible. It is a waste of resources for all involved, including the courts, to require a property owner to bring a challenge addressing the same error in each and every year the exemption applies. Matter of Highbridge Broadway, LLC v Assessor of the City of Schenectady, 2016 NY Slip Op 03544, CtApp 5-5-16

REAL PROPERTY TAX LAW (PETITIONER NEED NOT CHALLENGE THE REAL PROPERTY TAX ASSESSMENT EVERY YEAR TO BE ENTITLED TO BUSINESS INVESTMENT EXEMPTION REFUNDS FOR THOSE YEARS)/BUSINESS INVESTMENT EXEMPTION (REAL PROPERTY TAX LAW, PETITIONER NEED NOT CHALLENGE THE REAL PROPERTY TAX ASSESSMENT EVERY YEAR TO BE ENTITLED TO BUSINESS INVESTMENT EXEMPTION REFUNDS FOR THOSE YEARS)

PURCHASE PRICE OF GOLF COURSE NOT PROPER VALUATION FOR TAX PURPOSES, PURCHASE PRICE REFLECTED POTENTIAL VALUE OF THE LAND AS DEVELOPED.

The Second Department, reversing (modifying) Supreme Court, determined the recent sales price of a golf course was not the proper benchmark for valuing the property for tax purposes. The $12,000,000 purchase price reflected the potential value of the land as developed:

“[T]he purchase price set in the course of an arm's length transaction of recent vintage, if not explained away as abnormal in any fashion, is evidence of the highest rank' to determine the true value of the property at that time” … . However, improved property must be assessed based on its current condition and use (see RPTL 302[1]…). “Property is assessed for tax purposes according to its condition on the taxable status date, without regard to future potentialities or possibilities and may not be assessed on the basis of some use contemplated in the future”… . Accordingly, in the context of a tax certiorari proceeding involving improved land, a recent sales price that was based upon speculation for future development, rather than continuation of the property's current use, is not a proper indicator of value (see RPTL 302[1]…).

Here, the evidence at trial established that the subject property was purchased for future residential development that had not yet occurred, and the sales price was based upon this residential development potential. Accordingly, the Supreme Court's adoption of the recent sales price as the valuation of the property for assessment purposes was in error … . Matter of Hampshire Recreation, LLC v Board of Assessors, 2016 NY Slip Op 01847, 2nd Dept 3-16-16

REAL PROPERTY TAX LAW (PURCHASE PRICE OF GOLF COURSE NOT PROPER VALUATION FOR TAX PURPOSES, PRICE REFLECTED POTENTIAL VALUE OF LAND AS DEVELOPED)/PROPERTY TAX ASSESSEMENT (PURCHASE PRICE OF GOLF COURSE NOT PROPER VALUATION FOR TAX PURPOSES, PRICE REFLECTED POTENTIAL VALUE OF LAND AS DEVELOPED)

ALLEGED ZONING VIOLATION DID NOT AUTOMATICALLY WARRANT REMOVAL OF TAX-EXEMPT STATUS; TOWN’S SUMMARY JUDGMENT MOTION SHOULD NOT HAVE BEEN GRANTED.

The Second Department, reversing Supreme Court, determined an alleged zoning violation, for which plaintiff property owner had never been cited, did not justify automatic removal of plaintiff's tax-exempt status. Therefore, defendant-town's motion for summary judgment should not have been granted. The property had been tax-exempt for years as low-income property. The alleged zoning violation, i.e. that the plaintiff had more than two residential apartments, was not incompatible with the tax-exempt use. Therefore, the alleged zoning violation could not justify automatic removal of the tax-exempt status:

 

… [E]ven assuming that a zoning violation had been sufficiently established, the defendants have failed to articulate why such a violation, under the particular circumstances presented, should result in the loss of the plaintiff's tax exemption. Not all violations of law automatically result in the loss of a tax exemption … . “The concern of the taxing authority is not with the observance or non-observance by plaintiff of regulatory provisions relating to a specific building, but to the use to which the real property as an entity is or is intended to be devoted” … .

This is not a case in which the applicable zoning regulation is incompatible with the occupant's tax-exempt use … . In such cases, the rationale for denying the tax exemption is simple and clear, as compliance with both the tax-exempt use and the zoning regulation is impossible. Here, by contrast, the tax-exempt use of providing residential housing to low-income tenants is consonant with the property's permitted use as a two-family dwelling. Under these circumstances, the defendants have failed to establish, prima facie, that the nature of the alleged violation (i.e., that the plaintiff had more than two residential apartments) can serve as a valid legal basis for denying the property tax exemption … . Community Humanitarian Assn., Inc. v Town of Ramapo, 2016 NY Slip Op 01458, 2nd Dept 3-2-16

REAL PROPERTY TAX LAW (ALLEGED ZONING VIOLATION DID NOT WARRANT AUTOMATIC REMOVAL OF TAX-EXEMPT STATUS)/ZONING (ALLEGED ZONING VIOLATION DID NOT WARRANT AUTOMATIC REMOVAL OF TAX-EXEMPT STATUS)/TAX-EXEMPT STATUS (REAL PROPERTY, ALLEGED ZONING VIOLATION DID NOT WARRANT AUTOMATIC REMOVAL OF TAX-EXEMPT STATUS)

Criteria for Determining If Land Is Overvalued Explained

n finding that petitioner did not meet its burden of demonstrating the tax assessor overvalued petitioner’s land, the Second Department explained the analytical criteria:

“In an RPTL article 7 tax certiorari proceeding, a rebuttable presumption of validity attaches to the valuation of property made by the taxing authority. Consequently, a taxpayer challenging the accuracy of an assessment bears the initial burden of coming forward with substantial evidence that the property was overvalued by the assessor. In the context of tax assessment cases, . . . the substantial evidence standard requires the taxpayer to demonstrate the existence of a valid and credible dispute regarding valuation. If the taxpayer satisfies this threshold burden, the presumption disappears and the court must weigh the entire record, including evidence of claimed deficiencies in the assessment, to determine whether petitioner has established by a preponderance of the evidence that its property has been overvalued” … .

Here, while the petitioner’s submissions were sufficient to demonstrate a “valid and credible dispute regarding valuation” of the properties in the relevant years …, they were insufficient to meet the petitioner’s burden to show that the properties were overvalued by the respondent. Matter of Peaceful Val. Land Stewardship, LLC v Johnson, 2015 NY Slip Op 07846, 2nd Dept 10-28-15

 

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Village Did Not Have Authority to Sell Village Land Dedicated to Public Use (Public Roads) to Satisfy Property Tax Liens

The Second Department determined the village did not have the authority under the Real Property Tax Law (RPTL) to sell land dedicated to public use (dedicated public streets) to satisfy property tax liens:

… [W]hile RPTL [Real Property Tax Law] 995 allows a municipality to consent to the sale of property to satisfy a tax lien, not all property owned by a municipality is freely alienable. As relevant here, a municipality holds the fee of dedicated public streets in trust for the public …, and may not convey such a fee unless there is specific legislative authorization permitting it, or the parcel’s use as a dedicated public street has been discontinued… .

RPTL 995 did not provide the Village with that specific authorization. The statute only authorizes petitions to collect “validly levied or charged” taxes (RPTL 995). Since the Legislature limited the application of the statute in that way, it did not contemplate that municipally owned property held for public use, which is exempted from taxation by RPTL 406(1), would be subject to an enforcement proceeding under RPTL 995, or that such property would be sold by a municipality at public auction in reliance on section 995, in satisfaction of a claim for such taxes (see McKinney’s Cons Laws of NY, Book 1, Statutes § 222). Contrary to the Village’s contention, Village Law § 1-102 likewise did not provide the specific authorization necessary for the Village to sell a dedicated public road. Matter of AJM Capital II, LLC v Incorporated Vil. of Muttontown, 2015 NY Slip Op 06335, 2nd Dept 7-29-15

 

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Trial Judge’s Acceptance of Petitioner’s Expert’s Valuation of the Property Was Against the Weight of the Evidence—the Actual Purchase Price in a Recent Sale and the Actual Rent Should Have Been Part of the Analysis

The Fourth Department, over a dissent, determined that the trial judge’s findings re: the assessed value of a retail property (for property tax purposes) were against the weight of the evidence. Specifically, the trial judge accepted the petitioner’s (Rite Aid’s) expert’s valuation which failed to take into account the actual price paid in a recent arm’s-length sale of the property, comparable sales, the actual rent (negotiated at arm’s length) and comparable rentals:

… [A]n appellate court is empowered to make new findings of value where the trial court ” has failed to give to conflicting evidence the relative weight which it should have’ ” …, giving due deference to the trial court’s power to resolve credibility issues by choosing among conflicting expert opinions … .

It is well settled that real “[p]roperty is assessed for tax purposes according to its condition [and ownership] on the taxable status date, without regard to future potentialities or possibilities and may not be assessed on the basis of some use contemplated in the future” … . Although several methods of valuing real property are acceptable, “the market value method of valuation is preferred as the most reliable measure of a property’s full value for assessment purposes” …, because “[t]he best evidence of value, of course, is a recent sale of the subject property between a seller under no compulsion to sell and a buyer under no compulsion to buy” … . A recent sale has been characterized as evidence of the “highest rank” in determining market value … . The scope of a “market” need not be limited to the locale of the subject property and, depending on the nature of the use, it may encompass national and/or international buyers and sellers … . * * *

… [W]e conclude that the failure of petitioner’s expert to use the recent sale of the subject property as well as readily available comparable sales of national chain drugstore properties in the applicable submarket as evidence of value demonstrates the invalidity of the expert’s conclusion with respect to the sales comparison valuation … . We further conclude that the use of sales not comparable to the subject and outside of the applicable market should have been rejected by the court as unreliable … . Moreover, the failure of petitioner’s expert to use the actual rent, negotiated at arm’s length and without duress or collusion, as well as the failure to use similar rental comparables from the applicable market as evidence of value, demonstrates the invalidity of the expert’s conclusions using the income capitalization method … . Matter of Rite Aid Corp. v Haywood, 2015 NY Slip Op 06049, 4th Dept 7-10-15

Similar issues and result in Matter of Rite Aid Corp. v Huseby, 2015 NY Slip Op 06051, 4th Dept 7-10-15

 

Parking Lots Owned by a Federal-Income-Tax-Exempt Charitable Organization Formed to Facilitate Commercial Development Were Not Entitled to a Charitable Exemption from Real Property Taxes—The Parking Lots Were “Used” to Increase Commerce Which Is Not a Charitable Use Under the Real Property Tax Law

The Court of Appeals, in a full-fledged opinion by Judge Pigott, over a two-judge dissent, determined that parking lots owned by “Greater Jamaica” were not entitled to a charitable exemption from real estate taxes.  “Greater Jamaica” is an organization formed for the purpose of facilitating Jamaica’s commercial development.  It is exempt from federal income taxation pursuant to 26 USC 501 (c) (3).  The NYC Department of Finance (DOF) revoked Greater Jamaica’s exemption from real estate taxes which the DOF had previously granted. Supreme Court upheld the revocation. The Appellate Division reversed Supreme Court. And the Court of Appeals reversed the Appellate Division. The Court of Appeals noted that the criteria for a charitable exemption under the IRS code is different from the criteria under Real Property Tax Law (RPTL) 420-a and, although a court may consider the IRS exemption in a RPTL 420-a proceeding, the IRS exemption is not determinative. The Court of Appeals concluded the parking lots were primarily used to facilitate the commercial growth of Jamaica, which was not a charitable purpose under the RPTL:

The City revoked the tax exemption on the ground that it was erroneously awarded in the first instance. It met its burden in this regard by demonstrating that the “use” of the parking facilities was not for “charitable” purposes but rather for economic development, and that the use of the parking facilities were not “incidental to another recognized charitable [*6]purpose.” Specifically, the City’s revocation letter explained that the City reached its determination after reviewing documents submitted to it by Greater Jamaica and case law from this Court. The City also explained why it believed that the status granted Greater Jamaica by the IRS had no bearing on the issue of “charitable use” of the parking facilities under section 420-a. The letter stated that although the parking facilities may have served “an important public purpose and support[ed] development of a community,” those factors did not qualify the facilities for a charitable exemption. Indeed, according to the City’s review of the ownership structure of the lots along with other documentation, it appeared that Jamaica First collected monies that exceeded the carrying, maintenance and depreciation charges attributable to the premises and that Jamaica First utilized those excess proceeds to fund other additional operations, such as the purchase of an additional parking lot. * * *

Although we do not disturb the Appellate Division’s holding that petitioners met the “organized or conducted exclusively for . . . charitable . . . purposes” prong of the tax exemption test, we part company with the Appellate Division relative to its holding that “petitioners demonstrated that the use of their public parking facilities was consistent with their exempt purpose, as expressly noted by the IRS in granting such operation tax exempt status” … . By so holding, the Appellate Division utilized the petitioners’ organizational status’ under Internal Revenue Code (26 USC) § 501 (c) (3) to support its holding that petitioners’ demonstrated that the use of the parking facilities was for an exempt purpose. This was error. …

… [T]he IRS’s definition of what constitutes an exempt “charitable” purpose is exceedingly broad, including, among other things, “the lessening of the burdens of [g]overnment” (26 CFR 1.501 [c] [3]-1 [d] [2]), while the second prong of section 420-a (1) (a) requires a court to review “the actual or physical use of the property when it exempts from taxation property ‘used exclusively for carrying out thereupon one or more’ exempt purposes” … . Thus, our analysis under section 420-a is concerned with the “use” of the parking facilities as a whole, and whether the facilities are “used exclusively for carrying out thereupon one or more of [section 420-a’s] purposes.” * * *

We disagree with petitioners’ assertion that the parking facilities are charitable in and of themselves because they fulfill the primary purpose of economic development. The economic benefit conveyed by below-market rate parking, however, inures to the benefit of private enterprise and cannot be said to further any charitable purpose. It lessens the burden of local businesses, obviating any need for them to make their own parking arrangements for prospective customers. The below-market rates that the facilities charge provide an incentive for the public to patronize those businesses, providing a dual benefit for local business and a benefit to prospective customers of those businesses. While these goals may be laudable, they are not charitable. Matter of Greater Jamaica Dev. Corp. v New York City Tax Commn., 2015 NY Slip Op 05620, CtApp 7-1-15

 

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Petitioner Was Entitled to a Reduction in the Assessed Value of a Home Depot Store Based Upon Its Expert’s Appraisal

The Third Department determined the trial court had properly found petitioner’s expert-appraisal of the value of a Home Depot store to be the most appropriate. Petitioner was therefore entitled to a reduction in the assessed value of the property. The Third Department carefully explained the valuation methods used by the competing experts (that discussion is not summarized here). As to the courts’ role in property-tax assessment proceedings, the Third Department explained:

A local tax assessment is presumptively valid and, to overcome that presumption, a petitioner must present substantial evidence that the property is overvalued … . Petitioner met this threshold burden here through its submission of the detailed appraisal of Harland, a certified real estate appraiser with considerable experience, who utilized accepted methodologies and adequately set forth his calculations and the necessary details regarding the properties … . The appropriateness of the comparable properties used by Harland in his analysis goes to the weight to be given to his appraisal, not, as respondents contend, the appraisal’s competency to raise a valid dispute regarding valuation … .

With petitioner having rebutted the presumptive validity of the assessments, Supreme Court was obligated to “weigh the entire record, including evidence of claimed deficiencies in the assessment, to determine whether petitioner has established by a preponderance of the evidence that its property has been overvalued” … . “Where, as here, conflicting expert evidence is presented, we defer to the trial court’s resolution of credibility issues, and consider whether the court’s determination of the fair market value of the subject property is supported by or against the weight of the evidence” … . Matter of Home Depot U.S.A. Inc. v Assessor of the Town of Queensbury, 2015 NY Slip Op 05556, 3rd Dept 6-25-15

 

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