MERRY-GO-ROUND PLAYHOUSE, INC. v. ASSESSOR OF CITY OF AUBURN

SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
268
CA 12-01797
PRESENT: SMITH, J.P., FAHEY, SCONIERS, VALENTINO, AND WHALEN, JJ.
IN THE MATTER OF MERRY-GO-ROUND PLAYHOUSE, INC.,
PETITIONER-APPELLANT,
V MEMORANDUM AND ORDER
ASSESSOR OF CITY OF AUBURN, BOARD OF ASSESSMENT
REVIEW OF CITY OF AUBURN, AND CITY OF AUBURN,
RESPONDENTS-RESPONDENTS.
BOYLE & ANDERSON, P.C., AUBURN (CHARLES H. LYNCH, JR., OF COUNSEL),
FOR PETITIONER-APPELLANT.
JOHN C. ROSSI, CORPORATION COUNSEL, AUBURN (ANDREW S. FUSCO OF
COUNSEL), FOR RESPONDENTS-RESPONDENTS.
Appeal from an order of the Supreme Court, Cayuga County (Mark H.
Fandrich, A.J.), entered April 2, 2012. The order, insofar as
appealed from, granted respondents’ motion for summary judgment and
denied petitioner’s cross motion for summary judgment.
It is hereby ORDERED that the order insofar as appealed from is
unanimously reversed on the law without costs, respondents’ motion for
summary judgment is denied, petitioner’s cross motion for summary
judgment is granted, the petition is granted insofar as it seeks a tax
exemption pursuant to Real Property Tax Law § 420-a (1) (a) for real
property located at 112 Franklin Street and 230 Genesee Street in the
City of Auburn, and the matter is remitted to Supreme Court, Cayuga
County, for further proceedings in accordance with the following
Memorandum: Petitioner, a not-for-profit corporation engaged in the
performing arts, commenced this proceeding seeking review of the
assessment for its property at 230 Genesee Street in the City of
Auburn (Genesee Street property), as well as respondents’
determination that the Genesee Street property and petitioner’s
property at 112 Franklin Street (collectively, properties) are not tax
exempt pursuant to RPTL 420-a. The properties consist of apartment
buildings used to house staff and actors employed in petitioner’s
seasonal theaters. The properties are open only to petitioner’s
actors and staff, and petitioner receives no income from the
properties.
In lieu of an answer, respondents moved to dismiss the petition
pursuant to CPLR 3211 (a) (7), and petitioner cross-moved for summary
judgment on the petition. The parties agreed that the assessed
valuation of the Genesee Street property should be reduced from
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CA 12-01797
$400,999 to $400,000, and Supreme Court issued an order to that
effect. In the same order, the court also treated respondents’ motion
as one for summary judgment, and granted that motion. Petitioner
appeals from the order insofar as it granted respondents’ motion for
summary judgment and denied petitioner’s cross motion for that relief.
“All real property within the state shall be subject to real
property taxation . . . unless exempt therefrom by law” (RPTL 300).
Both the New York Constitution and the RPTL provide exemptions from
taxation for real property used for religious, educational or
charitable purposes. The New York Constitution provides an absolute
exemption for real property “used exclusively for religious,
educational or charitable purposes as defined by law and owned by any
corporation or association organized or conducted exclusively for one
or more of such purposes and not operating for profit” (NY Const, art
16, § 1). RPTL 420-a (1) (a) also grants that mandatory exemption
from taxation by providing that “[r]eal property owned by a
corporation or association organized or conducted exclusively for
religious, charitable, hospital, educational, or moral or mental
improvement of men, women or children purposes, or for two or more
such purposes, and used exclusively for carrying out thereupon one or
more of such purposes either by the owning corporation or association
. . . shall be exempt from taxation as provided in this section.”
RPTL 420-a (1) (a) thus creates a two-part test for determining
eligibility for tax-exempt status, i.e., “[t]he owner of the real
property must establish (1) that the organization is organized or
conducted exclusively for an exempt purpose, and (2) that the land for
which exemption is sought is used exclusively for an exempt purpose”
(New York Nonprofit Law and Practice § 14.03 [4] [a] at 14-48 [Matthew
Bender 2012]).
Here, there is no dispute that petitioner satisfied the first
prong of RPTL 420-a (1) (a), i.e., that petitioner is organized
exclusively for an exempt purpose. Petitioner’s certificate of
incorporation provides that petitioner was formed for purposes
including the “present[ation] [of] theater as the showcase for all the
arts”; “to encourage appreciation of wholesome entertainment in the
Auburn area”; and “to conduct year round programs in the performing
arts for children, teenagers, and adults.”
Our analysis thus turns to the second prong of RPTL 420-a (1)
(a), i.e., whether the properties are used exclusively for an exempt
purpose. “ ‘Generally, the burden of proof lies with the taxpayer who
is seeking to have real property declared tax exempt’ ” (Matter of
Lackawanna Community Dev. Corp. v Krakowski, 12 NY3d 578, 581; see
Matter of Mobil Oil Corp. v Finance Adm’r of City of N.Y., 58 NY2d 95,
99). “[W]hile exemption statutes should be construed strictly against
the taxpayer seeking the benefit of the exemption, an interpretation
so literal and narrow that it defeats the exemption’s settled purpose
is to be avoided . . . Accordingly, ‘exclusive’, as used in the
context of [tax] exemption statutes, has been held to connote
‘principal’ or ‘primary’ ” (Matter of Association of Bar of City of
N.Y. v Lewisohn, 34 NY2d 143, 153). Moreover, “[t]he test of
entitlement to tax exemption under the ‘used exclusively’ clause of
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CA 12-01797
[RPTL 420-a (1) (a)] is whether the particular use is ‘ “reasonably
incident[al]” to the [primary or] major purpose of the [corporation]’
. . . Put differently, the determination of ‘ “whether the property is
used exclusively for the statutory purposes depends upon whether its
primary use is in furtherance of the permitted purposes” ’ (Matter of
Genesee Hosp. v Wagner, 47 AD2d 37, 44, affd 39 NY2d 863, quoting
Gospel Volunteers v Village of Speculator, 33 AD2d 407, 411, affd 29
NY2d 622)” (Matter of Yeshivath Shearith Hapletah v Assessor of Town
of Fallsburg, 79 NY2d 244, 250).
Here, petitioner met its burden on its cross motion by presenting
evidence that the primary use of the properties furthers a primary or
major purpose of that corporation (see generally Zuckerman v City of
New York, 49 NY2d 557, 562). Applying a “fair reading” of the
purposes set forth in petitioner’s certificate of incorporation
(Matter of Highland Lake Bible Conference v Board of Assessors of Town
of Highland, 92 AD2d 655, 656, lv denied 59 NY2d 604), we conclude
that petitioner’s submissions establish that it was founded for the
purpose of promoting and presenting theatrical arts, i.e., for
purposes of education and the moral and mental improvement of men,
women and children (see Matter of Symphony Space v Tishelman, 60 NY2d
33, 35). The affidavit of petitioner’s producing and creative
director establishes that the use of the properties at issue is
reasonably incidental to the primary or major purpose of petitioner
(see Yeshivath Shearith Hapletah, 79 NY2d at 250), i.e., the
properties are intended to house staff and actors who work in
petitioner’s theaters and to help cultivate petitioner’s community
amongst its artists. According to that director, the housing of
actors and staff together promotes countless hours of volunteer work
in the form of “running lines together, discussing creative ideas,
working on wardrobes, [and] creating sets,” all of which further the
purposes and mission of petitioner. That director also averred that
the properties are not open to the public and create no income for
petitioner. In view of that evidence, we conclude that petitioner met
its initial burden on its cross motion (see generally Zuckerman, 49
NY2d at 562). Indeed, we note that housing used to further an exempt
purpose has been found tax exempt in numerous other contexts (see e.g.
Matter of Adult Home at Erie Sta., Inc. v Assessor & Bd. of Assessment
Review of City of Middletown, 10 NY3d 205, 216; Yeshivath Shearith
Hapletah, 79 NY2d at 247-251; Matter of St. Joseph’s Health Ctr.
Props. v Srogi, 51 NY2d 127, 129; University of Rochester v Wagner, 63
AD2d 341, 355-356, affd for the reasons stated 47 NY2d 833; Sephardic
Congregation of S. Monsey v Town of Ramapo, 47 AD3d 915, 916-918;
Matter of Foundation for A Course In Miracles v Theadore, 172 AD2d
962, 964, lv denied 78 NY2d 856).
Respondents’ submissions both in support of their motion and in
opposition to the cross motion, which consist primarily of the
affidavit of the real property appraiser of the City of Auburn and
petitioner’s tax exemption applications, do not raise an issue of fact
to defeat the cross motion (see generally Zuckerman, 49 NY2d at 562).
We thus reverse the order insofar as appealed from, grant petitioner’s
cross motion for summary judgment and remit the matter to Supreme
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CA 12-01797
Court to calculate the amount of real property tax, if any, to be
refunded to petitioner (see generally Miriam Osborn Mem. Home Assn. v
Assessor of City of Rye, 80 AD3d 118, 147). We further note that,
although petitioner sought an award of costs and disbursements in the
petition, including attorneys’ fees, it did not specifically address
that request for relief either before the motion court or on appeal.
We thus grant the petition only insofar as it seeks a tax exemption
for the properties pursuant to RPTL 420-a (1) (a) (see Ciesinski v
Town of Aurora, 202 AD2d 984, 984; cf. U.S. Underwriters Ins. Co. v
City Club Hotel, LLC, 3 NY3d 592, 596-597).
Entered: March 22, 2013 Frances E. Cafarell
Clerk of the Court