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Court of Appeals Clarifies Charitable Property Tax Exemption Rulings

In two new cases, the New York Court of Appeals clarifies the rules on the exemption from property tax of properties used for charitable purposes.

The cases are Adult Home at Erie Station, Inc. v. Assessor of Middletown, and Regional Economic Community Action Program, Inc. v. Bernaski. Both are treated in a combined opinion reported at 10 N.Y.3d 205, 856 N.Y.S.2d 515 (March 13, 2008).

Adult Home at Erie Station (AHESI) concerned an adult home where about 30% of the occupants were poor but did not have government benefits as their sole source of income. These "contract residents" paid for their residence themselves, but paid at a below-market rate. The city proposed, in essence, that only SSI recipients are "poor enough to be objects of charity." The Court of Appeals disagreed, holding that "people whose expenses for housing and medical care leave them with no more than $2,000 in assets and $50 in disposable income" - - referring to the contract residents - - "are poor by any reasonable definition." Given prior precedent that providing housing to poor people at below market rates is "plainly a 'charitable' purpose," the court found that AHESI's property should be exempt.

Regional Economic Community Action Program (RECAP), in comparison, is a social work organization "devoted to combating homelessness, substance abuse and other social ills among low-income participants." RECAP operates a "community re-entry program" designed to transition participants back into productive community residency. RECAP received rents comparable to rents charged by private landlords. The City did not contest that RECAP's purpose of helping the homeless, alcoholics, and drug addicts was a charitable purpose. It did, however, claim that because the programs were not carried out on the exempt property itself (the properties at issue were merely residences, with the program activities undertaken elsewhere), the properties should not be exempt. The Court of Appeals relied on Matter of St. Luke's for the prospect that residential use of a property which is "reasonably incident" to the "major purpose" of the exempt organization will not disqualify the property from exemption. "Providing an acceptable place for people to live while they participate in social work programs advances the goal of keeping them in the programs and thus of helping them overcome their troubles."

The slip opinion is published at the Court of Appeals website here.

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