Preserving Non-Profit Property Exemptions: Insights from Recent Legal Precedent

New York Courts have consistently held that properties owned by an eligible charitable, religious and educational non-profit cannot lease it to an ineligible for-profit or they will lose their property exemption. While there may be some distinguishable cases, a recent Court of Appeals decision supports this premise.

The recently decided Matter of Brookdale Physicians’ Dialysis Assocs. v. Dep’t Fin. of City of N.Y., considered New York Real Property Tax Law § 420-a, exemptions from real property taxation for non-profit organizations. Here, a not-for-profit corporation property owner leased portions of its New York City building to petitioner Brookdale Physicians’ Dialysis Associates, Inc., a for-profit dialysis services corporation.

The Court found that “New York Real Property Law (RPTL) § 420-a mandatorily exempts from taxation any real property owned by certain not-for-profit entities and used exclusively for statutorily-enumerated beneficial purposes without financial gain. The statute unambiguously reflects the legislative intent to limit the exemption to those purposes. The exemption also does not apply to property, like that at issue here, which is leased by a for-profit corporation. Consequently, the subject property is not exempt under RPTL 420-a, and the petition to annul the revocation of the property’s standing exemption should have been denied.”

Matter of Brookdale Physicians’ Dialysis Assoc., Inc. v Department of Fin. of the City of N.Y. (2024 NY Slip Op 01583) (nycourts.gov)

Thank you Nancy DeBiasi for this week’s Tax Tracker!