Upstate Props. Dev., Inc. v City of Syracuse

[*1] Upstate Props. Dev., Inc. v City of Syracuse 2010 NY Slip Op 50566(U) [27 Misc 3d 1205(A)] Decided on April 7, 2010 Supreme Court, Onondaga County Greenwood, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on April 7, 2010
Supreme Court, Onondaga County

Upstate Properties Development, Inc., Petitioner,

against

THE City of Syracuse, NEW YORK, THE BOARD OF ASSESSMENT REVIEW OF THE CITY OF SYRACUSE and JOHN GAMAGE, THE COMMISSIONER OF ASSESSMENT OF THE CITY OF SYRACUSE, Respondents.



2009-3156



APPEARANCES: DAVID G. LINGER, ESQ., OF HANCOCK & ESTABROOK, LLP

For Petitioner

JOSEPH FRANCIS BERGH, ESQ., OF CORPORATION COUNSEL

For Respondents

Donald A. Greenwood, J.

The petitioner, Upstate Properties Development, Inc. (hereinafter "Upstate") has moved for summary judgment on its petition seeking tax exempt status for tax year 2009 - 2010 with respect to its real property located at 626-672 South Salina Street in Syracuse, New York. The petitioner, a New York not-for-profit corporation which is a tax exempt organization pursuant to §501(c)(2) of the Internal Revenue Code, contends that the respondent City was incorrect in its determination that the property is not entitled to such status. Petitioner's exclusive corporate purpose and activity is to hold title on behalf of its sole member, the Health Science Center Foundation at Syracuse, Inc. (hereinafter "the Foundation"). The Foundation is a not-for-profit corporation and is tax exempt pursuant to §501(c)(3) of the Internal Revenue Code, with the exclusive corporate purpose being to receive and administer gifts and bequests on behalf of and to pay over monies to State University of New York Upstate Medical University (hereinafter "the University"). The subject premises are currently leased to the University, with the rental amount being limited to the carrying charges of the premises. The property consists of a parking lot and [*2]a building, with 25% of the building being used as a child care center for students and employees of the University. The child care center is operated by Upstate Day Care Center, Inc., a not-for-profit corporation pursuant to §501(c)(3) of the Internal Revenue Code, with its main purpose being to provide day care services to University employees. In addition to free rent, the University provides financial support to the day care center in the form of free utilities and maintenance to enable the day care center to offer reduced rates to students and employees.

Section 420-a of the Real Property Tax Law provides that real property owned by a corporation organized or conducted exclusively for religious, charitable, hospital or educational purposes and used exclusively for carrying out one or more such purposes is exempt from taxation. See, RPTL §420-a. The statute requires that the property be owned by a corporation organized or conducted exclusively for an exempt purpose and that the property be used exclusively for an exempt purpose. See, id.

The petitioner asserts that the subject property qualifies for such an exemption inasmuch as the petitioner, as owner, is a not-for-profit tax exempt corporation organized exclusively for exempt purposes and that the subject property is used exclusively for exempt purposes within the meaning of Real Property Tax Law §420-a(1)(a). The City contends that the subject property is not entitled to tax exempt status since the petitioner failed to claim a "hospital" exemption and that the subject property is not used exclusively for charitable purposes.

Turning first to the City's argument concerning the petitioner's untimely objection, this Court finds that the contention is not supported by the language of the statute or the record here. The City essentially asserts that the petitioner was required to distinguish between the use for "charitable" or "hospital" purposes at the time of its application and hearing before the Board. However, that distinction is not required by the law; in fact the statute refers to a number of exempt purposes together and states "organized or conducted exclusively for religious, charitable, hospital, educational or moral or mental improvement of men, women or children purposes..." RPTL §420-a(1)(a). It has long been recognized that hospitals, which are devoted to the care of the sick aid in maintaining public health and make valuable contributions to the advancement of medical science, are devoted to benevolent and charitable purposes for tax exempt purposes. See, People ex rel. Doctors Hospital v. Sexton, 267 AD 736 (1st Dept. 1944). Moreover, the petitioner's application repeatedly refers to its affiliation with University Hospital. See, Petitioner's "RP-420-a/b- Use (9/08)" dated 12/22/08, pp. 1 and 2 (hereinafter "Application"). The hospital affiliation was also acknowledged by both parties at the Board hearing. See, Audio Recording of Board of Assessment and Review hearing (hereinafter "Board Hearing Recording"). The fact that the petitioner may have erroneously designated the property as "charitable" in the initial application (although not in the 420-a form) does not defeat its entitlement to the exemption.

The petitioner has shown that 25% of the subject property was used for purposes reasonably incident to the major purposes of the University, a child care center serving University staff and students, which makes the University more desirable to potential employees and students. The child care center receives support from the University, including the rent-free use of the subject premises, financial support which enables the day care center to offer reduced rates to students and employees, and by the payment for utilities, maintenance and repairs to the building. As such, that portion of the building is exempt from taxation since the operation of the [*3]day care center, constitutes a purpose reasonably incident to the hospital's purpose. See, Matter of St. Joseph's Health Center Properties, Inc. v. Srogi, 51 NY2d 127 (1980).

The Court now turns to the issue of the exempt status of the remaining 75% of the building. The petitioner has offered inconsistent explanations of the use for the remaining portion as of the taxable status date. In its application, the petitioner indicated that the remainder of the building "will be used for professional offices in the future". Application, p. 2. At the Board hearing, petitioner's representatives testified that they had planned to use the space for doctors' offices but that such use was "not in the cards anymore". See, Board Hearing Recording.[FN1] Suitable improvements were not in progress as of the taxable status date and petitioner submitted no proof that it contemplated in good faith making improvements to the property such as permits, applications or even plans. Real property tax exemption statutes are to be strictly construed against the property owner and the petitioner carries the burden of proof to demonstrate its entitlement to the exemption. See, World Buddhist Ch'an Jing Center, Inc. v. Schoeberl, 45 AD3d 947 (3rd Dept. 2007). The representations of the petitioner that it "is planning" to make various improvements is insufficient to allow petitioner to meet its burden of proof by clear and convincing evidence. See, Matter of Chautauqua Rails to Trails, Inc. v. Accessors of Town of Chautauqua, et al., 231 AD2d 878 (4th Dept.1996)

NOW, therefore, for the foregoing reasons, it is hereby

ORDERED, the petitioner's motion for summary judgment is granted, in part, to the extent that it is hereby determined that the 25% of the subject property used for day care purposes is exempt from real property taxation for the tax year 2009 - 2010, and it is further

ORDERED, the petitioner's motion for summary judgment is denied, in part, to the extent it is hereby determined that the remaining 75% of the subject property is not exempt from real property taxation for the tax year 2009 - 2010.

ENTER

Dated: April 7, 2010

Syracuse, New York

DONALD A. GREENWOOD

Supreme Court Justice Footnotes

Footnote 1: It should be noted that the use of such offices for treating private patients has been determined to be taxable inasmuch as it was a profit-making use not reasonably related to the primary hospital purpose. See, Review and Reduction of Real Property Assessments in New York, §10.05, Lee and LeForestier. 3rd Ed., (1988); see also, Genesee Hospital v. Wagner, 47 AD2d 37 (4th Dept. 1975), aff'd 39 NY2d 863(1976); see also, Community General Hospital v. Town of Onondaga, 80 Misc 2d 96 (Onon. Co Sup. Ct. 1974).