New York\u2019s highest court has, for the second time in two years, seen fit to take up a property tax charitable exemption matter involving a highly complex, fact-dependent pattern that adds to the many reported cases that provide future exemption applicants with a range of guidance in structuring real estate plans. Both decisions were split, indicating that even at the highest level of review, these determinations aren\u2019t straightforward. <\/p>\n
Last year, New York Court of Appeals Justice Jenny Rivera wrote for the majority in denying a charitable exemption in Matter of Brookdale Physicians\u2019 Dialysis Assoc., Inc. v. Department of Finance<\/a> because a tenant\u2019s services didn\u2019t precisely align with the nonprofit property owner\u2019s mission. <\/p>\n Rivera now finds herself writing the dissent in Matter of First United Methodist Church in Flushing v. Assessor of Callicoon<\/a>, where the majority delivered a win for the church-applicant, hinged on an unusual set of facts concerning entitlement to a full tax exemption where the property use was alleged to violate the local zoning code.<\/p>\n Most exemption cases involving the use of the property turn on whether there\u2019s a sufficient link between the activities happening on the property and the mission of the nonprofit owner. Here, the use question came with a twist: The government said it denied the exemption because its use violated the local zoning code.<\/p>\n The Queens-based church owned 73 acres of land in a rural Catskills town to grow food and hold occasional unplanned worship activities. The town\u2019s \u201crural district\u201d zoning allows for certain agricultural and similar activities, but it didn\u2019t specify religious retreats.<\/p>\n The zoning code separately states that any use not specifically permitted is deemed specifically excluded. Some \u201cconditional\u201d uses, such as summer camps, are permitted but only with special approval, which hadn\u2019t been sought or granted here.<\/p>\n In submissions, the church explained that although the property was intended to be used as a retreat center, the actual use of the property had become farming vegetables for distribution to low-income residents in Queens. Small groups of church volunteers would visit the property during harvest periods and engage in Bible study and other traditionally church-oriented activities while there.<\/p>\n The crux of the Court of Appeals\u2019 opinion therefore turned on interpreting the church\u2019s non-farming activities at the property. The majority affirmed the factual conclusions of the lower courts, disregarding occasional prayer meetings as rising to the level of a conditional use that violated the zoning restriction.<\/p>\n The opinion quoted from the trial court decision, emphasizing that though \u201coccasional retreats may have been held at which people engaged in organized prayer, this does not constitute regular organized services as required under the code to constitute a church.\u201d The majority was dismissive of the dissenting opinion for \u201cimpermissibly substituting\u201d its own view of factual determinations made by the courts below.<\/p>\n The dissent focused on the zoning code\u2019s language and the conditional use avenue and then refers extensively to testimony submitted by the church concerning its activities and original plans for the property.<\/p>\n In the dissent\u2019s view, the sole way to read the record was to find a violation of the zoning code, calling the property an obvious \u201cretreat center\u201d regardless of how frequently it was used for that purpose. Ironically, the dissent accuses the majority of \u201cimpermissible factfinding\u201d and fabricating the evidence. The dissent also raised a question that practitioners addressing future circumstances should keep in mind: How relevant is the intended use compared with the actual use?<\/p>\n The majority acknowledged that the church, here, originally intended a use as a retreat but relied on facts that suggest the original intent wasn\u2019t carried out in practice. The dissent took a different approach, noting signs on the property that referred to a retreat center, and arguing that \u201cevidence of how a landowner intended to use their property is relevant to interpreting how they actually used that property.\u201d<\/p>\n The takeaway for any prudent adviser is that surrounding facts and circumstances may color the court\u2019s interpretation of how the property is actually being used. To a large extent, as is true here, particular facts are often so unique as to be difficult to apply confidently elsewhere. But the ruling in First United Methodist Church adds another consideration when the use itself may well be charitably exempt but could risk defeating the exemption if it\u2019s impermissible for reasons unrelated to exemption law. <\/p>\n The case is Matter of First United Methodist Church in Flushing v. Assessor of Callicoon<\/a>, N.Y., No. 69, decided 11\/24\/25.<\/p>\n This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.<\/p>\n Author Information<\/p>\n