Nonprofit’s Parking Facilities Ruled Subject to Property Tax

The Court of Appeals reinstated a revocation of Greater Jamaica Development's Corporation property tax exemption. Image credit: GJDC

The Court of Appeals reinstated a revocation of Greater Jamaica Development’s Corporation property tax exemption. Image credit: GJDC

Court of Appeals reversed decision of Appellate Division recognizing a tax exemption.  In 2011, the Department of Finance revoked a property tax exemption granted for five public parking facilities owned by the nonprofit Greater Jamaica Development Corporation and its LLC, Jamaica First Parking.  The exemption, granted in 2007 pursuant to RPTL §420-a in recognition of Greater Jamaica’s mission to spur development and growth in the downtown Jamaica area, was revoked on the grounds that operating parking facilities were not inherently a charitable activity under §420-a.

Greater Jamaica brought an article 78 petition against Finance and the New York City Tax Commission challenging the revocation as arbitrary and capricious.  After the revocation was upheld in Supreme Court the Appellate Division, Second Department reversed and reinstated the exemption in 2013.  The Appellate Division held the revocation of the tax exemption was arbitrary and capricious and the City failed to prove Greater Jamaica’s operating of the parking facilities did not conform to a charitable purpose under §420-a.  The court also held Greater Jamaica made a presumptive showing of its entitlement to the exemption by demonstrating its nonprofit tax-exempt status as recognized by the federal Internal Revenue Service.  The City appealed.

On July 1, 2015 the Court of Appeals voted 5-2 to reverse and uphold the City’s revocation of the tax exemption.  Judge Eugene F. Pigott, Jr., writing for the court, stated the Appellate Division erred in accepting the IRS’ recognition of Greater Jamaica as tax-exempt as a presumptive showing of its entitlement to an exemption under RPTL §420-a.  The Court held the IRS’ standards, definitions, and methods of evaluation apply to federal income tax exemptions and cannot double for exemption from New York state property tax.  The Court also held property must be used exclusively for an enumerated charitable purpose under §420-a to receive an exemption; providing a public benefit, such as operating parking facilities at below-market rates to lessen the burden on local government to provide parking, is but one factor in determining exclusive use.

Jamaica Develop. Corp. v. NYC Tax Commission, No. 108, NYLJ 1202731079070, at *1 (Ct. of App., Jul. 1, 2015) (Attorneys: Ronald G. Blum for Greater Jamaica Development Corporation and Jamaica First Parking; Vincent L. D’orazio for New York City Department of Finance and the New York City Tax Commission; New York State Conference of Mayors and Municipal Officers, Lawyers Alliance for New York et al., amici curiae).

By:  Michael Twomey (Michael is the CityLaw Fellow and a New York Law School graduate, Class of 2014)

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