Parking Facilities Ruled Exempt from Property Tax

Greater Jamaica Development Corporation logo. Image courtesy of: GJDC.

Greater Jamaica Development Corporation logo. Image Credit: GJDC.

Parking Lots associated with Greater Jamaica Development corporation challenged Finance’s withdrawal of tax exemption. Greater Jamaica Development Corporation and Jamaica First Parking, LLC, brought an article 78 petition against the Department of Finance and the New York City Tax Commission, challenging the City’s revocation of a charitable tax exemption for the public parking facilities they owned and operated. On appeal to the Appellate Division, Second Department, the court restored the tax exemption.

Greater Jamaica Development Corporation was formed in 1967 as a charitable, not-for-profit corporation with a mission to promote the development of the business-commercial-retail district of Jamaica, Queens. In 1998, Greater Jamaica Development Corporation partnered with Jamaica First Parking to acquire, develop, and operate public parking facilities in the Jamaica community on a nonprofit basis. First Parking operated five parking facilities which offered significantly lower rates than similar for-profit facilities so as to attract visitors, consumers, and other businesses to the area.

In 2007, Finance granted an exemption from real property taxes pursuant to Real Property Tax Law §420-a on the public parking facilities owned and operated by First Parking. In February 2011, however, Finance revoked the real property tax exemption on the ground that the operation of the parking facilities was not, in and of itself, a charitable activity as contemplated by RPTL §420-a. Section 420-a provides that a not-for-profit property is tax exempt only if the corporation is “organized or conducted exclusively for religious, charitable, hospital, educational, or moral or mental improvement of men, women or children purposes.”

On November 27, 2013, the New York Supreme Court, Appellate Division, Second Department, held that the revocation of the tax exemption did not have a rational basis and was, therefore, arbitrary and capricious. The court held that the City failed to meet its burden of proving that Greater Jamaica and First Parking’s activity did not conform to a charitable purpose within §420-a and were subject to taxation. Greater Jamaica made a presumptive showing of its entitlement to exemption by demonstrating that it is a not-for profit entity whose tax-exempt status has been recognized by the Internal Revenue service and whose property is solely used for charitable purposes. Greater Jamaica entered into evidence a 2001 letter from the IRS, recognizing them as a charitable organization entitled to tax exemption and concluding that the operation of public parking facilities would not adversely affect Greater Jamaica’s federal tax exempt status. Greater Jamaica and First Parking also produced Certificates of Incorporation to establish their not-for-profit status and an organization for a charitable purpose within the definition of RPTL§420-a. The Appellate Court found this evidence sufficient to  maintain tax exempt status under RPTL §420-a.

Greater Jamaica Development Corp. v. New York City Tax Com’n, 975 N.Y.S. 2d 749 (2nd Dep’t Nov. 27, 2013) (Attorneys: Ronald G. Blum and Damien Wint for Greater Jamaica Development Corporation and Jamaica First Parking; Vincent L. D’Orazio and Neil E. Schaier for New York City Department of Finance and the New York City Tax Commission).

By: Jennifer Baek (Jennifer is a City Law Fellow and a New York Law School Graduate, Class of 2013).

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