In the Matter of Greater Jamaica Development Corporation, et al., Respondents,v.New York City Tax Commission, et al., Appellants.BriefN.Y.June 2, 2015Sup. Ct. Queens Co. lndex l',1o. 2l2l5llL APL*2014-00165 To be argued by: Vincent D'Orazio (15 minutes) STATB OF NEW YORK COURT OF APPEALS In the Matter of GREATER JAMAICA DEVELOPMENT CORPORATION And JAMAICA FIRST PARKING, LLC., Petitioners-Respondents, - against - TAX COMMISSION OF THE CITY OF NEW YORK and NEW YORK CITY DEPARTMENT OF FINANCE, Respondents-Appel I ants. APPELLANTS' REPLY BRIEF LEONARD KOERNER, VINCE,NIT D'ORAZIO, ANDREA M, CHAN, Af Counsel ZACI-TARY V/. CARTER Corporation Counsel of the City of New York Attorney for Respondents-Appellants 100 Church Street, Room 5-231 New York, New York 10007 TEL: (212) 3s6-2t33 FAX: (212) 3s6-4a69 achan@law,nyc.gov November 2l,2Al4 TABLE OF CONTENTS TABLE, OF AUTHORITIES PRELIMINARY STATEMENT. PETITIONERS IGNORE CONTROLI,ING COURT OF APPEALS PRECEDENT AND THE CLEAR PRINCIPLE THAT IMPORTING THE DEFINITION OII "CHARITABLE'' FROM OTHER CONTEXTS TO QUALIFY FOR A TAX EXEMPTION IINDER RPTL 420. A IS IMPERMISSIBLE, CONCLUSION PÁ.GIT u I ARGUMENT 4 ,4 20 TABLE OF AUTHORITIES Cases Adutt Home at Eríe Station v Assessor, 10 NY3d 205 [2008] [200e1 NY Not-for-Profit Corporation Law $ 551(a) RPTL {i 414 PAGE 13, l4 Association of the Bar of the Cìty of New Yorkv Lewisohn,34 NY2d 143 lre14l .,,,,,,4, 6 Detafield 246 Corp v City of New York, i 1 AD3d 268 [lst Dept 2004].".'.17 Farm Sanctuary v Patton,22l ADZ| 67 l3d Dept 19961"""""""""""""""' 6 Frye v Commissioner of Finance of City of New York,62 NYzd 841 [1984l T7 Matter of Lackawannq Communíty Dev Corp v Krakowski,12 |IY3d 578 passlm Matter af Swedenborg Foundation v Lewisohn,40 NYzd S7 119761,',,,.,'4,9 Plattsburgh Airbqse 2l [3d Dept 2012] Statutes Redevelopment Corparation v Rosenbøum, 101 AD3d IRC s0l (cX3) I 17, l8 Laws 1971, ch 414, $ 1 Not-for-Profit Corporation Law $ 141l(a) """"""""""' 8 5 7 5 II RPTL $ a20-a(1Xa) 5 Olher Authorities Brief for Petitioner-Appellant in Matter of Corp v Krøkowski,12 NY3d 578 [2009] B ri e f for P etiti oner-Re spondent in P I att s b ur gh A ír b as e Re dev e I oprnent Corparatian v Rosenbaum, 101 AD3d 21 [3d Dept ?Anl Ilesulations ............,i- 26 CFR $ 1.s01[c][3]-ltdlt2l :::*:::::::::?v,iii,,15 19 9 lu PRELIMINARY STATEMENT Revenues realized from the collection of real property taxes are critical to the survival of municipalities across the State, When the number oftax-paying properties in the tax base is reduced, the tax burden increases for the remaining property owners. Moreover, difficult policy choices are presented to elected oflicials who now must find ways to fünd programs and services with less tax revenue. That is why the Court of Appeals has steadfastly adhered to the mandate of the Legislature to construe the eligibility requirements for a mandatory real properfy tax exemption under RPTL ã}'anarrowly. Howevern petitioners disregard this well-settled principle and assert that it is not Court of Appeals precedent that governs, but, rather, Third Department case law, when determining how to define the term "charitable" for RPTL 420'a purposes, The Court of Appeals has reiterated on numerous occasions that it is impermissible to import the defînition of oocharitable" from other statutory schemes in order to create a'otaxloophole" to qualiff for a tax exemption under RPTL 420-a, Yet, petitioners ignore this Court's precedent and maintain that the concepts of providing aoocommunity or public benefit" andoolessening the burdens of government," as found in other contexts such as Intemal Revenue Code 501(cX3) and the NY Not-for-Profit Corporation Law, should nevertheless control. 1 Moreover, petitioners assert that Greater Jamaica Development Corporation's (hereinafter "GJDC") operation of commercial, for-profitparking lots should be deemed a charitable use under 420-a because it furthers its charitable purpose of "promotlingl economic development" by providing "inexpensive public parking in order to attract visitors and businesses to a distressed downtown" (Pet-Resp Br at 5). But this very rationale has been rejected by this Court in the case of Matter of Lackawanna Community Dev Corp v Krakowski, 12 NY3d 578 QA09), where this Court held that the economic revitalization of a distressed community does not qualiff as a charitable purpose under RPTL 420-a. Despite the striking similarities between this aase and Lackawanna, petitioners reject the controlling principle enunciated by Lackawanne - that a commercial activity use of the property does not satisff the o'useo'test for a mandatory property tax exemption under RPTL 420-a, And it is indisputable here that the "actual use" physically taking place on the subject property is the operation of for-profit, commercialparking lots, This Court should reject petitioners' invitation to broaden thc scope of charitable purpose under RPTL 420-a. Since the enactment of the statute, the Court of Appeals has been consistent in strictly limiting the mandatory tax exemption under RPTL 420-a only to properties where there was a clear 2 societal recognition of a charitable use (homes for the elderly, wildlife sanctuaries, theaters for the arts, rehabilitative programs for substance abuse assistance, etc,). In fact, no court has found that the operation of a commercial stancl-alone parking garage constitutes a "charitable" use under RPTL 420-a, Indeed, in the limited instances where courts have permitted a tax exemption on a parking facility, it has been where the parking facilities were "merely incidental" to an already established charitable purpose such as a hospital, church, or school. Petitioners' efforts to expand the definition of o'charitable," and, in turn, the scope of RPTL 420-a would open this provision to a proliferation of claimed tax exempt activities heretofore not even contemplated, much less recognized by this Court and the Legislature. This is inconsistent with the principle that mandatory real property tax exemptions must be narrowly construed. 3 ARGUMENT PETITIONERS IGNORE CONTROLLING COURT OF' APPEALS PRECEDDNT AND THE CLEAR PRINCIPLE THAT IMPORTING THE DEFINITION OF TCHARITABLE'O FROM OTHER CONTEXTS TO QUALIFY FOR A TAX EXEMPTION UNDER RPTL 42A.4 IS IMPERMISSIBLE. This Court has long held that not only does an organization's tax exempt status in other contexts fail to establish qualification for a real property tax exemption under RPTL 420-a,but that it is, indeed, entirely unpersuasive (see Matter of Swedenborg Foundation, v Lewisohn, 4A NY2d 87,95 11976l; see also Association of the Bar of the Cíty of New Yorkv Lewisohn,34 NY2d 143' 154 [ 97a]; Matter of Lackawanna Communíty Dev Corp v Krakowski, 12 NY3d 578 [2009]), Thus, petitioners attempt to incorporate language from Intemal Revcnue Code 50 I (c)(3), the NY Not-for-Profit Corporation Law, and other various sources in order to come within the meaning of o'charitable" under RPTL 420-a, directly contradicts both this Court's precedent and the clear mandate of the Legislature to construe mandatory real property tax exemptions narrowly, RPTL 420-a is a mandatory state real property tax exemption reserved for a limited number of organizations that fall exclusively into one of five 4 categories: religious, charitable, hospital, educational, or for the moral or mental improvement of men, women or children. A party seeking to qualifu for a tax exemption under RPTL $ a2O-a(l)(a) must show that the owner-entity seeking the exemption is organized primarily or principally for tax exempt purposes and that the subject property is used primarily or principally for exempt purposes, Because of its mandatory nature, a 420-atax exemption is automatically granted as of right when eligibility is established. This Court has consistently interpreted the statute in the most namow way to ensure that the granting of a 420-a tax exemption is solely limited to those organizations for which the tax exemption was truly intended' The Court of Appeals' c4ution in this area can be traced to the mandate of the Legislature to check the proliferation of real property tax exemptions that was eroding municipal tax bases, and led to the enactment of RPTL $ 414, the preoursor to RPTL 42CI-a (see Laws 1971, ch 414, $ 1), It is axiomatic that real property taxes are the frscal life-line of municipalities: broadening the scope of mandatory real property tax exemptions will only serve to further imperilthe soundness of already fiscally stretched municipal budgets, Thus, this Court has specifically limited the reach of the termoocharitable" and explicitly forbidden the practice of importing language from other statutory schemes in order to come within the narrowly construed standard of RPTL 420'a, 5 Nevertheless, petitioners assert, here, that it is not Courl of Appeals precedent that governs, but, rather, Third Department case law, and when coupled with a canvassing of the term "charitable" as used in various contexts, tlre term .'charitable" for RPTL A2}-apurposes, should include any entity that either provides a "community or public benefit" or "lessens the burden of govemment" (Pet-Resp Br at29-36), Relying fìrst on Farm sanctuary v Patton, 221 ADzd 67 (3d Dept lgg1),petitioners argue that the Third Department's approach in defining the term ,,charitable" should control, Claiming that because the court in Farm Sanctuary looked to various definitions of oocharitable" in granting a 420'alax exemption, petitioners assert that the Court of Appeals must now follow its lead, and also "consider a broad tapestry of sources to determine the contours of the term,, (Pet-Resp Br at22), But this is the very approach that this court has explicitly held should not govern. This Couft has repeatedly maintained that the practice of importing an entity's status under various statutory schemes is both inappropriate and impermissible in an RPTL 420'a analysis. In Associqtion af the Bar v Lewisohn, the Court of Appeals found that "decisions acknowledging the charitable, . , character of Bar Associations in other contexts for other explicit and distinguishable purposes are unpersuasive" when evaluating a claim to an 6 RPTL 420-atax exemption (34 NY2d 143 [1974D. There, this Court affirmed the NYC Tax Commission's determination to revoke a 420'a charitable tax exemption from the New York City Bar Association notwithstanding the fact that the bar association was çommonly recognized as "charitable" in other tax- related contexts (íd, aT 154). Thus, this Court held that what is considered charitable in one context has no bearing on what is deemed charitable under RPTL a20-a (id,), Not surprisingly, the one source which petitioners assert carries "the most relevant statutory defïnition," is that of NY Not-for-Profit Corporation Law {i 551(a) (Pet-Resp Br at 34). Accordingto petitioners, this provision defines o'charitable" as "the promotion of a governmental pu{pose' or any other purpose the achievement of which is beneficial to the community," and petitioners argue that this language should be read together with that of RPTL 420-a(íd.,). lnaclvancing this argument, petitioners ovcrlook that the Court of Appeals has specifîcally rejected the use of language from the Not-for-Profit Corporation Law to qualify for a 420-a tax exemption under the RPTL' In Matter of Lackøwanna Communíty Dev Corp v Krakowski,12 NY3d 578 (2009), petitioner, a local development corporation, urged the Court to review the language of the NY Not-for-Profit Corporation Law in tandem with that of RPTL 420-a in order to deterrnine petitioner's eligibility for lhe 420-a 7 tax exemption (søe Ilrief for Petitioner-Appellantr pp, 12-14 in Matter of Lackawannq Community Dev Corpv Krqkawski,l2NY3d 578 [2009]), There, the local development corporation cited to Not-for-Profit Corporation Law $ l4l I (a), stating that because "an LDC is designed for olessening the burdens of government and acting in the public interest' by 'performing an essential governmental function,' it is therefore entitled to a charitable tax exemption under RPTL 420-a (see Brief for Petitioner-Appellant p, 14 in Matter of Lackawannø), Flowever, this Court held expressly that it would "decline [any] invitation to read the Real Property Tax Law together with the Not-For-Profit Corporation Law in such a manner as to establish a'tax loophole' where one would not otherwise exist" (12 NY3d at 582). This Court went on further to note that'oif the Legislature had intended to provide a blanket real property tax exemption for local development corporations, it would have done so expressly, as it has in other contexts" (id'), tat Petitioners also attempt to deemphasize the role that the IRS Ruling played in the Appellate Division's decision here, but it is undeniable that the I Copies of the Brief f'or Petitioner-Appellant in Matter of Lctckawanna Community Dev Corp v Krakowski,l2 NY3cl 578 [2009] will be providecl to this Court upon request. A courtesy copy was provirled to Petitioners-Respondents herein, I standard of "lessening the burdens of government" is taken directly from the Internal Revenue Code's dehnition of 'ocharitable" under IRC 501(cX3).' Petitioners resist this fact because the Court of Appeals has also explicitly addressed the role of an IRC 501(cX3) status when analyzing a claim under RPTL 420-a. In Matter of Swedenborg Foundationv Lewisohru, this Court denied a tax exemption pursuant to RPTL 420-aeven though the nonprofit foundation was classified by the IRS as a 501(cX3) income tax-exempt organization (40 NY2d 87, gS tl976l). Despite the fact that petitioner there was recognized as a federally tax exempt entity, this Court refused to accept the organization's federal tax status as a substitute for satisffing the strict requirements of RPTL 420-a. In response to the petitïoner's attempt to persuade the Court with U,S. Department of Treasury rulings, this Court stated, "[n]or does the fact that the foundation has received favorable determinations from the lJnited States z IRC 501(cX3) is an expansive income tax exemption statute that defines "charitable" so broadly so as to include all of the following: rclief of the poor and distressed or of the unclerprivileged; advancement of religion; advançement of education or science; erection or maintenance of public buildings, monuments, or works; lessening of the burdens of Government; and promotion of social welfare by organizations designed to accomplish any of the above purposes, or (i) to lessçn neighborhood tensions; (ii) to eliminate prejuclice and discrimination; (iii) to defend human and civil rights secured by law; or (iv) to combat community deterioration and juvenile delinquency (see 26 CFR $ l,s0l [c]13l-1 tdlt2l), 9 Department of the Treasury as to its exempt status for other tax purposes affect the outcome" (id,), alt Only by ignoring this Court's decision in Lackawenne, can petitioners state that no New York court has opposed the proposition that economic revitalization of a distressed community qualifies as a charitable purpose under RPTL 420-a(Pet-Resp Br at22,25), and that GJDC's operation of commercial, for-profrt parking lots should be deemed a charitable use under A}}'abecause it furthers its charitable purpose of "promot[ing] economic development" by providing "inexpensive public parking in order to attract visitors and businesses to a distressed downtown" (Pet-Resp Br at 5). Petitioners' calculated avoidance of this Court's ruling does not change the fact that the Courl of Appeals has rejected this argument, ln Lackawanna, the petitioner, a local development corporation, asserted that its real property, leased to a for,profît manufacturing corporation, at below market rent, was entitled to tax exempt status under RPTL A2}-abecause the use of the property furthered its core charitable purpose of "promoting business, providing jobs, and furthering economic development within the community" (see Brief for Petitioner-Appellantp, 6 in Matter of Lackøwanna), Here, petitioners present 10 the exact same argument, According to petitioners, GJDC is a local development corporation, that operates for-profit parking lots, at below market rates, in order to further its core charitable purpose of "promoting commerce and business growth" and encouraging "the development and expansion of commercial, industrial and manufacturing facilities in Jamaica" (Pet-Resp Br at 7), Petitionerso argument is the very same argument that this Court rejected in Lackawanne, 'I'here, in denying a claimed RPTL 420'atax exemption, this Court observed: there is no question that local development corporations formed for the 'charitable or public purposes of relieving and reducing unemployment, . . bettering and maintaining job opportunities',.. and oencouraging the development of, or retention of, an industry in the community',,, among other purposes'.. are pursuing laudable goals that better the State's communities...[but] not all laudable activities, however, entitle the actor to a property tax exemption.., (12 NY3d s78, s82 [2009]). Focusing on "the actual and physical use of the property," this Court recognized that the actual use, in Lqckawannz, was, in facl, a for-profit manufacturing busin ess (Lackawanna at 5 81 ("It is the actual or physical use of the property thatthe Real Property Tax Law is concerned with when it exempts LT from taxation property 'used exclusively fof carrying out thereupon one or more' exempt purposes")), Thus, the Court rejected the argument that by leasing its property to a manufacturing company, the taxpayer was "using" the property to further its charitable purpose of spurring economìc development (Lackawanna at 582). Petitioners attempt to blunt the force of the holding in Lackawannaby pointing to the existence of a lease arrangemcnt. This distinction misses the mark completely. The controlling prìnciple enunciated by Lackawnnna is that the commercial activity use of the property would not meet the "use" test for a mandatory property tax exemption under RPTL 420-a, And it is indisputable here that the "actualuse" physically taking place on the subject property is a for,profit, commercial parking lot, which, similarly, does not establish a "charitable" use purpose under RPTL 420-a.3 Another striking similarity is that both petitioners here, and in Lackawanna, each claim that their generated revenue is used to further their charitable purposes and that the excess profits should simply be overlooked by this Court. In Lackawanne, the petitioner could not deny that it generated revenue from the property, and so it claimed that the revenue was "reinvested 3 Significant, too, is that the Lackawanna case was also in the same procedural posture as the instant case - a real property hx exemption was revoked by the municipality (Lacknwanna aÍ s8r). 12 into the organization to further its core charitable putpose" (see Brief for Petitioncr-Appellant p, 9 in Matter of Lackawanna), It went on to argue that the fact that "the property is used by a corporation that operates for profit is not of importance" (see Brief for Petitioner-Appellant p, 17 in Møtter of Lackawanna), Here, petitioners make the same claim, According to GJDC, petitioners are "entitled to the RPTL 420-a exemption regardless of whether the parking facilities generate net proceeds" (Pet-Resp Br at 48). lJnable to deny its excess revenues, petitioner proclaims that "it makes no difference that the cost to operate the parking facilities is less than the revenue they genente" (id,), Petitioners posit the notion that the operation of parking garages merely "takes a form thalresemóløs commercial activity" (id, [emphasis added]). Incorrectly interpreting Adutt I{ome at Erie Stqtion v lssessor, 10 NY3d 205 (2008), petitioners here argue that a social work organization "providing decent and affordable housing" to its program participants at market rates is analogous to the operation of commercial parking garages for a substantial profit (Pet-Resp Br at 48-49). However, petitionerso reliance an Adult Home is misplaced. In Adult Home, petitioner, a social work organization, o'devoted to combating homelessness, substance abuse and other social ills among low-income people" 13 (Adult Home at2l3), provided'odecent and affordable housing to participants [in order to] further the program's goals" (id. at 215), There, this Court found that the residential use of the property was "reasonably incident" to the social work organization's purposes, reasoning that "[i]t can hardly be questioned that providing an acceptable place for people to live while they participate in social work programs advances the goal of keeping them in the programs and thus of helping them overcome theirtroubles" (id at2l6), Here, petitioners' operation of commercial parking garages is not reasonably incident to any recognized charitable purpose, but is, indeed, the primary purpose for which the parking lots are run, Of note, in Adult Home, this Court also highlighted the distinction between a commercial apartment complex and the social work organization's apartment complex, noting that "apartments in commercial complexes are not provided solely to people struggling against alcoholism, drug addiction and the like on condition that they participate in programs designed to help them" (id.), Here, too, this distinction exists. Unlike in Adult Home, GJDC's parking garages are not solely reserved for or dedicated to any particular needy individuals or groups. Any person with a aar can park in one of GJDC's facilities, regardless of what they intend to do after they park there. GJDC's T4 commercial parking garages generate over $1,5 million a year in excess revenues ancl, thus, clearly do more than resemble a commercial activity.a Additionally, petitioners here imply that because its land was originally purchased from the City, involved financing from the Economic Devclopment Corporation and Industrial Development Authority, and was improved from deterioration, that their properties should now be tax exempt (Pet-Resp Br I -2)' However, this Court found similar arguments in Lackawanna to be unconvincing, The petitioner in Lackawanna, tla, obtained its properties "through a gift from the City" and 'oeminent domain through the City," and claimed that it "improved the property so that it could be used to further its core charitable purpose" (see Brief for Petitioner-Appellantpp. 9-10 in Møtter of Lackawanna), Yet, despite these facts, this Court denied the tax exemption under RPTL 420-a. Moreover,the Løckawanna case also stands for the proposition that the revocation of the real property tax exemption by the Lackawanna tax assessor, based on the actual use of the property, was sufficient to revoke the exemption, without getting into the issue of the purpose and organization of the Lackawanna Community l)evelopment Corporation, Petitioners spend much a As noted in the Record below, each garage charges for the use of its facilities (R 2l) and petitioners concede that the properties gcnerate not only profits, but excess revenues (R 20 I ), Additionally, Greater Jamaica's IRS Form 990, a publio document annually frled with the IRS, indicates that the subject parking facilities generate over $ I ,5 million a yew in excess revenues. 15 capital on this appeal arguing that Appellants, in their administrative determination revoking the real property tax exemption, were required to make a frnding regarding the activities petitioners engage in5 (see Pet-Resp Br at 8, 27), Finally, it is also significant to note that although petitioners allege that the Department of Finance's revocation in 201I was unsupported because "nothing changed in the four years between the 2007 tax exemption and the 201I revocation" (Pet-Resp Br at 3), they fail to recognize that this Court rendered its decisionîn Lackawanna during that four-year period, in 2009, and, there, the Court clearly articulated its position that economic revitalization does not qualifo as a charitable purpose under RPTL 42A-a. Moreover, just as the taxing authority in Lackawanna revisited the appropriateness of the then existing realproperty tax exemption, so too did Appellants here determine that the existing exemption granted to petitioners was in error, 5 Petitioners complain on this appeal for the fìrst time that the Department of Finance revocation determination was deficient in not developing "a,, , comprehensive factual record of CJDC's activities,,," (Pet*Resp Brat 8). This claim is specious fortwo reasons, To begin with, this argument was never prescnted in the Appellate Division (see Pet'r Br in App Div l2-25). Second, the Department of Finance determination (R 75-76) was reached after affording petitioners the opportunity to submit documents and present intbrmation, In challenging the f)epartment of Finance revocation determination, petitioners in their Article 78 petition never argued, much less suggested, that the determination ignored materials submitted or presented by petitioners, Even more tellingly, petitioners did not present doçuments which they claimed were overlooked, or otherwise supported their position, to the trial court as exhibits (see R l3-190). T6 Regardless, this Court has "held many times, estoppel is not available against a governmental agency in the exercise of its govemmental fi;nctions" (Frye v Commíssíoner of Finance of City of New York,62 NY2d 841,844 [19S4]), This is espeoially true where the governmental duty at issue is taxation (DelaJìetd 246 Corp v City of New York, 1 I AD3d 268,273 [1 st Dept 2004]), aal In elevating Third f)epartment caselaw over Court of Appeals precedent, petitioners cite approvingly lo PlattsburghAirbase Redeveloprnent Corporation v Rosenbaum,l0l AD3d 21 (3d Dept 2012), to stand for the proposition that "local redevelopment efforts.,, servfe] a charitable purpose" in that "the development company's activities in owning, maintaining and selling real estate were charitable because they 'promote economic development"' (Pet- Resp Br at 25), However, even ifthis Court should lìnd this case informative, the facts in Plattsburgh are distinguishable from this matter in all events, An entity seeking an RPTL 2}-aexemption must not only be organized for a charitable purpose, but the properly for which it seeks an exemption must be used exclusively thereupon to further such charitable purpose (RPTL 42A-a; see also Matter of Lackawanna Community Dev Corp v Krakowski,12 NY3d 578,582 [20091). T7 \n Plqttsburgh, the court found that petitionel was actively marketing the vacant properties for sale to private investors in direct furtherance of its goal to revitalize the local economy, There, the court noted that petitioner had already "conveyed 88% of the property to new owners, returning many of those properties to the tax rolls for the first time in more than 50 years" (Plattsburgh at24-25). By contrast here, GJDC clearly holds the subject properties, not for its future conveyançe to would-be taxpayers, but for its own commercial use * the operation of for-profit parking garages, Thus, it is unrnistakable that the property is not being used thereupon for a charitable purpose, and that, unlike \n Plattsburgh, GJDC's ultimate goal is to keep its properties off of the tax rolls. Of even greater importance, the petitioner inPlqttsburgh agrees with this reasoning. In fact, the petitioner in Plattsburgh dið not advocate the extreme position that petitioners advance herein. In its brief, the redeveloprnent coqporation\n Plattsburgh argued that its propertiesooarç vacant properties held for sale to promote economic development, not to make a profit or to cany on activities that themselves constitute economic development" (see Brief for Petitioner-Respondent6 p. 9 in Plattsburgh Airbase Redevelopment Corporation 6 Copies of the Brief for Petitioner-Respondent in Plattsburgh Airbase Redevelopment Corporation v Rosenbaum, 101AD3d 21 l3dDept2012) will be provided to this Court upon request. A courtesy Çopy was provided to Petitioners-Respondents herein, 1B v Rosenbaum, 101 AD3d 2l l3dDept 20121[emphasis added]). Adding turther, petitioner stated "it is this distinction that distinguishes the circumstances in this proceeding from those at issue in Lackawanna" (fd.). Thus, it is plain that both petitioners and the Appellate Division below have ignored the precedent of this Court, the mandate of the Legislature, and the well-established standard calling for strictly construing eligibility for tax exemptions under RPTL 420-a, The Appellate Division has now improperly introduced the categories of providing a "community or public benefit" or 'olessening the burdens of government'o as exemption-worthy, charitable, activities under RPTL 424'a. Indeed, any commercial entity that is part of a downtown ateac,an easily state that the community benefrts from its presence and that the public at large benefits from a vibrant commercial district, None of the arguments advanced by petitioners would change if the subject properties were operated as shopping malls instead of parking garages, Shopping malls would be equally important to revitalizing Jamaica and aid community development, 'Ihe revenues generated by the shopping malls would help to support projects that improve the quality of life in Jamaica. Petitioners advance a standard that would invite any commercial entity to pursue a real property tax exemption based on the benefit and importance to the community of the commercial enterprise. t9 Equally incapable of meaningful limitation is the introduction ofthe standard of "lessening the burdens of governmentno as a charitable purpose under RPTL 420-a. Here, too, a vast array of activities that are privately performed, such as transpoftation services, security, and sanitation, would now be deemedto lessen a burden of government and qualifu for a mandatory real property tax exemption, Recognition of such activities as coming within the term charitable purpose under RPTL 420-a will result in an erosion of municipal tax bases statewide, and will impose a particular hardship on the taxpaying citizens of New York State. Thus, it is of paramount importance that this Court reverse the Appellate Division and reinforce the strict interpretation of this nanowly construed statutory exemPtion, CONCLUSION The Order appealed from should be reversed and the petition should be dismissed. 20 Dated LEONARD KOERNER, VINCENT D'ORAZIO, ANDREA M, CHAN, Of Counsel New York, New York November 21,2014 ZACHARY Vf. CARTER Corporation Counsel of the City of New York Attomey fo r R e s p o nd ent s - Appellants 100 Church Street, Room 5-231 New York, New York 10007 Tel: (212) 356-2t33 E-mail : achan@law.nyc,gov By: Andrea M, Chan Assi stant Corporation Counsel 2L ADDENDUM Brief for Petitioner-Appellant in Matter of Lackawanna Communíty Dev Corp v Krakowski, 12 NY3d 578 [2009] - Pages 6,9,10,12, t3,14,16,17 Brief for Petitioner-Respondent in P latts bur gh Airb as e Re dev elopment Corporation v Rosenbaum, l0l AD3d 2l l3d Dept 20121- Page 9 Brief for Petitioner-Appellant in Matter of Lackawanna Communíty Dev Corp v Krakowski, 12 NY3d 578 [2009] - Pages 6,9,10,12,13,14,16,17 2008 WL 6191440 0,{.Y.) Page 6 *5 JURISDICTION This Court has jurisdiction to hear this appeal as the Appellate Division, under CPLR $5602(a), refused permission to appeal to the Court of Appeals by Order dated July 3, 2008. (R. at 6a)' Further, the Memorandum and Order of the Appellate Division dated April 30, 2008 is a final determination. (R. at 6a). The LCDC timely moved for permission to appeal to this Court under CPLR $5602. CPLR $55 l3(b) provides that the time to move for permission to appeal to the Court of Appeals must be made within 30 days from the date of service of a copy of the order of the court who already denied permission together with written notice of entry. In this case, Respondents served the LCDC with a copy of the Order from the Appellate Division denying permission to appeal to the Court of Ap- peals, together with Notice of Entry dated July 9, 2008. (R. at 8a-9a). The LCDC moved for permission to appeal to this Court. (R' at 5a). By Order dated October 21,2008, this Court granted the LCDC's motion for permission to appeal directly to the New York State Court of Appeals' (R. at 5a)' *6 QUESTIONS PRESENTED 1. Is a Local Development Corporation ("LDC") entitled to tax exempt status, under RPTL $420-a(1), on its real property that is leased to a for-profit corporation, at below market value rent, in order to promote business, provide jobs, and further economic development within the com- munity consistent with the LDC's core charitable purpose? (R. at 106-09, l0a-11a). Response: Yes, 2, Did the Appellate Division err in holding that the Property owned by the LCDC was not entitled to tax exempt status under RPTL $a20-a(1) because it was leased to a for-profit corporation, in furtherance of the LCDC's charitable purpose in its Certificate of Reincorporation, and because the LCDC realized a profit from the rents paid as a result of that lease? (R. at 106-09, l0a-l la). Response: Yes *7 STATEMENT OF FACTS @ 2014 Thomson Reuters. No Claim to Orig. US Gov. Works' 2008 v/L 6191440 (N.Y.) Page 9 rate for the lease and sale of properties. (R. at 107). The LCDC does not receive annual allocations of revenue from New York State, any municipal corporation, or public authority. (R. at 107). 2. The LCDC's Sister Organization: The Lackawanna Housing Development Corporation *10 In 1990, to further the LCDC's mission of community development, it created the Lackawanna Housing Development Corporation ("LHDC"). (R. at 43). The LHDC is considered a sister or- ganization to the LCDC and was created in order to obtain more grants and opportunities for community and housing development. (R. at 43). The LHDC is also a not-for-profit corporation whose goal is to improve housing and living conditions for low to moderate income families in the City of Lackawanna ("the City"). (R. at 43). The administrative staff for the LCDC performs functions for both the LCDC and LHDC. (R. at 43). 3. Atl Generated Revenue is Used to Further the LCDC's Core Charitable Purpose The LCDC'5 revenue is reinvested into the organization to further its core charitable purpose by permitting it to perpetuate its existence and continue funding its charitable endeavors. The LCDC uses any revenue to cover reasonable administrative costs and fund additional projects. (R' at 43-44, 108). Importantly, the LCDC's Certifîcate of Reincorporation, consistent with the NPLC $1411, Pro- hibits the LCDC's officers, members, or directors from receiving any pecuniary or financial gain unless statutorily authorized under the NPLC or the New York State Public Authorities Law: The Corporation may do any other act or things incidental to or connected with the fore- going purposes or in advancement hereof, but not for the pecuniary profit or financial gain of its members, directors or *11 officers, except as permitted underArticles 5 and 14 of the Not-For-Profit Corporation Law and Article I of the Public Authorities Law. (R. at 48 emphasis added). B. The 100 Ridge Road PropertY From 1981 through 1985, the LCDC acquired the parcels that comprise the 100 Ridge Road property which were granted tax exempt status by the City. (R. at 4l). These parcels were acquired by four different means: @ 2014 Thomson Reuters. No Claim to Orig' US Gov' Works 2008 wL 6191440 (1.,1,Y.) Page 10 1) through gift from the City; 2) eminent domain through the City where the LCDC paid reasonable compensation to the owners; 3) purchase from businesses such as Buffalo Slag Company and Buffalo Crushed Stone; 4) and purchase from individuals. (R. at 41). Thereafter, the LCDC improved the property so that it could be used to further its core charitable purpose. At its own expense, the LCDC then demolished the existing buildings, installed all new infrastructure, including sewers, water pipes, electrical power lines, streetlights, and the streets themselves, and eventually erected the structures that are currently located on the parcel. (R. at 42). The construction was completed in 1993. (R. at 42)' Since the time the properties have been improved by the LCDC, they have *1"2 been used exclu- sively in furtherance of the LCDC's charitable purposes. (R. at 42).The LCDC was able to attract new and viable business, not only to Western New York, but to the City. (R. at 42).lnNovember 1993, the LCDC attracted a start-up company, Now-Tech Industries, Inc. ("Now-Tech"), to locate in the City by offering it below market rates for the lease of the 100 Ridge Road property. (R. at 42). Now-Tech leased the facilities at 100 Ridge Road. (R. at 42-43). Now-Tech has significantly expanded and was recently purchased by PCB Group. Currently, Now-Tech employs approxi- mately 70 people. The LCDC is now in the process of negotiating a new lease with Now-Tech in order to enable this company to remain in the City' (R' at 43,75-103). The 100 Ridge Road tenant is charged rent at or below market value due to the fact that the property is exempt from real property tax. (R. at 43).In turn, the tenant, under the lease agreement, has the ability to purchase the real property after it would be subject to taxable status. (R. at 79). 100 Ridge Road has only been used to further the LCDC's core charitable purpose to spur eco- nomic development in the City and create new jobs in the City, (R. at 108). In furtherance of the LCDC's core charitable purpose, any revenue generated from the lease of 100 Ridge Road is re- invested in the LCDC. (R. at 43). *I3 ARGUMENT @ 2014 Thomson Reuters. No Claim to Orig. US Gov. Works 2008 wL 6191440 (1.,1.Y.) Page 12 statutory exemption provided by RPTL $a20-a(1) cannot be interpreted so narrowly or literally so as to defeat the purpose of the statute, which is to foster and promote corporations or associations organized exclusively for religious, charitable, hospital, educational, or the moral or mental im- provement of men, women or children . (ln the Matter of Yeshivath Shearith Hapletah v Assessor of the Town of Fallsburg, et a|,79 NY2d 244,250119921.) Therefore, the Court, in determining whether the exemption applies, has *15 analyzed whether three requirements were met: I ) that the co¡poration's certificate of incorporation states the cor- poration's organization is exclusively for those purposes enumerated in RPTL $420-a(l); 2)that the real property itself, not what or who occupies the property, is used primarily to further the corporation's purposes in the certificate of incorporation and RPTL $a20-a(1); and 3) that the corporation's officers have no benefrt from any pecuniary profit generated by the corporation. (Gospel Volunteers, Inc v Village of Speculator,29 NY2d 622, 624-25 [971].) The rationale behind this inquiry is to expose and eliminate those corporations who abuse the exemption to make a profit without paying property tax. B. A LDC, Incorporøted Under the Not-For-ProJit Law, Inherenily Complìes Wìth RPTL $420-ø A LDC that has incorporated or reincorporated as a not-for-profit corporation has statutory re- quirements imposed upon it that inherently comply with the exemption provided in RPTL $420-a(1), thereby leaving no ability for a LDC to abuse the tax exemption. A review of the purpose, powers, and additional requirements imposed upon a LDC for a certification of incor- poration or reincorporation under the New York State Not-For-Profit Law is essential to under- stand why a LDC cannot abuse the exemption under RPTL $a20-a(l). Section lal l(a) of the New York State NoçFor-Profrt Corporation Law ("NPCL $1411(a)") sets forth the purpose of a LDC, which is to operate for the *16 exclusive charitable purpose of spur- ring economic growth in a community: This section shall provide an additional and alternate method of incorporation or reincorporation of not-for-profit corporations for any of the purposes set forth in this paragraph....Corporations may be incorporated or reincorporated under this section as not-for-profit local develop- ment corporations operated for the exclusively charitable or public purposes of relieving and reducing unemployment, promoting and providing for additional and maximum em- ployment, bettering and maintaining job opportunities, instructing or training individuals to improve or develop their capabilities for such jobs, carrying on scientific research for the purpose @ 2014 Thomson Reuters. No Claim to Orig. US Gov. Works. 2008 v/L 6191440 0\.Y ) Page 13 of aiding a community or geographic area by attracting new industry to the community or area or by encouraging the development of, or retention of, an industry in the community or area, and lessening the burdens of government and acting in the public interestn and any one or more counties, cities, towns or villages of the state, or any combination thereof, or the New York job development authority in exercising its power under the public authorities law to en- courage the organization of local development corporations, may cause such corporations to be incorporated by public officers or private individuals or reincorporated upon compliance with the requirements of this section.... NPCL $141l(a) [emphasis added]. In order for a LDC to fulfill its purpose of spuning economic development, the statute contem- plates that the LDC purchase and lease real property to for-profrt entities: ...a local development corporation incorporated or reincorporated under this section shall have the following powers: to construct, acquire, rehabilitate and *17 improve for use by others in- dustrial or manufacturing plants in the territory in which its operations are principally conducted, to assist financially in such construction, acquisition, rehabilitation and improvement, to maintain such plants for others in such territory, to disseminate information and fumish advice, technical assistance and liaison with federal, state and local authorities with respect thereto, to acquire by purchase, lease, gift, bequest, devise, or otherwise real or personal property or interests therein, to borrow money and to issue negotiable bonds, notes and other obligations therefore, and notwithstanding section 5l0,..without leave of the court, to sell, lease, mortgage or otherwise dispose of or encumber any such plønts or any of its reøl or person&l property or any interest therein upon such terms as it møy determine and, in connection with loans from the New York job development authority, to enter into covenants and provisions thereof, and otherwise to cørry out its corporate purposes ønd to foster and encourage the locøtìon or expønsìon of in- dustríal or mønufacturing plønts Ín the tetìtory in which the operøtions of such corporøtíons øre príncÍpølly to be conducted.... NPCL $1411(c) (emphasis added). The statute contemplates that a LDC will not only acquire, but also lease, real property for use by other industrial and manufacturing plants. Also, the statute expressly permits the lease of these types of real property by a LDC in order to "foster and en- courage" the establishment of industrial and manufacturing plants within the geographic area. Nowhere does the statute restrict a LDC's transactions to another not-for-profit corporation. In- deed, such a restriction would frustrate the statutory purpose of a LDC. @ 2014 Thomson Reuters. No Claim to Orig. US Gov. Works. 2008 wL 6191440 0\.Y.) Page 74 Further, NPCL $1411(e) requires that a LDC's certificate of incorporation *18 provide that all income and earnings will be used for its corporate purpose and that no officer may realize pecu- niary gain from the LDC's income and eamings, consistent with the requirements of RPTL $420-a to maintain the tax exemPtion: In addition to the requirements of 402 (Certificate of incorporation; contents) the certificate of incorporatÍon or reincorporation of a local development corporation incorporated or rein- corporated under this article shall state (1) that all income and earnings of such corporation shall be used exclusively for its corporate purposes or accrue and be paid to the New York job development authority, (2) that no part of the income or earnings of such corporation shall inure to the benefit or prolit of, nor shall any distribution of its property or assets be made to any member or private person, corporate or individual, or any other private in- terest, except that the certificate of incorporation or reincorporation may authorize the repayment of loans and may also authorize the repayment of contribution (other than dues) to the local de- velopment corporation but only if and to the extent that any such contribution may not be allow- able as a deduction in computing taxable income under the internal revenue code of nineteen hundred fifty-four, (3) that if such corporation accepts a mortgage loan or loans from the New York job development authority, such corporation shall be dissolved in accordance with the pro- visions of paragraph (g) upon the repayment or other discharge in full by such corporation of all such loans. NPCL glal l(e) (emphasis added). Likewise, NPCL $1411(Ð provides that the income and oper- ations of corporations incorporated or reincorporated under NPCL $ 1411 shall be exempt from taxation. NPCL $ 1411(Ð. Accordingly, a LDC that is incorporated under NPCL $ l4i 1 is designed, and *19 has statutory requirements imposed upon it, to ensure that it complies with the tax exemption requirements of RPTL $420-a. This is because a LDC acts in the public interest and supplements governmental efforts at economic development in a certain geographic area. NPCL $ 141 1(a). A LDC is designed for "lessening the burdens of government and acting in the public interest" by "performing an essential govemmental function.'" NPCL $1 al I (a). C. A LDC's Lease of Real Property to ø For-ProJit Corporation is Consistent with lls Core Chsrítøble Purpose and Does Not Destroy lts Tøx Exemptíon In order for a charitable corporation, such as a LDC, to enjoy tax exempt status on real property it owns, that real property must be used "exclusively" for the LDC's core charitable purpose, De- @ 2014 Thomson Reuters. No Claim to Orig. US Gov, V/orks. 2008 wL 6191440 (N.Y.) Page 16 work organization whose charitable pu{pose was to combat homelessness, substance abuse, and other social problems faced by low income residents of the City. (ld at2l4.) RECAP owns various homes in the City that house participants of a program called the "Community Re-Entry Program." This program permitted individuals to reside at the RECAP homes for periods of three years or more until the program was completed. RECAP charged and received market rate rent from each resident. (ld at214.) The City argued, without success, that since RECAP received market rate rents any commercial landlord would receive from a tenant, RECAP's real property could not be used for a charitable purpose. (Id at2l5.) Accordingly, the real property was not tax exempt. This Court held that RECAP was entitled to tax exempt status, as RECAP's*22 charitable purpose of helping homeless individuals, alcoholics, and drug addicts become productive members of society, was consistent with the use of the real property. Put differently, the fact that RECAP re- ceived revenue from the rents charged to individuals for housing or that RECAP officials, i.e, staff members, were not occupying the housing, was not relevant to whether the property was being used to further RECAP's core charitable purpose. This Court aptly reasoned: The courts below erred in concluding that, because RECAP receives fair market value for its properties, the propertiss are not distinguishable from a commercial apartment complex. The dis- tinction is that apartments in commercial complexes are not provided solely to people struggling against alcoholism, drug addiction and the like on condition that they participate in programs de- signed to help them. That these people (or the government agencies that support them) pay market rents, and the RECAP may even benefit economically from its rental income, does not change the result. The issue is not whether RECAP benefits, but whether the property is 'used exclu- sively' for RECAP's charitable purposes. RECAP could lose its exemption under RPTL $a20-a(lXb) if the economic benefit went to its officers or employees personally, but an economic benefît to a charitable organization does not by itself extinguish a tax exemption. The question is how the properfy is used, not whether it is profitable. (Adult Home,10 NY3d at2l6.) A LDC is faced with the same situation as RECAP as both possess real property that is being used for a charitable purpose. The fact that the occupants of *23 the property pay rent that could result in a profit benefiting the corporation does not eliminate the tax exemption. Likewise, that the @ 2014 Thomson Reuters. No Claim to Orig. US Gov. V/orks. 2008 wL 619t440 (N.Y.) Page I7 property is used by a corporation that operates for profit is not of importance. The focus is whether the charitable organization's use of the property is for its charitable purpose. Simply stated, the LDC's charitable purpose is to spur economic growth, pursuant to NPCL $ l4l (c), through the lease of its real property to for-profit corporations. NPCL $ 1a I 1(c) contem- plates that a LDC will do so in order to fulfrll its core charitable purpose. As long as the LDC is leasing its real property to corporations that are reducing unemployment and maintaining job opportunities in the geographic area, which is consistent with its required statutory purpose as a charitable corporation, then the real property enjoys tax exempt status. There is no statutory or common law requirement that the LDC inhabit or occupy the real property. If that were the requirement, then the LDC could not advance its core charitable purpose of cre- ating job opportunities or minimizing unemployment in the geographic area. In order to fulfill the LDC's core charitable purpose, it must attract new for-profit corporations to the geographic area. The leasing of LDC-owned real property to these for-profit corporations is a method of achieving the LDC's core charitable purpose. Thus, it stands to reason that, in determining whether the LDC's real property enjoys tax exempt status, the inquiry focuses on what the LDC's core charitable purpose is and whether it is using ifs *24 real property to further its core charitable purpose. Further, the Appellate Division and Respondents relied upon case law that is inapposite to a LDC's circumstances regarding the lease of real property. ln Matter of Genesee Hosp v I4/agner (47 AD2d 37 l4thDept 19751 , affd,39 NY2d 363 [1976]), a hospital built a doctors'office building adjacent to the hospital. The city assessor determined that the office building was not tax exempt. (Id at 40.) The Court partially upheld the assessor's determination, The Court reasoned that the part of the real property, if used for the charitable purpose of a hospital, would qualify for tax exemption. Therefore, those portions of the building that fulfilled the hospital's primary pu{pose of care and treatment of patients were tax exempt. (ld at 47.) The Genesee Hospital case directly addressed the "idea of reasonable compensation for services in effecting one or more exempt purposes" in relation to'the profits realized from the office building. (ld at 45.) The Court held that those profits disqualified those portions of the building used for the private practice of the physicians, reasoning that the private practice of medicine was not suffi- ciently related to the charitable function of the hospital itself: Here, however there is a commercialization and profit-making which goes well beyond the hos- p it al's tr aditìonally non-pr ofi t func t io ns . @ 2014 Thomson Reuters. No Claim to Orig. US Gov. Works. Brie f for Petitioner-Respondent in P I att s b ur gh A ir b as e Re dev e I opm ent Corporation v Rosenbaum, l0l AD3d 2l l3d Dept 20121- Page 9 a POINT II TIIE PROPERTIES ARE "USED' IN FURTIIERANCE ox' PABç'S çHAßrrABts, PUBPOSES' The PARC Properties are vacant properties held for sale to promote economic development, not to make a profït or to carry on activities that themselves constitute economic development, As noted above, it is this distinction that distinguishes the circumstances in this proceeding from those at issue in L4ckaw4lrna Cn!y. Dev. Cory, v. Lkakpwq-ki, 12 N'Y'3d 578 (2009), upon which the City relies'a Again, the property in Lackawanr.rp, although owned by a local development oorporation' was leased to a for-profìf oorporation that ca¡ried out þr'pro/ìf manufacturing activities on the ---.<, prõerty. Ld, at 580. The Court of Appeals explained that the property was taxable "[b]ecause the property [was] 'used' within the meanïng of RPTL 420-a(1) by the forçrofit lessee for manufacturing activities, and not by the ilooal development corporation] for an exempt purpose ' . . .,, Iú, In this case, howevef, the properties are not leased to any entity, profit-making or otherwise, Instead, PARC, a federally recognized oharitable organization pursuant to section 501(c)(3) of the Internal Revenue Code, wholly owns and uses the properties to further its talc- exempt pwposes. PARC has invested significant resouÍces with respect to inftastructure' property improvements, demolition of obsolete buildings and sfi.uchües, and asbestos and lead' a It is also a distinction that disposes of an additional theme of the CitY 's briof, that numerous provrsrons of law encourage and support Private i¡vestments in economic development projects without providing for a mandatory tax exemPtion, such as those pertaining to the Empire State Development CorP. which, acoording to the CitY, "provides a variety of assistance aimed at helping businesses," CitY Brief, at 6 & n.3. Again, however in those circurnstances there is a profit-making entity being supported, accordinglY the real property at issue is "used" bY that entity. In oontrast, there is no such profit making entitY here' The - a not for profit charitable organization *_ and PARC alone.PARC 9 use of the propertY is bY