In the Matter of Greater Jamaica Development Corporation, et al., Respondents,v.New York City Tax Commission, et al., Appellants.BriefN.Y.June 2, 2015To be Argued by: RONALD G. BLUM (Time Requested: 15 Minutes) APL 2014-00165 Queens County Clerk's Index No. 21215/11 Qtnurt nf Appeals nftqe ~tate nf New lnrk ______ _. .. ._ ____ __ 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-Appellants. BRIEF FOR PETITIONERS-RESPONDENTS Date Completed: November 6, 2014 MANATI, PHELPS & PHILLIPS, LLP Attorneys for Petitioners-Respondents Seven Times Square New York, New York 10036 Tel.: (212) 790-4500 Fax: (212) 790-4545 CORPORATE DISCLOSURE STATEMENT Pursuant to Section 500.1 of the Rules of the Court of Appeals, Petitioner- Respondent GREATER JAMAICA DEVELOPMENT CORPORATION states that it has no parent corporation and that it is the sole member of JAMAICA FIRST PARKING, LLC. Petitioner-Respondent JAMAICA FIRST PARKING, LLC states that it is an LLC whose sole member is GREATER JAMAICA DEVELOPMENT CORPORATION. Dated: New York, New York November 6, 2014 By: MANATT, PHELPS & PHILLIPS, LLP 'JG~L Ronald G. Blum 7 Times Square New York, NY 10036 (212) 790-4500 Attorneys for Petitioners-Respondents TABLE OF CONTENTS Page PRELIMINARY STATEMENT .............................................................................. ! COUNTERSTATEMENT OF QUESTIONS PRESENTED .................................. 6 COUNTERSTATEMENT OF FACTS .................................................................... 7 A. Greater Jamaica Development Corporation and Its Mission to Revitalize Downtown Jamaica ............................................................ 7 B. Jamaica First Parking, LLC and the Parking Facilities in Question ............................................................................................. 1 0 C. The 2001 IRS Letter Ruling that the Parking Facilities Lessen the Burdens of Government ............................................................... 12 D. DOF's 2007 Ruling Granting the Exemptions .................................. 14 E. DOF's 2011 Ruling Revoking the Exemptions ................................. 14 TI-IE DECISIONS BELOW ................................................................................... 16 A. The Decision of the Supreme Court, Queens County ....................... 16 B. The Decision of the Appellate Division, Second Department .......... 17 ARGUMENT ......................................................................................................... 20 I. TI-IE APPELLATE DIVISION CORRECTLY FOUND THAT GJDC OPERATES PURSUANT TO A CHARITABLE PURPOSE, BECAUSE DEVELOPING AN ECONOMICALLY DISTRESSED COMMUNITY RELIEVES POVERTY AND LESSENS TI-IE BURDENS OF GOVERNMENT ................................................................ 22 A. The Second Department Correctly Held that GJDC and JFP Operate in Order to Develop Jamaica's Distressed Economy and Lessen the Burdens of Local Government, Which Appellants Conceded at the Administrative Level ............................ 23 -1- TABLE OF CONTENTS (continued) B. New York Law Recognizes Economic Development Is a Page Charitable Purpose ............................................................................. 25 1. Charitable Purposes Have Long Included Relieving Poverty, the Goal of Economic Development.. ....................... 26 2. Appellants and Other New York Tax Authorities Have Long Regarded Economic Development as Charitable, and Appellants Propose No Coherent Alternative Definition of "Charitable Purposes" ....................................... 28 3. The Appellate Division Did Not Apply a "Public Benefit Test," But Correctly Considered Community Benefit as a Criterion of Charitable Purpose ............................................... 29 C. It Is Well Established That Charitable Purposes Include Lessening the Burdens on Government ............................................. 3 3 II. THE APPELLATE DIVISION'S CONSIDERATION OF RESPONDENTS' EXEMPT STATUS AND THE IRS TAX RULING WAS CORRECT ......................................................................... 36 A. IRS Recognition of an Activity as Charitable Is Relevant to Interpreting the Statutorily Undefined Meaning of "Charitable Purposes" Under Section 420-a ......................................................... 38 B. The Appellate Division Did Not Use the IRS Ruling to Alter the Parties' Burdens of Proof, as the Burden ofProof Already Rested with Appellants ...................................................................... 3 8 C. Theoretical Differences Between Federal Tax Exemption and Section 420-a Have Nothing to Do with the IRS Ruling Recognizing the Parking Facilities as Charitable .............................. 39 -11- TABLE OF CONTENTS (continued) III. GJDC USES THE PROPERTIES FOR A CHARITABLE PURPOSE AND APPELLANTS FAILED TO MEET THEIR BURDEN TO Page PROVE OTHER WISE ................................................................................. 41 A. The Parking Facilities Are Used Primarily for a Charitable Purpose and Are "Central" to GJDC's Larger Mission ..................... 42 B. Appellants Made No Findings of Fact Disputing the Parking Facilities' Primary Purpose and No Evidence Supports Such Findings .............................................................................................. 45 C. GJDC Is Entitled to the RPTL 420-a Exemption Regardless of Whether the Parking Facilities Generate Net Proceeds ..................... 48 D. The "Actual Use" of the Parking Facilities Is for a Charitable Purpose ............................................................................................... 50 CONCLUSION ...................................................................................................... 51 -111- TABLE OF AUTHORITIES Page CASES Debevoise & Plimpton v. New York State Dep 't of Taxation & Fin., 80 N.Y.2d 657 (1993) ........................................................................................ 20 Economic Opportunity Comm 'n of Nassau County, Inc. v. Village of Hempstead, 148 A.D.2d 570 (2d Dep't 1989) ....................................................................... 25 Jackson v. Phillips, 96 Mass. 539 (1867) ........................................................................................... 35 Jones v. Bill, 10 N.Y.3d 550 (2008) ........................................................................................ 20 Matter of Adult Home at Erie Sta., Inc. v. Assessor, 10 N.Y.3d 205 (2008) .................................................................................. 27, 49 Matter of A mer. Soc y for Prevention of Cruelty to Animals v. Tax Comm'n ofNew York, 113 Misc. 2d 427 (Sup. Ct. N.Y. Cnty. 1981) ................................................... 33 Matter of Ass 'n of the Bar of City of New York v. Lewisohn 34 N.Y.2d 143 (1974) .................................................................................. 30, 31 Matter of Canton Human Servs. Initiatives, Inc. v. Town of Canton, 4 Misc. 3d 413 (Sup. Ct. St. Lawrence Cnty. 2004) .......................................... 36 Matter of Ellis Hasp. v. Fredette, 27 A.D.2d 390 (3d Dep't 1967) ......................................................................... 44 Matter of Farm Sanctuary, Inc. v. Patton, 221 A.D.2d 67 (3d Dep't 1996) ....................................................... 22, 29, 33, 38 Matter of Featherstone v. Franco, 95 N.Y.2d 550 (2000) ........................................................................................ 21 Matter of Greater Jamaica Dev. Corp. v. New York City Tax Comm 'n, 111 A.D.3d 937 (2d Dep't 2013) ................................................................ passim Matter of Vassar Bros. Hasp. v. City of Poughkeepsie, 97 A.D.3d 756 (2d Dep't 2012) ......................................................................... 44 Matter of Lackawanna Cmty. Dev. Corp. v. Krakowski, 12 N.Y.3d 578 (2009) ................................................................................. passim -lV- TABLE OF AUTHORITIES (continued) Matter of Merry-Go-Round Playhouse, Inc. v. Assessor of City of Auburn, Page 104 A.D.3d 1294 (4th Dep't 2013) .................................................................... 21 Matter of Miriam Osborn Mem 'l Home Ass 'n v. Assessor of City of Rye, 80 A.D.3d 118 (2d Dep't 2010) ......................................................................... 42 Matter of Moore's Estate, 66 Misc. 116 (Sur. Ct. Saratoga Cnty. 1910) ..................................................... 33 Matter of New York Botanical Garden v. Assessors ofTown of Washington, 55 N.Y.2d 328 ( 1982) ........................................................................................ 21 Matter of North Manursing Wildlife Sanctuary v. City of Rye, 48 N.Y.2d 135 (1979) ........................................................................................ 29 Matter of Plattsburgh Air base Redevelopment Corp. v. Rosenbaum, 101 A.D.3d 21 (3d Dep't 2012) .................................................................. passim Matter of Quail Summit, Inc., v. Town of Canandaigua, 55 A.D.3d 1295 (4th Dep't 2008) .......................................................... 21, 35, 36 Matter of Rockefeller's Estate, 177 A.D. 786 (1st Dep't 1917) ........................................................................... 30 Matter of Salvation Army v. Comm 'n of Assessment & Taxation of Vil. of Port Chester, 110 Misc. 2d 1036 (Sup. Ct. Westchester Cnty. 1980) ...................................... 46 Matter of Salvation Army v. Town of Ellicott Bd. of Assessment Review, 100 A.D.2d 361 (4th Dep't 1984) ............................................................... passim Matter of State ofNew Yorkv. Daniel F., 19 N.Y.3d 1086 (2012) ...................................................................................... 20 Matter of Stuyvesant Sq. Thrift Shop, Inc. v. Tax Comm 'n of City of New York, 54 N.Y.2d 735 (1981) ........................................................................................ 46 Matter of Swedenborg Found., Inc. v. Lewisohn, 40 N.Y.2d 87 (1976) .................................................................................... 32, 38 -v- TABLE OF AUTHORITIES (continued) Matter of Symphony Space, Inc. v. Tishelman, Page 60 N.Y.2d 33 (1983) .............................................................................. 22, 26, 27 Matter ofTap, Inc. v. Dimitriadis, 49 A.D.3d 947 (3d Dep't 2008) ......................................................................... 42 Mohonk Trust v. Bd. of Assessors of Town of Gardiner, 47 N.Y.2d 476 (1979) ............................................................................ 21, 29, 36 Oelsner v. State of New York, 66 N.Y.2d 636 (1985) ........................................................................................ 20 People ex rei. Untermyer v. McGregor, 295 N.Y. 237 (1946) .......................................................................................... 34 People ex rei. Watchtower Bible & Tract Soc y, 1nc. v. Haring, 8 N.Y.2d 350 (1960) .......................................................................................... 44 Rocky Point Drive-In, L.P. v. Town of Brookhaven, 21 N.Y.3d 729 (2013) ........................................................................................ 20 Sherman v. Richmond Hose Co. No.2, 230 N.Y. 462 (1921) .......................................................................................... 33 STATUTES CPLR Article 78 ................................................................................................ 16, 20 Internal Revenue Code § 50 1 ( c )(3) ........................................................................... 7 N.Y. Exec. Law§ 171-a .......................................................................................... 29 N.Y. Exec. Law§ 172 ............................................................................................. 29 N.Y. Not-for-Profit Corp. Law§ 551(a) ................................................................. 34 Real Property Tax Law Article 7 ............................................................................ 16 Real Property Tax Law§ 420-a ....................................................................... passim Real Property Tax Law § 420-a(l )(b) ..................................................................... 49 Real Property Tax Law§ 420-a(b) .......................................................................... 50 OTHER AUTHORITIES 26 C.F.R. § 1.501(c)(3)-1(a)(l) ............................................................................... 40 18 N.Y. Jur. 2d Charities§ 2 ................................................................................... 35 -VI- TABLE OF AUTHORITIES (continued) 9 Ops. Counsel SBEA No. 68 (1991) http://www.tax.ny.gov/pubs_and_bulls/orpts/legal_opinions/v9/68. Page htm ...................................................................................................................... 32 Black's Law Dictionary (9th ed. 2009) ............................................................. 23, 35 Dep't of Finance Letter Ruling No. 024794-003 2002 N.Y. City Tax LEXIS 259, June 12, 2002 ................................................ 12 Dep't of Finance Letter Ruling No. 074873-021 2007 N.Y. City Tax LEXIS 17, Nov 21, 2007 ............................................. 12, 45 Dep't of Finance Letter Ruling No. 084882 ........................................................... 12 Internal Revenue Service Treasury Regulation 301.7701-3 ................................... 12 Local Law No. 46 (1971) of the City ofNew York ................................................ 31 New York State Office ofthe Attorney General, FAQs- Registration .................. 30 Victoria B. Bjorklund, et al., New York Nonprofit Law and Practice; With Tax Analysis§ 14.03, n.61 [Matthew Bender, 2d ed.] .............................. 30 -Vll- PRELIMINARY STATEMENT The unanimous panel below properly declined Appellants' request to impose arbitrary and unprecedented limits on what constitutes charity. Section 420-a of the Real Property Tax Law does not define the term "charitable purpose," yet New York courts have interpreted that term in various statutes for over a century, and this Court has made clear that Section 420-a reaches "various and varied charitable and educational purposes." Case law and common sense dictate that charitable purposes include economic development designed to relieve the constraints of poverty and lessen the burdens of local government. The parking facilities at issue on this appeal exist solely to help rejuvenate the economically struggling community of Jamaica, Queens, thereby improving the quality of life for all who live, work or shop in southeast Queens. The City of New York knows this because the City was directly involved in creating the parking facilities and inducing Respondents to own and operate them. Respondent Greater Jamaica Development Corporation ("GJDC") is a not-for-profit corporation dedicated to improving downtown Jamaica and its environs. It formed Respondent Jamaica First Parking, LLC ("JFP") to develop, maintain and operate the parking facilities at issue. The City long acted in partnership with GJDC to revitalize downtown Jamaica with the knowledge that this would help the surrounding communities. 1 While working directly with the City, Respondents shouldered the burden to rescue failing and deteriorating municipal parking facilities and bring badly needed safe and affordable parking to the area. They purchased land from the City, renovated facilities, applied for and obtained a grant from the City's Economic Development Corporation ("EDC"), secured bond financing from the City's Industrial Development Authority ("IDA"), and built one parking garage from the ground up. All of this occurred over years and amid Respondents' numerous other economic development programs. It was no surprise, therefore, that in 2001 the Internal Revenue Service found that the acquisition and operation of the parking facilities were charitable. The IRS found that JFP's ownership and operation of the facilities were for the primary purpose of lessening the burdens ofNew York City government (which the City then acknowledged) and were substantially related to Respondents' tax- exempt purposes. The IRS noted that the absence of adequate parking in downtown Jamaica would preclude travel to the area, and thereby impede economic recovery and prevent GJDC from accomplishing its goal of revitalizing Jamaica's urban core. It was also no surprise that the City itself, through Appellant Department of Finance ("DOF"), confirmed that the parking facilities were operated primarily for charitable purposes. In 2007, ruling on applications from GJDC and JFP, DOF 2 granted full exemption from real property taxes for the parking facilities pursuant to Real Property Tax Law Section 420-a. That tax exemption continued for four years without question. The surprise is that Appellants now refuse to acknowledge how Respondents provided Jamaica with a basic transportation infrastructure that is critical to the economic survival of the downtown and surrounding neighborhoods. Despite longstanding reliance on Respondents' efforts, Appellants now argue that JFP is motivated primarily by profit, and that these facilities- which were originally built and operated by the City - are no more charitable than a for-profit health food store. Nothing changed in the four years between the 2007 tax exemption and the 2011 revocation. The law has not changed. The statutory history that Appellants rely on to support revocation goes back to the 1970s. The facts that DOF relied on - few though they may be - were no different in 2007 than in 2011. The only change has been Appellants' desire to revoke the tax exemption. But at stake for Respondents is more than the four parking facilities that Respondents took over when the City could not maintain them and the one that the City's EDC funded and the IDA financed for Respondents to build. It is not hyperbole to say that in this case the power to tax involves the power to destroy, as Chief Justice John Marshall long ago opined. Without this tax exemption, GJDC 3 cannot operate and maintain the facilities, which are central to GJDC's mission. Uunder Appellants' argument, Respondents' core mission of economic revitalization would not be charitable at all. Even more notably, Appellants advance the radical proposition that community economic development is never a charitable purpose. That position contravenes not only well-settled law under Section 420-a ofNew York's Real Property Tax Law ("RPTL"), but also basic concepts of charity adopted by numerous authorities- the Not-for-Profit Corporations Law, courts applying New York's trust and estate law, opinions of the New York State Attorney General, leading treatises and rulings by the IRS, to name a few. Further, contrary to Appellants' main contention, it was perfectly appropriate for the appellate panel to consider a prior IRS decision recognizing GJDC and JFP as charitable organizations. The court below did not equate an IRS tax exemption and a New York RPTL exemption. Courts routinely and properly consider numerous sources to determine whether an activity is recognized as charitable. IRS determinations about the same activities, or the same entities, are highly relevant. The Second Department also correctly held that the facts support GJDC's entitlement to a Section 420-a exemption. GJDC operates the parking facilities solely for charitable purposes, namely to improve the quality of life in downtown 4 Jamaica and its surrounding neighborhoods. The facilities promote that purpose by attracting visitors and businesses through safe, convenient and affordable public parking. As the Second Department found, Appellants failed to meet their burden of proving that the properties are subject to taxation and the 2007 exemption was erroneously granted. DOF attempted to redefine the term "charitable purpose," and Appellants now fail to provide any definition for the term. DOF's unexplained flip-flop, apparently occasioned by a news opinion piece, is the very definition of "arbitrary and capricious" agency action. 5 COUNTERSTATEMENT OF QUESTIONS PRESENTED 1. Is providing quasi-governmental services in order to promote economic development of a distressed downtown and its surrounding neighborhoods a "charitable purpose" under Real Property Tax Law Section 420-a? 2. Has an entity whose (1) tax-exempt status is recognized by the Internal Revenue Service and (2) whose property is used solely for charitable purposes made a presumptive showing of tax-exempt status under Real Property Tax Law Section 420-a? 3. Did Appellants fail to meet their burden of establishing a non-charitable primary purpose of Respondents in operating certain public facilities, where ( 1) the City was unable to maintain and encouraged Respondents to develop the facilities, (2) the facilities provide safe, convenient and inexpensive public parking in order to attract visitors and businesses to a distressed downtown, and (3) Appellants adduced no facts suggesting the purpose is not charitable? The unanimous decision of the Appellate Division, Second Department answers these questions in the affirmative. 6 COUNTERSTATEMENT OF FACTS A. Greater Jamaica Development Corporation and Its Mission to Revitalize Downtown Jamaica Respondent GJDC was formed in 1967 in order to promote commerce and business growth in one ofNew York City's most economically distressed areas, Jamaica, Queens. R. 18. GJDC seeks to expand economic, cultural, recreational and educational opportunities to improve the quality of life for the ethnically and economically diverse residents of Jamaica. R. 18. GJDC was incorporated to: ( 1) promote, assist, participate in and coordinate the sound planning and improved development of downtown Jamaica, Queens; (2) encourage and effect the development and expansion of commercial, industrial and manufacturing facilities in Jamaica; and (3) support and assist in the planning, development and expansion of educational, cultural, recreational, residential, governmental, transportation and other related facilities in Jamaica. R. 44-45. The Internal Revenue Service recognizes GJDC as a charitable organization exempt from federal income taxation pursuant to Internal Revenue Code Section 501(c)(3). R. 67-72. GJDC is registered with the New York State Attorney General as a charitable organization. R. 17. 7 Jamaica, Queens was one ofNew York's most seriously distressed neighborhoods. R. 200. Although downtown Jamaica is an active business and cultural center, it suffered severely and disproportionately during the economic downturn. R. 199. The area around downtown Jamaica has the highest mortgage foreclosure rate in New York State. R. 200. Major local employers- Mary Immaculate Hospital and Hostess Wonder Bread factory - recently closed, costing the area 1,200 jobs and creating economic uncertainty for residents. R. 200. One condition that contributes to the difficult economic climate in downtown Jamaica is the fact that local enterprises and services must compete with nearby suburban malls. R. 201-02. Downtown Jamaica is only four miles from the Nassau County border, and shopping malls like Roosevelt Field and Green Acres Mall in Nassau County provide extensive and safe free parking. R. 20. GJDC has advanced its charitable mission through numerous projects that improve the quality of life in Jamaica, often working closely with the City. Although DOF did not develop a comprehensive factual record ofGJDC's activities, the record contains some examples ofGJDC's charitable activities: Support for Cultural and Educational Institutions. GJDC provides crucial services, financial support and leadership for the establishment or improvement of educational and cultural institutions, including the King Manor Museum, King Park, York College, Jamaica Market and the 8 Jamaica Center for Arts and Learning. GJDC also worked to attract a laboratory facility for the U.S. Food and Drug Administration on the York College campus. R. 200-01. Performing Arts Center. GJDC assisted in the preservation, protection and restoration of the City-owned landmark former First Reformed Church, which has been transformed into a performing arts center managed by Jamaica Center for Arts and Learning. R. 200. Transportation and Local Access. GJDC orchestrated the $8.4 million Jamaica Pathways project, which provides pedestrian routes through downtown Jamaica to encourage visitors to explore the neighborhood on foot. !d. GJDC also established a dispatch for livery cabs, eliminating taxi-hustling. R. 201. Event Sponsorship. GJDC has cosponsored cultural events each summer in downtown Jamaica. R. 201. Beautification. GJDC provides landscaping and beautification, including to Sutphin Boulevard. R. 201. In keeping with its multifaceted approach to improving the quality of life in the area, GJDC has been heavily involved since the 1970s in a vital component of economic recovery- downtown Jamaica's parking and transportation infrastructure. 9 B. Jamaica First Parking, LLC and the Parking Facilities in Question In 1976, GJDC applied to the U.S. Economic Development Administration on behalf of the City for a grant to construct a new municipal garage. The application included considerable administrative work with City and federal agencies by GJDC staff, plus architectural plans and specifications that GJDC paid for. R. 20. The application was approved, resulting in a $3.4 million grant to the City and the City's construction of a 530-car garage, completed in 1978. The City's Department of Transportation initially operated this public parking facility. R. 20. Because the City could not manage or maintain the facility, it fell into disrepair. The facility's unsightly and unsafe conditions coincided with departures from downtown Jamaica of major commercial anchors and employers- three department stores, two bank headquarters, a large newspaper plant and offices. R. 20. In the 1990s, community groups and local businesses recognized that downtown Jamaica would not recover economic viability or flourish as it had in the past without additional convenient, safe and affordable parking facilities. R. 20; see also R. 68 (referencing independent consultant's predictions of looming parking shortages in several areas of downtown Jamaica). They understood that 10 the downtown's recovery and growth required adequate, affordable off-street parking. R. 20. GJDC worked directly with City government to remedy this problem. On June 26, 1996, GJDC purchased a parking garage from the City through EDC. R. 21. Two years later, in 1998, GJDC formed Respondent JFP in order to acquire, develop and operate public parking facilities in downtown Jamaica. In 2004, JFP purchased the fifth property, which was vacant land, from the City and constructed a 41 0-car parking garage, using a grant from EDC, which was matched with funding from the proceeds of tax-exempt facility revenue bonds issued by the IDA. R. 21. The City encouraged GJDC to engage in the transactions, and both the City and GJDC understood that the parking facilities were necessary to support local businesses, federal and city offices and cultural institutions. R. 70. JFP is a special-purpose Delaware limited liability company authorized to conduct business in New York State. GJDC is its sole member. R. 18, 44-50, 55- 56. JFP operates the five parking facilities (two lots and three garages) that are at issue in this case. R. 18. JFP's sole purpose is owning and operating parking facilities exclusively "in furtherance of the charitable purpose of the member," GJDC. R. 59. 1 1 The term "GJDC" in this brief refers collectively to GJDC and JFP. New York City follows federal tax treatment of disregarded entities for real property tax purposes. See Dep't of Finance Letter Ruling No. 084882 R. 150-54; Letter 11 Before GJDC purchased and renovated them, the facilities were dark, in disrepair, unattended, unsafe and consequently underutilized. Respondents have made substantial investments in the facilities - investments that the City wot1ld have had to make had it retained the lots. R. 21-22. The City abandoned its obligation to operate and maintain these facilities, and Respondents took on the properties and relieved the City of its burden. R. 21. The parking facilities not only promote economic development, but also complement other publicly minded projects. For example, one facility serves as an essential adjunct to a 180-unit multifamily building that is 100% affordable housing- the first new housing built in downtown Jamaica in 30 years. R. 21-22. The JFP parking spaces met zoning requirements and enabled development of this housing, which would not have been built without parking made available by JFP. !d. JFP provides special arrangements for other nonprofits, as well as religious organizations, to use the facilities. R. 21. C. The 2001 IRS Letter Ruling that the Parking Facilities Lessen the Burdens of Government Not long after JFP was formed, Respondents sought a ruling from the IRS concerning JFP's tax status. In a private letter ruling in 2001, the IRS concluded Ruling No. 074873-021, 2007 N.Y. City Tax LEXIS 17, Nov. 21, 2007; and Letter Ruling No. 024794-003, 2002 N.Y. City Tax LEXIS 259, June 12, 2002. As a single-member limited liability company, JFP is disregarded as an entity separate from GJDC for federal income tax purposes. See Internal Revenue Service Treasury Regulation 301.7701-3. 12 that (1) JFP's ownership and operation ofthe parking facilities would be primarily for charitable purposes because they lessened the burdens on local government; (2) GJDC operated pursuant to a charitable purpose of revitalizing the economy in downtown Jamaica; and (3) the operation of the parking facilities was substantially related to that purpose because the failure to provide adequate parking would impede the area's recovery. R. 67-72 (the "IRS Ruling"). In so doing, the IRS determined that promoting economic recovery to depressed areas falls within the "generally accepted legal sense" of the word "charitable." R. 70. In concluding that owning and operating the parking facilities would lessen the burdens of government, the IRS reviewed in detail the facilities' history, including efforts by the City and its officials to address a significant parking shortage, and the direct cooperation between GJDC and the mayor in those efforts. The IRS noted: The City and the other governmental entities involved in the transactions have objectively manifested that they consider the provision of parking in the Downtown as a means of combating community deterioration to be their burden. The City has had a continuous close and cooperative relationship with [GJDC]. Moreover, the City has granted concessions to [GJDC] to encourage the Transactions. The parking facilities are necessary to serve the needs of several federal and city offices and cultural institutions as well as businesses. Accordingly, the ownership and operation of the Parking Facilities by [JFP] will qualify as charitable activities. Since [JFP] is a disregarded entity wholly owned by 13 R. 70. [GJDC], operation of the Parking Facilities will be regarded as a charitable activity of [GJDC]. The IRS also concluded that providing parking in Jamaica was substantially related to GJDC's mission of promoting economic recovery: R. 71. Many individuals who travel to Downtown do so by automobile. An absence of adequate parking facilities Downtown will likely preclude or discourage individuals from traveling to this area, thereby impeding the Downtown's continued economic recovery and preventing [GJDC] from achieving maximum effectiveness in accomplishing its purposes. D. DOF's 2007 Ruling Granting the Exemptions In 2007, DOF granted a full exemption from real property taxes for these parking facilities pursuant to RPTL 420-a. (Extracts from the 2010-to-2011 tentative assessment roll evidencing the 420-a exemption, exemption code 1523- 01, Charitable and Philanthropic, are attached to the Amended Verified Petition. R. 66.) E. DOF's 2011 Ruling Revoking the Exemptions The exemptions that DOF granted in 2007 remained in place for four years. On February 23, 2011, DOF revoked them in a two-page decision. The revocation rests on two conclusions. 14 First, DOF's principal ground is that parking lots cannot be charitable. "Use of the property for parking facilities does not fall into one of the enumerated uses set forth in 420-a .... We have not found authority in the case law to consider use of the properties for the purpose of operating parking lots - even for economic development of an underdeveloped area- to be 'charitable.' " R. 74. Second, DOF relied upon Matter of Lackawanna Cmty. Dev. Corp. v. Krakowski, 12 N.Y.3d 578 (2009), purportedly for the proposition that community development and public good are not, in and of themselves, charitable purposes under Section 420-a. R. 75. DOF made few factual findings. DOF's letter did not dispute that the parking facilities furthered GJDC's mission of revitalizing the economically distressed community of Jamaica. In fact, the letter acknowledged that the parking facilities "may serve an important public purpose and support development of a community." R. 75. DOF did not find or suggest that the primary purpose of the parking lots was profit. It noted that it appears that JFP collects "amounts from the lots that exceed the carrying, maintenance and depreciation charges attributable to the premises," but made no findings as to those revenues. DOF did not remotely suggest that GJDC's articulated charitable purpose in operating the parking lots was a pretext for profit-making. 15 On March 11, 2011, JFP sought review of the revocation decision, and on April3, 2011, JFP requested a response to the request for review. R. 149. THE DECISIONS BELOW A. The Decision of the Supreme Court, Queens County In September 2011, Respondents filed a petition pursuant to CPLR Article 78 seeking restoration of the tax-exempt status for the five parking facilities. In October, 2011, Respondents filed an Amended Petition, seeking the same relief, and in the alternative, pursuant to RPTL Article 7, challenging the amount of the tax assessments in the event the court declined to restore the tax-exempt status. R. 13-15. In November 2011, Appellants cross-moved to dismiss the petition. R. 191-92. By Short Form Order dated April12, 2012, and entered on April16, 2012, the Supreme Court, Queens County (Siegal, J.), denied the petition and granted Appellants' cross-motion to dismiss. R. 5-12. According to the court, Appellants had met their burden of showing that DOF's revocation of the tax exemptions was not arbitrary and capricious. In so ruling, Justice Siegal noted that Respondents "cite cases that do support the proposition that a parking lot in certain circumstances may obtain exempt status. In such cases, as long as 'operation of the parking lot is reasonably incident to the major purpose of its owner, the parking structure may be exempt 16 from taxation.' " R. 1 0. The trial court also noted that Respondents cited cases showing that revenue-generating property owned by nonprofit organizations has been held exempt. R. 10. The trial court concluded that were it "reviewing this case de novo, it might have been inclined to lean toward a finding that the organization is one of charitable nature." R. 10. Nevertheless, despite rejecting Appellants' reasoning, the court held that Appellants had met their burden and upheld the agency decision on the ground that the DOF decision did not lack a rational basis. B. The Decision of the Appellate Division, Second Department Respondents appealed, and on November 27, 2013, a unanimous panel of the Second Department reversed. The appellate court emphasized that when, as here, a municipality seeks to revoke a tax exemption that it had previously granted, "the municipality bears the burden of proving that the real property is subject to taxation." Matter of Greater Jamaica Dev. Corp. v. New York City Tax Comm 'n, 111 A.D.3d 937, 938 (2d Dep't 2013) (quoting Lackawanna, 12 N.Y.3d at 581). R. 211. The Second Department held that Appellants "failed to meet their burden of proof for revocation of the tax exemption on the grounds that the petitioners' activity did not conform to a charitable purpose within the meaning ofRPTL 420- a." Greater Jamaica, 111 A.D.3d at 939. R. 211. 17 The Appellate Division cited the IRS finding of tax exemption as part of its discussion of the meaning of "charitable purpose," which has no statutory definition: Absent a precise statutory definition of "charitable purpose," courts have interpreted this category to include relief of poverty, advancement of governmental and municipal purposes, and other objectives that are beneficial to the community. Furthermore, a property owner seeking a real property tax exemption which demonstrates that it is a not-for-profit entity "whose tax- exempt status has been recognized by the Internal Revenue Service and whose property is used solely for [charitable] purposes has made a presumptive showing of entitlement to exemption." !d. (quoting Matter of Plattsburgh Airbase Redevelopment Corp. v. Rosenbaum, 101 A.D.3d 21,23 (3d Dep't 2012) (citations omitted)). R. 211. The appellate court also observed, citing the 2001 IRS Ruling, that the parking facilities supp,orted GJDC's charitable purposes: In a private letter ruling issued in 2001, the Internal Revenue Service (hereinafter the IRS) concluded that the operation of public parking facilities by JFP would not adversely affect GJDC's federal tax exempt status, in large part because such activity was "substantially related" to GJDC's charitable tax-exempt purposes and would "lessen the burdens of government" as defined by certain tax regulations. Greater Jamaica, 111 A.D.3d at 937. R. 210. Reviewing the case law, the Second Department found that GJDC's purpose to "support and assist in the planning, development and expansion of educational, 18 cultural, recreational, residential, governmental, transportation and other related facilities in Jamaica" qualified as charitable. /d. at 939. As the panel put it, GJDC's "charitable purpose was to improve Jamaica's business district through further economic development," and "offering convenient and inexpensive public parking to attract visitors and businesses was central to their aim." !d. at 940. It therefore found that the property qualified for an exemption under Section 420-a. Appellants filed a motion for leave to appeal on January 2, 2014, which the Appellate Division denied on March 27, 2014. Appellants then moved before this Court, which granted leave to appeal on July 1, 2014. 19 ARGUMENT This appeal challenges the Appellate Division's statutory construction of Section 420-a and its findings of fact regarding GJDC's primary purpose with respect to the parking facilities. Questions of pure statutory interpretation before this Court are reviewed de novo. See Jones v. Bill, 10 N.Y.3d 550, 553 (2008). Moreover, decisions of an agency charged with administering a statute "are not entitled to such deference when, as here, the issue is one of pure statutory construction." Debevoise & Plimpton v. New York State Dep 't of Taxation & Fin., 80 N.Y.2d 657, 664 (1993). When the Appellate Division reverses the findings of fact made by a trial court and makes new findings, the Court of Appeals must "determine which court's findings are in accord with the weight of the evidence." Oelsner v. State of New York, 66 N.Y.2d 636, 637 (1985). This Court will not make new findings, but will "review the record to determine which factual findings 'more nearly comport with the weight of the evidence.' " Rocky Point Drive-In, L.P. v. Town of Brookhaven, 21 N.Y.3d 729, 737-38 (2013) (quoting Matter of State of New York v. Daniel F., 19 N.Y.3d 1086, 1087 (2012)). Review in this action is limited to the record and findings developed by DOF as part of its February 2011 decision. Confining review to the administrative record is, as this Court has observed, "a fundamental tenet of CPLR article 78 20 review." Matter of Featherstone v. Franco, 95 N.Y.2d 550 (2000). Thus, "OJudicial review of administrative determinations is confined to the facts and record adduced before the agency." !d. (internal quotation marks omitted). Where, as here, a municipality seeks "to withdraw a previously granted tax exemption, the municipality bears the burden of proving that the real property is subject to taxation." Lackawanna, 12 N.Y.3d at 581 (quoting Matter of New York Botanical Garden v. Assessors ofTown of Washington, 55 N.Y.2d 328, 334 (1982)). It may do so by showing that the law has changed, that the property is used for a different purpose than it was initially, or that the exemption "was erroneously awarded in the first instance." Matter of Quail Summit, Inc. v. Town of Canandaigua, 55 A.D.3d 1295, 1297 (4th Dep't 2008). Appellants argue that GJDC's exemption "was erroneously awarded in the first instance." (App. Br. 11 ). The real property exemption normally depends on a two-part showing: "( 1) that the organization is organized or conducted exclusively for an exempt purpose, and (2) that the land for which exemption is sought is used exclusively for an exempt purpose." See, e.g., Matter of Merry-Go-Round Playhouse, Inc. v. Assessor of City of Auburn, 104 A.D.3d 1294, 1295-96 (4th Dep 't 2013) (internal quotation marks omitted). "Exclusively" is not construed literally, but means "primarily." Mohonk Trust v. Bd. of Assessors of Town of Gardiner, 47 N.Y.2d 476, 483 (1979). Thus, to revoke the exemption for GJDC's 21 parking facilities, Appellants must demonstrate that either 1) GJDC does not operate primarily for a "charitable purpose" or 2) the parking facilities are not operated primarily for that purpose. Appellants do not make either showing. I. THE APPELLATE DIVISION CORRECTLY FOUND THAT GJDC OPERATES PURSUANT TO A CHARITABLE PURPOSE, BECAUSE DEVELOPING AN ECONOMICALLY DISTRESSED COMMUNITY RELIEVES POVERTY AND LESSENS THE BURDENS OF GOVERNMENT Appellants' core argument is that the term "charitable purpose" in Section 420-a does not encompass either economic revitalization of a distressed community or lessening the burdens of government. (App. Br. 22, 34). Appellants cite no statute, court, administrative agency or secondary source that agrees with this proposition, and with good reason. None exists. As Appellants acknowledge, RPTL 420-a contains no definition of "charitable." This Court has cautioned, however, that "an interpretation so literal and narrow that it defeats the exemption's settled purpose is to be avoided." Matter of Symphony Space, Inc. v. Tishelman, 60 N.Y.2d 33, 36 (1983). In the absence of a statutory definition of "charitable purpose," courts consider a broad tapestry of sources to determine the contours of the term. See Matter of Farm Sanctuary, Inc. v. Patton, 221 A.D.2d 67, 68-69 (3d Dep't 1996) (considering secondary sources including the Restatement (Second) of Trusts, New York Jurisprudence (Second), and Black's Law Dictionary). 22 A. The Second Department Correctly Held that GJDC and JFP Operate in Order to Develop Jamaica's Distressed Economy and Lessen the Burdens of Local Government, Which Appellants Conceded at the Administrative Level The Appellate Division identified GJDC's primary purposes, which as a factual matter are not in dispute. As the Appellate Division noted, GJDC's Certificate of Incorporation states that GJDC's purpose is "To support and assist in the planning, development and expansion of educational, cultural, recreational, residential, governmental, transportation and other related facilities in Jamaica." The Certificate also identifies its mission to "participate in and coordinate the sound planning and improved development of the business-commercial-retail district of Jamaica," to "encourage and affect the development and expansion of commercial, industrial and manufacturing facilities in Jamaica," and to "assist and cooperate with Federal, State and local departments, agencies and government organizations of every kind in furtherance of the purposes of the Corporation .... " R. 44-45. DOF made no findings disputing that GJDC helps relieve residents of the constraints of economic depression or that it lessens the burdens of government. DOF never hinted that these purposes are a pretext for profit. GJDC and JFP also operate to lessen the burdens of government in at least two ways. First, economic development itself is a burden of local government. 23 Indeed, providing parking as a component of economic development has historically been a duty shouldered by the City, as the IRS Ruling described: The City and the other governmental entities involved in the transactions have objectively manifested that they consider the provision of parking in the Downtown as a means of combating community deterioration to be their burden. The City has had a continuous close and cooperative relationship with [GJDC]. Moreover, the City has granted concessions to [GJDC] to encourage the Transactions [i.e., JFP's purchase and operation of parking garages]. . . . Accordingly, the ownership and operation of the Parking Facilities by [JFP] will qualify as charitable activities. R. 70. Moreover, circumstances that encourage commerce within downtown Jamaica also benefit the City by generating tax revenue, such as business income taxes. Second, by building and maintaining parking facilities, GJDC and JFP undertake and discharge responsibilities that would otherwise fall to local government. Respondents provide high-quality security services and lighting, making downtown Jamaica safer. R. 201-02. They keep the facilities clean and sanitary, and have improved them by investing in landscaping. !d. Indeed, when these properties were City-owned, these burdens fell to local government, burdens that proved more than the City could handle. When JFP acquired the facilities, they were decrepit and dangerous, and provided insignificant revenue for the City. R. 202. Respondents obtained the properties 24 precisely because the City was unwilling to invest in them. Id. Relieving the City of the obligation to operate and maintain the facilities, so that it could spend taxpayer resources elsewhere, by definition eases the burdens of government. B. New York Law Recognizes Economic Development Is a 0 Charitable Purpose Until the trial court decision in this case, no New York court had rejected a property tax exemption on the ground that economic development is not charitable. Thus the recent Third Department decision in Plattsburgh is not surprising. In that case, a unanimous Third Department panel expressly recognized local redevelopment efforts as serving a charitable purpose, and held that the development company's activities in owning, maintaining and selling real estate were charitable because they "promote economic development." Plattsburgh, 101 A.D.3d at 24-25. Appellants criticize Plattsburgh for relying in part on an IRS ruling, but that misses the point. Plattsburgh, like Appellants in 2007 and the IRS to this day, readily recognizes economic development as a form of charity. See also Economic Opportunity Comm 'n of Nassau County, Inc. v. Village of Hempstead, 148 A.D.2d 570, 573 (2d Dep't 1989) (describing trial court finding, not disturbed on appeal, that an antipoverty organization was a non-profit organization within the meaning of Section 420-a). The only case that Appellants cite for the proposition that community development is not charitable expressly disavows any such holding. Lackawanna, 25 12 N.Y.3d 578, involved a community development corporation that this Court recognized was formed for the "charitable or public purposes of relieving and reducing unemployment ... bettering and maintaining job opportunities, instructing or training individuals to improve or develop their capabilities for such jobs." !d. at 582 (citation omitted). This Court held that the corporation was not entitled to the exemption only after the corporation began leasing the relevant property to an unrelated private company. See id. at 581. In so holding, this Court expressly warned that it was not ruling on the question of whether the corporation's economic development mission was charitable, or whether its property had qualified for the exemption for the 12 years before being leased. ld. at 5 81 ("we assume without deciding that prior to it being leased, the [property] held by LCDC was exempt from taxation."). Lackawanna lends no support for the draconian interpretation advanced by Appellants. 1. Charitable Purposes Have Long Included Relieving Poverty, the Goal of Economic Development Community economic development in distressed areas is a charitable purpose in part because it advances the textbook charitable goal of relieving poverty. In connection with Section 420-a, this Court has specifically warned against "tak[ing] a narrow and fragmentary view of the exemption." Symphony Space, 60 N.Y.2d at 37. "[R]ather than dissecting each exempt purpose, this court has indicated that the statute [Section 420-a] may encompass property used 26 primarily for various and varied charitable and educational purposes .... " !d. New York courts recognize that poverty relief is not limited to alms-giving; a number of activities improve the lives of the economically and socially disadvantaged and are thereby "charitable." Thus, providing employment opportunities to the disenfranchised is charitable. See Matter of Salvation Army v. Town of Ellicott Bd. of Assessment Review, 100 A.D.2d 361, 364 (4th Dep't 1984). Providing housing to recovering alcoholics on the condition that they attend programs is "charitable," even when the charity receives market rates for the apartments. See Matter of Adult Home at Erie Sta., Inc. v. Assessor, 10 N.Y.3d 205, 216 (2008). Section 420-a, with its unqualified inclusion of all "charitable purposes," is broad enough to cover all of the "various and varied" ways, Symphony Space, 60 N.Y.2d at 37, in which selfless organizations help the disadvantaged. DOF never made any findings to suggest that community economic development in Jamaica fails to relieve poverty, or disputed JFP's primary purpose in doing so. Appellants point to no support (much less a rational basis) for that proposition in the record, because DOF did not even consider it. Suffice it to say, ample literature and data exist on the crucial role that local, not-for-profit development corporations can play in relieving poverty, all of which could be part of the record below had Appellants put the matter in issue. 27 2. Appellants and Other New York Tax Authorities Have Long Regarded Economic Development as Charitable, and Appellants Propose No Coherent Alternative Definition of "Charitable Purposes" Apart from this action, Appellants have generally accepted that GJDC's economic development mission is a charitable purpose. DOF granted the original exemption in 2007, and allowed it to stand for years, because at that time it recognized that community development and lessening the burdens of government were "charitable purposes," and it was convinced that GJDC was using the parking facilities primarily for those purposes. That determination is why Appellants bear the burden ofprooftoday. Appellants now claim that their approval of the parking facilities' exempt status in 2007 was an "error," but they never explain how the error occurred. All that changed is the administrative agency's 2011 flip-flop on the law, purportedly based on statutory language and legislative findings dating back to the 1970s. DOF understood the law correctly in 2007, and its reversal in 2011 was arbitrary and capricious. Appellants argue that "charitable purpose" must be read as strictly as possible, but acknowledge, as they must, that this Court and the Appellate Divisions have found "charitable purpose" under Section 420-a to include such activities as conservation of land, operating a wildlife sanctuary, caring for abused animals, and even operating a retail store for the sake of providing jobs to 28 employees. See Mohonk Trust, 47 N.Y.2d at 480; Matter of North Manursing Wildlife Sanctuary v. City of Rye, 48 N.Y.2d 135, 140 (1979); Farm Sanctuary, 221 A.D.2d at 68-69; Salvation Army, 100 A.D.2d at 362. Appellants cannot account for these decisions in any principled way. Instead, they argue only that GJDC does not care for abused animals, protect the environment or promote wildlife. The case law under 420-a invites only one conclusion: the definition of "charitable"- even strictly construed- encompasses selfless activities that alleviate hardship in many forms, aside from the straightforward giving of alms. 3. The Appellate Division Did Not Apply a "Public Benefit Test," But Correctly Considered Community Benefit as a Criterion of Charitable Purpose Appellants also err in suggesting that public benefit has no relevance in assessing charitable purpose. The Executive Law defines a "charitable organization" to include "[a]ny benevolent, philanthropic, patriotic, or eleemosynary person or one purporting to be such .... "2 N.Y. Exec. Law§ 171-a. New York Courts have long held that when an entity acts for a purpose that is "of public usefulness, unstained by personal, private or selfish considerations, its 2 Under New York's Executive Law, "Every charitable organization, and any charitable organization registered or required to be registered pursuant to article eight of the estates, powers and trusts law," with some exceptions, must register with the Attorney General. N.Y. Exec. Law § 172. GJDC has long been registered with the Charities Bureau in accordance with this statute. R. 17. 29 charitable character insures its validity." Matter of Rockefeller's Estate, 177 A.D. 786, 791 (1st Dep't 1917). The New York Attorney General states that "Under New York Law, charity is defined very broadly to include purposes such as education, relief of poverty, cultural programs, promotion of health and research to cure disease, and many other purposes that are beneficial to the community." New York State Office ofthe Attorney General, FAQs- Registration http://www.charitiesnys.com/faqs_reg_new.jsp (emphasis added). The legislature, the courts and the executive branch are all in agreement: public benefit is an important and relevant characteristic of charity. Likewise, the leading treatise on New York's nonprofit law notes that providing a public benefit is a measure of an organization's qualification for exemption. Victoria B. Bjorklund, et al., New York Nonprofit Law and Practice; With Tax Analysis § 14.03, n.61 (Matthew Bender, 2d ed.) (citing cases and noting that "Rulings subsequent to the Mohonk Trust decision suggest that the Court has embraced the public-benefit criteria as a measure of the organization's qualifications for exemption."). In determining a taxpayer's charitable purpose, this Court has never held that public or community benefit is irrelevant. In Matter of Ass 'n of the Bar of City of New York v. Lewisohn, 34 N.Y.2d 143, 153 (1974), this Court held that the primary concern of a Bar Association is "the professional interests of its 30 members." Because a RPTL 420-a requires that an organization seeking the exemption use the property primarily for its charitable purpose, the Bar Association did not qualify; its charitable and educational purposes are "incidental and peripheral only," id., while its primary purpose was to professionally benefit its own members- an inherently self-interested exercise. To be sure, this Court rejected a test whereby any organization that performs some "public benefit" would qualify, noting that the Bar of the City ofNew York is not charitable merely because it screens judges or roots out the unauthorized practice of law. !d. at 154. But Association of the Bar did not consider whether revitalizing economically depressed communities or lessening the burdens of government fall within the categories of activities that have been accepted by society and the law as "charitable. "3 The New York State Department ofTaxation and Finance ("NYS DOTF") acknowledged over 20 years ago that an expansive reading of Association of the Bar, which Appellants advance here, is untenable: Whereas, in the past, these purposes have been narrowly construed (see, e.g., Ass 'n of the Bar v. Lewisohn, supra) the recent trend, especially with respect to environmentally oriented organizations, has been to blur 3 In fact, New York City Bar's 420-a exemption was revoked because the State Legislature passed a law specifically permitting municipalities to tax Bar Associations, and the New York City Council passed a measure declaring such property taxable. Ass 'n. of the Bar, 34 N.Y.2d at 152; see Local Law No. 46 (1971) of the City ofNew York. No targeted legislative directive exists here. 31 the distinctions among purposes and, consequently, to broaden the scope of the exemption. 9 Ops. Counsel SBEA No. 68 (1991), available at http://www.tax.ny.gov/pubs_and_bulls/orpts/legal_opinions/v9/68.htm. The bulk of the opinion in the other case Appellants rely on, Matter of Swedenborg Found., Inc. v. Lewisohn, 40 N.Y.2d 87 (1976), concerns whether distributing the writings of a single religious philosopher is a "religious" or "educational" purpose, concluding it is neither. The discussion of whether the Swedenborg Foundation is "charitable" is barely a sentence long, and this Court found that the organizational purpose of distributing books of a particular writer is not "charitable." !d. at 95. Together, these cases indicate only that tax authorities can and should determine the "primary purpose" of a would-be charitable organization through appropriate findings. No exemption is required where a group's primary purpose is to benefit its own dues-paying members (or a single author), even where some incidental social good results. Here, by contrast, the Appellate Division found that GJDC's primary purpose is entirely selfless- to rejuvenate Jamaica's distressed downtown and surrounding neighborhoods - a factual finding that Appellants cannot disprove. Thus, when the Appellate Division wrote that New York courts define as charitable "other objectives that are beneficial to the community," it was not 32 endorsing a far-reaching public benefit test, as Appellants suggest. Greater Jamaica, 111 A.D.3d at 939. Instead, the panel was acknowledging that a number of publicly beneficial purposes, including the development ofunderserved communities and lessening the burden of government, have been recognized as "charitable" under New York law. The selfless improvement of impoverished communities is the quintessential act of charity. C. It Is Well Established That Charitable Purposes Include Lessening the Burdens on Government Courts throughout the state have recognized that "[t]he word charitable encompass[ es] organizations ... which perform governmental functions by discharging social obligations which the State would otherwise have to assume, thereby lessening the burdens of taxation." Matter of Amer. Soc y for Prevention of Cruelty to Animals v. Tax Comm 'n of New York, 113 Misc. 2d 427,434 (Sup. Ct. N.Y. Cnty. 1981); see also Farm Sanctuary, 221 A.D.2d at 68-69; Sherman v. Richmond Hose Co. No. 2, 230 N.Y. 462, 468 (1921) ("[A] charitable use is not confined to the relief of the poor or to the assistance of learning and religion, but includes the advancement of objects of general public utility. Thus a trust that tends to reduce taxation and lessen the burdens of government was a charitable use.").4 4 As long ago as 1910, a New York court scoffed at the notion of denying tax exemptions for activities that shoulder the burdens of government. Matter of 33 The same concept also appears in the most relevant statutory definition. New York Not-for-Profit Corp. Law§ 551(a) expressly defines "charitable purpose" as "the relief of poverty, the advancement of education or religion, the promotion of health, the promotion of a governmental purpose, or any other purpose the achievement of which is beneficial to the community including any purpose that is charitable under the laws of the state ofNew York." (emphasis added). This definition is particularly relevant here because GJDC is incorporated under this law, and this Court has held that "[t]he test as to what is and what is not an exempt charitable corporation may be gathered from the statute under which it is incorporated." People ex rei. Untermyer v. McGregor, 295 N.Y. 237, 244 ( 1946) (holding that a public garden is tax-exempt under the predecessor to Section 420-a). Even the secondary sources cited by Appellants (App. Br. 31) embrace quasi-governmental work as "charitable." The definition of a "charitable" purpose in a charitable trust under the Restatement of Trusts, for example, includes not only "the relief of poverty" but also "governmental or municipal purposes" as well as "other purposes that are beneficial to the community." Restatement (Third) of Trusts § 28 (2003). The first definition of"Charitable" in Black's Law Dictionary Moore's Estate, 66 Misc. 116, 121-22 (Sur. Ct. Saratoga Cnty. 1910) ("I do not think the Legislature ever intended to tax benevolently inclined people for the privilege of making legacies designed to relieve the State of its burdens. No more effectual way of stopping such benevolence could be well devised."). 34 is "Dedicated to a general public purpose"- a far more expansive definition than the Second Department selected or GJDC advances here. See Black's Law Dictionary (9th ed. 2009). Similarly, New York Jurisprudence (Second) concludes that a "comprehensive and carefully drawn legal definition" of charitable is as follows: a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons, by bringing their hearts under the influence of education or religion, by relieving their bodies from disease, suffering, or constraint, by assisting them to establish themselves for life, or by erecting or maintaining public buildings or works, or otherwise lessening the burdens of government. 18 N.Y. Jur. 2d, Charities§ 2. This definition dates back at least to the mid- nineteenth century.5 GJDC's mission falls within this classic definition of charity, in which public benefit is only a component- it operates "for the benefit of an indefinite number of persons" it seeks to relieve the community from the "suffering[] or constraint" of economic depression, assists in strengthening the community's economic presence, "maintain[s] ... buildings" for public use, and otherwise "lessen[s] the burdens of government." Id. And Matter of Quail Summit, cited by Appellants, confirms that the court below was correct. In that case, the Fourth Department assumed for the sake of the 5 Authority as early as 1867 supports the above definition, including the feature of "lessening the burdens of government." Jackson v. Phillips, 96 Mass. 539, 555-56 (1867). Thus, the concept of charity does not originate in the IRS Code (App. Br. 33), but rather, the IRS Code reflects this long-standing common-law concept. 35 case that "lessening a burden of government would justify an exemption under RPTL 420-a," Quail Summit (55 A.DJd at 1296) (emphasis added). It cited two cases for that proposition. See id. (citing Matter of Canton Human Servs. Initiatives, Inc. v. Town of Canton, 4 Misc. 3d 413, 420-422 (Sup. Ct. St. Lawrence Cnty. 2004) and Mohonk Trust, 47 N.Y.2d at 483-84 (1979)). It upheld the revocation, however, because the government does not operate market-rate nursing homes, and the petitioner's activities were not primarily intended to lessen any government burden. Quail Summit, 55 A.DJd at 1296 ("petitioner failed to establish that any cognizable burden of government was lessened by its use of its property"). Quail Summit stands for the unremarkable proposition that the mere utterance of a charitable purpose is not sufficient. II. THE APPELLATE DIVISION'S CONSIDERATION OF RESPONDENTS' EXEMPT STATUS AND THE IRS TAX RULING WAS CORRECT The court below did not equate IRS tax exemption with RPTL exemption or state that an IRS exemption alone creates a presumption of RPTL exemption. Appellants' arguments regarding the IRS Ruling provide no basis for reversal. Although the Appellate Division recognized GJDC's "presumptive" eligibility based on an IRS Ruling and the exclusively charitable use of the property, that statement is dicta. The Appellate Division never suggested that the eligibility was "automatic" (App Br. 18, 19.), or prevent Appellants from 36 presenting their case. This appeal relates to a revocation decision. Thus, with or without the IRS Ruling, the burden of proving ineligibility rested with Appellants. In addition, the Second Department considered the IRS Ruling as one of many sources to confirm that GJDC's purpose is considered "charitable" and to refer to factual information that Appellants have never disputed. Indeed, the heart of the IRS Ruling relates to facts that DOF's 2011 revocation letter did not address at all- presumably because these are the same facts that demonstrate that the Section 420-a exemption was appropriate. Appellants argue that the Second Department "improperly place[ d] significant weight" on the IRS Ruling, that it "import[ ed] a finding of charitable status under federal income tax law" to the 420-a context, and that it held, based on the IRS Ruling, that "the properties themselves are now automatically relieved of also satisfying the requirements under RPTL 420-a." (App. Br. 13, 14, 19). This is not so. The panel did not import uniquely federal concepts of tax law into its analysis. The IRS concluded that GJDC's intended use of the parking facilities was charitable because the facilities would lessen burdens on government - which happens to be a well-established charitable purpose under New York law. 37 A. IRS Recognition of an Activity as Charitable Is Relevant to Interpreting the Statutorily Undefined Meaning of "Charitable Purposes" Under Section 420-a The Second Department considered the IRS Ruling as one of many factors demonstrating that GJDC's mission is charitable. Appellant DOF is not the only agency tasked with determining whether a particular purpose is "charitable." Other municipal taxing authorities, the NYS DOTF, and the Internal Revenue Service make such determinations. These determinations, in tum, may assist a court in deciding whether a particular purpose falls within the meaning of "charitable purposes." See Swedenborg, 40 N.Y.2d at 95 ("More significant are the facts that the foundation was not chartered by the Board of Regents and it is not classified as an educational institution by the Department of Education."); Farm Sanctuary, 221 A.D.2d at 68-69 (considering a restatement, a treatise and a law dictionary in assessing whether a purpose was charitable). B. The Appellate Division Did Not Use the IRS Ruling to Alter the Parties' Burdens of Proof, as the Burden of Proof Already Rested with Appellants Contrary to Appellants' suggestion, the Appellate Division did not abdicate its decision-making to the Internal Revenue Service. The panel's analysis did not end with GJDC's IRS tax status; the court below observed that a "presumptive showing" ofRPTL 420-a exemption arose from a combination of the corporation's tax-exempt status as determined by the IRS and use of property solely for 38 charitable purposes. The Appellate Division carefully examined the parking facilities' primary purpose. See Greater Jamaica, Ill A.D.3d at 940. On this latter point, the Appellate Division referenced the undisputed facts set forth in the IRS Ruling, but did not defer to the IRS. GJDC's IRS tax-exempt status could have affected only an issue of pure law: whether economic development and lessening the burdens on government are "charitable purposes." New York law makes clear that those purposes are indeed charitable, and the Appellate Division decision was correct. The Appellate Division's reliance in part on the IRS Ruling, moreover, did not relieve GJDC of any burden. Appellants, not GJDC, bore the burden of disproving the properties' exempt status. That burden shifted to Appellants because of Appellants' ruling in 2007 that the parking facilities were tax-exempt. The decision below was not affected by any presumption. Appellants simply could not prove their case. This appeal has nothing to do with whether a state or local tax agency must follow an IRS determination. The information in the IRS Ruling is not in dispute and illustrates why the DOF revocation was wrong. C. Theoretical Differences Between Federal Tax Exemption and Section 420-a Have Nothing to Do with the IRS Ruling Recognizing the Parking Facilities as Charitable The IRS's finding of charitable purpose as to JFP was not based on any issue unique to federal law. Appellants describe nuanced differences between federal 39 and state tax exemptions, suggesting that those differences were at play in the IRS Ruling regarding GJDC. That is not the case. The IRS concluded that JFP's activities were charitable for a reason that is equally relevant under Section 420-a: they would lessen the burdens on government. R. 70. Lessening the burdens on government is not a uniquely federal concept of charity, but is found throughout New York law, including the very statute under which GJDC is incorporated. See supra at 33-36. Appellants posit that the IRS Ruling addressed only whether the parking business was "substantially related" to GJDC's charitable purpose, not the more strict "exclusive purpose" standard applied under Section 420-a. (App. Br. 18-19). But the IRS Ruling additionally and separately analyzed precisely the question of whether JFP operated "exclusively" for charitable purposes. R. 69-70 (citing 26 C.F.R. § 1.501(c)(3)-1(a)(1) and 1(c)(l) for the principles that 501(c)(3) exemption requires that an organization "must be both organized and operated exclusively for one or more of the purposes specified in such section," which means "it engages primarily in activities which accomplish one or more of such exempt purposes") (emphasis added). The IRS concluded JFP met that standard, and the Appellate Division appropriately referenced the IRS Ruling. In addition, the IRS Ruling is relevant beyond the mere fact ofGJDC's tax- exempt status. The IRS reviewed in detail the history of the parking facilities, 40 including past downtown parking shortages, how the City worked closely with GJDC to fund construction of the garages, and the longstanding efforts of the City and GJDC (again, working together) to revitalize downtown Jamaica. R. 67-70. In persuasive terms, the IRS observed that the purpose ofGJDC's ownership and operation of the parking facilities was to lessen the burdens on government and was related to its general efforts to revitalize downtown Jamaica and its surrounding neighborhoods. R. 70, 71. Although Appellants bear the burden of proof, they do not challenge any of the factual information culled by the IRS, much of which is about the City government itself. The Appellate Division was not required to disregard undisputed information merely because it is set forth in an IRS document. The Appellate Division correctly relied on this information, as part of the record as a whole, when it concluded that "offering convenient and inexpensive public parking to attract visitors and businesses was central" to GJDC's overall charitable purpose of economic development. Greater Jamaica, 111 A.D.3d at 940. III. GJDC USES THE PROPERTIES FOR A CHARITABLE PURPOSE AND APPELLANTS FAILED TO MEET THEIR BURDEN TO PROVE OTHERWISE The second prong of the 420-a test, whether a property is primarily used for a charitable purpose, is a factual inquiry and has, in other cases, required a lengthy administrative record or even a trial to resolve. See Salvation Army, 100 A.D.2d at 41 3 63 (noting that the "facts developed there" - at a trial in another property tax exemption dispute concerning a Salvation Army thrift store- "must be closely examined in the context of this case"); see also Matter of Miriam Osborn Mem 'l Home Ass 'n v. Assessor of City of Rye, 80 A.D.3d 118, 138 (2d Dep't 2010) (noting that the petitioner was organized for a "hospital purpose" but considering the lengthy record of a non jury trial to determine that the property at issue was not used principally for that purpose); Matter ofTap, Inc. v. Dimitriadis, 49 A.D.3d 947, 948-49 (3d Dep't 2008) (noting that the taxing authority had "presented no evidence that petitioner is not currently pursuing the organizational purpose alleged"). A. The Parking Facilities Are Used Primarily for a Charitable Purpose and Are "Central" to GJDC's Larger Mission The record reveals that the exclusive purpose for GJDC to own and operate the parking facilities is for the economic development of downtown Jamaica and its surrounding neighborhoods, and to lessen the burdens on the City. GJDC has worked with the City government on parking and transportation issues in the area for decades, and the City arranged for GJDC to purchase and renovate certain of the facilities. The City made a significant concession on price to promote GJDC's involvement in and development of the facilities. R. 69. The parking facilities benefit not just shoppers and retailers, but also city, state and federal offices, churches, educational, medical and cultural institutions - the panoply of 42 organizations that reinforce one another to make an area thrive. GJDC took a substantial responsibility off the City's hands, and the parking facilities are key to economic recovery in the downtown area and surrounding neighborhoods. R. 201- 02. Also attesting to the primary purpose of the parking facilities is that their use is vital to GJDC's larger economic mission. The facilities are not isolated from, or unrelated to, GJDC's mission; the Appellate Division's finding that the parking facilities were "central" to GJDC's economic development mission is well supported and factually undisputed. One lot facilitated construction of the first affordable housing in downtown Jamaica in 30 years. See supra at 12; R. 21-22. More important, businesses, government, social service and cultural institutions cannot thrive if patrons and employees have no place to park, or are dissuaded by the poorly lit or unsafe conditions that predated GJDC's operation of the facilities. GJDC's operation of the parking lots is analogous to the commercial thrift store activities held charitable in Salvation Army, 100 A.D.2d at 362. There, the primary purpose of the thrift store was not the commerce of the store itself, but the creation of jobs for community members and what the Salvation Army described as "work therapy" - a benefit completely invisible to the shoppers buying goods. Likewise, the primary purpose of the parking structures is not to rent parking spaces for profit or to make money for GJDC's other charitable endeavors. 43 Supporting community development and lessening the burdens on government through resources such as safe, affordable parking is GJDC's primary purpose in operating the properties. Courts have thus recognized that parking lots, even seemingly commercial in nature, may be reasonably incidental to a larger charitable purpose. The Third Department concluded over 50 years ago that even where a parking lot does not serve an independent charitable purpose, it may be tax-exempt as long as "operation of the parking lot 'is reasonably incident to the major purpose of its owner.'" Matter of Ellis Hasp. v. Fredette, 27 A.D.2d 390,392 (3d Dep't 1967) (property used for parking lot meant for hospital patients, employees and visitors was tax-exempt even though it generated a surplus for the hospital) (quoting People ex rel. Watchtower Bible & Tract Soc y, Inc. v. Haring, 8 N.Y.2d 350, 358 (1960)). Likewise, in Matter of Vassar Bros. Hasp. v. City of Poughkeepsie, 97 A.D.3d 756 (2d Dep't 2012), the portion of a parking garage used for and by a hospital was exempt under Section 420-a, see id. at 758, whereas the exemption did not apply to a portion of the garage leased to the private physician group (which of course would have had to pay property taxes if it had purchased the property outright rather than leased it).6 6 Notably, GJDC does not seek an exemption for the portion of one parking facility that is leased to a commercial entity. R. 202. 44 Nor is it required that the parking facilities be physically joined to a building where charitable activities occur. In other contexts, Appellant DOF agrees. In Finance Letter Ruling 074873-021, a not-for-profit entity used Dormitory Authority bonds to build dormitories that provided affordable housing to New York City college students. Letter Ruling No. 074873-021, 2007 N.Y. City Tax LEXIS 17, Nov. 21, 2007, attached to Amended Verified Petition. R. 155-61. DOF agreed that the taxpayer's purpose in operating the dormitories was educational, in that dormitories were necessary for achieving students' educational goals. DOF reached that conclusion even though the dormitories were not meant for students of a particular college, but college students in general. Likewise, here both GJDC and the City (which gladly transferred ownership of the facilities to GJDC) have long identified the need for safe, affordable parking in downtown Jamaica as a required component of economic development. B. Appellants Made No Findings of Fact Disputing the Parking Facilities' Primary Purpose and No Evidence Supports Such Findings Appellants refer numerous times to a supposed "stand-alone, for-profit, commercial parking lot," but this description is sleight of hand. The issue under RPTL 420-a is the "primary purpose" ofGJDC's activity, not whether the activity involves commerce. And the issue is fact-intensive. Thus, two separate cases involving the same activity (operating a thrift shop) produced very different 45 results. In Matter of Stuyvesant Sq. Thrift Shop, Inc. v. Tax Comm 'n of City of New York, 54 N.Y.2d 735, 737 (1981) the exemption was denied. The owner cited the sale of discounted goods, but the lower court found, as a factual matter, such discounts "to be occasional only rather than the primary activity of petitioner which would qualify it for exemption." Stuyvesant Sq. Thrift Shop, 54 N.Y.2d at 737. In contrast, in Salvation Army, the exemption was upheld based on the stated purpose of therapy for its workers. "[C]ritical" to the Salvation Army court's decision was that "the importance of the thrift store as a rehabilitative tool utilized by the Army was established at a trial [in another case]." Salvation Army, 100 A.D.2d at 363 (citing Matter of Salvation Army v. Comm 'n of Assessment & Taxation ofVil. of Port Chester, 110 Misc.2d 1036, 1040-41 (Sup. Ct. Westchester Cnty. 1980)). The lesson of Stuyvesant and Salvation Army is that the primary purpose of the property is a factual matter.7 Appellants' brief rests on numerous assertions about the parking facilities that have no support in the record. They assert, for example, that the parking lots are not incidental to other charitable activities (App. Br. 26), that the businesses aided by these facilities are not "needy," id. at 35, and that GJDC's "primary 7 Appellants refer to the revenue generated by all five facilities as reported in GJDC's Form 990, for which Appellants provide a website citation. This is beyond the administrative record. In any event, no court decision suggests that the amount of revenue is a factor in determining whether a property is used for a charitable or noncharitable purpose. The volume of sales at the Salvation Army stores, for example, is not discussed in the opinion. 46 objective" for the parking lots is profit, with charity merely a "claimed pretext," id. at 40.8 As serious as Appellants' accusations are, there is nothing -literally nothing- in the record to refute GJDC's primary purpose. Thus, the primary purpose of the parking facilities satisfies Section 420-a because it is charitable in and of itself, i.e., for economic development and the lessening of the burdens of local government. Appellants repeatedly refer to the parking lots as "free standing," an assertion they do not support or explain with facts. One would expect Appellants to back up these claims with a thorough review ofGJDC's other economic development activities as of 2011, an analysis of how parking and transportation issues affect the downtown Jamaica economy, and potentially expert testimony. In fact, analysis would have shown that JFP's facilities are tightly woven into the social and economic community of southeast Queens. It is also incorrect to characterize the 2011 DOF letter ruling as asserting that DOF made the "determination ... that the subject parking garages here are exclusively commercial in nature and are 'the very purpose for which the properties are being used.' " (App. Br. 38). The words "exclusively commercial" appear nowhere in the DOF 2011 letter ruling. DOF never made any finding that 8 Whether or not GJDC's facilities benefit the "needy" is irrelevant to the charitable purpose of lessening the burdens of government, which has nothing to do with serving the needy. 47 the parking lots were "exclusively commercial in nature," much less in purpose. Rather, DOF's 2011 letter ruling stated that "Here the parking lots are not incidental to another recognized charitable purpose but are the very purpose for which the property is used." R. 75. The choice of language is telling. DOF does not dispute that the parking facilities are intertwined with GJDC 's primary purpose; instead, it merely finds that the facilities are not incidental to what DOF regards as a "recognized charitable purpose." DOF thus did not make any meaningful findings of fact, instead relying on a faulty legal premise about the limits of "charitable purposes." Further, to say that "the parking lots ... are the very purpose for which the property is being used," is a tautology. One might just as easily conclude that the purpose of a thrift store is to run a thrift store, or that the purpose of a nursing home is to run a nursing home, but the proper Section 420-a analysis cannot end there. C. GJDC Is Entitled to the RPTL 420-a Exemption Regardless of Whether the Parking Facilities Generate Net Proceeds For purposes of this appeal, it makes no difference that the cost to operate the parking facilities is less than the revenue they generate. The question is whether the property is being used to accomplish GJDC's charitable purpose, even . though the activity takes a form that resembles commercial activity: 48 That these people (or the government agencies that support them) pay market rents, and that 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 exclusively" for RECAP's charitable purposes. RECAP could lose its exemption under RPTL 420-a( 1 )(b) if the economic benefit went to its officers or employees personally, but an economic benefit to a charitable organization does not by itself extinguish a tax exemption. The question is how the property is used, not whether it is profitable. Adult Home, 10 N.Y.3d at 216 (emphasis added). And, as in Plattsburgh, the revenues earned by the parking lots are also "reinvested to further petitioner's purpose of revitalizing the economy ofthe local community." Plattsburgh, 101 A.D.3d at 25. Appellants nonetheless argue that the mere existence of net proceeds disproves a party's charitable purpose, which is contrary to the statute. Under the statute, net proceeds from a property's operations are consistent with its exempt status, as long as the enterprise is not a "pretense" for profit-making, and as long as those proceeds are not enjoyed by the corporation's officers, members or employees: Real property such as specified in paragraph (a) of this subdivision shall not be exempt if any officer, member or employee of the owning corporation or association shall receive or may be lawfully entitled to receive any pecuniary profit from the operations thereof, except reasonable compensation for services in effecting one or more of such purposes, or as proper beneficiaries of its strictly charitable purposes; or if the organization thereof 49 for any such avowed purposes be a guise or pretense for directly or indirectly making any other pecuniary profit for such corporation or association or for any of its members or employees .... RPTL 420-a(b ). Thus, Section 420-a expressly contemplates that charitable activities may generate net revenues from operations, and the Legislature declared that such revenues do not preclude tax-exempt status. Notwithstanding the fact that the parking facilities generated positive net revenues, the Appellate Division correctly held that they are primarily for charitable purposes. D. The "Actual Use" of the Parking Facilities Is for a Charitable Purpose Appellants cite Lackawanna for the principle that the "actual use" of the property is what matters, but that issue has no relevance here. The "actual and physical use" of the property was key in Lackawanna because there the development company had given up possession of the property entirely, leasing it to a for-profit manufacturer. Here, GJDC maintains complete ownership and control of the facilities, ensuring they are operated exclusively to fulfill GJDC's mission. GJDC relieves the burdens of government and attracts individuals, businesses and commerce to downtown Jamaica through the parking facilities themselves. Indeed, the parking facilities are much more in "actual use" than the undeveloped land in Plattsburgh, 101 A.D.3d at 24-25. There, the Third 50 Department ordered that a nonprofit created to redevelop land once used as an air force base was entitled to a 420-a exemption for land that it was merely marketing for sale. Indeed, the Third Department noted that "petitioner's very purpose is to own, maintain, market and sell this land to promote economic development." !d. at 24. The case for the exemption is even stronger here; GJDC actively operates and maintains the parking facilities to promote economic development by providing essential safe and affordable parking that local government cannot provide. Such community development is the very charitable purpose for which GJDC was formed. CONCLUSION For the foregoing reasons, Petitioners-Respondents respectfully request that the Court affirm the decision below. Dated: New York, New York November 6, 2014 MANATT, PHELPS & PHILLIPS, LLP Kimo S. Peluso Andrew Case 7 Times Square 51 New York, NY 10036 (212) 790-4500 Attorneys for Petitioners-Respondents