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. Index No. 2l2l5lll APL -2014 - 00165 To be argued by: Vincent D'Orazio (15 minutes) STATE OF NEW YORK COURT OF APPEALS In the Matter of GREATER JAMAICA DE,VELOPMENT CORPORATION And JAMAICA FIRST PARKING, LLC., Petiti oners-Re spondents, - against - TAX COMMISSION OF THE CITY OF NE\M YORK and NEV/ YORK CITY DEPARTMENT OF FINANCE, Respondents-Appellants. APPELLANTS' BRIEF LEONARD KOERNER, VINCENT D'ORAZIO, ANDREA M. CHAN, Of Counsel ZACHARY \M. 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) 3s6-4069 achan@law.nyc.gov September 19,2014 TABLE OF CONTENTS TABLE OF AUTHORITIES PRELIMINARY STATEMENT STATEMENT OF JURISDICTION...,.. QUESTIONS PRESENTED. . . . THE RELEVANT STATUTE FACTS... DECISIONS BELOW... ARGI.II\4ENT PAGE ll 1 J J 7 4 7l) The Trial Court Decision... 2) The Appellate Division Decision THE DECISION OF THE APPELLATE DIVISION IS CONTRARY TO COURT OF APPEALS PRECEDENT BECAUSE IT IMPROPERLY ACCORDS SIGNIFICANT WEIGHT TO IRC s01(cX3) STATUS IN DETE,RMINING ELIGIBILITY FOR AN RPTL 420- A STATE, LAW REAL PROPERTY TAX EXEMPTION AND BECAUSE IT EXPANDS THE DEFINITION OF "CHARITABLE" I-INDE,R RPTL 420- A TO REACH FOR-PROFIT, STAND-ALONE PARKING FACILITIES BECAUSE TFIE, FACILITIES ARE CLAIMED TO BENE,FIT TFIE PUBLIC, A RESULT CONTRARY TO THE LACKAWANNA DECISION OF THIS COIIRT.... 8 10 4 CONCLUSION 42 TABLE OF AUTHORITIES Cases Adult Home at Erie Statíon v. Assessor, 10 NY3d 205 (2008).............. Matter of Met Life Ins Co v. Boland, 28r NY 3s7 (te3e)........ Matter of Miriam Osborn Memorial Home Association v. Assessor of City of Rye, 80 AD3d I l8 (3d Dept. 2010) Mqtter of Míríam Osborn Mem. Home Assn v. Assessor of City of Rye, Pages Amerícan Bible Soc v, Lewisohn, 40 NY2d 78 (1976)........ ....24-2s,27,29 American Soc þr Prevention of Cruelty to Animals v Tax Comm of NY, I 13 Misc 2d 427 (Sup Ct, NY County 1981) .31-32 Associqtion of the Bar of the City of New Yorkv. Lewisohn, 13, 15, 16, 18,25,27 Colt Industríes v. Department of Fínance, 66 NY2d 466 (1e8s) Matter of Ellis Hospital v. Schenectady, 288 ADzd s8l (3d Dept 2001) ...........' 38 Matterof Farm Sanctuary v. Patton, 221 AD2d667 (3d Dept. 1996) .9,30,31 Matter of Gilman v. DHCR, 99 Ny2d r44 (2002)......,....... .....,........ l0 Matter of Greøter Jamaica Dev Corp v. Tax Commission, 111 AD3d 937 (2d Dept 2013) 2,13,16,20,21,26,30,33,37 Matter of Løckawannq Community Dev Corp v, Krakowski, 12 NY3d 578 (2009).............. .... 11 ,13,14,18,22,23,36,37 11,24 30-31 29 25 - ll- 27 5 AD2d 714 (2d Dept 2000) ll Matter of New York Botanical Garden v. Assessors of the Town of [4/ashington, ss NY2d 328 (1982) Matter of St, Francis Hospital v. Taber, 76 AD3d 635 (2d Dept 2010) Matter of Swedenborg Foundation v, Lewisohn r1,28 Matter of Níøgara Mohawk Power Corp. v. Town of Potsdam Bd. of Assessors, 216 ADzd775,776 (3d Dept 1995), lv denied 87 NY2d 802 (1995) 1l Matter of Peckham v. Calogero, 12 Ny3d 424 (2009).............. ............... 10 Matter of Pell v. Board of Education, 34 NY2d 222 (te74)....... Matter of Quaíl Summít, Inc. v. Town of Canandaigua, 55 AD3d 1295 (4th Dept 2008), lv denied 1 I NY3d 716 (2009).....,........ 11,34 Matter of Salvation Army v. Town of Ellícott Bd of Assessment Review, 100 AD2d 361 (4th Dept 1984) 40-41 l0 38 40 NY2d 87 (te76) Matter of Vassar Bros. Hospital v. Poughkeepsie, 97 AD3d7s6 (2d Dept 2012) Mobil Oíl Corp. v. Finance Administrator, s8 NY2d 9s (1e83).......... Mohonk Trust v. Board of Assessors of Town of Gardiner 42 NY2d 476 (re79) North Manursing faridlife Sanctuary v. City of Rye 48 NY2d r3s (te7e) P I at t s b ur gh A ir b as e Re dev el opm ent C orpor at ion v. Ro s enb aum, r-2, 9, 13, 15, 16, 17, 26, 27 38, 39 11,24 18,27 28,29-30,3r 101 AD3d 2 (3d Dept 2012) - lll- 1, 8-9, 2r,33-34 Stuyvesant Square Thríft Shop v, Tax Commission, s4 NY2d 73s (le8l)......,..... 36,40 Symphony Space v, Tíshelman 60 NY2d 33 (1e83)........ 28-29, 30 Yeshiva Beth Yehuda Vchaim D'Betlan v. Town of Shandaken, 100 AD2d 641 (3d Dept. 1984) ..........21 Statutes 26 CFR $ 1.s01[c][3]-1tdlt2l) .......'........ le J IRC $501(c)(3) ......1,3,6,8, 10, 13,14,15,16,17,18,19,20,21,24,33 IRC $ 5 13(a) . l- lil::: ::i : 1i' f;,';l: l¿,'];,']å,'l;,'l;,'f;,'l;,']¿,'l;, 4,40 t8 2t )) 40 RPTL $a20-(a)(1Xa) RPrL $a20-(aXlXb) www.eri-nonprofit- s al arie s. c om/index. cfm? Fus eAc tion : N P O. Form9 9 0 &EIN : 2 3 7 0 2 I 2 7 3 4, 15, 17,36 RPTL ç421 Secondary Sources Hístorícal Development and Present Law of the Federal Tax Exemptionþr Charítíes qnd Other Tax-Exempt Organizations, Publication No. JCX-29-05 April 19,2OO5,located on The Congress of the United States Joint Committee on Taxation website: http://wwwjct.gov/x-29-05.pdf.............. 19-20 http : //www. irs. gov/Charities - &-Non- P r ofit s / Char itabl e- Organizations/Organizational-Test-Internal-Revenue-Code-Sectíon-501(c)(3).,..17 http : //www. irs. gov/Charitie s - &-N on- P rofits /Charítab I e- Organizations/Operational-Test-Internal-Revenue-Code-Section-501(c)(3).........17 - lv- 40 PRELIMINARY STATEMENT This is an appeal from an Order of the Appellate Division, Second Department dated November 27, 2013 which reversed the Order of the Supreme Court dated April 2,2012 and held that the City's revocation of the tax exemption did not have a rational basis. This case raises the fundamental question of whether an organization's status under federal tax law can be deemed to establish presumptive eligibility for a New York State mandatory real property tax exemption under Real Property Tax Law 420-a. This question arises because the Appellate Division, Second Department, in reversing the lower court, erroneously granted petitioners a real property tax exemption, holding that the operation of stand-alone, for-profit, commercial parking facilities qualifies as a "charitable" use under RPTL 428-a. In reaching this result, the Appellate Division relied on petitioners' status as an Internal Revenue Code ("IRC") $ 501(c)(3) organization and cited with approval a recent Third Department decision stating that IRC $ 501(c)(3) status establishes presumptive eligibility for a state real property tax exemption (Plattsburgh Airbase Redevelopment Corporation v Rosenbaum, l0l AD3d 2t l3d Dept 20t21). The Appellate Division's decision ignores the precedent of this Court which states that IRC 501(cX3) status has no bearing on eligibility for an RPTL 420-a real property tax exemption (see Swedenborg Foundation v Lewisohn, 40 NY2d 87 (tl9761). The Appellate Division decision is also contrary to both the mandate of the Legislature to narrow the categories eligible for mandatory tax exemptions and the well-established standard requiring that eligibility for tax exemptions under RPTL 420-a be strictly construed, The Apfellate Division also erred in accepting petitioners' arguments that its for-profit commercial parking lots should be deemed "charitable" because they provide a "public benefit" and "lessen the burdens of government." It is clear from prior decisions of this Court and the legislative history surrounding RPTL 420-a, that neither of these considerations establishes eligibility for a charitable tax exemption under RPTL 420-a. The issue of eligibility for tax exempt status under RPTL 420-a is of critical statewide importance because relaxing the standard for establishing tax exempt status will adversely affect not only the tax base of the City of New York, but that of every municipal taxing jurisdiction in the State. Such an outcome is foreshadowed by the Appellate Division's acceptance of the notion that "charitable" activity under RPTL 420-a includes the "offering [of] convenient and inexpensive public parking to attract visitors and businesses" (Matter of Greøter Jamaica Dev Corp v Tax Commission, lll AD3d 937,940 [2d Dept 2013]). This formulation opens the door to similar claims by commercial entities seeking tax exempt status who would likewise claim that a community benehts from the 2 successful operation of their own commercial enterprises and, therefore, they too are deserving of tax exempt status. It cannot be seriously disputed that by increasing the number of entities that are eligible for real property tax exemptions, a coTïesponding decrease in tax revenue will occur, and such a shortfall can only be made up by increasing the tax burden on the tax-paying base, or by reducing or eliminating services. STATEMENT OF JURISDICTION This Court has jurisdiction pursuant to CPLR 5602(a)(1xi) because this proceeding originated in the Supreme Court and the Court of Appeals granted leave to appeal from a final order of the Appellate Division that is not appealable as of right (R205-207). QUESTIONS PRESENTEI) (1) Did the Appellate Division err in holding that the mere showing of IRC $501(cX3) status creates presumptive eligibility for a real property tax exemption under RPTL 420-a? (2) Whether the term "charitable" under RPTL 420-a should be so broadly . construed so as to encompass for-profit commercial parking facilities which its owners claim provide a public benefit or lessen the burdens of government? The City first raised the questions presented before the Supreme Court a J in their cross-motion to dismiss the petition (R. 191-98). Petitioners then raised the issues on appeal to the Appellate Division (see Pet'r Br in App Div at l, 12-25). Thus, the questions presented have been preserved for this Court's review. THE RELEVANT STATUTE New York Real Property Tax Law $ 42}-aprovides the statutory basis for the real property hx exemption sought by petitioners. The statute provides: [r]eal property owned by a corporation or association organized or conducted exclusively for religious, charitable, hospital, educational, or moral or mental improvement of men, women or children pu{poses, or for two or more such purposes, and used exclusively for carrying out thereupon... shall be exempt from taxation as provided in this section. RPTL 420-altltal.) Furthermore, a tax exemption is disallowed if the organization "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-alrltbl). FACTS Petitioners ("GJDC") claim that they are formed for the primary purpose of promoting commerce in the business-commercial-retail district of Jamaica, Queens (R 18, 44) and that their operation of five (5) commercial parking garages serves a charitable purpose under RPTL 420-a (R 13-29). The subject 4 parking facilities are free-standing, for-profit, commercial parking garages that allegedly offer parking at a reduced rate or (unspecified on this record) "low cost" to customers in Jamaica, Queens. Aside from this unsupported claim, petitioners' parking facilities are indistinguishable from the hundred of other parking facilities operating in New York City. Petitioners have never denied that their commercial parking facilities earn a profit. Nor do petitioners claim that parking at their facilities is offered to the public for free or even that the rates they charge are de minimis. Each garage charges for the use of its facilities (R 2l) and petitioners concede that the properties generate not only profits, but excess revenues (R 201). Nevertheless, petitioners contend that the properties are entitled to a charitable tax exemption under RPTL 420-a because they "further [petitioners'] charitable goal of enhancing economic recovery and development - commerce, higher education, government services, public transportation in downtown Jamaica" (Pet'r Br in App Div at 18). For four years, petitioners enjoyed a full exemption from real property taxes for its hve public parking facilities (Pet'r Br in App Div at 9-10), which has saved them at least $700,000 each year in annual taxes (Pet'r Br in App Div af l7). However, in 20ll the NYC Department of Finance ("DOF" or "Finance") conducted a review to determine if tax exempt status was waranted for petitioners' 5 stand-alone commercial parking garages. DOF determined that the exemption had originally been granted in error (R 73-75). By letter dated February 23,2011, Finance notihed petitioners of its intention to revoke the 420-a tax exemption from the properties. The letter stated that: [b]ased on [a] review of the applicable statutes, rulings and case law, as well as submissions from GJDC to Finance, we have concluded that the properties... are not entitled to a tax exemption under Real Property Tax Law section 420-a fsince] under RPTL 420-a, only real property owned by an entity organized for 'religious, charitable, hospital, educational, or moral or mental improvement of men, women, or children purposes' and 'used exclusively... for carrying out... such purposes' is exempt. (R 74.) DOF further noted in its determination that "the parking lots are not incidental to another recognized charitable purpose but are the very purpose for which the property is being used" (R 75). Finance further explained that "the [501(c)(3)] status granted GJDC by the IRS [was] not determinative of the issue of charitable use of the property as defined by 420-a." Rather, "case law interpreting 420-a fis what] governs" (R 74) 6 DECISIONS BELOW 1) The Trial Court Decision By Decision and Order, dated April 2,2012 and filed April 16,2012, Justice Bernice D. Siegal of the Queens County Supreme Court denied petitioners' Article 78 petition and granted the City's cross-motion to dismiss the petition. Justice Siegal held that the Department of Finance determination to revoke the RPTL $ 420-a tax exemptions from the subject parking facilities was made with a reasonable basis and that the agency determination was neither arbitrary nor capricious (R 1l). In so holding, Justice Siegal rejected petitioners' contention that their stand-alone public parking facilities qualif'for a full exemption from real property taxes under New York Real Property Tax Law 420-a because they are operated for a charitable purpose (R 6-7). The lower court reviewed Court of Appeals precedents which "discussed the distinction between a purpose that is for public benefit and those enumerated in section 420-a" (R 8). In addition, the court noted that the legislative history supporting section 421, section 420-a's predecessor, indicates that"taxexemptions in the first half of the 20th century had been growing at an alarming tate," and that "it was in response to these realizations that the legislature enacted chapter 414 of the Laws of 1971, in an attempt to limit 7 exemptions to only nonprofit organizations conducted exclusively for religious, educational, charitable, hospital or cemetery purposes" (R 8). While noting that petitioners' tax exempt status for its commercial garage properties had been the subject of a newspaper article, Justice Siegal stated that the basis for DOF's determination was "...case law that draws a distinction between public benefit and charitable pu{poses, as well as legislative history indicating the legislature's intent to construe the categories formed by section 420- a narrowly" (R l1). 2) The Annellate n I)ecision The Appellate Division reversed the trial court. First, the Appellate Division relied upon petitioner's IRC $ 501(c)(3) status and its qualification for a federal income tax exemption to establish presumptive eligibility in meeting the requirements of New York's RPTL 420-a. Relying solely on a 2001 IRS letter ruling, the Appellate Division held that IRC $ 501(c)(3) status satisfies in effect both the "charitable purpose" and "charitable use" prongs of the 420-a test (R 210- l1). In its opinion, the appellate courtruled that"a property owner seeking areal 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"' (R 211 citing Plattsburgh Airbase Redevelopment 8 Corporation v Rosenbaum, 101 AD3d 21,23 [3d Dept 2012]). The Appellate Division chose explicitly to decline to follow controlling Court of Appeals precedent, which states that IRC 501(c)(3) status has no bearing on determining eligibility for an RPTL 420-a exemption (Swedenborg Foundation v Lewisohn, 40 NY2d 87, 95 (t19761). Indeed, the Appellate Division's decision goes so far as to cite to this Court's decision in ,Swedenborg as contrary authority (R 211) and otherwise disregard the holdin g \n Swedenborg. Second, the Appellate Division equated the concept of conferring a public benefit to carrying out a "charitable purpose" under RPTL 420-a (id.). The Appellate Division relied on the decision of the Third Department in Farm Sanctuary v Patton, in which the court stated that "[a]bsent a precise statutory definition of 'charitable purpose,' courts have interpreted this category to include relief of poverty, advancement of governmental and municipal pu{poses, and other objectives that are beneficial to the community (R 2l I citing Farm Sanctuary,22l AD2d 67 , 68-69 [3d Dept 1996]). 9 ARGUMENT THE DECISION OF THE APPELLATE DIVISION IS CONTRARY TO COURT OF APPEALS PRECEDENT BECAUSE IT IMPROPERLY ACCORDS SIGNIFICANT \ryEIGHT TO IRC s01(c)(3) STATUS IN DETERMINING ELIGIBILITY FOR AN RPTL 420-A STATE LA\ry REAL PROPERTY TAX EXEMPTION AND BECAUSE IT EXPANDS THE DEFINITION OF ..CHARITABLE'' UNDER RPTL 420.A TO REACH FOR-PROFIT, STAND-ALONE PARKING FACILITIES BECAUSE THE FACILITIES ARE CLAIMED TO BENEFIT THE PUBLIC, A RESULT CONTRARY TO THE LACKAWANNA DECISION OF THIS COURT. (1) In an Article 78 proceeding challenging an agency determination, the standard of judicial review is whether the determination is arbitrary and capricious or devoid of a rational basis (Matter of Pell v Board of Education,34 NYzd 222, 231 ll97 4l; see also Mqtter of Gilman v DHCR,99 NY2d 144, 149 120021). If the reviewing court concludes "that the determination is supported by a rational basis, it must sustain the determination even if the court concludes that it would have reached a different result than the one reached by the agency" (Matter of Peckham v Calogero,12 NY3d 424,431 [2009]). - l0- Here, where the City seeks "to withdraw a previously granted tax exemption, the municipality bears the burden of proving that the real property is subject to taxation" (Matter of Lacknwqnna Community Dev. Corp. v Krakowski, 12 NY3d 578, 581 [2009]; New York Botanical Garden v Assessors of Town of Washington, 55 NY2d 328,334 [1982]). This burden may be met by proving, for example, a change in the law governing the applicable exemption (see e.g. Matter of Niagara Mohawk Power Corp. v Town of Potsdam Bd. of Assessors,216 AD2d 775,776 [3d Dept 1995], lv denied 87 NY2d 802 [1995]), a change in the use of the properfy (see e.g, Matter of Míríam Osborn Mem. Home Assn. v Assessor of Cíty of Rye, 275 AD2d 714,715 l2d Dept 20001), or that the tax exemption "was effoneously awarded in the first instance" (Matter of Quøil Summit, Inc. v Town of Canandaigua, 55 AD3d 1295, 1297 [4th Dept 2008], lv denied I I NY3d 716 t2009])). Here, it is the City's position that the tax exemption was effoneously awarded in the first instance Moreover, it is well settled in this State that tax exemption statutes are to be strictly construed against the taxpayer seeking the benefit, and in the case of ambiguity, àfry doubt is to be resolved in favor of the taxing authority (see Colt Industries v Department of Fínance,66 NY2d 466,471 [985]; Mobíl Oil Corp. v Finqnce Administrator,53 NY2d 95,99 [1983]). - 1l - Notwithstanding that the burden is upon the City to prove ineligibility under RPTL 420-a, the statute still remains one which grants an exemption Therefore, Section 420-a of the RPTL is to be strictly construed against the party seeking the exemption regardless of whose burden it is to prove eligibility or ineligibility. Here, it is clear from this Record that the Department of Finance met its burden of proof as it reached its determination following a thorough review of the applicable statutes, rulings, case law, as well as petitioners' own submissions (see the Department of Fínance's letter determination dated February 23, 201 I,R 74-75). As discussed in Finance's comprehensive analysis (R 74-75) and in even greater detail below, petitioners' parking lots fail to satisff the strict requirements for a tax exemption under RPTL 420-a for numerous reasons and were clearly awarded the exemption in error. Consequently, as the lower court held, Finance's determination to revoke the real property tax exemption was made with a reasonable basis and was neither arbitrary nor capricious. However, the Appellate Division conflated these standards of review. The Second Department misinterpreted the burden shift to the municipality as grounds for relaxing the well-established standard that tax exemptions are to be strictly and narrowly construed against the taxpayer. Without any explanation or analysis, the Second Department merely states that "respondents failed to meet - 12- 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" and "[a]ccordingly...the respondents' revocation of the tax exemption did not have a rational basis and was, therefore, arbitrary and capricious" (Matter of Greater Jamaica, Il l AD3d 937 ,939-40 l2d Dept 2013]). Giving no weight whatsoever to Finance's letter determination, the controlling precedent of this Court, or the mandate of the Legislature to construe tax exemptions under RPTL 420-a narrowly, the Appellate Division erroneously applied its own newly formulated standard of review and, as a result, reached the wrong conclusion (2) In its reversal of the lower court, the Appellate Division improperly places significant weight on petitioners' IRC 501(cX3) status, finding the mere showing that petitioners are a 501(c)(3) organization to establish "presumptive eligibility" for obtaining a real property tax exemption under RPTL 420-a (Matter of Greater Jamaica at940) This holding directly contravenes long-standing Court of Appeals precedent (see Matter of Swedenborg Foundqtion v Lewisohn, 40 NY2d 87,95 11976l; see also Association of the Bar of the City of New York v Lewisohn,34 NY2d 143,154ll97a]; Matter of Lackawqnna Community Dev Corp v Krakowski, - 13- 12 NY3d 578 [2009]). In so holding, the Appellate Division improperly introduced a new factor in the analysis employed to determine whether a property is eligible for a real property tax exemption when claiming it is organized or conducted exclusively for a charitable purpose under RPTL 420-a. The consequences of importing a finding of charitable status under federal income tax law are far reaching for two additional reasons. First, IRC 501(c)(3) is not only broader in scope than RPTL 420-a, it is a completely separate and independent federal statutory provision. Section 501(c)(3) of the Internal Revenue Code provides a federal income tax exemption to organizations while RPTL 420-a provides a real property tax exemption to properties. Second, in relying upon IRC 501(c)(3) status to establish presumptive eligibility for a charitable exemption under RPTL 420-a, the principle that tax exemptions are to be narrowly construed is undermined. A review of this Court's decisions issued shortly after the passage of RPTL 420-aln l97l are not only controlling, but serve as a much needed reminder of the circumstances and concerns that led to this legislation limiting the categories eligible for mandatory real property tax exempt status. Today, where municipalities struggle to maintain their fiscal health, these concerns are no less valid. - t4- A party seeking to quali$, for a tax exemption under RPTL 420- 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 (Assocíation of the Bar of the City of New Yorkv, Lewísohn,34 NY2d 143,153 [974]). In other words, owners seeking to qualiff for an RPTL 420-a exemption must satisff a two-prong ownership and use test. This standard alone has governed the analysis for determining an entity's entitlement to a mandatory real property tax exemption since the passage of RPTL 420-a in 1971. By its express terms, RPTL 420-a makes no mention whatsoever of IRC 501(cX3) status as establishing presumptive eligibility for a real property tax exemption. That is simply not the test under this state statute. In Matter of Swedenborg Foundation v Lewisohn, a nonprofit foundation classified by the IRS as a 501(cX3) income tax-exempt organization was denied an RPTL 420-a tax exemption despite the fact that it was recognized as a federally tax exempt entity (40 NY2d 87,95 ll976l). There, this Court refused to accept petitioner's federal tax status as a substitute for satisfoing the strict requirements of RPTL 420-a. In denying the 420-a tax exemption, this Court stated, "[n]or does the fact that the foundation has received favorable - 15- determinations from the United States Department of the Treasury as to its exempt status for other tax purposes affect the outcome" (id.). Similarly, in Association of the Bar v Lewísohn, 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 commonly recognized as "charitable" in other tax-related contexts (34 NY2d 143 lI974l). The Court of Appeals found that "decisions acknowledging the charitable. . . character of Bar Associations in other contexts for other explicit and distinguishable purpo es are unpersuasive" when evaluating a claim to an RPTL 420-a tax exemption (id. at 154). Thus, the clear principle that emerges from this Court is that federal IRC 501(cX3) status has no bearing on a nonprofit corporation's eligibility for a real property tax exemption under RPTL 420-a. Yet remarkably, as noted earlier, the Appellate Division cites to this Court's decision in Swedenborg as contrary authority on this issue (see Matter of Greater Jamaica at 939). The seminal decisions issued by this Court shortly after the passage of RPTL 420-a are rooted in the unassailable principle that federal income tax and state property tax schemes are not interchangeable. Moreover, it is inappropriate to default to an organization's federal tax status to determine what is a uniquely state law concern, - t6- that is based entirely on a state statute. In fact, it is readily apparent from a review of IRC 501(c)(3) that this provision is far broader in scope than RPTL 420-a. As made clear by this Court's decisions in Swedenborg and Association of the Bar v. Lewisohn, an organization's federal tax status does not establish its qualifications for a real property tax exemption under RPTL 420-a. For over 42 years, IRC 501(cX3) and RPTL 420-a have co-existed yet have functioned independently of each other. IRC 501("X3) and RPTL 420-a are separate statutes with separate missions. Section 501(c)(3) of the Internal Revenue Code provides a federal income tax exemption to entities based on their organization and operation (see the IRS's "organizational test"l and "operational test"? for IRC 501(c)(3) as described on its website). By contrast, RPTL 420-a provides a local real property tax exemption to properties based on their ownership and use (see RPTL 420-all]ta]). Thus, IRC 501(cX3) looks to the organization and operation of an entity, while RPTL 420-a looks to the ownership and use of a property. Although an entity may be deemed "charitable" for federal income tax purposes under IRC 501(c)(3), this does not mean that all of its properties are automatically entitled to a real property tax exemption under RPTL 420-a. Each property must be examined independently I http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations/Organizational-Test- Internal-Revenue-Code-Section-5 0 1 (c)(3) 2 http://www.irs.gov/Charities-&-Non-Prohts/Charitable-Organizations/Operational-Test- Internal-Revenue-Code- Section-5 0 I (cX3 ) t7- to see if it is actually being used for a charitable purpose (see Matter of Lackqwanna Community Dev. Corp. v Kralcowski,12 NY3d 578, 581 [2009] ("It is the actual or physical use of the property that the Real Property Tax Law is concemed with when it exempts from taxation property 'used exclusively for carrying ovt thereupon one or more' exempt purposes)). Here, the IRS found that "the operation of the parking facilities by TGJDC] [did] not constitute an unrelated trade or business... within the meaning of IRC 513" (R 72) and would therefore not defeat the continuation of GJDC's federal income tax exemption. IRC 513 merely requires that any trade or business operated by the corporation be "substantially related" to the corporation's charitable purpose (see IRC 513[a]). This is starkly different from the more stringent requirement under RPTL 420-a that a property seeking exemption be "exclusiv.ly"'used in furtherance of an organization's charitable purpose. Thus, here, the IRS concluded that petitioners' operation of commercial parking facilities was not enough to compromise GJDC's income tax exemption under 501(c)(3). However, this, by no means, signifies that the parking facilities are now automatically entitled to real property exemptions. This is an entirely separate test. Just because the IRS allowed GJDC to run parking lots 3 In the context of RPTL 420-a,the word "exclusive," has been held to connote "principal" or "primary" (Association of the Bar v. Lewisohn aI153; Mohonk Trust v Board of Assessors of Town of Gardiner, 42NY2d 476,483 [1979]). 18 - without taking away its income tax exemption, this does not mean that the properties themselves are now automatically relieved of also satis$ring the requirements under RPTL 420-a. If this were the case, there would be no need for a separate test under the state statute Moreover, IRC 501(c)(3) is an expansive income tax exemption statute that defines "charitable" so broadly so as to include all of the following: relief of the poor and distressed or of the underprivileged; advancement of religion; advancement 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 pulposes, or (i) to lessen neighborhood tensions; (ii) to eliminate prejudice and discrimination; (iii) to defend human and civil rights secured by law; or (i,r) to combat community deterioration and j uvenile delinquency (see 26 CFR $ 1.s01 [c][3]-l tdlt2l). According to the Congressional Joint Committee on Taxation, "this definition is broad, encompassing several ideas that would not generally be considered as charitable in the ordinary sense" (see page I of the Hístorical Development and Present Law of the Federal Tax Exemptíon for Charítíes and Other Tax-Exempt Organizations, Publication No. JCX-29-05 April 19, 2005, - 19- located on The Congress of the United States Joint Committee on Taxation website : http ://www j ct. gov/x-29-05 .pdf). The Committee goes on to note: the term 'nonprofit' generally refers to an organization's form under State law, not its Federal tax status. The Federal exemption is extended in some instances to organizations that are not subject to a State-law constraint on distributions, as some entities are not required for exemption purposes to be organ\zed in corporate form. Therefore, ffederal] exemption may be obtained by some organizations that do not fit the classic definition of 'nonprofltt' id. at page 3. Therefore, it is evident that Section 501(cX3), as a provision of the Internal Revenue Code, is a federal tax statute that exists independently from New York State's Real Property Tax Law. A federal tax provision should not dictate eligibility for a state law real property tax exemption which is based exclusively on a state statute. Apparently realizing that the precedents of this Court could not support a conclusion establishing tax exempt status for Petitioners, the Appellate Division cited a Third Department decision (see Matter of Greøter Jqmaica at 939 - 20- citing Plattsburgh Aírbase Redevelopment Corporationa v Rosenbaum, l0I AD3d 21,23 [3d Dept 2012]), which holds that the mere recognition of an organization by the IRS as "charitable" for federal income tax purposes creates a "presumptive showing of entitlement" to a real property tax exemption under RPTL 420-a (id.). In holdingthat IRC 501(cX3) status satisfies in effect both the "charitable purpose" and "charitable use" prongs of the 420-a test, the Appellate Division ened by allowing petitioner to use its qualification for a federal income tax exemption to usurp the state statutory requirements of New York's RPTL 420-a (see Matter of Greater Jamaica at 939-40). Had the Legislature intended to make IRC 501(cX3) status the litmus test for an RPTL 420-a tax exemption, it could have expressly so provided. It did not. The Appellate Division has by its holding mandated an outcome which the Legislature declined to adopt. aThe genesis of the Third Department's formulation of IRS 501(c)(3) status as establishing presumptive eligibliltiy for an RPTL 420-a real property tax exemption can be found in the case Yeshiva Beth Yehuda Vchaim D'Betlan v. Town of Shandaken, 100 ADzd 641 (3d Dept. 1984) also cited by the Appellate Division, Second Department (Greater Jamaica at 939). Ln Yeshiva Beth, plaintift a religious corporation, sought a real property tax exemption under RPTL 421 (the predecessor provision to RPTL 420-a). Yeshiva Beth, therefore challenged both the town and local school taxes. The town settled the case, but the school district failed to appear and subsequently sought to vacate a default judgment that had been entered against it. The default judgment was upheld against the school district, in part because no meritorious defense had been advanced by the district, and in particular, the court found Lhat Yeshiva Beth had made a "presumptive showing of entitlement" to the tax exemption because the IRS had recognized that the property was used for religious purposes solely (Yeshivø Beth at 642). Thus, it appears that the doctrinal roots of the presumptive eligibility formulation of the Third Department stem from a case concerning the respective burdens of the parties in litigating a motion seeking to vacate a default judgment, and not from a considered analysis of eligibility for a RPTL 420-a real property tax exemption. - 2t- Recently, in fact, this Court reaffirmed its refusal to allow corporations to profit by drawing on expansive def,rnitions of "charitable" from other unrelated statutory contexts in order to bypass the narrow construction that has been historically applied to the exemption analysis under RPTL 420-a (see Matter of Lackawqnna Community Dev Corp v Krqkowski,12 NY3d 578 [2009]). In Lqckawennq, this Court found that the petitioner therein, a local development corporation, failed to quali$r for a charitable exemption under RPTL 420-a even though petitioner was formed for a charitable purpose under section I4ll of the Not-For-Profit Corporation Law (id. at 582). Indeed, the Court emphasized that it "declinefs] fpetitioner]'s 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" (id.). This Court also stated in Lackawqnna that had the Legislature intended such a result it certainly could have expressed its desire to do so by explicitly providing for a tax exemption (id.). Notably, this Court also acknowledged in Lackqwqnnq that even though the goals of the Lackawanna Community Development Corporation included reducing unemployment, creating better job opportunities, and encouraging the development andlor retention of industry, not all laudable goals are tax exempt (íd. at 582) aa Here, the Appellate Division's decision to adopt recognition of federal tax exemption status under the Internal Revenue Code as evidence of both "charitable purpose" and "charitable use" in lieu of the well-established RPTL 420-a analysis serves to create the "tax loophole" result which the Court of Appeals expressly cautioned against in Lackawqnnq. The expedient of mixing and matching different statutory schemes to f,rnd an easy answer should be rejected. Such a simplistic approach, particularly in the context of determining an entitlement to a mandatory tax exemption, can have devastating consequences for municipalities struggling to maintain fiscal solvency, (3) The legislative initiative that led to the passage of RPTL 420-a forty years ago was a direct response to the problem of the erosion of municipal tax bases throughout the state as a result of the proliferation of tax exemptions. As evinced by the legislative history, [i]n 1971, the Legislature found that30o/o of the total assessed valuation of real property in the State and one third in the City of New York was then exempt from taxation, and that the continuous removal from the tax rolls of taxable real property was imposing a particular hardship on local sovernments of s state and the citizens of who are increasingly burdened by additional taxes, whenever such tax exemptions reduce the tax base... - 23- (Laws 1971, ch 414 $1 lemphasís addedl; see also American Bible Soc v Lewisohn, 40 NY2d 78, 86 11976l (noting "the Legislature's articulated desire to stem and to reverse the severe erosion of the local municipal tax base, accompanied by its recognition of the corollary serious predicament of local municipal finances")). The decision in this case by the Second Department undermines the concerns which led the Legislature to act in 1971. The fiscal well-being of the City, or any municipality for that matter, is jeopard\zed when the eligibility requirements for tax exemptions are set at a low threshold. By introducing the standard of "presumptive eligibility" based on IRC 501(c)(3) status, the long standing doctrine requiring that tax exemptions be strictly construed against the taxpayer is negated. It is well settled in this State that tax exemption statutes are to be strictly construed against the taxpayer seeking the benefit and, in the case of ambiguity, àny doubt is to be resolved in favor of the taxing authority (see Colt Industries v Department of Fínance, 66 NY2d 466, 471 [1985]; Mobil Oíl Corp. v Finance Admínistrator, 58 NY2d 95,99 [1983]). Strict construction against the proponent of a claimed exemption is rooted in the principle that because tax exemptions increase the economic burden of the community at large, the party seeking the exemption must prove it fits within the statutory requirements (see 24- American Bible Society v Lewisohn, 40 NY2d 78, 86 11976]; see also Association of the Bar v Lewisohn, 34 NY2d 143,155-56 ll979l) As a matter of policy, easing the path to tax exempt status simply based on an organization's IRC 501(c)(3) status would sow the seeds for a proliferation of tax exemption applications not based on any requirement in RPTL 420-a. Such a result would bypass the test adopted by the Legislature of this State when it enacted RPTL 420-a. As this Court has held, "[w]e are not privileged, by judicial construction, to legislate. If a change in the wording of the provision is desired, it must be made by the Legislature" (Matter of Met Lífe Ins Co v Boland, 281 NY 3s7,361 [1939]). Finally, it is critical to note that tax exemptions do not merely relieve certain entities of the tax obligation. The granting of tax exemptions burdens the taxpaying base of the City and the State and impacts the level of services provided. The Appellate Division's adoption of the standard of presumptive eligibility cannot be reconciled with the well-established rule of construction calling for strictly construing eligibility for tax exemptions under RPTL 420-a. The Appellate Division's new test for mandatory tax exempt status under RPTL 420-a has been crafted at the expense of ignoring Court of Appeals precedent as well as Legislative history and the plain language of the statute. If left unchecked it will be at the expense of the fiscal health of municipalities across New York State 25- (4) The Appellate Division's decision further distances itself from the precedents of this Court by its acceptance of the notion that an entity which claims to engage in activities which provide a public benefit satisfies the charitable purpose category of RPTL 420-a and is therefore entitled to a mandatory real property tax exemption. Here, the Appellate Division found that, by operating for- profit, public parking facilities, petitioners were ostensibly providing a public benefit because their charitable pu{pose was to "improve Jamaica's business district through further economic development, offering convenient and inexpensive public parking to attract visitors and businesses ." (Matter of Greater Jamaica at940) In the first place, this is plainly improper because petitioners concede that their purpose in operating the garages is to benefit the businesses - i.e. the private, commercial interests of store owners (see PeI'r Reply Br in App Div at 8) This is more than just an incidental benef,rt, it is petitioners' avowed purpose. No part of this avowed pu{pose can be construed as a charitable purpose. More importantly, this Court has previously rejected equating a "public benef,rt" test or standard with establishing a charitable purpose under RPTL 420-a (see Matter of Swedenborg Foundatíon v Lewísohn,40 NY2d 87,95 11976l; - 26- see also Association of the Bar of the City of New Yorkv Lewísohn,34 NY2d 143, 1 54 [ 97 4] and American Bible Soc v Lewisohn, 40 NY2 d 7 8, 86 [ 1 97 6]). In Associatíon of the Bar, this Court unambiguously affirmed the agency's decision to revoke the 420-a exemption, stressing that "public benefit is not the test for qualification for the exemption, as the legislative history... makes so abundantly eleaÍ," despite the fact that the Bar Association "confers a public benefît, and a great one, through its laudable activities in the screening of judicial candidates, rooting out the unauthorized practice of law... and timely commenting on issues of broad public concerïì," (34 NY2d at 154; see also Swedenborg at 95 ("although aspects of the foundation's activities may loosely be characterized as charitable... such purposes...are not the principal purpose of this foundation. Again, we say that 'public benefit is not the test of qualification for exemption"')). Nor has this Court disavowed this standard in subsequent cases, In Mohonk Trust v Board of Assessors of Town of Gardiner, this Court held that the use of 1,801 acres for a variety of environmental, conservation, educational and compatible recreational pu{poses was within the RPTL 420-a categories of charitable, educational, and moral improvement of men, women or children pu{poses, to support atax exemption (42 NY2d 476,480 U979D. Significantly, in Mohonk, although this Court observed that the use of the lands for environmental and conservation purposes were necessary for the -27- public good and enjoyed by the public, the Court there clearly did not establish a "public benefit" category under RPTL 42Q-a (id.). That the public at large benefits from the dedication of a vast tract of land as a nature preserve is a statement of fact. Such a statement cannot reasonably be viewed as making a benefit to the public the touchstone of the standard for tax exemption status. Moreover, "public benefit" is a term that would subsume the categories set forth in RPTL 420-a for it cannot be disputed that the public derives a benefit from organizations pursuing educational, rpligious, charitable, hospital or moral or mental improvement of men, women or children purposes, Rather, the litmus test was, and remains, whether the RPTL 420-a categories of religious, charitable, hospital, educational and moral or mental improvement of men, women, or children can be met (see North Manursíng Wítdlife Sanctuary v City of Rye 48 NY2d 135 119791@ wildlife sanctuary dedicated to preserving species natural to the atea) and to study new species, accomplished several exempt pu{poses, including educational, charitable and moral improvement purposes; see qlso Matter of New York Botanical Garden v Assessors of the Town of Washington, 55 NY2d 328 llgïzl(botanical garden and museum which conducts many educational programs and research activities met exempt categories of educational, charitable and moral); Symphony Spøce v Tishelmqn, 60 NY2d 33 [1983](where a theater sought tax exempt status for a portion of its facilities offering free instruction and space to public and private 28- schools and struggling artists, and this Court found that such activities fell within the RPTL 420-a categories of charitable, educational, and moral and mental improvement)) Time has not lessened the concerns which led this Court to reject a public benefit test for a real property tax exemption. Indeed, any municipality would feel the repercussions of construing the phase "charitable purpose" so broadly as to encompass any activity that would in some way "benefit the public." Such a test would prove difficult, if not impossible to administer. There are countless entities and organizations that could readily claim that their purpose or activities provide a beneht to the public - supermarkets, banks, shopping centers, amusement parks, restaurants - the list goes on. As this Court has stated, engaging in laudable activities or conferring a public benefit does not satisf,i the RPTL 420-a test for exemption from real property taxes based on pursuing a charitable purpose (Assocíatíon of the Bar at 154; Americqn Bible at 86). Although the term "charitable" is not defined in the RPTL, it ls equally true that when called upon to give meaning to this term, courts are guided by long held societal recognition of certain activities such as care for the indigent (Adult Home at Erie Station v Assessor, l0 NY3d 205 [2008]); dedicating land for wildlife conservation (North Manursing Wíldlìfe Sanctuary v City of Rye,48 NY2d 29- 135 ll979l); and a theater offering its facilities and instruction free to schools and struggling artists (Symphony Space v Tishelman, 60 NY2d 33 [1983]), The Appellate Division decision in this case frees itself from the constraints of this Court's rulings by embracing a more expansive definition of "charitable purpose" articulated by the Third Department. The Appellate Division observed that courts have interpreted "charitable purpose" to include relief of poverty, advancement of governmental and municipal purposes, and other objectives that are beneficial to the community" (Matter of Greater Jamaica at939 citing Matter of Miriam Osborn Mem Home Assn v Assessor of Cíty of Rye, 80 AD3d 1 18, I 33 l2dDept 20101 and Matter of Farm Sanctuary v Patton, 22t ^D2d 67, 68-69 [3d Dept 1996]). The Appellate Division's reliance on these cases is unavailing for at least two reasons. First, as noted above, neither the Legislature nor this Court have ever adopted a public benefit test as the standard to be met in order to establish eligibility for a tax exemption. In fact, in Matter of Miríam Osborn Mem. Home Assn. v Assessor of City of Rye, the court notes recognized charitable activities such as relief of poverty, advancement of education, and the care of abandoned and abused animals (80 AD3d 118, 133 [3d Dept 2010]). Miríam Osborn then states, citing to matter of North Manursing Wildlife Sanctuary v, City of Rye,48 NY2d 135, 140 (1979), that property, to be entitled to an exemption on the ground that it 30- is being used for a charitable pulpose, must a þrtíori be used for a public purpose (Miriam Osborn at 133). This statement merely reflects this Court's observation in North Manursing that the public benefits from lands dedicated to the preservation of wildlife. Moreover, the Court in Miriam Osborn denied a RPTL 420-a tax exemption to a continuing care retirement community that serviced wealthy and relatively healthy senior citizens and not an indigent population. Second, the Appellate Division's reliance on Farm Sanctuøry v Patton,22l AD2d 67 (3d Dept 1996) is misplaced. ln Farm Sanctuary, the Court canvassed a variety of sources defining the term "charitable," including the Restatement on Trusts, New York Jurisprudence 2d on Charities, Black's Law Dictionary, all to arrive at the conclusion that the care of abused and neglected animals was a charitable activity (id. at 69). In Farm Sanctuary, the taxing authority, in response to a claim that providing for the care of abused animals was charitable, argued that only the purpose of caring for abused or abandoned people could be deemed charitable. Thus, Farm Sanctuary's holding that "the rescue of abandoned and abused farm animals from livestock facilities" was "charitable in appearance" cannot be read as endorsing a public benefit test (Farm Sanctuary at 68-9). As explained in American Soc. þr Prevention of Cruelty to Animqls v Tax Com. of New York, another case also holding that the care of abused and neglected animals is a charitable purpose: - 31 - The determination that activities on behalf of animals are charitable has a long and consistent history.... Concern for those in the animal kingdom has long been regarded as charitable in nature... The ASPCA is an organization with a consistent record of approval by the court, clearly considered charitable by the public and is constitutionally protected from being shunted into a different classification to make it amenable to real estate taxes. Boundaries of the charity concept may shift and take form and definition from context allowing the Legislature to cast off novel, peripheral or ambiguous activities from charitable status. But unanimous legal and public acknowledgment may not be disregarded by the Legislature if the charitable concept is to retain its core and its constitutional protection remain inviolate (113 Misc 2d 427,434 [Sup Ct, NY County 1981].) Thus, both of the above cases can only be read as recognizingthat organizations that care for abused or neglected animals have long been viewed as charitable in nature. While societal notions of what activities may be viewed as charitable can evolve over time, it cannot be legitimately argued that a stand-alone, for-profit, commercial parking garage should be deemed a charitable use. For petitioners to imply That a commercial parking lot is to be accorded the same status as a home for the impoverished, or a wildlife sanctùãÍy, illustrates the extreme nature of its argument. It is quite a stretch to argue that providing reasonably priced parking to shoppers is now viewed or has ever been viewed as charitable by either the public - 3Z- or by established law. Imbuing stand-alone parking lots with a charitable purpose disregards logic, the law as written, express legislative intent and would afford charitable status to novel, peripheral and ambiguous activities well beyond the specified exempt categories. (s) This Court should also reject the Appellate Division, Second Department's endorsement of the IRS's opinion, that petitioners' parking facilities should be considered "charitable" pursuant to IRC 501(c)(3) because they "lessen the burdens of government" by "offering convenient and inexpensive public parking..." (see Matter of Greater Jamaíca at937-938) and are therefore entitled to a 420-a exemption. Clearly, the standard of "lessening the burdens of govemment" is directly taken from IRC 501(cX3). To illustrate how far this standard can be stretched, petitioners argued below that by installing "horticultural investments" and "lighting" in their parking lots, they added to the safety and aesthetic appeal of downtown Jamaicaand should, thus, be regarded as lessening governmental burdens (see Pet'r Br in App Div at22). Not only is this language of "lessening the burdens of government" absent from the RPTL 420-a itself, but it is inconsistent with decisions of this Court. Indeed, it is quite apparent that this reasoning was taken from the Third Department's decision in Plattsburgh Airbase Redevelopment Corporation v - JJ- Rosenbaum,where the court improperly found that because "fp]etitioner's restated certificate of incorporation demonstrates that it exists for the exclusive benefit of the public interest and to reduce the burdens on municipal government... petitioner is a charitable corporation within the meaning of RPTL 420-a" (l0l AD3 d 21,24 [3d Dept 2012]). Significantly, the lessening of governmental burdens standard was rejected by the Fourth Department. In Matter of Quail Summít v Town of Canandaigua, the Fourth Department supported the revocation of petitioner's 420- a tax exemption even though petitioner used its property to provide housing to the elderly (55 AD3d 1295, 1296 [4th Dept 2008], lv denied 11 NY3d 716 12009D. Although petitioner conceded that the housing was provided at market rates, petitioner still maintained that it was entitled to a charitable exemption under 420-a "because it lessened a burden of government" (Quail Summít at 1296). The court in Quail Summit rejected this argument, stating that although the Town, in previously awarding the exemption, even admitted that petitioner's operation of the retirement community did lessen a burden of govemment, the court still found that the "contention lack[ed] merit" (íd.). Thus, without question, the Fourth Department has clearly articulated that "lessening a burden of government," standing alone, does not justifz a "charitable" exemption under RPTL a20-a (id.) 34- As a policy matter, the incorporation of such broad language as "lessening the burden of government," into an RPTL 420-a analysis will most certainly invite numerous entities to seek a complete real property tax exemption. There are countless activities which arguably lessen the burdens of government -- private sanitation firms, private security, private transportation companies, health food stores, and credit counseling agencies to name a few. As with the "public benefìt" standard, this formulation, too, is fat reaching and incapable of meaningful limitation. It is also unpersuasive that Petitioners claim to be charitable because they "charge less than market rates for parking" and "provide special benefits to needy groups by giving discount parking coupons for civic, religious, government, and nonprofit organizations" (R 29), To begin with, other than identi$'ing its recipients as "needy," the record is devoid of any factual evidence indicating that discounts are provided to entities that arc actually in need of charity (R 13-38). However, the pricing structure is established, it is undisputed that the parking facilities intend and do operate at a prof,tt (R 201). Indeed, petitioners' primary argument that its parking lots lure shoppers away from Roosevelt Field and Green Acres Mall (Pet'r Br in App Div at 6) indicates that, in actuality, the parking facilities are primarily benefiting commercial retailers, businesses, and shoppers with sufficient resources to afford automobiles who may or may not reside in the - 35- Greater Jamaica area. Such a constellation of entities and individuals can hardly be described as "needy." This Court has rejected any attempt to pass "discounts" as constituting a charitable purpos e (see Stuyvesant Square Thrift Shop v Tax Commission, 54 NY2d 735,737 [1981]) ("Nor does it avail petitioner that some of its merchandise was sold at reduced prices to needy persons... for the Appellate Division found these activities to be occasional only rather than the primary activity of petitioner which would qualiff it for exemption")). The Appellate Division, in equating the broad-based concept of "public benefit" to "charitable purpose," has introduced a new and far-reaching component to the standard under RPTL 420-a. In so doing, it has expanded the definition of charitable purpose to a point which is incapable of meaningful limitation, and as such, cannot be permitted to stand. (6) As held recently by this Court, "[i]t is the qctual or physical use of the property that the Real Property Tax Law is concerned with when it exempts from taxation property 'used exclusively for carrying out thereupon one or more' exempt purposes" (Matter of Lackawanna Communíty Dev. Corp. v Krakowskí,12 NY3d 578, 581 [2009] citing RPTL a20-allllal). - 36- In Lackawqnncr) this 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 economic development. Although this Court recognized that the existence of the manufacturing company would certainly, by extension, "encouragfe] the development of, or retention of, an industry in the community..." for example, as would any other new business, the Court readily distinguished that this was not the actual use that was physically taking place upon the property (see Matter of Lackawqnna at 582.) The actual use was a fot-profit manufacturing business (Matter of Lackawqnnq at 580). Here, the Appellate Division ignores completely this requirement of "actual use." The Appellate Division readily accepts petitioners' claim that it "offerfs] convenient and inexpensive public parking to atttact visitors and businesses," in furtherance of its charitable purpose of economic development(see Matter of Greater Jamaica at940). It is undisputed, however, that the "actual use" that is physically taking place on the subject property is a stand-alone, for-profit, commercial parking lot. Moreover, the Appellate Division compounds its effor by citing to a series of cases where parking facilities were accorded tax exempt status because their use was incidental to a rgcognized charitable purpose entirely distinguishable from the situation here. Although courts have granted an RPTL -37- 420-a exemption concerning parking lot properties, in all instances, the parking lots were merely an incidental use of än already established charitable institution such as a hospital, church, or a school (see e.g. Matter of Vassar Bros. Hospital v Poughkeepsie, 97 AD3d 756 l2d Dept 20121; Matter of St. Francis Hospítal v Taber, 76 AD3d 635 lzd Dept 20101; Matter of Ellis Hospital v Schenectady,2SS AD2d 581 [3d Dept 2001]). Never have the courts held that a free-standing commercial parking lot, in and of itself, be deemed a charitable activity. The circumstances affording an exemption to parking lots as presented in the foregoing cases are simply not present in this case. This distinction was highlighted by the Department of Finance in its determination when it noted that the parking facilities in those cases were clearly incidental to the recognized charitable purpose, while the subject parking garages here are exclusively commercial in nature and are "the very purpose for which the properties are being used" (seeDepartment of Finance determination atR74-75). Therefore, petitioners' attempt to liken its commercial, for-profit parking garages to those that are undeniably part of an established church, school, or hospital facility should be rejected (see Pet'r Br at 15-16 (where petitioners argue that their commercial parking garages should enjoy the same tax exempt status as those of New York Presbyterian Hospital, Columbia University, and the Cathedral of St. John the Divine)). - 38- Equally instructive is the recent Second Department decision in Mqtter of Vassar Bros. Hospital v Poughkeepsie, where the court applied RPTL 420-a in the context of a hospital parking garage and parking spaces associated with individual physicians' medical practice (97 AD3d 756 l2d Dept 20121). In Vassar Bros., petitioner was a not-for-profit hospital that owned a 699-space parking gaîage adjacent to its hospital complex (id. at759). Pursuant to a ground lease, a private physician group was permitted to utilize 250 of the parking spaces in the garage for its physicians, employees, and patients (id.). Only 40 of the spaces were strictly reserved, while the remaining2l0 spaces were available on a fîrst-come first-served basis and could potentially be used by the hospital as well (id.). However, the court found that regardless of these facts, all250 spaces of the garage accessible to the private physicians' practice must be deemed fully taxable because "a substantial portion of the parking garage is allocated for a use not reasonably incidental to the purpose of the hospital" (Vassar Bros at759). Thus, even where a parking garage is affiliated with an already-established exempt entity such as a hospital, a proper analysis will ensure that only the parking spaces strictly associated with the exempt entity receive the benefits of a 420-a tax exemption It is also important to note that petitioners concede that their parking lots earn a profit. Indeed, petitioners freely admit to generating excess revenues (R - 39- 201), As is apparent from Greater Jamaica's IRS Form gg}5, a public document annually filed with the IRS, the subject parking facilities generate over $1.5 million a year in excess revenues. Thus, by allowing petitioners, to operate multiple, for-profit parking garages completely free of all real property taxes, the Appellate Division has granted petitioners an unfair advantage in the commercial parking market. Of course petitioners are able to provide lower-than-market rates, because they are operating their parking facilities tax-free. Yet, as demonstrated by Court of Appeals precedent and the statute itself, neither the Legislature nor this Court will tolerate the claimed pretext of "charity" when in fact "the primary objective of the enterprise is to generate profits" (see RPTL a}}-allllb]; see also Stuyvesant Square Thrrft Shop v Tax Commíssion,54 NY2d 735,737 [1981]). Nor should it be persuasive that petitioners qualiff for a tax exemption because they redistribute their excess profits from the parking lots back into petitioners' other charitable projects (see Matter of Salvation Army v Town of Ellícott Bd of Assessment Review, 100 AD2d 361 [4th Dept 1984] (where the Salvation Army's thrift store was only deemed "charitable" under RPTL 420-anot because its net proceeds were put directly back into the charity, but because the 5 Form 990 is a public document and can be found on The Economic Research Institute's website: 40- orm990&EIN:237 2 court found that the primary purpose of the thrift store lay in the work therapy and rehabilitation opportunities for homeless men)). In Sqlvation Army, the charity's thrift store sold donated items for a nominal price and the net proceeds were put directly back into the charity to finance one of the Army's rehabilitation centers (100 AD2d 361 ,363-4 [4th Dept 1984]). There, the court found that the thrift stores were an integral part of rehabilitative work conducted by the Salvation At-y because the primary purpose of the thrift store lay in the work therapy and rehabilitation opportunities for homeless men (id. af 364), and the sales were only incidental to that purpose. By contrast, here, Petitioners' operation of commercial parking garages is the very purpose for which the property is being used. And, in light of the holding in Salvation Army, Petitioners' claim that excess revenues are then donated to GJDC's projects does not qualiS, the properties for a charitable exemption. CONCLUSION The Order appealed from should be reversed and the petition should be dismissed. - 4t- Dated LEONARD KOERNER, VINCENT D'ORAZTO, ANDREA M. CHAN, Of Counsel New York, New York September 19,2014 ZACHARY W. CARTER Corporation Counsel of the City of New York Attomey fo r Re s p ondent s - Appellants 100 Church Street, Room 5-23I New York, New York 10007 Tel: (212) 356-2133 E -mail : achan@law.nyc. gov .(l aBy Andrea M. Chan Assistant Corporation Counsel 42