Appellate Division, Second Department Holds that A Property Tax Exemption Was Warranted


In the Matter of Rye Country Day School v. Whitty, -- A.D.3d ---, 2023 WL 380195 (2d Dep’t 2023) involved the denial of a real property tax exemption under RPTL §420-a. Section 420-a “establishes a mandatory tax exemption for real property of nonprofit corporations.” Matter of Legion of Christ v. Town of Mount Pleasant, 1 N.Y.3d 406, 411 (2004). RPTL 420–a(1)(a) provides that “[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 purposes, or for two or more such purposes, and used exclusively for carrying out thereupon one or more of such purposes either by the owning corporation or association or by another such corporation or association as hereinafter provided shall be exempt from taxation as provided in this section.”

Rye Country Day School (“RCDS” or “Petitioner”) is a registered not-for-profit college preparatory school that provides education ranging from pre-kindergarten to twelfth grade. For more than 25 years the Petitioner used several tax-exempt, single family residential properties to provide housing for school faculty and administrators. In 2018, the Petitioner applied to the Assessor for the City of Rye for an exemption under RPTL 420-a for a single tax lot improved with six townhomes that were occupied by full-time faculty of the Petitioner. The City Assessor denied the application on the ground that Petitioner did not “sufficiently establish that the Property was an integral part of the education process.” The Petitioner subsequently filed a grievance complaint with the City of Rye Board of Assessment Review (“BAR”) seeking a property tax exemption under RPTL 420-a, which the BAR denied.

Petitioner next filed a petition under RPTL Article 7 and CPLR Article 78, wherein it sought, inter alia, the annulment of the BAR’s denial of the property tax exemption. The Supreme Court, Westchester County denied the Article 78 branch of the petition, finding that the BAR’s determination was not arbitrary, capricious, or contrary to law. Agreeing with the respondents, the Supreme Court held that Petitioner failed to establish that the property was an integral part of the school’s educational process.

On appeal, the Appellate Division, Second Department reversed, finding that RCDS “demonstrated that the ‘primary use’ of the faculty-occupied townhouses furthered its ‘primary purpose’ of operating as a school.” RCDS (quoting Matter of Merry–Go–Round Playhouse, Inc. v. Assessor of City of Auburn, 24 N.Y.3d 362, 368 [2014]). At the outset, the Appellate Division recognized that “New York has long recognized that residential property used for housing an educational institution’s faculty and staff is entitled to a tax exemption under RPTL 420–a.” Matter of Rye Country Day School, 2023 WL 380195, *2. In the present case it was undisputed that RCDS received tax exemptions for several residential properties occupied by faculty or administrators for at least 25 years, and that, by May 1, 2018, all of the townhouses on the property were occupied by full-time RCDS faculty or administrators. Id. The Appellate Division found that the “respondents failed to show a meaningful distinction between the townhouses and RCDS’s other tax-exempt residential properties used for housing faculty and administrators.” Id. Furthermore, “RCDS established that the townhouses were used to attract talent that would otherwise look [elsewhere] for employment, and it would have difficulty recruiting qualified [faculty] if it did not provide the housing, which would undermine its primary [educational] purpose.” Id. (internal quotations omitted). Consequently, the Appellate Division held that there was no rational basis for denying the tax exemption, and thus the Supreme Court should have granted that branch of the petition arising under CPLR article 78.

The attorneys at Griffin, Coogan, Sulzer & Horgan, P.C. have experience in assisting property owners obtain tax exemptions under RPTL §420-a and other statutes and are available to assist you with any exemption-related issues.