In two separate cases released on the same day, the New York Court of Appeals concluded that properties used by not-for-profit corporations to house individuals were exempt from property taxation on the basis that the properties were primarily used by the not-for-profits in advancement of their charitable purposes. Matter of Maetreum of Cybele, Magna Mater, Inc. v. McCoy, 2014 NY Slip Op. 07929 (N.Y. Nov. 18, 2014); Matter of Merry- Go-Round Playhouse, Inc. v. Assessor of City of Auburn, 2014 NY Slip Op. 07928 (N.Y. Nov. 18, 2014).

Applicable Law

RPTL § 420-a(1)(a) exempts from real property taxation “[r]eal property owned by a corporation or association organized or conducted exclusively” for charitable, religious, educational, and/or moral or mental improvement purposes, as long as the property is “used exclusively” for such purposes. The Court of Appeals has held that the determination of whether a property is used “exclusively” for exempt purposes depends upon “whether the particular use is reasonably incidental to the primary or major purpose of the facility,” or, “[p]ut differently, . . . whether the property is used exclusively for the statutory purposes depends upon whether its primary use is in furtherance of the permitted purposes.” Matter of Yeshivath Shearith Hapletah v. Assessor of Town of Fallsburg, 79 N.Y.2d 244, 250 (1992) (emphasis added).

Maetreum of Cybele Case

Facts. Maetreum of Cybele, Magna Mater, Inc. (“Maetreum of Cybele”), is the corporate entity for the Cybeline Revival, a pagan following founded in 1999. The Cybeline Revival’s fundamental religious principle is that the divine feminine, the mother goddess Cybele, is present in everything, thereby creating a connection in all living things, as well as giving rise to an obligation to do charitable work and a responsibility to improve the conditions of all people, particularly women.

Maetreum of Cybele owned a parcel of real property within the Town of Catskill, with a main house, a small caretaker’s cottage, several buildings, an outdoor temple, and “processional paths.” Maetreum of Cybele’s activities on the parcel include nightly praise, religious instruction and spiritual counseling, marriage and death rituals, bi- weekly new moon and full moon celebrations, an annual pagan pride festival, a weekly open café, a monthly pagan brunch, and a monthly, more secular, bisexual brunch. Several of the Cybeline Revival’s priestesses live on the parcel, and testimony established that convent-style living is a component of the Cybeline Revival.

Procedural history and decisions. In 2009, 2010, and 2011, Maetreum of Cybele, which received tax-exempt status from the Internal Revenue Service, filed applications for exemption from real property taxes under RPTL § 420- Each application was denied by the Town of Catskill’s Town Assessor (the “Catskill Assessor”) and the Board of Assessment Review for the Town of Catskill. Maetreum of Cybele petitioned the New York State Supreme Court, which held a non-jury trial where Maetreum of Cybele called witnesses but the Catskill Assessor called none. The Supreme Court judge nonetheless ruled against Maetreum of Cybele, concluding that the primary use of the parcel is to “provide affordable cooperative housing to a small number of co-religionists” and that the exempt uses are “merely incidental to that primary non-exempt use.”

The Appellate Division reversed, finding that the trial testimony demonstrated that Maetreum of Cybele “uses the [parcel] primarily for its religious and charitable purposes,” and was therefore entitled to a property tax exemption for the years in question. Matter of Maetreum of Cybele, Magna Mater, Inc. v. McCoy, 111 A.D.3d 1098 (3d Dep’t 2013). The Catskill Assessor argued that the previous owners transferred the parcel to Maetreum of Cybele and continued its former residential use, as evidenced by the fact that financial support for the parcel continued to come from the few adherents. The Appellate Division, however, determined that the Catskill Assessor was effectively contending that to qualify for the exemption under RPTL § 420-a, “some threshold amount of activity and public benefit” must be shown, and determined that the actual applicable standard “is simply whether the property was used primarily for religious and charitable purposes.” The Appellate Division found sufficient evidence that the Cybeline Revival “stresses communal living among its adherents, as well as providing hospitality and charity to those in need, and the members consider [the parcel] the home of their faith.”

The Catskill Assessor appealed to the Court of Appeals, which affirmed the Appellate Division decision. The Court of Appeals explicitly relied on its precedent defining the term “exclusively” as used in RPTL § 420-a(1)(a) in a more relaxed fashion, but provided no other analysis.

Merry-Go-Round Case

Facts. Merry-Go-Round Playhouse, Inc. (“Merry-Go-Round”) operates two theaters: a professional summer stock theater in the City of Auburn, and a youth theater that tours New York State. Merry-Go-Round recruits actors and staff for its summer stock theater nationwide, and has traditionally provided housing to help compensate actors and staff for their relatively low salary and the temporary nature of their employment. In 2011, Merry-Go-Round purchased two apartment buildings for use by its actors and staff. The apartment buildings are not open to the public, and no income is derived from the buildings. Merry-Go-Round argued that the buildings eased its previous burden of obtaining apartments from landlords, and “aided in cultivating a community among its artists.” Merry-Go-Round highlighted that the actors and staff “spend countless volunteer hours, offstage and offtheclock, running lines together, discussing creative ideas, working on wardrobes, creating sets and working in the furtherance of the purposes and mission of Merry-Go-Round.” Merry-Go-Round also received tax- exempt status from the Internal Revenue Service.

Procedural history and decisions. Merry-Go-Round filed applications for real property tax exemptions with the City of Auburn Town Assessor (the “Auburn Assessor”) under RPTL § 420-a. Such applications were denied by the Auburn Assessor and by the City of Auburn’s Board of Assessment Review. Merry-Go-Round appealed to the New York State Supreme Court, which determined on summary judgment that Merry-Go-Round was not entitled to the exemption because it had failed to establish either that its summer stock theater was a proper tax exempt purpose under RPTL § 420-a, or that the use of the apartment buildings to house employees was reasonably incidental to its primary purpose.

The Appellate Division reversed. It first determined that Merry-Go-Round was organized exclusively for the tax-exempt purpose of “showcasing and encouraging appreciation of the performing arts, thereby advancing the education, as well as the moral and mental improvement of, the community.” Further, the Appellate Division concluded that Merry-Go-Round sufficiently demonstrated that its use of the apartment buildings was reasonably incidental to its primary purpose because the buildings “helped to establish a community among its artists.”

The Auburn Assessor appealed to the Court of Appeals, which affirmed the Appellate Division decision. The Court of Appeals first agreed that Merry-Go-Round was “clearly” organized exclusively for a purpose exempt under RPTL § 420-a, and that the summer stock theater was sufficiently geared toward the exempt purpose of promoting the arts. Next, the Court of Appeals applied the same precedent highlighted in the Maetreum of Cybele case and concluded that the apartment buildings were used as required under RPTL § 420a(1)(a) to claim the exemption. The Court of Appeals pointed out that its own precedent had applied the RPTL § 420-a exemption to housing provided for employees working for hospitals, universities, and religious summer camps, and reasoned that the use of the housing owned by Merry-Go-Round was sufficiently similar to the use of the housing properties in those other cases.

Additional Insights

The Maetreum of Cybele and Merry-Go-Round decisions highlight the practical approach the Court of Appeals has previously taken in interpreting the requirement under RPTL § 420-a(1)(a) that property be used “exclusively” for an exempt purpose. Rather than holding that only property used to directly advance an exempt purpose can be exempt from real property taxation, the Court has recognized that providing housing to employees or religious adherents can be integral to advancing a not- for-profit entity’s cause. As stated by the Court of Appeals in earlier decisions applying RPTL § 420-a, although exemption statutes should be strictly construed, they nonetheless should not be interpreted so narrowly as to defeat their settled purpose.