NY appeals court upholds tax exempt status for human service agency

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A state appeals court has confirmed the tax-exempt status of a day care center operated by Heritage Christian Services Inc.

Heritage Christian Services is a human services nonprofit agency that supports individuals with intellectual and developmental disabilities. The daycare center integrates children with and without disabilities.

Heritage filed a petition in state Supreme Court claiming tax-exempt status under Real Property Tax Law.

According to the New York State Department of Taxation and Finance, real property owned by a nonprofit corporation or association organized exclusively for one or more specific purposes (religious, educational, charitable, hospital, or moral or mental improvement of adults or children) is exempt from taxation.

In August 2024, state Supreme Court Justice Daniel J. Doyle granted a motion from Heritage seeking summary judgment. The Webster school district appealed.

During the oral argument before the Fourth Department on Jan. 22, Ryan L. McCarthy, the school district’s appellate attorney, told the panel it was important to recognize what impact this granting the petition would have on the school district.

“This decision would require the district to pay over $400,000 in refunds and interest to the petitioner and it would remove $1.5 million of taxable property from the tax rolls indefinitely,” McCarthy told the court.

“So that tax burden would then be shared by members of the community that own property and pay taxes,” he said.

Justice Stephen K. Lindley responded: “If the taxes were unlawfully imposed in the first place that doesn’t seem to be a good reason.”

“It is hereby ordered that the order and judgment so appealed from is unanimously affirmed without costs,” the Appellate Division of state Supreme Court, Fourth Department, ruled.

“Contrary to the school district’s contention, petitioner, a property owner seeking an exemption from real property taxes pursuant to RPTL 420–a, met its burden of establishing that the subject property is used exclusively in furtherance of its charitable purpose,” the court wrote.

“With respect to petitioner’s cross-motion for summary judgment seeking an order requiring the exemption, we conclude that the affidavit of petitioner’s president and chief executive officer relied upon her firsthand knowledge in detailing several aspects of petitioner’s operations and thus had probative value,” the court wrote.

“We further conclude that, in opposition to petitioner’s showing, the school district failed to raise a material issue of fact,” the Fourth Department found.

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