New York Law Allows Immediate Tax Exemption for Real Property Acquired by Nonprofit Organizations

Client Advisory

September 21, 2007
by Clifford P. Case III, Dan Pittman and Melinda Poon

Last month, New York Governor Spitzer signed into law Senate Bill 5764, An Act to Amend the Real Property Tax Law, in Relation to the Exemption for Nonprofit Organizations. The bill amends the Real Property Tax Law to provide immediate exemption from tax for New York City real property acquired by tax-exempt organizations. The change is effective immediately, and will significantly reduce the tax burden for nonprofit entities purchasing New York City real property from nonexempt entities.

New York has historically exempted from property taxation all real property owned and used by most nonprofit organizations. The taxable status of property, however, was determined annually, a few months prior to the beginning of the taxable year in question. Thus if real property was held by a for-profit entity on the assessment date--January 5, in New York City--it would be classified as taxable property for the entirety of the following tax year. As many as 18 months could pass between the acquisition of a property by a tax-exempt organization and the commencement of the property’s exemption from taxation.

The new law changes that. Effective for purchases made on or after August 1, 2007, when an exempt organization acquires real property which was assessed as taxable property prior to the sale but which will qualify for the exemption in the exempt organization’s hands, the property will be treated as exempt from property taxation as of the date title to the property is transferred. The new law allows the purchaser to immediately begin proceedings to have the assessment changed. Any property tax payments it makes prior to a determination that the property is indeed exempt would be refundable, and any determination of the city’s Department of Finance that the property remains partially or wholly taxable would be immediately appealable by the exempt entity.

Questions regarding this client advisory may be directed to Clifford P. Case III (212-238-8798,, Melinda Poon (212-238-8642, or Dan Pittman (212-238-8854,

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© Copyright 2007

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