Many New York City nonprofit organizations that use their properties for charitable and educational purposes have long enjoyed exemption from New York City property tax. Recently, a number of these organizations have received notices from the City’s Department of Finance (DOF) indicating their tax-exempt status may soon be revoked. The City, which appears to have adopted a new “get tough” policy on charities without any notice or procedure, is presumably taking this action in order to raise revenues. It is unclear if the City has also considered the cost of losing vital services and cultural educational resources – let alone basic fairness.
Why Formally Tax-Exempt Nonprofits Have Now Received Notices
It’s uncertain how many organizations have received these notices, but leading practitioners report that they are receiving panicked calls from nonprofit groups that have enjoyed tax-exempt status for decades. In almost every case, the story is the same: the organization filed a routine application for renewal of exemption as it does every year, but instead of a routine approval, it received a letter from the City indicating the exemption is at risk. The organization is given a short period to respond or face the loss of its exemption. Most of these are nonprofits that the City has treated as tax-exempt for years; nothing about them has changed. The law has not changed. The only thing that has changed is the City’s fiscal situation.
Department of Finance Justification
To justify its position, the Department of Finance is citing two old cases from the 1970s which interpret the grounds for exemption very narrowly. DOF conveniently ignores more recent cases which expand the definition considerably. Some of the groups that have been affected are fighting back; others imply they have a lack the resources to do so.
This has happened at previous times when the City faced financial problems. We (and many others) find this policy wrong – wrong on the law, and wrong for the City. If we take the past as a guide, advocates will eventually persuade the City that they are wrong this time, too. But it’s too risky for nonprofits to take that for granted; they should oppose the revocation of the exemption promptly and with vigor.