Originally published on Forbes.com Nov 26th, 2014
Merry-Go-Round Playhouse Inc operates a professional summer stock theater in Auburn, New York. MGRP recruits actors and staff from all over the country. Given the short term nature of the gig and the low pay, MGRP needs to provide the aspiring thespians with housing. This had been handled by leasing apartments with local landlords, but as the operation grew it became rather cumbersome. So in 2011 MGRP acquired two apartment buildings with a total of 30 units. None of the units are rented out. They are used exclusively to provide staff housing. So now that the buildings are owned by a not for profit and being used for its exempt purpose, they come off the city’s tax rolls – right? The assessors did not think so, which is why we now have a decision from the New York Court of Appeals. I’ll keep you in suspense for now, so you can decide who to root for.
Some Fourth Grade Math
It can be much more challenging for an organization to gain a property tax exemption than to be recognized as an exempt organization, even one with the gold standard of exemptions – 501(c)(3) – which allows for the receipt of deductible charitable contributions. This is likely because, as was pointed out to me when I was covering the Kansas Property Tax Consultants War, property tax exemptions and valuation reductions are a zero sum game.
Typically a municipality sets its budget expecting to raise the bulk of it from property taxes. The required amount becomes the numerator of a fraction. The denominator of the fraction is the total assessed value of taxable property in the municipality. Typically, using mathematical transformations that you probably learned in the fourth grade, the denominator is transformed to 1,000 and that’s your tax rate. Harking back to that fourth grade training, you will recall that lowering the denominator raises the value of the fraction. So one taxpayer’s savings burdens everybody else in a very direct way. That is why assessors resist property coming off the rolls or having its assessed value lowered.
Why The Buildings Supported The Exempt Purpose
Besides solving the housing problem, MGRP reaped other benefits from the new arrangement.
In addition to reducing the burden of obtaining individual housing for each staff member, petitioner maintains that the living arrangement has “aided in cultivating a community among its artists” and that the actors and other staff “spend countless volunteer hours, off-stage and off-the-clock, 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.”
Apparently they also found time to make the occasional video.
And The Ruling Is
The judge went with the the theater.
….the primary use of the apartment buildings is in furtherance of Merry-Go-Round’s primary purpose. Petitioner established that the housing is used to attract talent that would otherwise look to other theaters for employment, that the living arrangement fosters a sense of community and that the staff spends a significant portion of its off-hours in furtherance of theater-related pursuits. In addition, similar to the situation presented by St. Luke’s, the record shows that petitioner would have difficulty recruiting qualified staff if it did not provide the housing, which would undermine its primary purpose. Although we have not previously addressed the provision of tax exempt housing in relation to an arts organization, the statute does not elevate one exempt purpose over another. Under these circumstances, the use of the property to provide staff housing is reasonably incidental to petitioner’s primary purpose of encouraging appreciation of the arts through theater.
Pagans Do Well Too
The Town of Catskill, New York was appealing a decision in favor of Maetreum of Cybele Magna Mater Inc, that I covered last year. The lower court decision was upheld in a very short opinion. This was a much more colorful case. In discussing the early stages with the New York Times, Mother Platine, the Battakes of the Phryganium had remarked.
Come on, we’re practically Catholic nuns except we’re willing to have sex.
Most of my pretty limited exposure to neo-paganism has been of traditions that were in part resisting the spread of the Roman Empire. The Phryganium, though is a revival of a tradition that was practiced in the Empire. In some of the coverage, you get the sense that there was a belief that the Town was upset by the paganism. I still would not rule out that it was generalized resistance to having another property go off the rolls. In my original article, I pointed out a Massachusetts case in which West Springfield was trying to tax a house that was lived in by women who were actual Catholic nuns.
Marlene Kennedy of Courthouse New Service covered both decisions in the same article.
About Auburn New York
Given that I grew up in the metro New York area (Fairview, NJ), I was trying to figure out why I was drawing a mental blank when it came to Auburn, so I checked the map and determined that I had been through it at least once. Route 20 runs through Auburn on its 3,365 mile journey from Boston, Massachusetts to Newport, Oregon, so my son and I must have passed through it on our cross country drive in 2010, but as it happens we ended up stopping in Seneca Falls a mere 15 miles west and home to the Women’s Rights National Historical Park. Auburn also had a prominent role in 19th century reform. The Auburn System of having prisoners live in total silence and march in lockstep originated in the prison there. Believe it or not penitentiaries were viewed as a breakthrough in human rights in those days. Don’t confuse the city with the Town of Auburn Mass, also on Route 20, where the first liquid powered rocket was launched by Robert Goddard in 1926.
And A Happy Thanksgiving
I won’t be posting again till Monday, so this my chance to wish you a Happy Thanksgiving. I could not help but remember how I would spend Thanksgiving morning when I was a teenager. I would have to make my way to the Bronx wearing a uniform loosely based on the US Army uniform of 1847 to fall in with the Xavier High School JROTC Regiment as we had a review in conjunction with the football game with Fordham Prep, which is now the longest running high school rivalry in New York City. If you are in the New York area you might still be able to get tickets. If you do be sure to root for the Knights not the Rams.
The video is from 2008. Go to the 2:50 mark and check out the precision drill team (X-Squad).