The New York City Department of Finance improperly denied a property tax exemption to the Drug Policy Alliance, a drug reform group, for its newly acquired headquarters in a condominium at 131 W. 33rd St., said Manhattan Supreme Court Justice Paul Wooten (See Profile).
The Department of Finance had determined that the group’s “advocacy of a cause” did not qualify it for a $40,000-a-year property exemption under state Real Property Tax Law §420-a(1)(a). The statute’s exemption applies to not-for-profit group property that is held for “religious, charitable, hospital, educational, or moral or mental improvement of men, women or children purposes.”
The city argued that while education may be a “component” of the Drug Policy Alliance’s operation, “it is clear from the record that the aims of legislative and policy change overwhelmingly dominate its activities and focus.”
But Wooten found in Drug Policy Alliance v. New York City Tax Commission, 103827/12, that the group engaged in a number of activities to promote its advocacy for drug reform, including media interviews, the staging of conferences and public policy debates and the production of publications.
He noted that the Drug Policy Alliance is exempt from federal income tax and from state and city sales and use taxes as an educational and charitable not-for-profit.
In addition, the group rightfully pointed out that “similar organizations have been granted a tax exemption pursuant to a liberal interpretation” of RPTL §420-a(1)(a), Wooten wrote.
The Drug Policy Alliance argued that its activities are similar to those of the NAACP Legal Defense Fund, the Alan Guttmacher Institute and the Roman Catholic Diocese of New York, all of which qualify for property tax exemptions.
The judge wrote that it is “evident” that the Department of Finance’s denial of the tax exemption was in error, and he ordered it to grant the group’s petition.
The Drug Policy Alliance has an annual budget of $13 million and 68 employees nationwide, 34 in New York City. The Manhattan office is the group’s national and statewide headquarters.
Wooten also cited a Nov. 27 ruling by the Appellate Division, Second Department, in Matter of Greater Jamaica Development v. New York Tax Com’n, 111 AD3d 937, in which the appeals court restored tax exemptions revoked by the Department of Finance for discount public parking garages owned by the Greater Jamaica Development Corp. in Queens.
The Drug Policy Alliance’s condo fits the same definition as the parking garages at issue in the Second Department case, Wooten wrote, as “showing entitlement to exemption” because it is held by a not-for-profit entity “whose tax-exempt status has been recognized by the Internal Revenue Service and whose property is used solely for [charitable] purposes.”
Wooten said it was unnecessary for him to reach the merits of the Drug Policy Alliance’s claims that it was denied a tax exemption because the content of its drug reform policies was unpopular with the Bloomberg administration. The group supports decriminalization for most drug possession crimes and diversion from prison for offenders.
The Drug Policy Alliance’s pro bono counsel in the tax case, William Josephson, said some in the not-for-profit communities were concerned that the Drug Policy Alliance and Greater Jamaica Development Corp. cases represented an effort by the city to “clamp down” on tax exemptions for not-for-profits based on faulty analyses of the real property tax law by the city.
“We felt that the grounds that were offered by the city for revocation, that the group was an ‘advocacy’ organization, were completely inconsistent with the nature of an educational exemption under the Real Property Tax Law and raised some serious constitutional issues,” Josephson said in an interview.
The New York Civil Liberties Foundation, the Asian American Legal Defense Fund and the Lawyers Alliance for New York all filed amicus curiae briefs in support of the Drug Policy Alliance’s position.
Josephson, a former partner at Fried, Frank, Harris, Shriver & Jacobson, is counsel to the firm.
He said he took the case at the request of his friend Ira Glasser, the president of the group’s board of directors and former American Civil Liberties Union executive director.
Josephson was assisted by Manhattan attorney Matthew Milford.
The city was represented by Barbara Moretti, a senior counsel in the New York City Corporation Counsel’s tax and bankruptcy litigation division.
“We are disappointed with these recent decisions,” Moretti said in a statement Tuesday. “We are seeking to appeal Matter of Greater Jamaica and considering our options in the Drug Policy Alliance case.”
@|Joel Stashenko can be reached at email@example.com.