Charter Development Co. v. City of Buffalo

• Decision Date: 02 May 2006
• Parties: In the Matter of CHARTER DEVELOPMENT COMPANY, L.L.C., Appellant, v. CITY OF BUFFALO et al., Respondents.
• Court: New York Court of Appeals Court of Appeals

848 N.E.2d 460

6 N.Y.3d 578

In the Matter of CHARTER DEVELOPMENT COMPANY, L.L.C., Appellant, v. CITY OF BUFFALO et al., Respondents.

Court of Appeals of New York.

May 2, 2006.

Hinman Straub P.C., Albany (James T. Potter and David W. Novak of counsel), for appellant.

Michael B. Risman, Corporation Counsel, Buffalo (Alan P. Gerstman of counsel), for respondents.

OPINION OF THE COURT

CIPARICK, J.

In 1998, the Legislature enacted the New York Charter Schools Act (L. 1998, ch. 4), codified in Education Law §§ 2850 to 2857, which authorized "a system of charter schools to provide [educational] opportunities for teachers, parents, and community members" (§ 2850[2]). Education Law § 2853(1)(d) provides in pertinent part that "[a] charter school shall be exempt to the same extent as other public schools from all taxation, fees, assessments or special ad valorem levies on its earnings and its property, including property leased by the charter school." Petitioner asserts that as the owner of real property leased to a charter school it is entitled to the exemption contained in the statute. We disagree.

In 2003, petitioner, Charter Development Company, L.L.C. (CDC), a for-profit Michigan company in the business of acquiring and developing sites for charter schools, acquired certain property in the City of Buffalo, developed it, and leased it to an affiliated corporation, which in turn subleased to Buffalo United Charter School. The sublease was for the period from July 1, 2003 to June 30, 2004 with a right of renewal for subsequent one-year terms, and required Buffalo United Charter School to pay an annual rent of $848,000 as well as "all taxes and special assessments . . . which shall be levied on or assessed against the Premises." In November 2003, petitioner sought tax exemptions on its real property.¹

Pursuant to RPTL 420-a, CDC applied to the Assessor of the City of Buffalo for a real property tax exemption for the 2003-2004 tax year on the ground that its lease of the property to Buffalo United Charter School caused the property to be exempt from real property taxes in accordance with Education Law § 2853(1)(d). The Assessor denied CDC's application for tax exemption relying upon a State Board of Real Property Services (SBRPS) opinion which held that since the Education Law equated a charter school's tax exempt status with that of a public school, and since neither the building nor the underlying land was owned by the school as required by Real Property Tax Law § 408, the premises leased by the charter school were not entitled to an exemption "solely on the basis of the lessee's status" (11 Ops Counsel SBRPS No. 37 [2002]).² CDC then sought review of the Assessor's determination by the Board of Assessment Review of the City of Buffalo which upheld the Assessor's determination.

Thereafter, CDC commenced this combined CPLR article 78 and Real Property Tax Law article 7 proceeding, seeking to annul the decision of the Assessor denying its application for an exemption for the 2003-2004 tax year and for a judgment declaring that the property leased by the charter school is exempt from real property taxes pursuant to Education Law § 2853(1)(d). In response to the petition, the City of Buffalo and its Assessor and Board of Assessment Review (City) moved to dismiss the petition. In an oral opinion, Supreme Court held that the statute provides charter schools with the same tax exemptions as public schools in regard to property they own and leased improvements made thereon, citing to the same SBRPS opinion. Supreme Court, in considering the full text of the statute, dismissed the petition and held that the Legislature did not intend to afford greater tax exempt status to charter schools than that of public schools by exempting real property leased by charter schools from taxation. The Appellate Division affirmed, holding that the statute clearly entitles a charter school to only those tax exemptions given to public schools, and concluding that public schools are exempt on real property that they own, not on real property that they lease. We now affirm.

Initially, "[w]here the language of a statute is clear and unambiguous, courts must give effect to its plain meaning" (Matter of Tall Trees Constr. Corp. v. Zoning Bd. of Appeals of Town of Huntington, 97 N.Y.2d 86, 91, 735 N.Y.S.2d 873, 761 N.E.2d 565 [2001]). Additionally, "all parts of an act are to be read and construed together to determine the legislative intent" (McKinney's Cons Laws of NY, Book 1, Statutes § 97).

Furthermore, in construing a tax exemption statute, the well-settled rule is that "[i]f ambiguity or uncertainty occurs, all doubt must be resolved against the exemption" (People v. Brooklyn Garden Apts., 283 N.Y. 373, 380, 28 N.E.2d 877 [1940]). In Matter of Mobil Oil Corp. v. Finance Adm'r of City of N.Y., 58 N.Y.2d 95, 99, 459 N.Y.S.2d 566, 446 N.E.2d 130 [1983], we held that "[t]ax exclusions are never presumed or preferred and before [a] petitioner may have the benefit of them, the burden rests on it to establish that the item comes within the language of the exclusion." Moreover, a statute authorizing a tax exemption will be construed against the taxpayer unless the taxpayer identifies a provision of law plainly creating the exemption (see People ex rel. Savings Bank of New London v. Coleman, 135 N.Y. 231, 234, 31 N.E. 1022 [1892]; see also Matter of Grace v. New York State Tax Commn., 37 N.Y.2d 193, 196, 371 N.Y.S.2d 715, 332 N.E.2d 886 [1975]). Thus, the taxpayer's interpretation of the statute must not simply be plausible, it must be "the only reasonable construction" (Matter of Federal Deposit Ins. Corp. v. Commissioner of Taxation & Fin., 83 N.Y.2d 44, 49, 607 N.Y.S.2d 620, 628 N.E.2d 1330 [1993] [internal quotation marks and citation omitted]).

In determining whether CDC may take...