Relates to certain leases of property by nonprofit organizations and makes certain technical changes

Section 2: Renumbers subdivision 13 of section 420-a of the real property tax law as subdivision 15.

Section 3: Establishes the effective date.

Justification

The General Society of Mechanics & Tradesmen of the City of New York is a tax-exempt organization pursuant to § 501 (c)(3) of the IRS Code. The Society was founded in 1785 by the skilled craftsmen of New York to protect and support such craftsmen and their families. Today, this 231-year old organization continues to serve and improve the quality of life of the people of New York through its educational, philanthropic and cultural programs including its tuition-free Mechanics Institute, The General Society Library, and its nearly two-century-old Lecture Series.

In 1820, The General Society opened one of the City's first free schools. The school, which became the Mechanics Institute in 1858, continues to provide tuition-free evening instruction in trades-related education and provides a critical service to improve job opportunities for New Yorkers in the building and construction industry. It also provides a highly trained workforce for the industry.

Each fall, over 350 students enroll in the Mechanics Institute's workforce development programs including Electrical Technology, HVAC Systems and Refrigeration Design, Plumbing Design, Construction Project Management, Facilities Management and Historic Preservation, AutoCAD and BIM. Without a tuition-free education, these underserved students would otherwise be unable to get the technical education needed to advance in careers. Thousands have benefitted from the Society's free education during its long history. Numerous leaders of the construction industry and the building trades from throughout New York State have studied at the Society over the years. The Society's 126-year old building, which houses its educational programs, is very costly to maintain. The Society purchased its headquarters located at 20 W. 44th Street in 1899. The building is on the Natural Register of Historic Places and the facade of the building is a New York City landmark. The age of the building coupled with the responsibilities of operating a building listed on the National Registry, results in extremely high maintenance costs.

For decades, in order to fully fund its educational and cultural programs and maintain its historic building, the Society has rented part of their building to various not-for-profit organizations. Notwithstanding the revenue generated from the rent, the Society continues to have annual operating shortfalls.

Beginning in 2012, the City of New York Department of Finance withdrew 50% of the Society's tax exempt status for real property tax purposes. It assessed the Society real estate taxes of approximately $350,000 in annual Real Property taxes invoking a New York State statute designed to prevent tax-exempt organizations from profiting from their real estate holdings. The rationale of the DOF was that the rent generated from the Society's tenants exceeded the maintenance costs of the property rented.

The true test should be whether the revenue the Society collects from ALL sources (rent, grants, etc.) exceeds the annual expenses. If revenue exceeds expenses, then property tax should be imposed. The Society at best breaks even each year and the imposition of property tax only serves to further damage the Society's finances. Without the rental income, the Society would operate at a substantial loss and, inevitably, it would face a financial crisis and, perhaps, insolvency within a few years.

Prior legislative history

New bill.

Fiscal implications

To be determined.

Effective date

This act shall take effect immediately and shall be deemed to have been in full force and effect on and after July 1, 2012.