Denial of Tax Exemption to Drug Reform Group Found in Error

, New York Law Journal

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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.

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