Takes Town To Court—

Youth Academy

Contests Its Tax Bill

By Kendra Bobowick

Attorneys for the Newtown Youth Academy (NYA) have issued to the town a civil summons “applying for relief against wrongful assessment of its property for taxation …”

“You are being sued” appears in a notice to the defendant — the Town of Newtown — and names the NYA as the plaintiff seeking a court date summoning the defendant to Danbury Superior Court on November 17 at 10 am. The plaintiff, a nonprofit, nonstock corporation, is “exempt from taxation” pursuant to the provisions of a 501(c) (3) internal revenue code, states the application to the Danbury court.

“There is no animosity,” said Town Attorney Dave Grogins, regarding the suit. “They’re just testing the law. We’re not fighting; it’s a legal question” of whether or not NYA qualifies for exemption under state provisions. Mr Grogins noted that the town assessor believes it qualifies for taxation, but clearly, the NYA disagrees. The town does not grant tax exemptions, Mr Grogins explained, “They have to qualify [with the state]. If they qualify, that’s fine.”

When the academy and town entered the lease agreement, “We didn’t know their business plan,” Mr Grogins said. He was aware it would qualify for “various provisions.” Not every 501(c)(3) is entitled to exemptions per state law, he explained, citing certain activities that might qualify for taxation. He did not comment on the case specifics, since “it’s in court.”

The summons states, “Pursuant to the lease between [the plaintiff and defendant], the parties contemplated that no property taxes on the land or improvements would be payable.” The recent assessment valued the NYA land at $566,280 and the building at $7,951,208. The document cites that the assessor “determined that all property shall be liable for taxation at 70 percent of its true and actual value.”

The suit alleges, “A tax was laid on this property, which tax was illegal and unlawful for the following reasons: First, “The property is properly exempt to taxation per the state’s general statures and the plaintiff’s lease with the town.” Also, “The land is leased from the town, which cannot tax itself.”

How did the assessor arrive at the tax numbers? The lawsuit asserts: the tax was computed on the assessment which was “manifestly excessive” and could not have been arrived at except by “disregarding the statutes for determining the valuation of such property.” The paperwork states again that the “subject of the assessment is owned by the town and not subject to tax.”

Copies of the notice went out to Mr Grogins, Finance Director Robert Tait, and both the Board of Assessment Appeals and Tax Assessor Chris Kelsey. The town clerk and First Selectman Joe Borst also have copies.

Has something gone wrong with the lease agreement and process to establish the lease? Mr Borst said Wednesday, “Not that I’m aware of. I can’t really comment,” he added, explaining he did not want to compromise any legal process. Should the town and NYA both have known — per the lease agreement established roughly one year ago — the tax standing for the academy? “I can’t comment,” Mr Borst replied.

Representing the Newtown Youth Academy, attorney Catherine Cuggino stated Thursday morning that she cannot comment on current litigation.

According To The Lease

Article 5 of the lease agreement drawn up between the town — Landlord — and the NYA — Tenant — describes terms for taxation, which notes both tax payments, or alternatives.

The section first notes that the tenant “shall be responsible for all taxes and assessments … that relate to leased premises,” and a second section clarifies that the tenant is responsible for all taxes “that relate to personal property owned by the tenant or located at the leased premises.” Further, the section notes that the parties “believe that under existing law no town of Newtown property taxes on the land or improvements will be payable … however if it is determined that the land or improvements are not exempt, payments are the responsibility of the tenant.”

Another condition exists in Section 5.5, which states that the tenant has the right to “seek a reduction … of leased premises for property tax purposes and contest in good faith by appropriate proceedings at the tenant’s expense the amount … in whole or in part of any property tax … provided that the tenant shall deposit with the Landlord the sum, to be placed in an interest bearing account, which shall be equal to the amount contested …”

Mr Grogins explained that the Article 5 portion of the lease is “just boilerplate,” and the tenant does have the right to contest it.