Opinion ID: 1981302
Heading Depth: 1
Heading Rank: 7

Heading: Exaction

Text: In Matter of Smith v Town of Mendon (4 NY3d 1, 10 [2004]), we held that [e]xactions are defined as land-use decisions conditioning approval of development on the dedication of property to public use  (citations and internal quotation marks omitted). A condition placed on land use is an exaction, and therefore an unconstitutional taking, if the condition lacks an essential nexus with the state interest for which it is imposed ( see Nollan v California Coastal Comm'n, 483 US 825, 837 [1987]), and is not rough[ly] proportional[] to the impact of the proposed development ( see Dolan v City of Tigard, 512 US 374, 391 [1994]). In Town of Mendon, we rejected the petitioners' claim that the Planning Board's conditioning of site plan approval upon acceptance of a conservation easement was an exaction. We did not reach the essential nexus and rough proportionality tests, deciding that exaction analysis does not apply where there is no dedication of property to public use and the restriction merely places conditions on development (4 NY3d at 12). We have confined our exaction analysis to those cases where the condition affects a property owner's right to exclude others, and where a fee is imposed in lieu of the physical dedication of property to public use ( id., citing Twin Lakes Dev. Corp. v Town of Monroe, 1 NY3d 98 [2003]). Plaintiffs ask us to find that Chapter 1 imposes an exaction on Empire because conversion is conditioned upon Empire's dedication of its not-for-profit assets to legislatively articulated public and charitable purposes. We decline to accept plaintiffs' invitation to expand our exaction analysis beyond the realm of land-use regulation. [22] Even if we were to do so, however, Chapter 1 passes both the essential nexus and rough proportionality tests. The challenged condition placed on Empire's property is the dedication of not-for-profit assets to the recruitment and retention of health care workers and public health programs. But Empire began as a captive of hospitals, and has always inhabited a borderland between a government-sponsored entitlement program, such as Medicaid, and a commercial insurer. Empire has traditionally functioned as both a financing device for hospitals and a means to make economical health care available to as many New Yorkers as possible. The dedication of conversion assets to support public health programs and to recruit and retain health care workers is wholly consistent with these activities. In short, there is not only a nexus but a direct correlation between the State's interest in enacting Chapter 1  allowing Empire to continue to carry out its dual historic mission  and the condition imposed  that Empire's not-for-profit assets be used for the public health purposes specified in Chapter 1. [23] The essential nexus test does not mirror N-PCL 1005 (a) (3) (A), which calls for distribution of a Type B not-for-profit's assets upon dissolution to one or more domestic or foreign corporations or other organizations engaged in activities substantially similar to those of the dissolved corporation  (emphasis added) ( see also Matter of Multiple Sclerosis Serv. Org. of N.Y. [New York City Ch. of Natl. Multiple Sclerosis Socy.], 68 NY2d 32 [1986]). [24] This appeal is not here pursuant to N-PCL 511 and so section 1005's quasi cy pres test does not apply to Empire's conversion. In any event, it does not follow, as plaintiffs seem to assume, that under N-PCL 1005 Empire's not-for-profit assets would have to be distributed entirely to a tax-exempt, IRC § 501 (c) (3) charitable foundation. Indeed, another not-for-profit insurer arguably more nearly qualifies as an entity engaged in substantially similar activities. Although plaintiffs liken Empire to a private charity and refer to donors, history does not bear out the analogy. Empire has never relied on philanthropy or carried out an explicitly charitable agenda. As already noted, Empire's former federal tax-exempt status was based on IRC § 501 (c) (4) as a social welfare organization. Empire was never a section 501 (c) (3) charity; Empire did not enroll subscribers for free. [25] Finally, the condition is roughly proportional to the impact of Empire's conversion because if Empire were to convert through any other mechanism  i.e., the Not-For-Profit Corporation Law  it would be required to dedicate its not-for-profit assets to purposes similar to those for which it was formed  i.e., promoting hospitals and access to health care. Thus, Chapter 1 places conditions on Empire's property similar to those that could have been imposed in the sale of its assets and dissolution under the Not-For-Profit Corporation Law.