Taxes

I imagine most people who made it through the library lingo in the question do not need a decoder ring for the answer.

That said, Ask the Lawyer is for everyone, so with a few twists of the decoder ring, this question is about:

• Education Law Section 259, which concerns library funding approved by the voters of a school district.
• Chapter 414 of the Laws of 1995, which amended Education Law 259 to include library funding approved by the voters of a municipality.[1]
• “JPOTB,” or funding that is “just part of the budget” of a municipality (no separate tax line supports the library; the money is allocated from the general levy).[2]

With those concepts defined, let’s tackle the first question:

… my understanding was, in the case of a 259, that the municipal funders were no longer allowed to collect the amount of money that had been used to fund the library. Is this true?

That is not true. Further, there is no provision in the Education Law, General Municipal Law, Town Law, Village Law, City Law, County Law, or Real Property Tax Law that could make this true.

What may have given rise to this impression is instances of JPOTB funding being re-allocated after a successful 259 vote. After all, if a library successfully transitions to support from a school district levy, it is pretty easy for the governing board of the municipality to justify adjusting the budget.

But to be clear, if that budget was already passed, and the levy issued, the portion of JPOTB funding allocated to the library is library money, the minute it is collected.[3]

But if the money is coming from a 414 source (as in, a separate levy approved by the voters), the only thing that can remove that funding is a vote per the applicable law of the taxing entity.

This leads us to the member’s next question: After a successful funding vote, can a municipality decide to allocate funds from their budget to go to the library?

The answer to this is a resounding “YES.” Not only is there no law barring it, but there is no relevant guidance from the usual suspects (Attorney General, NYSED, State Comptroller) suggesting it can’t be done. If a municipality wants to support a public library that gets additional sources of revenue, it can do so.

The logical next question is: After a successful 259 (school district funding vote), how does a municipality reduce its 414 funding, if desired?

The elimination or reduction of 414 funding will vary by municipality. Although establishing or increasing 414 funding per Education Law 259 requires a petition signed by 25 voters and an endorsement by the library’s board of trustees,[4] reduction or elimination must follow the municipality’s particular path to removal.[5]

This is an important thing to be sensitive to. A public library should have diverse and secure streams of revenue,[6] but must take care not to appear greedy, wasteful, or unfair to taxpayers supporting more than one library.

While this is just common sense, it is so serious that it has recently been the subject of attempted state legislation (see 2024 – 2025 NYS Assembly Bill 4530A). Although this bill did not pass, it sets out issues to be aware of and is worth reading as a cautionary tale.

The bottom line: when a public library is planning to change a revenue source, careful strategic planning should be part of the process. Early participation by legal counsel, as well as an experienced legislative and/or public relations professional, is wise.[7]

Thank you for an important question.

For the five people reading this who don’t work day-to-day on library budget matters but for some reason care about this question,[1] I will explain: a “414” is the nickname for when the voters of a village, town, city, or county approve a separate tax levy to support a public or association library (or libraries).

The “414” got its nickname for the reason set out in the question (“Chapter 414 of the laws of 1995”), but the tax is enabled through Education Law Section 259. It is called “414” to differentiate it from another fun nickname in library tax-land, the “259,” which is reserved for levies approved by school district voters.

“414” is actually a bad nickname,[2] because in the time since “Chapter 414 of the Laws of 1995” was passed, the part of the law governing “414 votes” has changed (in 1996, 1997, 2021, and (most recently) in 2023. I guess changing “414” to “587” (for “Chapter 587 of the laws of 2023”) is too cumbersome.

While I appreciate that nicknames are important, that isn’t the real reason I am reviewing this history. Rather, I am reviewing the history because it is relevant to the question: is a “414” a “new” tax?

The answer is: in 1995 (when the vote was only to “increase” the amount to appropriate), there may have been some grounds to say it was not a “new” tax. But since the 2007 change, the law has allowed for the tax to be not only “increased” but to be “established.”

So, since 2007, without a doubt, a 414 (or, more fittingly, a “184” for “Chapter 184 of the Laws of 2007”) can be a “new” (as in separate and never having happened before) tax.

While the phrase “new tax” might be a repugnant notion to some,[3] to call a tax proposed by the voters, endorsed by the library board, and separately enforced by the power of a tax levy and a lien on real property is… disingenuous, at best. In fact, it could be viewed as downright dishonest, by some.[4]

A tax such as a 184[5] is defined in New York’s Real Property Tax Law[6] as “a charge imposed upon real property by or on behalf of a county, city, town, village or school district for municipal or school district purposes…”[7]

The ability of any library (not just a library created by the taxing entity) to benefit from a 184 or a 259 is a vast power.[8] As a separate tax, it is also subject to the Real Property Tax Law’s provisions about refunds (meaning a library sometimes has to return part of it). As a tax, it can be enforced by the power of the state, and it provides an important source of independent, separate funding. For these reasons, its status as a new tax (when it is first adopted) should not be denied.

Libraries that want to point out that a new 414 to replace funding that from a municipality’s budget can stress that it’s not an additional charge (if the amount isn’t increasing).

A newly established 414 (or whatever you call it) is a new tax. An official source that glosses over these considerations may want to refine its guidance.

Thank you for a thoughtful question.

It can be a fact as shocking as learning that there are no “Berenstein Bears”:[1] a public library or library system—or even a town or a village—can engage directly in lobbying.

A public library, library system, or municipality can also join a membership organization that uses funds from its dues to engage in lobbying.[2]

Now, it is important to not confuse lobbying with political activity, political donations, electioneering, or telling regular voters (not lawmakers) how to vote on a particular item. Those are forbidden to any quasi-governmental organization, and all but the last one (telling voters how to vote[3]) are forbidden for association libraries and other private nonprofit organizations, too.

“Lobbying”—which any library organization of any type can do or pay another entity to do on its behalf—is an activity that is defined by state and federal law, and it means directly asking government officials for things,[4] such as:

• A budget item
• A new law
• A change to the law
• Voting against something
• Changing the enforcement or interpretation of something

Lobbying involves direct contact with a government official… not testimony at a hearing, not demonstrating in front of a building, and not attending an open meeting to make an ask or presentation (activities many people call “advocacy”).

For readers who are taking this in and having a Berenstain Bears Moment (“It can’t be true!”) about tax-funded entities lobbying, try this exercise: If an organization is lobbying or hiring lobbyists in New York, you can look up its reporting here. Search the database for “town” or “school district” and you will see many towns and other taxpayer-funded entities engaging in lobbying.

Basically, if a taxpayer-funded entity has decided that lobbying is in the best interests of the organization, the expenditure is legal.[5] As long as all the lobbying registration and reporting requirements are met and not too much money is spent on the lobbying, all will be well.[6]

So yes, a public library or library system can use budget moneys derived from taxpayer revenue to hire a lobbyist or pay dues to an organization doing advocacy/lobbying.

For more information on the difference between lobbying, political activity, advocacy, and gepvia,[7] please see this longer, more detailed RAQ.

Short answer: yes, it is legal, and yes, there are options.

Let’s review why it is legal,[1] and then we’ll discuss the options.

For over thirty years, there has been clear guidance that when a municipality or school district collects taxes for a public library, the money should be turned over “as soon as practicable after their receipt.”

For this reason, libraries and their taxing authorities should stay in close communication about the timing of payment(s).

If an “incremental” approach is needed because of delayed payments, this close communication is more critical, because there are a few more details to consider, such as how to know when to demand payment, and how to demand incremental payments efficiently.[2]

Because the district is obligated to keep the library’s moneys in a separate account,[3] the district should be able to provide current information about when there are moneys to be paid.

Proceeding from there, the district and the library should be able to agree on periodic payments, and memorialize the agreement as follows:

RE:        [NAME LIBRARY] [YEAR] Levy

              Agreement regarding payments of [LEVY AMOUNT]

Dear [NAME AT DISTRICT]:

Thank you for meeting with [NAMES] on [DATE] to discuss the manner in which the District will convey the levy.

As we discussed, the District will remit the full amount by [DATE], unless it has not received the full amount, in which case it will remit what it has collected.

In the event the full amount cannot be paid, after [DATE], the District will pay over moneys collected for the Library by [the # day of the month].[4]

The District will consider this letter a standing request for payment of the [YEAR] levy per Education Law Section 259.

In the event the District receives notice of assessment challenges that might result in the need to return funds, the District shall notify the Library as soon as possible via an email to [ADDRESS].

Thank you for your assistance in this matter.

Sincerely,

NAME

President

NAME Library

Going back to the Comptroller’s guidance from 1992, this might not be the only option. In many counties, the county as taxing agent actually fronts anticipated revenue to the entities it collects for. In some places, steady revenue is assured by issuance of “tax anticipation notes,”[5] which are low-interest loans that bridge any gap between the need for funding and the levy collection.[6]

What does this mean?

If a library depends on timely collection of a levy for cash flow (either because that’s just how things are, or because there may be a time of unusual burden on reserve funds, as in the question), it is important for the library to:

• Know how taxes are collected.
• Know if funds are ever advanced prior to full collection.
• Know if there are anticipated “claw backs” due to assessment challenges.
• Know if “tax anticipation notes” are issued.
• If “tax anticipation notes” are not used, but could ensure fiscal stability for the library, work with the taxing agency to explore if they can be used.[7]

This approach could be helpful in a scenario like one described by the member, because the issue is created not only by some special circumstances at the library (construction project) but sudden notification of a change in payment practice.

In a case like the one in the question, being tactical/diplomatic/strategic and involving legal counsel and/or accountants with experience in municipal/school district finance is just as important as knowing the law.[8] Prior to meeting with the district, setting out a plan and confirming it with the library’s board of trustees is the way to go.

Thank you for an important question. Given the pressures on library budgets and taxpayers in 2024, this is likely not going to be a unique situation.

Let’s give short, punchy answers to the questions and then drill down with further information about each answer.

1. Do we need to pay refunds to tax levies received in prior years?

If the library was not a party to the settlement (which it wasn’t), NO.

2. If we’re not obligated to pay the refund, would the school district have to pay it on our behalf as the tax collector?

If the district entered into the settlement without the library being notified, YES.

3. Are we subject to settlements that we weren’t involved in, nor aware of?

There is no case law on this point (yet) but a wise position to adopt is NO (while being ready to be told MAYBE).

Okay, let’s break this down a bit more:

First, let’s remember how we got here: in 2021, the State Assembly amended Real Property Tax Law Section 726, enabling school districts to collect from the library any lost revenue from taxpayer challenges to property assessments. A recap and commentary on that law, which went live in 2022, is posted at https://wnylrc.org/raq/return-school-district-tax-levy-money.

In that earlier answer, I wrote: “There are about fifty more pages I could write on this topic, but that’s the Big Picture, and the Big Takeaways are: 1) it can happen; 2) it is good to prepare for it; and 3) if it happens, review the details before agreeing to it.”[1]

This issue—settlements of assessment challenges covering multiple years, including years before the law was changed—is a big chunk of those fifty pages! But we’ll keep this answer short.

So, to dive in a bit more:

Why do I say there is no obligation to pay refunds for tax levies from prior years (before 2022) if the library was not a party to the settlement?

I say this, because it is a prudent first position to take. Agreeing to pay a settlement when your library wasn’t notified or invited to the table is dicey. Agreeing to pay the money for years when there was no obligation to pay it is even more dicey! It is wise to be circumspect and assess the claim before paying it.

Why do I say that, if a library is not obligated to pay a refund, the school district would still have to pay it? Because the law doesn’t allow the taxpayer to collect the refund from the library directly; it allows the district to collect the money from the library after repayment to the taxpayer. In this case, while the district might only be able to collect part of the payment from the library, it will still owe the full amount of the refund to the taxpayer.

Finally, why did I say it is wise to reject that your library is obligated by a settlement it wasn’t involved in nor made aware of, but that your library “maybe” should be ready to be told otherwise?

Whenever the law changes, there is a period of trying to figure out the new boundaries and implications of the change. While the resolution of an assessment challenge is often a judicial order, with thousands of dollars at stake, it is good to take a hard look at what is being demanded and make sure the district demanding it is clearly entitled to it.

So, when a refund is demanded, it is a good idea to demand ALL the paperwork related to the assessment challenge, the negotiations, the settlement, and the final order, to make sure your library is both following the law and not handing over more than it has to.

And on a final note: all that said, every aspect of a tax assessment challenge and refund must be handled with extreme tact and diplomacy. After all, the library must maintain a positive and collaborative relationship with the people involved in the deliberations, so, when assessing potential refunds and requesting paperwork, feel free to pour as much sugar as you want into the request.

Sample language for this is: “Of course the library wants to issue a refund in any amount required by law. Please provide us with copies of the documentation related to the assessment challenge, any settlement, and the final order, and our treasurer will assess this as soon as possible so we can issue the correct amount.”

When your library has received the documentation, have your local attorney take a look it, and issue a written opinion as to what is owed.

Once the board has the complete picture and any advice it needs, it can vote to issue the refund, and then make sure it is considering the financial implications of the amount.

Thank you for a nuanced and very important question!

This sounds like a lovely service to both the library and community, so I am going to make this answer as positive as possible.

First, it is clear from the question that the instructor (a “community member”) is not a library employee. So, they are either doing this as a volunteer or as an independent contractor.

Either way, before we delve into the financial/tax/deduction questions, I have to say this:

If the instructor is a volunteer, because yoga can involve some risk in injury, it is wise to have a letter in place confirming the terms of the volunteer service. That letter would address logistics, how the class is promoted, liability considerations (“hold harmless,” indemnification, insurance), and address the financial considerations (the donation arrangement).

If the instructor is an independent contractor who is getting paid to offer the class, it is wise to have a letter in place confirming the terms of the independent contractor service. That letter would address when/where the class takes place, how the class is promoted, liability considerations (“hold harmless,” indemnification, insurance), and finances (the donation arrangement).

For any library (and Friends), although incidents of injury are rare, because of the potential cost, addressing these “liability considerations” is critical. As it so happens, they can be addressed in the same letter that addresses the financial aspects.

Okay, now we can discuss the financial aspects.

The good news is that the member is 100% right: Perhaps a simple solution would be to re-word how this is done…

Exactly.

We won’t go over wording for all the combinations,[1] we’ll just deal with this scenario: a free, donation-accepting class conducted by a volunteer, with the donations turned over to the library, to be turned over to the Friends.

The issue here, of course, is: what is the donated income from the class—a direct donation to the Friends (held briefly by the library) or direct payment to the instructor?

This distinction is important.

If money paid by the attendees is a direct donation to the Friends, the instructor cannot claim a deduction for it (since it was never their income, it was only ever a donation).

If, on the other hand, the money paid by the attendees is a direct payment to the instructor, it can then be a donation from the instructor and to the Library/Friends.[2] That shouldn’t be a problem, unless the income is not declared.[3]

There is no scenario where the donations collected can become the value of the service that was volunteered, and thus the credit is for “in-kind” services. The IRS doesn’t work that way.[4]

The issue presented here is not rare or esoteric. In fact, it is so common, the IRS has a fancy name for it: the “assignment of income doctrine,” which basically says that if you earn money and immediately give it away, it is still taxable income. 

To clear this up, the member’s “re-wording” suggestion is spot-on. However, before changing the publicity, it would be good to focus on the arrangement, so there is clarity between the instructor, the library, and the Friends. After that, the advertisements can be updated to fit the agreement.

Where can you get such a letter? It is best for a final version to be reviewed by your lawyer, but as it turns out, we occasionally get questions about yoga here. So, two places to start are Live streaming a chair yoga program and Liability Waivers for Library Fitness Programs.

In closing: Yoga is a beautiful activity and a library hosting it is providing a valuable community resource; the law and the IRS should never get in its way. With a careful arrangement, that can happen.

Thank you for a thoughtful question!

The short answer is yes, it's true. A school district tax levy, even if it’s a separate line on a school district bill in support of a library, can be reduced if a taxpayer challenges their assessment after the tax bills go out, and yes, since 2022, a library may have to refund overpayments.

While taxes supported directly by the voters (and distinctly designated on tax bills as for the library) are the most stable sources of annual revenue, both can be subject to the correcting and refund provisions of New York's Real Property Tax Law (RPTL 554 and 729, respectively).

For this reason (and others), it’s a good idea for a library dependent on such revenues to maintain a fund balance that can help bridge any reductions.

All that said, if your library receives notice that a reduction or refund must be made due to correction, it is wise to ask for the details and underlying documentation (and have your lawyer or accountant review them), to ensure the board is in a position to agree that the reduction or refund was issued properly.

There are about fifty more pages I could write on this topic, but that's the Big Picture, and the Big Takeaways are: 1) it can happen; 2) it is good to prepare for it; and 3) if it happens, review the details before agreeing to it.

A "pass-through" is when a 501(c)(3) organization agrees to let a non-501(c)(3) use its tax status to accept grant money.  It’s a not uncommon arrangement; in fact, some 501(c)(3)’s are actually set up to do it so smaller and less established organizations can benefit from grant money.

Since it can give access where access would otherwise be denied, a pass-through can be a very helpful and equitable thing.  But sharing a tax status is like sharing a milkshake: you can do it—and it's a sweet gesture—but it comes with risks.

What are those risks, and how can they be handled?

At the bare minimum, any public library considering serving as a pass-through must have a written, board-approved policy for doing so, and the policy must include:

• How does serving as a pass-through serve the library's mission and long-range plan, and how do they select pass-through affiliations that stay within that purpose?
• What is the admin fee for serving as a pass-through (usually no more than 10%)?  NOTE: the admin fee is essential for a public library since it cannot offer the accounting and other services associated with being a pass-through without being remunerated at least at cost.
• Does the library have the accounting and administrative capacity to safeguard the money and monitor that all funding requirements have been met before it is disbursed (since failure to meet them can require a claw-back)?
• The contracts for the grant must be kept for 6 years.
• The library's accountant should be consulted before any pass-through is approved, so it can be assured that the library can properly account for the funds.
• The library must keep in mind that a failure to meet the requirements of the grant could impact future funding from state/federal sources AND being associated with funding from a source (even just as a pass-through) could bar the library from obtaining funding from the same source for its own project.

There are risks to both state and federal legal compliance, as well as contract compliance for an individual grant, if these items are not addressed properly.  For this reason, many NFPs just say "NO" to requests to be a pass-through.

A related but separate solution to this type of need is the library serving as the grantee and bringing in the potential "partner" as a subcontractor (or "sub-awardee").  In that scenario, the library applies for the grant and then sub-contracts with the person/org who will do most of the work.  (This relationship is usually written right into the application for the grant).

Bottom line: if the library wants to offer services as a pass-through for mission-aligned organizations, it can, but it should have a written policy and be ready to spend administrative time 1) monitoring the grant terms and 2) accounting for the grant.  Once a policy is in place, requests can be evaluated, and pass-through relationships can be governed in accordance with it.

Still not sure if your library should do that? Here’s a litmus test:

If a library is not prepared to have its staff spend around ten hours of admin time (or more) on it each fiscal year, then the answer should be a "we do not have the policy or capacity to grant this request".  If the library feels like the project is worthy enough, it could then offer "however, the library will consider applying for the grant directly, with your organization as a subcontractor."

I hope this is helpful!

Short answer: You can't find anything to verify that claim because what is claimed is wrong.

Long answer:  The rental business may be wrong, but I can't blame them the way I can blame someone for parking in a "No Parking" zone.[1]

That's because if they are basing their answer on a plain reading of the relevant regulations (N.Y. Comp. Codes R. & Regs. Tit. 20 § 529.7), the exemption applies only to "sales."

Here's the language from the regulations:

(h) Sales to exempt organizations.

(1) Any sale or amusement charge to or any use or occupancy by an exempt organization to which an exempt organization certificate has been issued is exempt from sales and use tax.

So, a literal reading of the regs suggests that the exemption applies only to sales (and amusement charges[2]); there is no reference to renting or leasing or borrowing equipment.[3]

However, a quick check of advisory opinions[4] from the New York Department of Tax & Finance confirms that rental fees are considered exempt, too. Here is an excerpt that confirms this:

When Petitioner, within 90 days of the transaction, accepts in good faith from its customer an appropriate and properly completed exemption document showing that the purchase is exempt from sales tax, Petitioner is relieved of its burden of proving that the transaction is exempt and need not collect tax on sales or rentals to that customer. See section 1132(c) of the Tax Law.

...

When its customer is a building owner that is an organization exempt from sales tax, Petitioner’s rental or sale of equipment will be exempt from tax.

...

The organization claiming exemption from the tax must be the purchaser of record on Petitioner’s bill or invoice and must be the payer of record. See section 529.7(h) of the Sales and Use Tax Regulations. [emphasis added]

So, there you have it: rentals to tax-exempt organizations are exempt just like sales.

I am sorry you are having to put up not only with mold but also with overly literal HVAC vendors.  I hope you can show them the opinion I've linked to and reach a good resolution.  If not, I suggest you have them call their accountant or the helpful folks at the New York State Tax & Finance Information Center: https://www.tax.ny.gov/help/contact/

There's a lot going on in this question, so I am going to be less fun and flowery[1] than usual as I answer it.

I am sorry to report that per NY Tax Law Section 1105(b), an association library must collect sales tax on sales of facsimile services for faxes sent and received within the state.[2]

In part, this is because association libraries, although chartered by State Ed, are regarded by the NYS Department of Taxation & Finance as not-for-profit corporations, not state agencies/instrumentalities.[3]

Now, as a not-for-profit, an association library is exempt from collecting and paying taxes on facsimile services per NY Tax Law Section 186-e--just like any other chartered library or museum would be.  But as the resource cited in the member's question[4] shows, exemption under 186-e doesn't equate to exemption under 1105 (b).[5]

Of course, legal guidance in "Ask the Lawyer" can supplement--but never substitute--guidance from your association library's tax professional or lawyer.  If the accountant or lawyer for your association library finds a way to avoid the obligation to collect tax on sales of intra-state faxes: 1) get that in writing from them before relying on it; and 2) please send us an update!

Thanks for a question that inspired frequent cross-checking of the tax code!  I wish I could offer a more helpful answer.

[1] "Fun and flowery!" is, I am sure, the headline of the upcoming New York Times Book Review covering "Ask the Lawyer: The Novel" (which, to the author's knowledge, is not in the works, but if you know a publisher, tell them I'm open to persuasion).

[2] If the person is faxing to New Jersey, or Russia, or anywhere but within New York, tax under 1105 does not apply.  If you want to read more on that, see NY Tax Opinion TSB-A-96 (70) S from November 25 1995.

[3] I could write a lot about this, but let's just say the commentary in NY Tax Opinion "TSB-A-13(1)R", regarding how the NYS Department of Taxation and Finance regards an association library, is a good summary of this position.

[4] NY Tax Publication 843; the link to the document is in the question.

[5] I'd say this situation isn't fair--but since this is an answer about taxes, such an observation would be redundant.