This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

FOREIGN FIRE INSURANCE TAXES -- Exempt Volunteer Firemen's Benevolent Association (use of tax moneys to rent room); (use of tax moneys to pay accountant or attorney); (use of tax moneys to obtain storage space for records); (use of tax moneys to pay for improvement to fire department headquarters); (investment of tax moneys by loan to fire department)

INSURANCE LAW, §§9104, 9105: The Lawrence-Cedarhurst Volunteer and Exempt Firemen's Benevolent Association may expend foreign fire insurance tax moneys to rent a meeting room if the purpose of the meeting relates to the care and relief of indigent or disabled volunteer firefighters and their families. The rental paid should be no more than fair market value and a room should be rented only if the Association's own facilities are inadequate. If the Association does not have adequate storage capacity for the retention of necessary records relating to the care and relief of indigent or disabled volunteer firefighters and their families, it may expend foreign fire insurance tax moneys for the reasonable cost of obtaining storage space. If issues arise which directly relate to the care and relief of indigent or disabled firefighters and their families and which necessarily require the services of an accountant or attorney, the Association may use foreign fire insurance tax moneys to pay for those services. The Association may not expend foreign fire insurance tax moneys to pay for improvements to the fire department's headquarters.

INSURANCE LAW, §§9104, 9105; ESTATES, POWERS AND TRUSTS LAW, §11-2.2: It is inadvisable for a volunteer and exempt firemen's benevolent association to invest foreign fire insurance tax moneys by loaning the moneys to a fire department having essentially the same membership as the association.

You ask whether the Lawrence-Cedarhurst Volunteer and Exempt Firemen's Benevolent Association, Inc., may expend foreign fire insurance tax moneys for the following purposes: (1) to pay for the use of a meeting room and storage space for records relating to the operation and disbursement of these moneys; (2) to pay a "nominal" retainer to an attorney and accountant engaged to assist in the administration of these funds; and (3) to pay for improvements to property owned by the Association and used as the fire department's headquarters when the fire department would repay the Association for the costs of making the improvements, at a market rate of interest, secured by a note and mortgage.

Insurance Law, §§9104 and 9105 govern the distribution and use of foreign fire insurance tax moneys, except as otherwise provided in any special law. Therefore, when an exempt firemen's benevolent association is governed by a special act of the State Legislature and is authorized to receive direct payment of foreign fire insurance tax moneys, the moneys may be expended only in the manner prescribed by the special act (see 1992 Opns St Comp No. 92-7, p 15; 1991 Opns St Comp No. 91-29, p 84; 1989 Opns St Comp No. 89-11, p 23; 1983 Opns St Comp No. 83-120, p 151; 1981 Opns St Comp No. 81-328, p 357).

The Lawrence-Cedarhurst Volunteer and Exempt Firemen's Benevolent Association, Inc. is governed by the Laws of 1940, chapter 73, §4 (Nassau County Civil Divisions Act, §612.0 et seq.). Insofar as it relates to the expenditure of foreign fire insurance tax moneys, chapter 73 provides as follows:

Such taxes shall only be used for the care and relief of disabled or indigent volunteer firemen and their families.

In construing similar language, we have previously expressed the opinion that the care and relief of disabled or indigent volunteer firefighters and their families necessarily requires at least occasional meetings of the Association or its trustees for this purpose (Opn No. 89-11, supra). We concluded, therefore, that foreign fire insurance moneys may be expended to rent a meeting room if the purpose of the meeting relates to the care and relief of disabled or indigent volunteer firefighters and their families. The rental paid should be no more than fair market value and the Association should not expend foreign fire insurance moneys for this purpose unless its own facilities are inadequate for conducting such a meeting.

Similarly, in our view, providing for the care and relief of disabled or indigent volunteer firefighters and their families necessarily involves the need to retain records relating to expenditures for this purpose (see General Municipal Law, §§30-a, 33-a) and, in certain instances, may necessarily involve the need to obtain the services of an accountant or attorney. Accordingly, it is our opinion that, should the Association not have adequate storage capacity in its current facilities for the retention of necessary records relating to the care and relief of disabled or indigent volunteer firefighters and their families, foreign fire insurance moneys may be expended by the Association for the reasonable cost of obtaining storage space. In addition, if issues arise which directly relate to the care and relief of indigent or disabled firefighters and their families and which necessarily require the services of an accountant or attorney, the Association may use foreign fire insurance tax moneys to pay reasonable amounts for those services.

Finally, since making improvements to the fire department's headquarters does not appear to relate to the care and relief of indigent or disabled firefighters and their families, we do not believe that the Association may expend foreign fire insurance tax moneys to pay for such improvements. If the Association were to pay for the improvements, to be reimbursed at a market rate interest by the department, secured by a note and mortgage, we believe that, in effect, the Association would be loaning the moneys to the fire department and the transaction would be in the nature of an investment by the Association. In this regard, we have previously concluded that the officer having custody of foreign fire insurance tax moneys holds them in a fiduciary capacity as trustee for the intended beneficiaries and, as such, may invest the moneys in any investment permitted a fiduciary pursuant to article 11 of the Estates, Powers and Trusts Law (see Estates, Powers and Trusts Law, §§11-2.2, 11-2.3; 1982 Opns St Comp No. 82-366, p 461; 1979 Opns St Comp No. 79- 859, p 200; see also 1983 Opns St Comp No. 83-159, p 200). It is well established, however, that except as otherwise provided by statute, a trustee may not sell its own property to a trust (see, e.g., In re Ryan's Will, 291 NY 376; cf., e.g., Estates, Powers and Trusts Law, §11-2.3[d], pertaining to investments in securities of related investment companies). Similarly, since the membership of the Association and the fire department is essentially the same (see Nassau County Civil Divisions Act, §612.0[b], pertaining to the composition of the Association), we believe that in the absence of specific statutory authority, it would be inadvisable for the Association to invest foreign fire insurance tax moneys by loaning the moneys to the fire department.

September 27, 1995
Jonathan B. Kohan, Financial Secretary
Lawrence-Cedarhurst Volunteer and Exempt
Firemen's Benevolent Association, Inc.