Opinion 91-29


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 The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.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 Associations (use of tax moneys for an eye care plan, hospital telephone and television charges, and gifts); (procedure to make fire department recipient of tax moneys); (power to require treasurer to be bonded) -- Recipients (procedure to make fire department recipient of tax moneys payable to benevolent association) -- Treasurer's Powers (liability for tax moneys)

INSURANCE LAW, §§9104, 9105; NOT-FOR-PROFIT CORPORATION LAW, §§717(a), (b), 720(a)(1), 1005(a)(3)(A), 1009, 1013; L 1955 ch 639: The Volunteer and Exempt Firemen's Benevolent Association of Lakeview may not expend foreign fire insurance tax moneys to pay for an eye care plan, hospital telephone and television charges, and gifts for all active firefighters, members, or their families. The Lakeview Fire Department may be made the recipient of the tax moneys payable to the association by the repeal of the association's authority to receive such moneys or the dissolution of the association. The treasurer of the association may be held liable for neglect, failure to perform, or violation of his or her duties. The association's board or trustees may require the treasurer to be bonded.

You ask whether the Volunteer and Exempt Firemen's Benevolent Association of Lakeview may expend foreign fire insurance tax moneys to pay for: an eye care plan for all active firefighters and their families; reimbursement of association members for charges incurred for the use of a telephone and television during a hospital stay; and a gift for each active firefighter (e.g., a rechargeable flashlight). You also ask how the Lakeview Fire Department could be made the recipient of the foreign fire insurance tax moneys presently paid to the association. Finally, you ask whether the treasurer of the association may be personally liable for the foreign fire insurance tax moneys paid to the association and whether the treasurer may be bonded.

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, where an exempt firemen's benevolent association has been created by 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 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 Volunteer and Exempt Firemen's Benevolent Association of Lakeview was incorporated by chapter 639 of the Laws of 1955, a special act of the State Legislature which added sections 647.0 through 647.6 to the Nassau County Civil Divisions Act (L 1939 ch 273, as amended). Section 647.6 authorizes the association to receive foreign fire insurance tax moneys and to use such moneys as follows:

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

Thus, the only purpose for which the association may expend foreign fire insurance tax moneys is the care and relief of disabled or indigent volunteer and exempt firemen and their families. The association is not authorized to expend the moneys for any other purpose, such as the purchase of gifts or the provision of benefits unrelated to the care and relief of disabled or indigent firefighters or their families. Therefore, in our opinion, the association may expend foreign fire insurance tax moneys to provide disabled or indigent volunteer and exempt firemen and their families with an eye care plan, reimbursement for hospital telephone or television charges, or gifts in furtherance of their care and relief. The association, however, may not make such expenditures on behalf of all active firefighters, members or their families without regard to indigency or disability.

With respect to making the Lakeview Fire Department the recipient of the foreign fire insurance tax moneys presently paid to the association, Insurance Law, §§9104 and 9105 generally provide that, in the absence of a special law, foreign fire insurance tax moneys must be paid to the treasurer or other fiscal officer of the fire department or, if the fire department does not have a treasurer or other fiscal officer, to the fiscal officer of the authority having jurisdiction and control of the fire department (Insurance Law, §§9104[a][1]-[3], 9105[d][2][B]-[D]; see also, e.g., 1990 Opns St Comp No. 90-20, p 48). Therefore, a special act of the State Legislature repealing the association's authority to receive such moneys (Nassau County Civil Divisions Act, §647.6) would have the effect of requiring the moneys to be paid to the fire department or municipal officer for the use and benefit of the department or the companies comprising the same, as provided in sections 9104 and 9105 (see Opn No. 89-11, supra). Please note, however, that we believe that any such special act should apply prospectively only and limit the use of previously accumulated foreign fire insurance tax moneys to the care and relief of disabled or indigent volunteer firefighters and their families.

The dissolution of the association, either by the State Legislature's repeal of the special act which created the association or through voluntary dissolution proceedings (see Not-For-Profit Corporation Law, art. 10), would also cause the foreign fire insurance tax moneys payable to the dissolved association to be distributed and used as provided in Insurance Law, §§9104 and 9105 (see Opn No. 89-11, supra; Not-For-Profit Corporation Law, §1013[b]). Following dissolution, the foreign fire insurance tax moneys previously accumulated by the dissolved association would have to be distributed to one or more domestic or foreign corporations or other organizations engaged in activities "substantially similar" to those of the association (see Not-For-Profit Corporation Law, §§1005[a][3][A], 1009, 1013[a]). The corporation or association acquiring the accumulated foreign fire insurance tax moneys of the dissolved association, however, may only expend those moneys for the purposes for which the moneys were received by the dissolved association (see Not-For-Profit Corporation Law, §1005[a][3][A]).

With respect to the liability of the treasurer for foreign fire insurance tax moneys paid to the association, we note that the association is generally subject to the Not-For-Profit Corporation Law (see Nassau County Civil Divisions Act, §§647.0, 647.3; Not-For-Profit Corporation Law, §103[a]). The treasurer of a not-for-profit corporation is required to discharge the duties of the position in "good faith and with that degree of diligence, care and skill which ordinarily prudent men would exercise under similar circumstances in like positions" (Not-For-Profit Corporation Law, §717[a]), and "[p]ersons who so perform their duties shall have no liability by reason of being ... officers of the corporation" (Not-For-Profit Corporation Law, §717[b]; cf. Hartford Insurance Co. v Hale, 154 AD2d 909, 546 NYS2d 61, pertaining to strict liability for loss of funds by public officers). An action may be brought, however, to compel the treasurer to account for his or her official conduct in the management and disposition of association assets committed to his or her charge, or for the transfer to others, loss, or waste of association assets due to any neglect, failure to perform, or other violation of duty (see Not-For-Profit Corporation Law, §720[a][1]; see also 1979 Opns St Comp No. 79-238-A, unreported). Thus, because of the potential for personal liability, the treasurer of the association, among other things, should not permit foreign fire insurance tax moneys in his or her custody to be expended for a purpose which the treasurer, in good faith, believes to be illegal or improper (see, e.g., Opn No. 86-16, supra).

Finally, the board of trustees of the association is authorized to require any officer to give security for the faithful performance of his or her duties (see Not-For-Profit Corporation Law, §713[e]). Therefore, the board of trustees may require the treasurer to post a bond.

August 13, 1991
Robert J. DeAngelis, Treasurer
Volunteer and Exempt Firemen's
Benevolent Association, Inc.
of Lakeview