Here, the Petitioner is an
individual and Little Lamb is a for-profit entity. Nevertheless, the
involvement of a for-profit entity does not necessarily preclude this
exemption. See College Corner v. Dep’t of Local Gov’t Finance, 840
N.E.2d 905, 908 (Ind. Tax Ct. 2006). “As early as 1879, the Indiana Supreme
Court scrutinized our Constitution and its focus with respect to tax exemption
statutes. The Court said our Constitution, ‘contemplates the character and
purpose of the property that may be exempted from taxation, not the character
and purpose of the owner of the property.’” Sangralea Boys Fund, Inc. v. St.
Bd. of Tax Comm’rs, 686 N.E.2d 954, 956 n.2 (Ind. Tax Ct. 1997) (quoting St.
ex rel. Tieman v. City of Indianapolis, 69 Ind. 375, 377 (1879)).
40. The evidence indicates that
Mr. Duke owned the subject property while Little Lamb occupied and used it.
Being owned, occupied, and used by a single entity, however, is not a
requirement for exemption. The Indiana General Assembly did not intend to require
that a single entity “achieve a unity of ownership, occupation, and use.” Sangralea,
686 N.E.2d at 958. “Importantly however, ‘when a unity of ownership, occupancy,
and use is lacking (as is the case here), both entities must demonstrate that they
possess their own exempt purposes….’” Hamilton Co. Property Tax Assessment
Bd. of Appeals v. Oaken Bucket Partners, 938 N.E.2d 654, 657 (Ind. 2010).
41. According to the evidence,
Mr. Duke acquired the subject property for the specific purpose of operating a
“faith-based early learning center.” The Little Lamb facility was constructed
pursuant to the plans approved by Debbie Duke, President of Little Lamb, specifically
for the purpose of facilitating Little Lamb’s early learning programs. Further,
Mr. Duke does not charge rent to Little Lamb. Under these circumstances, the use
by Mr. Duke and Little Lamb is indistinguishable for purposes of Ind. Code §
6-1.1-10-16.
42. Is the use of the subject
property predominantly (or 84% as claimed by the Petitioner) religious? The
Board must look to the “predominate use” test as outlined in Ind. Code § 6-1.1-10-36.3(a).
In order to meet the “predominate use” requirements, the facility must be used
for the stated purpose “more than fifty percent (50%) of the time.” While it is
true that the mission behind the Little Lamb facility is that of a religious
nature, the “predominate use” of the facility is not religious. On average, at
most only 3.5 hours per day involve programs and materials that could be
considered religious. Pet’r Ex. P8. While the hours of operation for the
Little Lamb are 11.5 hours per day. Id.
43. The Petitioner attempts to
draw the Board’s attention to a Supreme Court case where the Court held “[w]e
simply recognize that a dedicated religious person, teaching in a school affiliated
with his or her faith and operated to inculcate its tenets, will inevitably experience
great difficulty in remaining religiously neutral.” Pet’r Reply Brief; citing
Lemon v. Kurtzman, 403 U.S. 602, 618 (1971). The Petitioner goes on to
argue that “education can and does have a religious purpose when it is
conducted by religious persons with a religious purpose.” Pet’r Reply Brief.
The problem that the Board finds with this argument is that in Lemon the
Court addressed parochial schools taught by nuns, and some lay teachers, but
were operating within the hierarchy of the Catholic Church. When looking at the
Lemon decision, the teachers were employed by the Catholic Church,
subject to the direction and discipline of religious authorities, and working
in a system dedicated to rearing children in the Catholic faith. Lemon, 403
U.S. at 618. Little Lamb however is not directly affiliated with any church,
further the evidence does not establish Little Lamb is subject to the direction
and discipline of religious authorities. Little Lamb consists of Christian
individuals integrating Christian beliefs into activities at the facility. This
comparison presented by the Petitioner falls short.
44. The Petitioner also attempts
to persuade the Board that it is entitled to a religious exemption by drawing a
comparison to a Colorado Supreme Court decision. Maurer v. Young Life, 779
P.2d 1317 (Colo. 1989). The Maurer decision involved a non-profit corporation
seeking a religious exemption based on “camping programs during which Christian
teachings are related to camping experiences in a low-key, informal manner.” Maurer,
779 P.2d at 1319. The decision from Colorado, while it may be persuasive,
is not controlling. Further, the requirements for a religious exemption could
be drastically different in Colorado than they are in Indiana. The Board cannot
draw conclusions from this Colorado case to find that the Petitioner is
entitled to a religious exemption.
45. The Board must also look to
the “reasonably necessary” standard when deciding if a property is used for a
religious purpose. LeSea Broadcasting Corp. v. St. Bd. of Tax Comm’rs, 525
N.E.2d 637, 639 (Ind. Tax Ct. 1988) (citing State Bd. of Tax Comm’rs v. Wright,
139 Ind. App. 370 (Ind. App. 1966) (finding “cabins were necessary and were
used exclusively to effectuate the religious purpose and activities of the
Church.”)). The use of the subject property does not “effectuate the religious
purpose” of any Church. Even though religious themes are present and the
subjects taught at the facility have religious connotations, the use of the
facility is not elevated to one that should be granted a religious exemption.
Further, the petitioner must show a public benefit sufficient enough to warrant
an exemption. Foursquare Tabernacle Church of God in Christ, 550 N.E.2d
850, at 854. From the evidence presented, the Petitioner failed to meet this burden.
46. The existence of religious
beliefs is not enough to qualify for a religious exemption. The activities must
be different from the everyday purpose of man in general. If the existence of a
religious belief was enough to qualify, every taxpayer that had any religious
belief would qualify for an exemption. Religious exemptions should be
restricted to those facilities that meet the requirements as outlined in Ind.
Code §6-1.1-10-36.3(a). The Little Lamb facility is not directly associated
with any religious organization. The only religious affiliation is that the
owners are Christians and that the lessons taught at Little Lamb have a
religious connotation. The Little Lamb does not meet the requirements necessary
for a religious exemption. Similar to the holding in National Association of
Miniature Enthusiasts, by Little Lamb simply declaring itself religious does not make its activities and
endeavors the sort that the law recognizes as religious and therefore entitled to
tax exemption. See Nat’l Ass’n of Miniature Enthusiasts, 671 N.E.2d 218
(stating that “[y]et declaring itself a charity does not make NAME’s activities
and endeavors the sort the law recognizes as charitable and therefore entitled
to tax exemption” citing Indianapolis Elks Bldg. Corp. v. St. Bd. of Tax
Comm’rs, 145 Ind. App. at 539, 251 N.E.2d at 683 (Ind. App. 1969)). The
Petitioner failed to prove that it is entitled to a religious exemption.
47. Is the use predominantly (or
84%) educational? As the term is broadly understood, “education” can occur
anywhere, including private homes, but a more restrictive definition is
required to avoid irrationally applying the exemption. See Fort Wayne Sports
Club, Inc. v. St. Bd. of Tax Comm’rs, 258 N.E.2d 874, 881 (Ind. App. 1970).
48. Exemptions from property tax
are generally granted based on the expectation that the public will derive a
corresponding benefit that justifies the loss of tax revenue. Accordingly,
applicants for the educational exemption must show their use of the property
provides some public benefit. See Oaken Bucket, 938 N.E.2d at 657;
Dep’t of Local Gov’t Finance v. Roller Skating Rink Operators Ass’n, 853
N.E.2d 1262, 1266 (Ind. 2006); Indianapolis Osteopathic Hospital, Inc.,
818 N.E.2d at 1014; Foursquare Tabernacle Church of God in Christ, 550
N.E.2d 850, at 854; Ft. Wayne Sports Club, 258 N.E.2d at 881. Examining
“the public benefits that accrue from a property’s use [is] a method of
determining whether the predominant use of a property is educational.” Trinity
School of Natural Health, Inc. v. Kosciusko Co. Property Tax Assessment Bd. of Appeals,
799 N.E.2d 1234, 1237 (Ind. Tax Ct. 2003). “If a property owner’s use of property
does not serve the public good, the property is taxable.” Roller Skating
Rink Operators Ass’n, 853 N.E.2d at 1265 (citing Travelers’ Ins. Co. v.
Kent, 50 N.E. 562, 564 (Ind. 1898)).
49. Educational use does not
require providing educational programs or classes that are identical to those
of tax-supported institutions. The public benefit test can be met by providing
courses found in tax-supported institutions, but it also can be met by
providing “related” programs and courses. Accordingly, “a taxpayer need only
relieve the State’s burden ‘to some limited extent’ with programs and
courses merely ‘related’ to those found in tax-supported schools.” Trinity
School, 799 N.E.2d at 1238 (italics in original); see also Roller
Skating Rink Operators Ass’n, 853 N.E.2d at 1266 (stating that “educational”
programs need not be the same as offerings of public schools).
50. The educational use must
confer a public benefit. The closer the activity is to traditional educational
programs offered in public schools, the more obvious is the public benefit. Prof’l
Photographers of Am., Inc., v. St. Bd. of Tax Comm’rs, 148 Ind. App. at
601, 268 N.E.2d 617 (1971); Ft. Wayne Sport Club, 258 N.E.2d at 874. “An
educational exemption is available to taxpayers who provide instruction and
training equivalent to that provided by tax supported institutions of higher
learning and public schools because to the extent such offerings are utilized,
the state is relieved of its financial obligation to furnish such instruction.”
Miniature Enthusiasts, 671 N.E.2d at 221 (quoting Ft. Wayne Sport
Club, 258 N.E.2d 874, 881-882).
51. The Board has made several
prior determinations with similar facts that provide particularly strong
guidance for the issue presented in this particular case. In Richmond Day
Nursery (March 2004) the Board held that Richmond Day Nursery was entitled
to an exemption in connection with its operation of a daycare and pre-school
facility. In that case, the Board relied on evidence that Richmond Day Nursery
provided scheduled educational training, employed teachers with educational
degrees, offered educational opportunities to children from lower income
families who attended the daycare on a government voucher program, and provided
a program similar to the government sponsored Head Start program. Approximately
five to six hours each school day were devoted to age-related education for
children enrolled at Richmond Day Nursery, where a program similar to typical
preschool education was provided. The Board concluded that Richmond Day Nursery
“demonstrated that their educational activities and curriculum confer a benefit
to the general public, (e.g. families, children, public schools, community) similar
to the government based Head Start program, but with the added bonus of onsite training
in conjunction with the child’s full time day care.” As a result, Richmond Day Nursery’s
property was determined to be 100% exempt.
52. Another Board decision
involving similar facts was KC Propco LLC, d/b/a KinderCare Learning Center (November
2011). In KC Propco LLC, the Board held that the facility was entitled to an
exemption based on the educational use of the property. The Board found that
the use of the subject property was substantially related to the programs and courses
public schools provide. The Board also noted that the Petitioner employed teachers
with educational degrees, scheduled educational training, and offered educational
opportunities to children from lower income families who attended the early learning
center on the government voucher program. The Petitioner also was able to show
that at least to “some limited extent” the curriculum, goals, and educational
and physical activities provided a benefit to the public. Thus, the Board found
KinderCare Learning Center to be 100% exempt.
53. Little Lamb provides
scheduled educational learning. Teachers prepare detailed lesson plans to guide
the children’s learning. The lead teachers have post secondary education. The
A-Beka curriculum is widely applied among Christian schools and is similar to
the academic standards used by public schools. The Little Lamb has a Level II
certification with Paths to Quality. The subjects taught at Little Lamb mirror
those that are taught at public schools, including: reading, writing, math,
science, history, physical education, language arts, social studies, music and
art. Teachers evaluate their students based on academic progress and then
inform the parents of that progress through progress reports and parent-teacher
conferences. The atmosphere at Little Lamb is one of education, where children
are learning throughout the day. All of the programs at Little Lamb are a complement
to and prepare children for enrollment in school by providing the foundational
elements children need to thrive in more advanced programs.
54. The Petitioner has shown that
the use of the subject property is substantially related to the programs and
courses public schools provide. The Petitioner has also shown that at least to
“some limited extent” its curriculum, goals, and educational activities provide
a benefit to the public.
55. The Board now turns its
attention to the arguments made by the Respondent. The Respondent argues that
the “predominate use” of the facility is not educational since it is open 11.5
hours a day, but only 3.5 hours a day are focused on education. The Respondent
also argues that Little Lamb “does not fit into the general scheme of education
provided by the State, and does not relieve the government of its burden of providing
public education in any significant way.” Resp. Reply Brief. The
evidence proves that the subjects taught at Little Lamb are similar to those
taught in public schools. Further, the Petitioner was able to prove that at
least to “some limited extent” its curriculum, goals, and educational
activities provide a benefit to the public, relieving a burden on the
government by preparing these children for the rigors of public school. The
Respondent fails to take into account that the teachers at Little Lamb also
spend additional time preparing for the daily curriculum. The evidence proves
that education is the “predominate use” of the facility.
56. The Respondent argues that
the activities taking place are the same learning activities that are taught by
parents and grandparents in their homes. While it is true that parents and grandparents
can teach their children to read and to write or to play games with them, the evidence
shows that the A-Beka program, which is used at Little Lamb, equips children to
engage in substantially similar educational activities offered in public
schools. Little Lamb educates the students at its facility with many of the
same academic skills otherwise taught in public schools. Further, Little Lamb
provides a structured learning program where teachers have set lesson plans and
they evaluate their students based on academic progress and inform the parents
of their child’s progress through progress reports and parent-teacher
conferences, mirroring what is seen in public schools.
57. The Respondent presented
evidence showing the attendance for numerous students at Little Lamb. The
Respondent argued that the attendance records show sporadic attendance patterns
for the children. Nowhere in Ind. Code §6-1.1-10-16 does it state how many days
individuals must attend in order for a facility to be found educationally exempt.
The Respondent failed to explain how the Board was to draw a conclusion from hundreds
of pages of attendance records that Little Lamb was not deserving of an educational
exemption.
58. The Respondent insinuates
that since a fee is charged by Little Lamb they are serving their own business
interests. While it is true a fee is charged, even the Respondent admits that
the fact that a fee is charged does not disqualify Little Lamb from property
tax exemption. Resp. Reply Brief; citing Roller Skating Rink
Operators Ass’n, 853 N.E.2d at 1266. The Board has found facilities tax
exempt in the past even though a fee was charged for services provided. (See KC
Propco, LLC. (November 2011)). The Board will not deny an educational
exemption based on the fact a fee is charged.
59. The Respondent also argued
that granting the Petitioner an exemption would in effect harm Hamilton County
schools. The Respondent argued that assessed values in Hamilton County are
decreasing while the student enrollments are increasing. The Respondent is
attempting to persuade the Board to deny an exemption application because the
school system will lose tax revenue. The Respondent is arguing that an educational
exemption is granted when the government is relieved of a burden, and by granting
an exemption here, that same governmental entity is actually being harmed. The
Respondent has not established that the Petitioner’s exemption should be denied
based on this information.
60. The Respondent’s argument
that the Board should decide this appeal based on other pending appeals does
not hold any weight. The Board will not decide an exemption case on the
argument that “currently 116 exemption appeals pending regards [sic] to
Hamilton County daycare facilities for tax years 2008 – 2012, with a potential
loss of approximately $179,141,200 in real property assessed value.” Resp.
Reply Brief. The Board has not, and will not, decide a case based on how
many other appeals are pending. Each exemption case is based on its own facts,
and not on how many appeals are pending. Here, the Respondent has simply not
provided enough evidence to impeach or rebut the Petitioner’s case.
61. After weighing all of the
evidence presented by both parties, it is clear that both educational programs
and child care activities take place at the Little Lamb daycare facility. From
the Petitioner’s point of view, the educational and religious programs are the
focus and the facility provides an educational curriculum that prepares
children for enrollment in school by providing foundational elements children
need to thrive in more advanced programs. The Respondent, however, argues that
the primary and predominate use of the facility is providing custodial care to
very young children. Ultimately, in this case it is the Petitioner’s point of
view that is more persuasive. The weight of the evidence establishes that the
use of the subject property is most accurately characterized as educational.
62. In making its determination,
the Board is not ruling that every single daycare or early learning facility is
entitled to an educational exemption. The Board continues to recognize the long
standing principle that each exemption application must be examined on its own
facts, as it was in this case.
