The exact meaning of what
constitutes a charitable or educational purpose has spawned much litigation.
Broadly speaking, courts have linked a taxpayer’s right to exemption to the
taxpayer’s property being used to provide a public benefit. See, e.g., Fort
Wayne Sports Club, Inc. v. State Bd. of Tax Comm’rs, 147 Ind. App. 129, 258
N.E.2d 874, 881 (1970) (“In our view, the well-established and obvious purpose
for legislative conferral of tax exemptions requires a showing of some public
benefit as a condition precedent to the granting of such exemption.”). Thus, to
show a charitable purpose, a taxpayer must demonstrate (1) the “relief of human
want . . . manifested by obviously charitable acts different from the everyday
purposes and activities of man in general,” and (2) a benefit inuring to the
public that is sufficient to justify the loss of tax revenue. Jamestown Homes
of Mishawaka, Inc. v. St. Joseph County Assessor, 909 N.E.2d 1138, 1141
(Ind. Tax Ct. 2009), reh’g den. 914 N.E.2d 13 (Ind. Tax Ct. 2009) (quoting
Indianapolis Elks Bldg. Corp. v. State Bd. of Tax Comm’rs, 145 Ind. App.
522, 251 N.E.2d 673, 683 (1969)).
18. Similarly, a taxpayer may
demonstrate a public benefit by showing that its property is used to provide
education that is the substantial equivalent of instruction offered in Indiana’s
tax-supported institutions. Dep’t of Local Gov’t Fin. v. Roller Skating Rink
Operators Ass’n, 853 N.E.2d 1262, 1266 (Ind. 2006). The closer the
education provided at the property is to traditional educational programs
offered in public schools, the more apparent the public benefit. A taxpayer,
however, need not offer courses that are directly analogous to those taught in
public schools; instead, the taxpayer’s courses need merely be related to
public school offerings. Id. (citing Trinity Sch. of Natural Health
v. Kosciusko County PTABOA, 799 N.E.2d 1234, 1238 (Ind. Tax Ct. 2003)). And
the taxpayer need only relieve the state’s burden of providing public education
to “some limited extent.” Id. (quoting Trinity Sch., 799 N.E.2d
at 1238). Nonetheless, “implicit in the requirement that education be the ‘substantial
equivalent’ of instruction offered in Indiana’s tax-supported institutions is the
notion that the education benefits the public, not the presenter” Id. Thus, “education
that primarily serves the private interests of an organization’s members” does
not meet the public benefit test. Id.
19. In Roller Skating Rink
Operators, the Indiana Supreme Court upheld the State Board of Tax
Commissioners’ determination denying an exemption to a property owned by a nonprofit
trade association whose members were roller skating rink owners and operators. Roller
Skating Rink Operators, 853 N.E.2d at 1263. The trade association used the
property in connection with operating Roller Skating University (“RSU”). Id.
RSU, in turn, provided classes to the association’s members. Id. The
classes covered topics such as hospitality, merchandising, customer service,
personnel management, event planning and promotion, contracts and negotiations,
risk management and legal issues, budgeting and finance, and advertising. Id.
Professors in recreational management from two universities helped develop the
curriculum, and participants could receive continuing education credits at the
University of Wisconsin. Id.
20. In rejecting the trade
association’s claims, the court distinguished the facts before it from cases
where educational exemptions had been allowed. Roller Skating Rink
Operators, 853 N.E.2d at 1266. In those cases, the courses were offered to
the public and the attendees were not largely or exclusively affiliated with
the presenter. Id. Thus, while many of the marketing and business
concepts taught at RSU were the same as those taught in business courses at
tax-supported colleges and business schools, the same could be said of the
professional development and training provided by virtually every trade association.
Id. The court therefore upheld the State Board of Tax Commissioners’ finding
that any educational training provided through the trade association was merely
incidental to the association’s promotional activities and therefore did not confer
a public benefit. Id. at 1267.
21. Like RSU’s courses, the
training offered at the subject property was merely incidental to Indiana Joint’s
promotion of its members’ private economic interests. In fact, Indiana Joint’s
claims in this case are even less compelling than the trade association’s
claims in Roller Skating Rink Operators. There, the trade association
showed at least some comparability between RSU’s training and courses taught in
public universities. By contrast, Indiana Joint’s witness, Mr. Altman, did not
explain how any of the training conducted at the union hall compared to
offerings from tax-supported institutions. Indeed, Mr. Altman did not identify
any purportedly educational component to some of the activities conducted at
the property, such as holding meetings and conducting the business of Indiana
Joint’s membership.
22. Similarly, Indiana Joint did
little to show that it predominantly used the property for charitable purposes.
Once again, Mr. Altman only cursorily described the activities conducted at the
union hall. And he did not attempt to break down the hall’s usage between those
various activities. At best, Indiana Joint prepared a document entitled “Building
Use 2012.” That document identifies the membership groups that held various meetings
at the hall, the dates those meetings occurred, and cursory descriptions of the
meetings’ content, such as “Discuss business of the Local,” or “Discuss member
issues and training for officers/stewards/members.” Resp’t Ex. 12. Even
if the Board were to assume that some of the activities identified by Indiana
Joint—such as assisting members with healthcare and pension forms and training
members on health and safety issues—were charitable within the meaning of the
exemption statute, Indiana Joint did not show that those uses predominated.
23. Thus, Indiana Joint’s
charitable-purpose claim rests on the premise that simply conducting
union-related activities inherently qualifies as a charitable use. The Indiana Tax
Court rejected a similar notion in 6787 Steelworkers Hall, Inc. v. John R.
Scott, Assessor of Porter County, 933 N.E.2d 591 (Ind. Tax Ct. 2010). In
that case, the Tax Court upheld the Board’s determination that a union’s banquet
hall did not qualify for an exemption. Among other things, the union claimed
that, “by definition, the purposes for which unions are formed and operated are
charitable” and that both the union itself and its use of the banquet hall for
union activities were therefore charitable. 6787 Steelworkers Hall, 933
N.E.2d at 596. But as the Tax Court explained, the union did not cite to any
authority for the proposition that unions are inherently charitable. Id.
24. Finally, the fact that the
PTABOA previously treated the subject property as exempt has little bearing on
this appeal. Indiana Joint had the burden of proving that it owned, occupied,
and predominantly used the property for exempt purposes. Because Indiana Joint
failed to meet that burden, the Board must deny its appeal.
http://www.in.gov/ibtr/files/Indiana_Joint_Board_02-074-13-2-8-00001.pdf
