Monday, February 17, 2014

Board Finds Property Owned and Used by Union Not Exempt

Excerpts of the Board's Determination follow:

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.