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On appeal, Eagles argues that the Indiana Board’s final
determination must be reversed for two reasons. First, Eagles claims that the
Indiana Board’s determination that it failed to establish a prima facie case
that it was entitled to the fraternal beneficiary association exemption under
Indiana Code § 6-1.1-10-23 is both contrary to law and unsupported by
substantial evidence. Second, Eagles claims that the Indiana Board’s determination
that it did not establish a prima facie case that it was entitled to the charitable
purposes exemption under Indiana Code § 6-1.1-10-16 is also contrary to law and
unsupported by substantial evidence.
The fraternal beneficiary association exemption
During the 2006 tax
year, Indiana Code § 6-1.1-10-23 provided that “tangible property is exempt
from property taxation if it is owned by a fraternal beneficiary association
which is incorporated, organized, or licensed under the laws of this state.” IND.
CODE § 6-1.1-10-23(a) (2006). The statute further provided that a fraternal beneficiary
association’s real property is exempt when “it is actually occupied and exclusively
used by the association in carrying out the purpose for which it was incorporated,
organized, or licensed.” I.C. § 6-1.1-10-23(b). Accordingly, a taxpayer seeking
an exemption under Indiana Code § 6-1.1-10-23 must first provide evidence to show
that it is a fraternal beneficiary association.
In its final determination, the Indiana Board relied on the
Indiana Court of Appeals’ decision in State Board of Tax Commissioners v. Fort
Wayne Sports Club, Inc., 258 N.E.2d 874, 880 (Ind. Ct. App. 1970) for a
definition of “fraternal beneficiary association:”
The term “fraternal benefit society” or “fraternal
beneficiary association” shall mean any corporation, society, order or
voluntary association, without capital stock, organized and carried on solely for
the mutual benefit of its members and their beneficiaries, and not for profit
and having a lodge system and representative form of government, and which
shall make provision for the payment of [death] benefits in accordance with
this act.
(See Cert. Admin. R. at 35-36.) In its appeal to the Court,
Eagles claims that the Indiana Board’s use of that definition is contrary to
law because it conflicts with the common law definition of “fraternal
beneficiary association” as provided in a 1944 Attorney General Opinion. (See
Pet’r Br. at 3-5.) Furthermore, Eagles maintains that the 1944 Attorney General
Opinion expressly recognized Indiana’s long-standing tradition to grant
property tax exemptions to fraternal beneficiary associations that use their
property for fraternal purposes. (See Pet’r Br. at 3-4; Pet’r Reply Br. at 2;
Oral Arg. Tr. at 16.)
A final determination of the Indiana Board is contrary to
law if it violates any statute, constitutional provision, legal principle, or
rule of substantive or procedural law. Shelbyville MHPI, LLC v. Thurston, 978
N.E.2d 527, 529 (Ind. Tax Ct. 2012). Official opinions of the Attorney General
have no precedential value and they are not judicially binding. See McPeek v.
McCardle, 888 N.E.2d 171, 177 n.4 (Ind. 2008); Illinois-Indiana Cable
Television Ass’n v. Pub. Serv. Comm’n, 427 N.E.2d 1100, 1111 (Ind. Ct. App. 1981).
Nonetheless, the 1944 Attorney General Opinion is instructive because it explained
that for purposes of the fraternal beneficiary association exemption, the term “fraternal
beneficiary association” should be defined to be consistent with Burns Indiana Statutes
Annotated § 39-4401 et seq. See 1944 Ind. Op. Att’y Gen. No. 65 at 265, available
at http://hdl.handle.net/1805/1120. Contrary to Eagles’ claim, therefore, the 1944
Attorney General Opinion defined the term “fraternal beneficiary association” according
to a statutory definition, not a common law definition. Moreover, both the Indiana
Court of Appeals in the Fort Wayne Sport Club case and the Indiana Board in this
case used the same statute to define a “fraternal beneficiary association.” See
State Bd. of Tax Comm’rs v. Fort Wayne Sports Club, Inc., 258 N.E.2d 874, 880
(Ind. Ct. App. 1970). (See also Cert. Admin. R. at 35-36.) Consequently, Eagles
has not shown that the Indiana Board’s final determination is contrary to law
on this basis.
Eagles further claims that the Indiana Board’s determination
that it did not present a prima facie case that it is a fraternal beneficiary
association is in error because it is unsupported by substantial evidence. More
specifically, Eagles contends that the Indiana Board simply ignored its
uncontroverted evidence that showed that it is indeed a fraternal beneficiary
association that uses its property for fraternal and charitable purposes. (See
Pet’r Br. at 5-9.)
It is
well-established that exemption statutes are to be strictly construed against the
taxpayer, and thus, the burden is on the taxpayer to prove that it is entitled
to the exemption that it seeks. See Tipton Cnty. Health Care Found., 961 N.E.2d
at 1051. See also Long v. Wayne Twp. Assessor, 821 N.E.2d 466, 471 (Ind. Tax
Ct. 2005) (explaining that to make a prima facie case, a taxpayer must walk the
Indiana Board through every element of its analysis rather than assuming that
the evidence speaks for itself), review denied. Here, then, Eagles was required
to present probative evidence demonstrating that it satisfies the statutory
definition of a fraternal beneficiary association set forth in Indiana Code §
27-11-1-1 (i.e., the successor to Burns Indiana Statutes Annotated §
39-4401(b)). See Fort Wayne Sport Club, 258 N.E.2d at 880 (explaining that an
entity must satisfy Burns Indiana Statute Annotated § 39-4401(b) to qualify as
a fraternal beneficiary association).
At the Indiana Board hearing, Eagles’ sole witness testified
that the lodge is used by its members only, that Eagles donates its profits to
support needy families and other charitable organizations, and that it provides
death benefits to its members. (See Cert. Admin. R. at 369-74.) The witness
also described how Eagles’ members used the lodge (e.g., meetings, fundraisers,
drinking, and gambling) and that Eagles made charitable donations after
deducting the cost of its own expenses. (See Cert. Admin. R. at 376-435.) In
addition, Eagles argued that its federal I.R.C. § 501(c)(8) status and its documentary
evidence (e.g., its bylaws, certificate of incorporation, and constitution) showed
that it uses its property exclusively for fraternal and charitable purposes.
(See Cert. Admin. R. at 363-65.)
Initially, Eagles’ recognition as an I.R.C. § 501(c)(8)
fraternal beneficiary society, order, or association for federal income tax
purposes does not, by itself, establish that Eagles met all the definitional
requirements contained in Indiana Code § 27-11-1-1. Moreover, Eagles failed to
show how its other documentary and testimonial evidence satisfied each element
of the definition of a “fraternal beneficiary association” as defined under
Indiana Code § 27-11-1-1. As the Indiana Board pointed out, Eagles’ evidence does
not indicate whether it has a representative form of government as required
under Indiana Code § 27-11-1-1. (See Cert. Admin. R. at 37-38.) See also IND.
CODE § 27-11-1-1 (2006). Furthermore, the Indiana Board found that Eagles’
evidence was unpersuasive because it was often conclusory, and therefore, it
could not independently demonstrate that Eagles met the six statutorily
prescribed elements of the definition of a “fraternal beneficiary association”
in Indiana Code § 27-11-1-1. (See Cert. Admin. R. at 36-38.) Based on its
review of the certified administrative record, the Court finds no basis for
reversing the Indiana Board’s findings. Consequently, Eagles has not shown that
the Indiana Board’s determination that it did not present a prima facie case
that it is a fraternal beneficiary association is unsupported by substantial
evidence.
The charitable purposes exemption
The charitable
purposes exemption, set forth in Indiana Code § 6-1.1-10-16, provides that
“[a]ll or part of a building is exempt from property taxation if it is owned, occupied,
and used by a person for . . . charitable purposes.” IND. CODE § 6-1.1-10-16(a)
(2006) (footnote added). The exemption generally extends to the land on which an
exempt building is situated and the personal property that is contained within.
See I.C. § 6-1.1-10-16(c), (e). Accordingly, a taxpayer seeking a charitable
purposes exemption under Indiana Code § 6-1.1-10-16(a) must demonstrate that it
owns, occupies, and either exclusively or predominately uses its property for
charitable purposes. See 6787 Steelworkers Hall, Inc. v. Scott, 933 N.E.2d 591,
595 (Ind. Tax Ct. 2010); IND. CODE § 6-1.1-10-36.3 (2006).
The Indiana Board
determined that Eagles did not make a prima facie case that its property was
exclusively or predominately used for charitable purposes. (See Cert. Admin. R.
at 31-34.) Eagles contends that the Indiana Board’s determination is contrary to
law and is unsupported by substantial evidence. (See Pet’r Br. at 9-13; Pet’r
Reply Br. at 2; Oral Arg. Tr. at 20-25.)
A review of Eagles’
presentation indicates that it urged the Indiana Board to find that using
property for fraternal purposes is synonymous with using property for charitable
purposes because fraternal organizations collectively seek to promote the general
welfare of their members and society in general. (See, e.g., Cert. Admin. R. 110-14,
268-73, 288, 363-66, 369-70.) The General Assembly, however, has not expressly
declared in any statute that property owned, occupied, and exclusively used by
a fraternal organization is ipso facto used for a charitable purpose and thus
exempt. See Indianapolis Elks Bldg. Corp. v. State Bd. of Tax Comm’rs, 251
N.E.2d 673, 681 (Ind. Ct. App. 1969); see also I.C. § 6-1.1-10-16(a).
Therefore, the fact that Eagles used its property for fraternal purposes does
not necessarily establish that its property was used for charitable purposes.
In this case, the evidence contained in the certified
administrative record shows that Eagles used its property both for a variety of
social and recreational purposes (e.g., gambling, drinking, dancing, karaoke,
pool/dart tournaments, and general relaxation) and for charitable purposes
(e.g., fundraisers and donations). (See Cert. Admin. R. at 107-45, 336-38,
369-414.) Nonetheless, Eagles’ Usage Report did not provide the Indiana Board
with a comparison of the relative amounts of time that the lodge was used for
exempt and non-exempt purposes. (See Cert. Admin. R. at 105-45, 288 380-82.)
Eagles’ failure to provide this comparison was fatal to its claim for either a
full or a partial exemption. In addition, Eagles’ evidence failed to show that
the activities that it claimed were charitable (i.e., its fraternal activities)
truly were. Consequently, Eagles has not
demonstrated that the Indiana Board’s determination that it did not make a prima
facie case that its property was exclusively or predominately used for
charitable purposes is either contrary to law or unsupported by substantial
evidence.
