January 27, 2000 | Read Time: 3 minutes
State courts in Maryland and Nebraska have dealt non-profit organizations a victory and a defeat, respectively, in cases involving property taxes.
The Court of Special Appeals of Maryland ruled that the North Baltimore Center, which provides outpatient mental-health care to poor people, deserves a “charitable exemption” from property tax.
The Maryland State Department of Assessments and Taxation had said that the North Baltimore Center flunked a test, set out by the state Court of Appeals in a 1986 decision, for deciding whether an organization is charitable and thus eligible for tax breaks. In the 1986 ruling, the Court of Appeals said that a determination of whether a group is charitable must include a “careful examination” of the organization’s purpose, the “actual work” performed, the extent to which the work “benefits the community,” and the “support provided by donations.”
In the new opinion, the Court of Special Appeals said that it had to decide if the North Baltimore Center failed the fourth “factor” of the test, since the organization receives only a relatively small amount of support from charitable donations. Most of its money comes from the state and federal governments.
Because the Maryland law that defines a charitable organization “is silent with respect to the means by which an organization is funded,” the court ruled that the word “charitable” is used “in the general common law sense.” That means “significant private donations are not required” for a group to qualify as a charity under the law, the court said.
The court interpreted the 1986 ruling that set out a test as “not necessarily requiring significant private donations, but as having identified factors to be considered in making what is always a factual determination.”
The court concluded that the North Baltimore Center qualified for the tax break, despite its sources of funds.
A copy of the court’s ruling, State Department of Assessments and Taxation v. North Baltimore Center, No. 5469, can be found on the court’s Web site, http://www.courts.state.md.us/opinions.html.
Meanwhile, the Nebraska Supreme Court ruled that Mercy Crestview Village, a non-profit group sponsored by the Sisters of Mercy, a Roman Catholic religious order, was not eligible for a property-tax break for an apartment complex that it bought as part of its mission to help poor people obtain housing.
Mercy Crestview Village, which supports itself on rental income and subsidies, leases most of the 154 apartments under dispute, and tenants qualify for federal housing subsidies. The organization uses one unit of the complex as an office and another as a “network center” for programs for residents that include tutoring, computer classes, and home ownership seminars.
The Sarpy County Board of Equalization granted an exemption for the apartment complex based on a state law that provides the break to property owned by educational, religious, or charitable groups that is used “exclusively” for educational, religious, or charitable purposes.
But the state Tax Equalization & Review Commission put the property back on county tax rolls, arguing that the predominant use of the property was to provide low-cost housing, an activity that does not qualify for an exemption as a charitable use of the facility.
The Nebraska Supreme Court agreed. The term “exclusively” in state law “means that the primary or dominant use of the property, and not an incidental use, is controlling in determining whether a property is exempt from taxation,” the court said. “The charitable and educational uses of the property, while providing a valuable community service, are incidental uses.”
The court’s ruling, Pittman v. Sarpy County Board of Equalization, S-99-063, can be found at http://court.nol.org/opinions/opinindex.htm.
