Indiana property tax exemptions: Church permitted to file letter in lieu of application; Trade Association failed to prove split between exempt educational and non-exempt use; conservation group’s 300+ acres of woodlands, lakes and tillable land exempt

Indiana property tax exemptions: Church permitted to file letter in lieu of application; Trade Association failed to prove split between exempt educational and non-exempt use; conservation group’s 300+ acres of woodlands, lakes and tillable land exempt


Though rented for camping and farming, the Indiana Board found conservation group's 300+ acres exempt

Though rented in part for camping and farming, conservation group’s 300+ acres were 100% exempt from property tax.

Church properly used letter of notification (and not official application) to claim exemption; previously granted exemption rolled forward.   The Indiana Board of Tax Review applied a 100% property tax exemption to a church in Trinity Springs Baptist Church v. Martin County Assessor, Pet. No. 51-006-13-2-8-00001 (April 21, 2014) (March 1, 2013 assessment).  Church claimed the property was built as a church in 1856 and had been used exclusively as a church since that time. The property had always been exempt. In 2006, Church executed a Declaration of Trust, which together with a Congregational Resolution designated Church’s pastor as trustee of its real and personal property.  That, according to the Church, required a filing of a quit claim deed on June 1, 2006.  Within a week, Church filed a “Letter of Notification” with the Assessor stating that the property was only used for worship. Between 2006 and 2013, no property taxes were assessed.

For the 2013 tax year, however, the exemption was revoked. On appeal, the County Board (the “PTABOA”) denied the exemption, finding, “No form answering the specific questions was filed, no Articles of Incorporation or By-laws were filed and no financial statements were filed.”

The Church had filed a letter because submitting an application “would operate as recognition of the authority of civil government to tax the Church.”  On appeal, the Assessor argued that she was simply complying with the Department of Local Government’s requirements. No exemption application was filed, so the letter was denied.

The Indiana Board noted that there was “no dispute that the property is owned, occupied and used for religious purposes.” (Page 9, ¶ 22.)  The property has always been used as a church and had always received an exemption. The Assessor wrongly denied the exemption in 2013. Citing to a 1989 memorandum from the Department’s predecessor agency, the Board concluded that the “Letter of Notification is an acceptable mechanism for claiming a religious exemption.”  (Pages 9-10, ¶ 23.)  Finally, the Church was not obligated to file a new exemption application for 2013. Under Ind. Code § 6-1.1-11-4, the previously granted exemption carried forward, because Church had continued to be use the property for religious purposes over the years. (Pages 9-10, ¶¶ 21-23.)

Nonprofit trade association and its wholly owned for-profit corporation failed to “separate the wheat from the chaff”; educational exemption was not applied where evidence did not show exempt v. non-exempt use.  In Independent Insurance Agents of Indiana, Inc. and Independent Agents Services Corp. v. Marion County Assessor, Pet. Nos. 49-600-08-2-8-00013 et al. (July 3, 2014) (March 1, 2008 to 2011 assessments), the Indiana Board concluded that Taxpayers – one a Nonprofit and the other a For-profit corporation – did not qualify for an educational use exemption regarding their real and personal property.  Taxpayers were related, with the Nonprofit being the sole shareholder of For-profit.  The property at issue included a building, parking lot, and the accompanying personal property.  Taxpayers operated out of the building, which was owned by For-profit. It was unclear who owned the personal property.

Nonprofit was a 501(c)(6) corporation whose members were comprised of, among others, approximately 600 independent insurance agencies across Indiana. Its function was to provide legislative and regulatory assistance to members. During the tax years, For-profit leased the property to Nonprofit free of charge and without a written lease.  For-profit provided “Errors and Omissions” coverage to Nonprofit’s members at discounted rates.  Income generated from these activities was used to pay the salaries and staff at the property and to finance Nonprofit’s ongoing educational programs, such as pre-licensure education and continuing education courses for insurance producers and applicants.

The building included a large classroom, conference rooms, and office space.  Classes were conducted on the property throughout the tax years. Nonprofit offered multiple professional designation courses.  Its representatives were also involved in developing educational programs at the university and high school levels.

Taxpayers had conducted a time study regarding use of the building space. The study concluded that the property was predominately used for education.

The Assessor charged that Nonprofit was a trade association involved in advocating the interests of its members before the legislature and providing insurance-related education.  Citing the Indiana Supreme Court’s decision in Department of Local Gov’t Finance v. Roller Skating Rink Operators Ass’n, 853 N.E.2d 1262 (Ind. 2006), the Assessor argued that helping a trade organization’s members to better operate their businesses failed to support application of the educational use exemption. The Assessor’s position was that “[p]romoting products and helping members to sell those products is not an exempt activity.”  To support an exempt use, the education provided must benefit the public – not the presenter.

The Board concluded that the facts in Roller Skating Rink Operators directly applied to this case. (Page 13, ¶ 41.)  The taxpayer in that decision was a nonprofit corporation that provided classes to rink operators and owners. A trade association, its purpose was to foster the professional development of its members.  The Indiana Supreme Court applied the “public benefits test,” where a taxpayer must prove there is an “educational purpose” that confers a public benefit justifying the loss of tax revenue. (Page 13, ¶ 43) (quotation omitted).  The Board observed that the “crux of the decision in Roller Skating Rink Operators was the finding by the Board that to the extent any educational training is provided through the taxpayer’s activities, it is merely incidental to the promotional activities of the organization.” (Page 14, ¶ 44) (internal quotations, brackets omitted; emphasis in original).  Moreover, the Court concluded that the programs of a trade association directed to the development of its members’ private businesses do not support application of the educational purpose exemption. Id. (quotation omitted).  The Board likewise concluded “that the typical educational activities offered by trade associations are not sufficient for an exemption.” Id.

The Board assumed a unity of ownership, occupancy and use of the subject property by Taxpayers.  The evidence established that Nonprofit’s members were part of a highly regulated industry and that Taxpayers had acquired “a large degree of influence over insurance regulation.”  (Page 15, ¶ 47.)  It did not, however, prove that Taxpayers’ “efforts have the interest of the public, rather than [Nonprofit’s] members, at heart.” Id.  Taxpayers failed to show how “their trade union operates differently from other trade unions representing dozens of other state-regulated professions.” Id.

But Taxpayers did provide an educational service to the public through the creation of curriculum and courses for state mandated pre-licensure and continuing education.  Those courses are “unique and differ from the types of professional development and training provided by virtually any trade association.”  (Page 16, ¶ 48.)  Those educational activities met the public benefits test in Roller Skating Rink Operators.  (Page 16, ¶ 49.)

The testimony and exhibits did not establish a percentage between the property’s exempt and non-exempt use. Because Taxpayers “failed to separate the wheat from the chaff, [they] have not met their burden and the exemption statute will be strictly construed.”  (Page 16, ¶ 18.)

Conservation group’s 300+ acres of woodland, lakes, and tillable land were 100% exempt, even though some property was rented to campers and farmers. The Indiana Board of Tax Review in Vigo County Conservation Club Inc. v. Vigo County Assessor, Pet. Nos. 84-011-12-2-8-00001 et al. (June 10, 2014) (March 1, 2012 assessment) applied a 100% exemption to a Nonprofit’s 367 acres of land on nine contiguous parcels of primarily wooded land, four interconnected lakes, and 41 acres of tillable land. The property contained a camping hill with improvements such as houses, travel-trailers and sheds owned by the campers. Nonprofit owned a clubhouse, caretaker house, and a machine shed.  Under its articles of incorporation and by-laws, Nonprofit was organized to “co-operate with the Indiana Department of Conservation and the State of Indiana to further promote the conservation program” and to “promote and protect the trees, shrubs, and lakes.”  And it was organized to “oppose the pollution of our streams and lakes for health and other reasons.” Its members paid dues, and Nonprofit collected rent from campers and from a farmer who leased some of its tillable ground.  The organization prohibited swimming and motorized boating, and it allowed campfires only in designated areas.  Furthermore, it cleared invasive plants and harvested trees according to the State’s forestry management guidelines.  Nonprofit also monitored the lakes’ water quality and deer population.  It sponsored various events and activities, such as fishing and shooting competitions, at the property for members and the public.

Nonprofit was established to preserve land and water. Indiana Code § 6-1.1-10-16(c)(3) permits an exemption for a tract of land (not to exceed 500 acres) owned by a non-profit “established for the purpose of retaining and preserving land and water for their national characteristics” if the property is not used to make a profit.  Nonprofit’s articles and bylaws showed that it was organized for the exempt purpose, and it took steps to preserve the property.  (Page 10, ¶ 25.)  The Board observed that renting to campers and maintaining a shooting range were activities “closely related to maintaining the subject property for its natural characteristics.”  One reason to preserve land and water, the Board explained, is for people to enjoy them!

Rentals did not interfere with Nonprofit’s preservation efforts; renting for farming was incidental to its overall use. The Board further reasoned, “There is little evidence that the camping and other activities at the subject property interfered with, rather than enhanced, [Nonprofit’s] overall efforts to retain and preserve the property for its natural characteristics.”  (Pages 10-11, ¶ 27.)  Moreover, the improvements constructed on the property were not shown to significantly interfere with the organization’s “ability to preserve the property’s natural characteristics.”  (Page 11, ¶ 27.)  In addition, “renting the tillable land, which comprises only about 11% of the property as a whole and which is interspersed throughout portions of several parcels, was incidental to [Nonprofit’s] overall use of the property.”  (Page 11, ¶ 28.)  Finally, the rents collected were used to pay expenses, not earn a profit. (Page 11, ¶ 29.)  The property was 100% exempt.

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