ATTORNEYS FOR PETITONER:
ATTORNEYS FOR RESPONDENT:
BRETT J. MILLER
BINGHAM SUMMERS WELSH &
ATTORNEY GENERAL OF INDIANA
DONNA HEISER DUBISKY
TED J. HOLADAY
LEWIS & KAPPES
Deputy Attorney General
INDIANA TAX COURT
PLAINFIELD ELKS LODGE )
No. 2186, )
v. ) Cause No. 49T10-9611-TA-177
STATE BOARD OF TAX )
ON APPEAL FROM A FINAL DETERMINATION OF THE STATE BOARD OF TAX COMMISSIONERS
August 2, 2000
The petitioner, Plainfield
Elks Lodge No. 2186 (the Elks) appeals the final assessment determination of the
State Board of Tax Commissioners (State Board) for the 1992 tax year, denying
it a property tax exemption for the 1992 tax year. In its
original tax appeal, the Elks raise one issue for this Courts consideration:
Whether the Elks property meets the charitable purpose requirements of Ind. Code Ann.
§§ 6-1.1-10-16(a) -36.3(a) (West 2000). For the reasons explained below, the Court
finds that the building meets the requirements and is entitled to an exemption.
FACTS AND PROCEDURAL HISTORY
The Elks were chartered in Plainfield, Indiana on July 6, 1960 and own
property consisting of a golf course, swimming pool and lodge house in Plainfield.
From 1960-1991, the Elks applied for and received a property tax exemption
under Ind. Code Ann. § 6-1.1-10-16(a) based on its charitable activities.
1992, however, its application for a property tax exemption was denied. As
a result, the Elks filed a petition with the Hendricks County Board of
Review (BOR) on June 2, 1992. On July 27, 1992, the BOR
denied the Elks petition. Thereafter, on August 24, 1992, the Elks appealed
to the State Board, which held a hearing on June 10, 1994.
Subsequent to the hearing, however, the State Board failed to issue a final
assessment determination within the statutory time frame; thus, the Elks deemed its petition
denied under Ind. Code Ann. § 6-1.1-15-4(e) (West 2000) and on November 26,
1996, filed its original tax appeal in this Court.
On September 22,
1997, the Court held a trial and on February 26, 1998, oral arguments
were heard from both parties. Additional facts will be supplied where necessary.
ANALYSIS AND OPINION
Standard of Review
This Court gives the State Boards decisions great deference when the Board acts
within the scope of its authority. See Bender v. State Bd. of
Tax Commrs, 676 N.E.2d 1113, 1114 (Ind. Tax Ct. 1997). As such,
final determinations by the State Board are only reversed by this Court when
the decision is unsupported by substantial evidence, is arbitrary or capricious, constitutes an
abuse of discretion, or exceeds statutory authority. See id.
The Elks argue that it is entitled to a property tax exemption for
the 1992 tax year, while the State Board argues that the Elks did
not meet the requirements of Ind. Code Ann. §§ 6-1.1-10-16(a) and 6-1.1-10-36.3(a).
Like other tax exemption statutes, these sections are strictly construed against the taxpayer.
See Trinity Episcopal Church v. State Bd. of Tax Commrs, 694 N.E.2d
816, 818 (Ind. Tax Ct. 1998). However, these provisions are not to
be construed so narrowly that the legislatures purpose in enacting them is defeated
or frustrated. See id. Therefore, the proper inquiry into the propriety
of an exemption is whether the use of the property furthers exempt purposes.
Ind. Code Ann. § 6-1.1-10-16(a) states that a building is exempt from
property tax if it is owned, occupied and used by a person for
educational, literary, scientific, religious or charitable purposes. Section 6-1.1-10-36.3(a) states that a
property is predominately used during the year for one or more of the
above purposes if it is used or occupied more than 50% of the
time. If this test is met, then the property is entitled to
an exemption in proportion to the amount of time it was used for
the above-stated purposes. See Ind. Code Ann. § 6-1.1-10-36.3(b)(3) (West 2000).
In order to receive the exemption, the Elks must prove that its property
is predominately used for charitable purposes. See Ind. Code Ann. §§ 6-1.1-10-16(a),
In accordance with the Elks constitution, money was set aside for the furtherance
of the charitable, educational and benevolent activities of the Elks. (Petr. Br.
at 3.) In addition, the Elks Articles of Incorporation state that the
Elks purpose is to promote spiritual, educational and charitable purposes. (Petr. Ex.
7.) As stated above, section 6-1.1-10-36.3(a) requires that a building be predominately
used for charitable, educational or other philanthropic activities in order to receive an
exemption. The Elks claim that the combination of both the members and
the organizations time, money and other in-kind donations is enough to meet this
test. The State Board argues that the Elks monetary contributions, as well
as the organizations other donations, are not enough to qualify it for the
In analyzing this test, charity is defined in its broad constitutional sense.
See Indianapolis Elks Bldg. Corp. v. State Bd. of Tax Commrs, 145 Ind.
App. 522, 532-33, 251 N.E.2d 673, 679 (1969). This definition applies to
the use of any property alleged to be exempt from property taxation.
See id. The Indiana Court of Appeals has also stated that If
the property is owned and occupied by an organization to which the exemption
applies, and the dominant use of the property . . . is predominately
and primarily . . . charitable . . . the property is exempt
from property taxation. Id.
At trial, the Elks secretary, Mr. Robert J. Burroughs, admitted that the organizations
property was not exclusively used for charitable endeavors. (Trial Tr. at 20,
21, 31, 35.) However, Mr. Burroughs went on to testify at length
about the different types of charitable events the Elks hold on their property
each year. For example, the lodge dining room was donated to various
organizations throughout the year such as the Rotary, Firefighters Association and the Sertoma
Club of Brownsburg. (Trial Tr. at 23.)
These and other organizations
were not charged a fee for use of the room. (Trial Tr.
at 26.) Further, the dining room was often used for planning Elk-sponsored
community events such as the Hoop Shoot, Young Woman of the Year show
and the annual Fourth of July fireworks. (Trial Tr. at 30.)
In the case of the golf course, Mr. Burroughs testified that while the
course was the main source of revenue for the Elks during the 1992
tax year, all net proceeds from the golf course were placed into the
Elks general fund, from which money was subsequently donated to various charitable causes
in the community. (Trial Tr. at 31-32.) In addition, the Plainfield
High School golf team was allowed unlimited free play on the course during
its season. (Trial Tr. at 32.) The course also hosted various
charity golf outings that benefited the Young Woman of the Year program and
the Firefighters Burn Foundation, among other charitable organizations. Finally, the golf course
served as the venue for the Elks annual Fourth of July Fireworks program
which Plainfield residents were invited to attend free of charge annually. (Petr Br.
In addition to the lodge building and golf course, the Elks also own
a swimming pool. Like the golf course, the pool was open to
all community members for a small fee that was used to help cover
the cost of lifeguard salaries and instructors. (Trial Tr. at 35.)
Among the activities held at the pool was a learn-to-swim program, where, upon
payment of a $12.00 fee (used to cover the operating costs of the
program), residents were entitled to swimming lessons.
The State Board argues that this is not enough to entitle the Elks
to the exemption. In support of its position, the State Board cites
Indianapolis Elks Building Corporation v. State Board of Tax Commissioners, 251 N.E.2d at
683, where the Indiana Court of Appeals held that the taxpayer did not
qualify for the property tax exemption when its facility was mainly used for
recreational activities. In this case, the State Board argues that the Elks
time and monetary contributions do not warrant a tax exemption because some of
their activities are social in nature.
The State Boards approach is incorrect.
The Indiana Supreme Court, in deciding whether or not to grant the
property tax exemption, has analyzed an organizations time and monetary contributions together.
See State Board of Tax Commissioners v. Fraternal Order of Eagles, Lodge No.
255, 521 N.E.2d 678, 681 (Ind. 1988). In addition, this Court stated
in Foursquare Tabernacle Church of God in Christ v. State Bd. of Tax
Commissioners, 550 N.E.2d 850, 854 (Ind. Tax Ct. 1990), that the rationale behind
the exemption is that a present benefit to the general public exists from
the operation of the charitable institution sufficient to justify the loss of tax
The State Board also cites Fraternal Order of Eagles, Lodge No. 255 for
the premise that since the Elks only donated a small percentage of their
income to charity, they are not entitled to the exemption. There, the
Indiana Supreme Court held that where the taxpayer donated roughly 3% of its
gross income to charity, it was not entitled to the exemption. See
Fraternal Order of Eagles Lodge, No. 255, 521 N.E.2d at 678. See
also Indianapolis Elks Bldg. Corp., 251 N.E.2d at 683 (taxpayers contributions were not
enough to warrant an exemption.) In this case, however, the testimony and
evidence revealed a much larger contribution by the Elks.
The State Board further argues that since the Elks made some profit on
the operation of the golf course, it is not entitled to the exemption.
As stated above, the net proceeds from the golf course were donated
back to the community in various forms. Even if the Elks had
kept some of the proceeds for themselves, the Indiana Supreme Court has stated
that an organization may make a small profit, yet still retain its exempt
status. See State Board of Tax Commissioners v. Indianapolis Lodge #17, Loyal
Order of Moose, Inc., 245 Ind. 614, 622, 200 N.E.2d 221, 225 (1964)
(Holding that the taxpayer was still entitled to the exemption, despite a small
profit made from its dining room). The Court finds that when combined
with the monetary donations, the Elks property was predominately, but not solely used
for charitable purposes under Ind. Code Ann. § 6-1.1-10-36.3(a). The State Board
abused its discretion by failing to grant the Elks a property tax exemption.
The Elks are entitled to an exemption for the 1992 tax year
pursuant to Ind. Code Ann. § 6-1.1-10-36.3(b)(3).
For the reasons stated above, the Court REVERSES the final determination of the
State Board, denying the Elks a property tax exemption for the 1992 tax
year. This case is REMANDED with instructions to conduct further proceedings to
determine the exemption allowed by Ind. Code Ann. § 6-1.1-10-36.3(b)(3) for the 1992
Previously Acts 1975, P.L. 47, SEC. 1.
Ind. Code Ann. § 6-1.1-15-4(e) states that if the State
Board fails to issue a final determination within 180 days after the hearing,
the appeal is deemed denied and the taxpayer may then file an original
tax appeal in this Court.
At trial, the Elks submitted a diary for the 1992
tax year, in which notations regarding the use of the lodge building by
various Plainfield charities were recorded. (Petr Ex. 10.) Such evidence supports
the contention that the Elks used their property predominately for charitable purposes.
This display was underwritten entirely by the Elks as a service
to the community. (Trial Tr. at 41.)
The Elks donated roughly $16,000 to Plainfield charities during the
1992 tax year. (Petr Ex. 9)(Respt. Br. at 4).
This is not to infer, however, that the determination of
an organizations exempt status turns on the percentage of its gross income used
for charitable, educational or other benevolent purposes. The statute clearly states that
a buildings exempt status turns on whether its property is used for the
above-mentioned purposes the majority of the time. See Ind. Code Ann. §
6-1.1-10-36.3(a). While the State Board invites this Court to establish a bright-line
test based on an organizations percentage of charitable giving, the Court respectfully declines
such an invitation and points out that neither the legislature nor the State
Board has adopted such a test.