Case Title: Camping and Education Foundation v. State

Citation: 164 N.W.2d 369

Docket Number: 

State: minnesota

Court: Minnesota Supreme Court

Date: 1969-01-10T00:00:00Z

Document:
164 N.W.2d 369 (1969) CAMPING AND EDUCATION FOUNDATION, Appellant, v. STATE of Minnesota, Respondent. No. 41280. Supreme Court of Minnesota. January 10, 1969. David C. Donnelly and Edward N. Denn, Oppenheimer, Hodgson, Brown, Wolff & Leach, St. Paul, Mark M. Abbott, International Falls, for appellant. Eugene T. Williamson, County Atty., International Falls, for respondent. Heard before KNUTSON, C. J., and NELSON, MURPHY, OTIS, and FRANK T. GALLAGHER, JJ. NELSON, Justice. Plaintiff, chartered as a nonprofit corporation under the laws of Ohio, appeals from a judgment of the District Court of Koochiching County entered November 20, 1967, denying its petition for exemption from payment of real estate and personal property taxes. Petitioner's address and principal place of business is 7930 Indian Hill Road, Cincinnati, Ohio. It alleges that it is a nonprofit educational and charitable corporation and is exempt from state and Federal income taxes because of its educational and charitable purposes. It has been certified as a foreign corporation doing business in Minnesota and is currently engaged in operating a 163.05-acre boys' summer camp, known as Camp Kooch-I-Ching, on Deer Island in Rainy Lake, Koochiching County. The legal description of the tract is as follows: It is also the owner of considerable personal property used to facilitate the purposes of the camp. It appears that the purpose or purposes of petitioner are described in amended Article Third of its articles of incorporation as follows: It also appears from exhibits introduced and received in evidence that petitioner has made application and has been granted exemption from state and Federal income taxes. It is a nonprofit corporation and no part of its net earnings may at any time inure to the benefit of any of its members, trustees, or officers. The membership in said corporation consists of the founders, organizers, and incorporators, plus all individuals who have financially contributed thereto. The established program of petitioner is implemented by trained counselors who supervise the campers and are directly responsible for the educational values that are imparted to them. The primary objective of the training program is to provide young campers a stronger background for constructive living as adults and to impart values to the boys. Petitioner's property is being used by it pursuant to its articles of incorporation and bylaws. Camp Kooch-I-Ching is a supervised camp for boys to improve their health, develop good character, and provide them with outdoor recreation. The full tuition for the 8-week season at the camp is $750 per boy, which is either paid for by the individual or through the awarding of a scholarship. In the year 1967, 96 out of 108 campers paid the full tuition. In that year Camp Kooch-I-Ching set up a revised budget based in part on receipt of tuition fees of $78,000 and payment of $6,475 in scholarship grants and discounts. Two campers had both their tuition and travel expenses paid in full. Nine or ten campers partially paid their way. The record discloses that the operating income for the 5-year period 1962-1966 totaled $385,893.93, of which $369,150 consisted of tuition fees. Petitioner basically gives scholarships by granting credit as opposed to paying money to the recipient. The income from tuition fees would include the amounts granted as scholarships. Petitioner publishes the fact that scholarship aid is available in the American Camping Association Magazine. Funds for scholarship aid are raised from donations or taken from operating income. Prior to April 1962, the camp was operated in substantially the same manner but as a profitmaking enterprise. The current camp director was the majority stockholder in the prior camp and is the organizer of petitioner corporation. Taxes payable in 1967 were levied against said real estate in the sum of $2,577.62 and against the personal property in the sum of $211.07. Petitioner prior to filing its petition paid to the county treasurer of Koochiching County 50 percent of the tax against its real estate and 100 percent of the personal property tax payable in 1967. Petitioner claims that said property is exempt from taxes under the provisions of Minn.Const. art. 9, § 1, and Minn.St. 272.02(6) enacted pursuant thereto in that petitioner is exclusively an "institution of purely public charity" under the terms of its incorporation. That part of Minn.Const. art. 9, § 1, pertinent to this appeal provides: Minn.St. 272.02 implements this constitutional provision in the following terms: The court below held that petitioner is not a charitable corporation within Minn. Const. art. 9, § 1, and Minn.St. 272.02(6), but is a nonprofit corporation; that the petition should be denied; and that the taxes levied against the property had been so levied pursuant to law. Through this appeal petitioner seeks to establish charitable-institution status in the State of Minnesota and exemption from state and county property taxes on its property here. The issue before us is whether a nonprofit corporation is entitled to tax exemption as an "institution of purely public charity" when its sole function is operating a summer camp to which some scholarships are given, when charges are made to the clientele and the bulk of the operating expenses is derived from such charges. There are certain general rules which have been long established relating to statutes and constitutional provisions providing for exemption from taxes. The basis for all tax exemption is the accomplishment of some public purpose as opposed to favoring of particular persons or corporations at the expense of the taxpayers generally. State v. Board of Foreign Missions of Augustana Synod, 221 Minn. 536, 22 N.W.2d 642. Accord, State v. Ritschel, 220 Minn. 578, 20 N.W.2d 673, 168 A.L.R. 274; State v. Northwestern Preparatory School, 249 Minn. 552, 83 N.W.2d 242; State v. Northwestern Vocational Institute, Inc., 232 Minn. 377, 45 N.W.2d 653. One of the rules that is well established is that taxation is the rule and exemption is an exception in derogation of equal rights. Therefore, there is a presumption that all property is taxable. In consequence, the burden of proof is on the one seeking the exemption to establish that he is entitled to the exemption. See, In re Petition of Junior Achievement of Greater Minneapolis, Inc. v. State, 271 Minn. 385, 135 N.W.2d 881; Christian Business Men's Committee of Minneapolis v. State, 228 Minn. 549, 38 N.W.2d 803; American Ry. Exp. Co. v. Holm, 169 Minn. 323, 211 N.W. 467. Another long-established rule is that exemption provisions are to be strictly construed. See, Ramaley v. City of St. Paul, 226 Minn. 406, 33 N.W.2d 19. See, also, St. Peter's Church of Shakopee v. Board of County Commissioners for County of Scott, 12 Minn. 280, (395); County of Hennepin v. Bell, 43 Minn. 344, 45 N.W. 615; County of Ramsey v. Church of the Good Shepherd, 45 Minn. 229, 47 N.W. 783, 11 A.L.R. 175.[1] *373 It is probably impossible to define precisely what is meant by the term "charity." In In re Petition of Junior Achievement of Greater Minneapolis, Inc. v. State, 271 Minn. 385, 390, 135 N.W.2d 881, 885, this court said: A definition of charitable institution may be found in State v. Bishop Seabury Mission, 90 Minn. 92, 95, 95 N.W. 882: As used in the statute, the word "purely" in the term "purely public charity" was defined in State v. Willmar Hospital, Inc., 212 *374 Minn. 38, 41, 2 N.W.2d 564, 566, as follows: When the rules and principles referred to herein are applied to the facts, it seems clear that petitioner is not entitled to tax exemption. What it does, does not in any just sense exercise any appreciable influence in lessening any burden the government would be under an obligation to assume an accomplishment which is frequently put forward as the fundamental reason for exempting charities from taxation. As the trial court in its memorandum said It is true that its operation at this time is not for private profit, but this is not the sole criterion for determining tax-exempt status. If it were, any and all nonprofit corporations would be exempt. We must start from the position that the property involved is presumed to be subject to taxation and that the petitioner has the burden of showing that it is entitled to the exemption sought. It must show that it is an "institution of purely public charity." While petitioner does perform some educational work, the difference between it and other summer camps appears to be one of emphasis rather than of facilities and experiences made available. Basically, the record herein indicates that petitioner is operating a venture with commercial aspects, since the bulk of its income results from tuition charges made to campers. It seems obvious that this commercial activity is not subordinate to or incidental to any possible charitable activities of petitioner. We do not question the good purposes of this corporation. Its activities, however, although commendable, cannot in light of the foregoing facts be brought within the class of "institutions of purely public charity" contemplated by Minn.Const. art. 9, § 1, and Minn.St. 272.02(6). It has not so far, in our view, dispensed charity as that term has been defined by this court in prior decisions. Petitioner is required upon the facts herein to share the burden of government along with the general public. The order and the judgment of the trial court are affirmed. Affirmed. [1] Insofar as Minnesota decisions are concerned, the only apparent exception to the rule of strict construction of the tax exemption provisions is the provision relating to schools of various types. In such cases the rule apparently does not apply because of a public policy of encouraging private educational institutions, which policy can be traced back to Article III of the Northwest Ordinance. See, State v. Bishop Seabury Mission, 90 Minn. 92, 95 N.W. 882; State v. Carleton College, 154 Minn. 280, 191 N.W. 400. Even with respect to that exception to the rule of strict construction, the exemption provisions have been relatively strictly construed and basically only those schools providing courses similar to or capable of being assimilated by the courses provided by the public educational system have been granted exemption from taxation. In consequence, certain trade schools and preparatory schools have been denied tax exemption. See, Graphic Arts Educational Foundation, Inc. v. State, 240 Minn. 143, 59 N.W.2d 841; State v. Northwestern Preparatory School, 249 Minn. 552, 83 N.W.2d 242; State v. Northwestern Vocational Institute, Inc., 232 Minn. 377, 45 N.W.2d 653. Mr. Chief Justice Dell in the Graphic Arts case said (240 Minn. 153, 59 N.W. 2d 848): "* * * These schools not only aid the individual student but also indirectly are beneficial to society in that they equip young men and women for more useful lives. But this is not the `accomplishment of public purposes' contemplated by the tax exemption provisions. To entitle an institution to enjoy the benefits of tax exemption there must be the offering of a substantial part of the general education ordinarily given by publicly supported schools with the resulting lessening of the financial burden on the taxpaying public." In State v. Northwestern Preparatory School, supra, the question before the court was whether tax-exempt status should be granted to a nonprofit corporation organized under the laws of the State of Minnesota for the declared corporate purpose of establishing and maintaining a school "for the thorough training of young men for the competitive and entrance examinations for the United States Military Academy at West Point, the United States Naval Academy at Annapolis, the United States Coast Guard Academy and for appointment to and service in the Army, Navy, Air Corps or other services for the United States of America." (249 Minn. 554, 83 N.W.2d 244.) We said in that opinion that since an educational institution may teach a variety of useful accomplishments and yet not be the equivalent of an academy, college, university, or seminary of learning which is entitled to tax exemptions under the Minnesota Constitution, it becomes essential whenever tax exemption is claimed, first, to determine as a fact question the actual function an institution performs in the field of public education as reflected by the basic nature, thoroughness, scope, and purpose of the educational program which it regularly offers to its students. Conflicts in evidence as to its true character and scope must be resolved by the trier of fact and if upon appeal the trial court's findings are challenged we must affirm such findings if they are reasonably sustained by the evidence as a whole. The accomplishment of the requisite public purposes in the case of seminaries of learning, we said (249 Minn. 557, 83 N.W.2d 246), is that of providing "* * * some substantial part of the educational training which otherwise would be furnished by the various publicly supported schools, academies, colleges, and seminaries of learning and which, to such extent, thereby lessen the tax burden imposed upon our citizens as the result of our public educational system." Accord, State v. Northwestern Vocational Institute, Inc., 232 Minn. 377, 380, 45 N.W.2d 653, 655; Graphic Arts Educational Foundation, Inc. v. State, 240 Minn. 143, 59 N.W.2d 841.