Case Title: Natl. Collegiate Realty v. Bd. of Johnson Cty. Comm'rs

Citation: 236 Kan. 394, 690 P.2d 1366

Docket Number: 56,683

State: kansas

Court: Kansas Supreme Court

Date: 1984-11-30T00:00:00Z

Document:
236 Kan. 394 (1984)
690 P.2d 1366
NATIONAL COLLEGIATE REALTY CORPORATION and THE NATIONAL COLLEGIATE ATHLETIC ASSOCIATION, Appellees,
v.
BOARD OF COUNTY COMMISSIONERS OF JOHNSON COUNTY, KANSAS, Appellant.
No. 56,683

Supreme Court of Kansas.
Opinion filed November 30, 1984.
Bruce F. Landeck, assistant county counselor, argued the cause, and Philip S. Harness, assistant county counselor, was with him on the briefs for appellant.
C.W. Crumpecker, Jr., of Swanson, Midgley, Gangwere, Clarke & Kitchin, of Kansas City, Missouri, argued the cause, and Louise L. Lucas, of the same firm, and Thomas Van Cleave, Jr., of McAnany, Van Cleave & Phillips, P.A., of Prairie Village, were with him on the brief for appellees.
The opinion of the court was delivered by
McFARLAND, J.:
National Collegiate Realty Corporation filed a tax grievance application with the Kansas Board of Tax Appeals *395 seeking exemption from ad valorem taxation for 1980, 1981, 1982 and future years, on certain improved real estate situated in Johnson County. The property is occupied by and used as the national headquarters of the National Collegiate Athletic Association (NCAA) and the association was allowed to join the proceedings as a party in interest. Exemption is sought under K.S.A. 1983 Supp. 79-201 Second and article 11, § 1, of the Kansas Constitution on the basis the subject property is used exclusively for educational purposes. The Board of Tax Appeals (BTA), in a divided decision, denied the exemption concluding the property was not being used exclusively for educational purposes.
On appeal, the district court held: (1) The BTA order was arbitrary, capricious and not supported by substantial competent evidence; and (2) the subject property was used exclusively for educational purposes and, hence, entitled to the requested exemption.
The Board of County Commissioners of Johnson County, Kansas, has perfected its appeal to this court and seeks reversal of the district court's decision and affirmance of the order of the BTA.
The BTA made 17 findings of fact in its order and these were adopted by the district court. They are as follows:
Before proceeding further it should be noted that although the subject property and improvements are owned by the National Collegiate Realty Association, said corporation is wholly owned by NCAA and the premises are used exclusively as the national headquarters of the NCAA. The parties do not contend the manner of ownership should have any bearing on the outcome of this litigation and have consistently presented the issues on the basis of whether or not the use made of the property by the NCAA is exclusively for educational purposes.
Article 11, § 1, of the Kansas Constitution provides in pertinent part:
K.S.A. 1983 Supp. 79-201 provides in part:
....
Questions of whether or not specific properties were entitled to exemptions from ad valorem taxes under the foregoing constitutional and statutory provisions have been before this court many times. These decisions are remarkably consistent in stating the applicable law. The parties in the case before us essentially agree on the applicable law, the dispute being limited to the proper application of that law to the facts herein. Under such circumstances, citing and discussing each case wherein the general law in the field has been reiterated would add nothing to this opinion except bulk. Rather, we shall utilize Lutheran Home, Inc., v. Board of County Commissioners, 211 Kan. 270, 505 P.2d 1118 (1973), as a suitable representative of these genus of cases.
In Lutheran Home the issue was whether or not property used as a nursing home was exempt from ad valorem taxation on the basis it was operated exclusively for charitable and benevolent purposes. Such purposes are granted exemption by K.S.A. 1983 Supp. 79-201 Second and article 11, § 1, of the Kansas Constitution as are properties used exclusively for educational purposes. As in the case before us, the facts in Lutheran Home were not disputed. In discussing the legal effect thereof, this court in Lutheran Home stated:
The court in Lutheran Home then proceeded to summarize the basic principles of law which are applied in cases of claimed exemption from ad valorem taxation because of charitable use of the property as follows:
The court then stated:
The balance of the opinion in Lutheran Home is devoted to determining what constitutes a charitable use and concluding the operation of the nursing home was not such a use. By substituting the word "educational" for "charitable" wherever the latter appears in the basic principles of law quoted from Lutheran Home, we have the law to be applied herein.
Additionally, the fact that the subject property is utilized for administration rather than programs directly and immediately involved with the education of students is not, in itself, a bar to the requested exemption. See Trustees of The United Methodist Church v. Cogswell, 205 Kan. 847, 473 P.2d 1 (1970), wherein we held:
We turn now to the matter of whether the NCAA's use of the *400 premises is exclusively for educational purposes. Little would be gained by attempting to develop a general definition of "educational purposes" applicable to such diverse needs as exemptions from zoning requirements, income taxation, obscenity laws, or ad valorem taxation. It is doubtful such a definition could be devised. The emphasis in our prior cases, and rightly so, has been placed on whether any activities in the use of the property were not exclusively for educational or other exempt purposes rather than any discussion of what uses were for exempt purposes. Illustrative thereof is Kansas State Teachers Ass'n v. Cushman, 186 Kan. 489, 351 P.2d 19 (1960), which case, incidentally, contains an excellent summary of prior cases involving claimed exemptions. In Cushman this court held that the KSTA's headquarters building was not entitled to exemption as the building was:
The NCAA is involved exclusively with regulating and promoting intercollegiate athletic events among its member colleges and universities. There is no serious contention that, generally speaking, physical education and sports programs in universities are not within proper "educational purposes" and we must conclude they are educational. This determination is consistent with the results reached by the courts that have attempted to define "education." The court in Mtr. of Syracuse Univ., 59 Misc.2d 684, 300 N.Y.S.2d 129 (1969), defined "educational" as embracing mental, moral and physical education. The court noted that the purpose of the statute exempting property used for educational purposes from property taxation "is to promote education, not academic degrees." p. 689. (Emphasis supplied.) The court in Albach v. Odle, 531 F.2d 983 (10th Cir.1976), described education as follows:
See also Senate Report No. 2375, 81st Congress, 2nd Session, reprinted in 1950 U.S. Code Cong. Serv. 3053, 3082, which *401 acknowledges "[a]thletic activities of schools are substantially related to their educational functions."
"Education" is defined as follows in 71 Am.Jur.2d, State and Local Taxation § 382, p. 689:
In concluding the activities of the NCAA did not qualify for the exemption, the BTA stated:
The federal case referred to in the BTA opinion, since the issuance of the order herein, has been the subject of an opinion of the United States Supreme Court. National Collegiate Athletic Association v. Board of Regents of the University of Oklahoma, 468 U.S. ___, 82 L. Ed. 2d 70, 104 S. Ct. 2948 (1984). The issue in the federal court was whether the NCAA was unreasonably restraining trade in the televising of football games. The United States Supreme Court held against the NCAA, but in so doing acknowledged the value of the association's role in regulating intercollegiate sports as follows:
The United States Supreme Court concluded:
As pointed out by the dissent filed to the BTA order and by the district court herein in its memorandum decision, the BTA's denial of the exemption rests largely on the size of the NCAA operation and the amount of money involved in its activities. Were the question before us the NCAA's ability to pay ad valorem taxes, the answer would be a resounding, "Yes!" But such is not the issue.
Sports are a legitimate part of collegiate education. Whether collegiate football and basketball, as they presently exist, are too large and too commercial are philosophical questions outside the issues of this action. No authority has been cited nor has our research disclosed any instance where a university's football stadium or gymnasium has been held taxable on the basis such facilities are commercial or entertainment facilities. The present large size of the NCAA arises from the great popularity with the general public of collegiate football and basketball events. This popularity spawns a myriad of problems such as improper recruiting practices which only the NCAA can properly control. The reasoning applied by the BTA appears to be that at some point a collegiate sport may cease to be an educational activity and become merely entertainment. Presumably an intercollegiate *403 sporting event such as archery which would be attended primarily by friends and relatives of the athlete is educational, but should the public interest in archery ignite with sufficient intensity, then the sport would become merely entertainment. The logic of this argument is difficult to follow.
The NCAA is a truly unique organization. It has no real counterpart. The association's nearest relative in Kansas is the Kansas State High School Activities Association, Inc. (KSHSAA). In Gilpin v. Kansas State High School Activities Ass'n, Inc., 377 F. Supp. 1233 (D. Kan. 1974), that association was described as follows:
In terms of wealth, the KSHSAA is, indeed, a poor relation of the NCAA, but it is the rough equivalent for Kansas high school athletic programs to the NCAA's role in national intercollegiate sports. The personal property owned by the KSHSAA has been held exempt by the BTA from ad valorem taxes. The order of the BTA granting the exemption on July 31, 1981 (Docket No. 2722-81-TX) states in part:
The real estate owned by the KSHSAA is also stated to have been held exempt from ad valorem taxes.
The NCAA enjoyed a like exemption for its personal property *404 by a BTA order issued in 1976 in Docket No. 1878-5, but the same was rescinded by the order on appeal herein.
As previously noted, the facts herein are not in dispute, hence the issue before us is purely a question of law. Lutheran Home, Inc., v. Board of County Commissioners, 211 Kan. 270, 275. See also Sterling Drilling Co. v. Kansas Dept. of Revenue, 9 Kan. App.2d 108, 673 P.2d 456 (1983), involving whether certain well drilling was exempt from sales taxes. In discussing the proper standard of review, the Court of Appeals stated:
The district court herein applied rule 1 and held the BTA order was not substantially supported by the evidence and was arbitrary and capricious. Properly, rule 2 was the applicable standard of review. However, in the district court's memorandum opinion is its determination that the exemption is authorized by K.S.A. 1983 Supp. 79-201 Second and article 11, § 1, of the Kansas Constitution.
The activities of the NCAA are varied including rule making, publication and dissemination of information, investigation of recruiting violations and discipline thereof, and promoting championship events. These activities are but parts of the whole program and are so integrated as to preclude separate consideration of the various components. We conclude that the subject property, the national headquarters of the NCAA, is property used exclusively for educational purposes within the meaning of *405 K.S.A. 1983 Supp. 79-201 Second, and article 11, § 1, of the Kansas Constitution.
The judgment of the district court reversing the order of the Board of Tax Appeals is affirmed.
SCHROEDER, C.J., dissenting:
On the facts found by the Board of Tax Appeals and adopted by the district court, it is my opinion the Board of Tax Appeals was correct in its conclusion the property used as headquarters of the National Collegiate Athletic Association was not exclusively used for educational purposes.
The function of the NCAA to entertain the public through televising collegiate games, resulting in revenues of approximately $20 million annually to the NCAA, cannot be classified as exclusively educational. This is big business.
It is respectfully submitted the property of the NCAA is subject to the payment of ad valorem taxes.