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IN THE SUPREME COURT OF THE STATE OF NEW MEXICO

Opinion Number: 2014-NMSC-029

Filing Date: August 4, 2014

Docket No. 34,039

CAVU CO., a Nebraska Corporation,

Respondent-Petitioner,

v.

DOMINGO P. MARTINEZ, Santa Fe

County Assessor,

Petitioner-Respondent.

ORIGINAL PROCEEDING ON CERTIORARI

Raymond Z. Ortiz, District Judge

Sommer, Udall, Sutin, Hardwick & Hyatt, P.A.

Kurt A. Sommer

Santa Fe, NM 

Francis P. Matthews

Elkhorn, NE

for Petitioner

Bridget Ann Jacober

Santa Fe, NM

for Respondent

OPINION

DANIELS, Justice.

{1} In this property tax case, we hold that the appropriate inquiry into the validity of a

property’s educational exemption from taxation under the exemption provision of Article

VIII, Section 3 of the New Mexico Constitution is whether use during the tax year furthers

the exempt purpose. Because the taxpayer in this case had only used the property for
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educational purposes, had declined to use it for noneducational purposes, and was actively

negotiating with schools capable of relocating to his campus property during the relevant tax

year when the property was temporarily vacant, we reverse the conclusions of the lower

courts that the property could not qualify for an educational use exemption and remand the

case to the Santa Fe County Valuation Protests Board for further consideration.

I. BACKGROUND

{2} The relevant facts are undisputed. Petitioner CAVU Company (Taxpayer), a

Nebraska corporation, was the owner of a twenty-six-acre school campus (the Property) in

Santa Fe that was developed and improved beginning in 1997 solely for operation as a

school. Since opening its doors over fifteen years ago, the Property has been used for

educational purposes by several schools and has never been used for any other purpose. The

following time line indicates the changes in occupancy of the Property since its development

for use as a school.

August 1998 to May 2008: New Mexico Academy for Science and Mathematics

June 2008 to January 2010: (vacant)

February 2010 to May 2010: Clever Canines, L.L.C. (training school for dog owners)

June 2010: (vacant)

July 2010 to May 2012: Santa Fe International Elementary School

May 2012 to Present: Desert Academy

{3} Taxpayer purchased the Property in 2004, when the New Mexico Academy for

Science and Mathematics (NMASM) was experiencing financial difficulties. Taxpayer

leased the Property to NMASM for $1.00 per year for several academic years and supported

the school with donations in an effort to help NMASM succeed. In August 2007, Taxpayer

raised the rent to $10,000 per month, although by November 2007 it was clear that NMASM

could not afford that rate. At this point, Taxpayer allowed the school to occupy the building

rent free until June 2008, when it closed.

{4} Throughout the remainder of 2008 and all of 2009, Taxpayer actively sought to lease

the Property to various other educational tenants, negotiating in particular with Desert

Academy. Taxpayer listed the Property for sale on the residential or commercial market but

refused to lease the building to anyone other than an educational tenant. According to

Taxpayer’s affidavit, a film company offered to lease the Property for $15,000 per month in

November 2009, but Taxpayer turned down the offer, insisting on “maintain[ing] the

property for educational uses only,” “continu[ing] in that category” as long as Taxpayer

owned it, and “[passing up] any lease, however attractive, other than to an educational

facility.”

{5} In March 2010, shortly after Taxpayer began temporarily leasing the Property to a

training school for dogs and their owners, the Santa Fe County Assessor discovered the

Property’s sale listing. Although the Assessor was apparently aware that the Property had
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been vacant, it was the sale listing that motivated the Assessor to put the Property on the tax

rolls and issue Taxpayer a notice of valuation for $6,689,750 for the 2010 tax year. Taxpayer

filed an application for an educational use exemption for 2010, which the Assessor denied

because “on January 1st of 2009 and 2010” the property “was not used directly and

immediately for educational purposes.”

{6} In July 2010, after protracted negotiations with Desert Academy ended without a

deal, Taxpayer successfully entered into a lease with the Santa Fe International Elementary

School (SFIES). In his affidavit, Taxpayer states that the lease to SFIES was “for a rental far

below market value.”

{7} Following a March 2011 hearing before the Santa Fe County Valuation Protests

Board, the Board reinstated Taxpayer’s exemption for 2010. The Board concluded that

because Assessor had allowed a similar vacant school—the St. Francis Cathedral School—to

remain exempt during the same tax year, Assessor was required to give Taxpayer’s property

equal treatment under Article VIII, Section 1(A) of the New Mexico Constitution.

{8} Addressing the Property’s educational use, the Board found that during the

Property’s vacancy, Taxpayer “was actively seeking a school tenant[,] . . . negotiating with

one or more potential tenants[,] . . . commit[ted] to an educational use of the subject property

in the form of nominal or significantly reduced rents for such use[, and] . . . not putting the

property to any commercially remunerative use—or even any non-educational use at all.”

Because of the Board’s dispositive decision to grant the exemption based on Taxpayer’s

equal treatment constitutional claim, however, the Board declined to “make a formal

decision” on the Property’s educational use. Nevertheless, the Board observed that “this case

might present one of the rare instances in which temporary nonuse actually constitutes an

exempt use of property.”

{9} On Assessor’s appeal, the First Judicial District Court reversed the Board’s decision

and denied the exemption pursuant to NMSA 1978, Section 7-38-7 (1997) because the

Property was not “currently and actively used as an educational facility” specifically on

January 1, 2010, the Property had been listed for sale to residential or commercial buyers,

and no showing of fraud or intentional discrimination entitled the Property to an exemption

under Article VIII, Section 1(A). Soon after the district court’s ruling, Taxpayer sold the

Property to Desert Academy.

{10} The Court of Appeals affirmed the district court’s denial of the exemption but on

different grounds. See CAVU Co. v. Martinez, 2013-NMCA-050, ¶¶ 1, 33, 302 P.3d 126,

cert. granted, 2013-NMCERT-004. The Court held that (1) the district court erred in

determining that Section 7-38-7 limited the qualification period for an exemption to January

1 alone because the appropriate qualification period was the previous calendar year and

January 1 was simply “the cut-off date,” see id. ¶¶ 18, 22 & n.2; (2) the Property did not

qualify for an exemption because taxes are assessed annually and because the educational

use was not “‘primary and substantial’” and “‘present and actual’” during the previous
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(2009) calendar year, see id. ¶¶ 22 & n.2, 24; and (3) Taxpayer’s property was not entitled

to an exemption under the constitutional equal treatment provision because the unequal

taxation between the two “similarly situated propert[ies]” was not intentional, fraudulent,

or discriminatory, see id. ¶¶ 25, 32.

{11} We granted certiorari to determine whether Taxpayer’s active negotiations with

potential educational tenants and Taxpayer’s rejection of a commercial lease during 2009

qualify as use eligible for exemption. We expressly affirm the other two Court of Appeals

holdings as follows. First, the prior calendar year is the appropriate time period upon which

to base a property’s exemption status, and January 1 is the appropriate “cutoff date” under

Article VIII, Section 3 of the New Mexico Constitution; the Property Tax Code, NMSA

1978, Sections 7-35-1 through -38-93 (1973, as amended through 2013); and the Property

Taxes chapter of the New Mexico Administrative Code, 3.6 NMAC (03/30/1973, as

amended through 04/15/2013). See CAVU Co., 2013-NMCA-050, ¶¶ 15, 17, 33. Second, a

taxpayer is not entitled to an exemption under Article VIII, Section 1(A) of the New Mexico

Constitution based on evidence that another taxpayer with similarly used property received

such an exemption, absent a finding that the unequal taxation was intentional, fraudulent, or

discriminatory. See CAVU Co., 2013-NMCA-050, ¶¶ 28, 33. Because the Court of Appeals

provided a thorough analysis on these two holdings, we do not add to them. See State v.

Ulibarri, 2000-NMSC-007, ¶¶ 2-3, 128 N.M. 686, 997 P.2d 818 (writing primarily to

emphasize certain points of law and secondarily to affirm the Court of Appeals without

“add[ing] anything further to the analysis contained in the opinion of the Court of Appeals”).

II. DISCUSSION

A. Standard of Review

{12} This Court reviews an administrative appeal under an administrative standard of

review, seeking to determine if the decisions below are fraudulent, arbitrary, capricious, an

abuse of discretion, not supported by substantial evidence in the record, or not in accordance

with law. See NMSA 1978, § 39-3-1.1(D)-(E) (1999); Rayellen Res., Inc. v. N.M. Cultural

Prop. Review Comm., 2014-NMSC-006, ¶ 15, 319 P.3d 639; see also Rio Grande Chapter

of Sierra Club v. N.M. Mining Comm’n, 2003-NMSC-005, ¶¶ 14 n.7, 15, 133 N.M. 97, 61

P.3d 806 (explaining that authority to review for abuse of discretion is in the appellate court

“solely”). In other words, we “conduct the same review of an administrative order as the

district court sitting in its appellate capacity, while at the same time determining whether the

district court erred in the first appeal.” Rio Grande Chapter of Sierra Club, 2003-NMSC005, ¶ 16. When an administrative decision is based on an issue of law, such as statutory or

constitutional interpretation, our review is de novo. See Rayellen, 2014-NMSC-006, ¶ 16.

B. Determination of Eligibility for Educational Property Exemption

{13} We begin our analysis with the recognized and potentially conflicting principles

which must provide the boundaries of our decision. The first is that “[p]roperty is presumed
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to be subject to taxation.” Georgia O’Keeffe Museum v. Cnty. of Santa Fe, 2003-NMCA003, ¶ 32, 133 N.M. 297, 62 P.3d 754; see also 3.6.7.16(A) NMAC (“Real property owned

by a nongovernmental entity is presumed to be subject to taxation under . . . the Property Tax

Code unless an exemption [is] claimed and allowed [under] this section.”). The second is the

broad and brief constitutional command that “all property used for educational or charitable

purposes . . . shall be exempt from taxation.” N.M. Const. art. VIII, § 3. Use for educational

purposes has been held to mean “the direct, immediate, primary and substantial use of

property that embraces systematic instruction in any and all branches of learning from which

a substantial public benefit is derived.” NRA Special Contribution Fund v. Bd. of Cnty.

Comm’rs, 1978-NMCA-096, ¶ 35, 92 N.M. 541, 591 P.2d 672 (internal quotation marks

omitted). The corresponding NRA eligibility test consists of three parts: (1) use that is direct,

immediate, primary, and substantial, (2) use that embraces systematic instruction in any and

all branches of learning, and (3) use that imparts a substantial public benefit. See id. Because

this three-pronged eligibility test accommodates a broad range of interpretations, we look

next to the history of the exemption and the policy considerations our appellate courts have

identified to guide our analysis.

C. History and Policy

{14} A 1933 exemption case involving Masonic lodge property surveyed exemption

provisions in other jurisdictions and concluded “that few states have constitutional or

statutory provisions more favorable to a claim of exemption . . . and that most states have

less liberally provided.” Temple Lodge No. 6, A. F. & A. M. v. Tierney, 1933-NMSC-013,

¶¶ 7, 9-12, 37 N.M. 178, 20 P.2d 280. This Court traced the New Mexico exemption

provision back to our 1882 territorial laws, noting that the drafters of the New Mexico

Constitution purposely chose to broaden the limited territorial exemption law to include any

and all “educational purposes.” See Temple Lodge, 1933-NMSC-013, ¶¶ 31-32 (“The

conclusion is natural, and not readily to be avoided, that a purpose existed to extend the field

or liberalize the policy of tax exemption.”).

{15} This Court advised applying a common sense construction to the drafters’ “deliberate

and studious” determination of citizens’ rights to an exemption:

Unlike most constitutional exemptions, [the exemption provision] does not

merely define a field of exemption, within which the legislative power may

operate from time to time at its discretion. It is affirmative and selfexecuting. It creates exemptions. It invests citizens with constitutional rights,

which administrative officers or Legislature may not impair, and which

courts must protect. Generally, such rights are not to be frittered away by a

construction so strict as to be unreasonable or harsh. Of course, they are not

to be so enlarged as to create rights which the Constitution makers did not

contemplate. In short, the canon of strict construction cannot afford a sure

formula.
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Id. ¶¶ 29, 32; see id. ¶ 41 (indicating primary or substantial use as the basis of “common

sense construction”); Benevolent & Protective Order of Elks, Lodge No. 461 v. N.M. Prop.

Appraisal Dep’t, 1972-NMSC-006, ¶ 6, 83 N.M. 445, 493 P.2d 411 (“The rule in New

Mexico is that of reasonable construction [of the constitutional exemption provision],

without favor or prejudice to either the taxpayer or the State.”) Meanwhile, the exemption

provision makes no distinction between private nonprofit and for-profit organizations. See

Georgia O’Keeffe Museum, 2003-NMCA-003, ¶ 40.

{16} Because there is no mechanical formula for determining eligibility for the

constitutional exemption in our constitution, statutes, or administrative code, we have noted

that the “broad expression ‘used for educational or charitable purposes’ necessarily imposes

upon the courts a severe task of interpretation” and that “[t]he line of demarcation . . . can

take shape only by the gradual process of adjudicat[ion].” Temple Lodge, 1933-NMSC-013,

¶ 39; see also Benevolent & Protective Order of Elks, 1972-NMSC-006, ¶ 3 (“Except to the

extent that the facts as to use [qualifying an exemption claim] are so nearly alike as to

logically compel like results, no case can be said to constitute a controlling precedent for

another case in this area.”).

{17} In the eighty-one years since Temple Lodge, our appellate courts’ gradual course of

adjudication has interpreted the boundaries of the exemption provision through dozens of

opinions. In 1978, the Court of Appeals in NRA looked to caselaw for New Mexico and other

jurisdictions to set out its three-pronged test. See 1978-NMCA-096, ¶ 35; see also id. ¶¶ 20-

45 (surveying and summarizing caselaw). There, the Court allowed a partial exemption for

property partly used for education. Id. ¶¶ 62-63. The Court stated that an exemption may not

be based on “the remote and consequential benefit derived from [the property’s] use,” id. ¶

25, and that “[w]here the land is idle, unimproved and not in actual use, because of its

present unsuitability to the actual activities of the use of the land, it will not qualify for tax

exemption in the absence of legislation,” id. ¶ 61.

{18} While NRA is useful for its general guidance, it is by no means inflexible. Over the

years the Court of Appeals has seen fit to minimize its importance and depart from its

language. Revisiting the NRA test in 2003, the Court of Appeals diverged from its

interpretation in NRA to allow a museum to seek an exemption for educational use that took

place off the property in question. See Georgia O’Keeffe Museum, 2003-NMCA-003, ¶¶ 2,

55. Although the educational use was arguably remote and consequential—not present or

immediately on the museum property—our Court of Appeals concluded that “such a unique

circumstance requires a slight departure from the full NRA standard otherwise applicable,

permitting consideration of whatever intrinsic educational value a museum has to the

museum visitors and of off-site educational programs and activities closely related to and

inextricably interconnected with the museum collection.” Georgia O’Keeffe Museum, 2003-

NMCA-003, ¶ 56 (emphasis added). The Court of Appeals remanded the case to the Board

with directions to take into consideration the museum’s relationship to its offsite educational

programs and the extent of any intrinsic educational value the museum provided to the

public. Id. ¶ 62.
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{19} More recently, in 2013, the Court of Appeals allowed an exemption on “vacant,

undeveloped, and unimproved land” held for charitable conservation purposes. See Pecos

River Open Spaces, Inc. v. Cnty. of San Miguel, 2013-NMCA-029, ¶¶ 1-2, __ P.3d __.

Although the Court of Appeals in NRA explicitly barred an educational exemption for land

that was “idle, unimproved and not in actual use, . . . in the absence of legislation,” 1978-

NMCA-096, ¶ 61, the Court distinguished the charitable conservation land in Pecos River

because it provided a substantial public benefit in its idle state. See 2013-NMCA-029, ¶¶ 16-

18, 22. The Court concluded that “[w]hether the property is in use is completely dependent

upon what the proposed use is.” Id. ¶ 22.

{20} We agree with this last statement because we conclude that it reflects the flexibility

the drafters granted to our administrative boards and courts for making fact-specific

determinations concerning exempt use. Like Georgia O’Keeffe Museum and Pecos River,

this case presents a unique set of circumstances that does not fit neatly within the parameters

of the NRA test. We see no reason to alter the Court of Appeals holding in NRA, Georgia

O’Keeffe Museum, or Pecos River, but we are reluctant to adhere to a mechanical test. See

Temple Lodge, 1933-NMSC-013, ¶ 39 (“The broad expression ‘used for educational or

charitable purposes’ necessarily imposes upon the courts a severe task of interpretation. . . .

The line of demarcation cannot be projected.”); Benevolent & Protective Order of Elks,

1972-NMSC-006, ¶ 3 (“[N]o case can be said to constitute a controlling precedent for

another case in this area.”).

D. The Appropriate Inquiry Is Whether the Property’s Use Furthered the Exempt

Purpose

{21} Instead of adding a new fact-specific exception to the rule, we distill the various rules

and exceptions governing exemptions to one overarching principle: “[T]he proper focus of any

inquiry into the propriety of an exemption is whether the use of the property furthers exempt

purposes.” Trinity Episcopal Church v. State Bd. of Tax Comm’rs, 694 N.E.2d 816, 818 (Ind.

Tax Ct. 1998) (representing the source of authority for this proposition on which multiple

Indiana cases have since relied); see also Congregation Machne Chaim, Inc. v. Kwak, 3 A.D.3d

708, 710, (N.Y. App. Div. 2004) (concluding that the party seeking exemption “submitted the

requisite quantum of evidence to establish that its use of the property was in furtherance of its

exempt purpose”). This clear and general guidance allows assessors, protests boards, and courts

alike to reasonably and flexibly determine how property is actually being used, notwithstanding

unique factual circumstances. Such flexibility is particularly important where the exempt use is

hindered by some reasonable explanation, whether for expansion of the property; remodeling

of a building due to fire, flood, or outdated infrastructure; or any of countless other potential

setbacks. See City & Cnty. of Denver v. Spears Free Clinic & Hosp. for Poor Children, 350 P.2d

1057, 1058-59, (Colo. 1960) (en banc) (allowing an exemption for a hospital under construction

with further work pending due to insufficient funds); Bd. of Assessors of Sharon v. Knollwood

Cemetery, 246 N.E.2d 660, 664 (Mass. 1969) (allowing an exemption for cemetery land awaiting

further burials); Mount Calvary Baptist Church, Inc. v. Zehnder, 706 N.E.2d 1008, 1015 (Ill.

App. Ct. 1998) (allowing an exemption for church property damaged by fire and caught up in
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a dispute over insurance coverage).

{22} Rather than supersede the rules found in NRA, Georgia O’Keeffe Museum, Pecos River,

and others, our guidance in this case should instead inform any inquiry into the validity of an

exemption—particularly where the facts are complex and equity and common sense demand

flexibility in the applicable rule. Because the current case presents just such a scenario, we

briefly apply the modified NRA analysis as a guide, keeping in mind the drafters’ “deliberate”

intent to “liberalize the policy of tax exemption,” Temple Lodge, 1933-NMSC-013, ¶ 32, and

reserving the final determination for the Board on remand.

1. The Use Must Be Direct, Immediate, Primary, and Substantial

{23} “[T]he phrase ‘used for educational purposes’. . . mean[s] ‘the direct, immediate, primary

and substantial use of property,’” NRA, 1978-NMCA-096, ¶ 35, “not the remote and

consequential benefit derived from its use,” id. ¶ 25. Georgia O’Keeffe Muesum departed from

this rule, but New Mexico appellate courts generally agree that a declared exemption based

solely on the unrealized intentions of the owner may be denied. See Albuquerque Lodge, No.

461, B.P.O.E. v. Tierney, 1935-NMSC-022, ¶ 29, 39 N.M. 135, 42 P.2d 206 (concluding that

“[i]t is the use of property, not the declared objects and purposes of its owner, which determines

the right to exemption”); Grace, Inc. v. Bd. of Cnty. Comm’rs, Cnty. of

Bernalillo,1981-NMCA-136, ¶ 3, 97 N.M. 260, 639 P.2d 69 (holding that property purchased

by a church corporation was taxable despite the intent of the church to construct a new church

there “sometime in the future”).

{24} Courts in other jurisdictions have interpreted limits such as these to mean that the use in

question must be “more than a mere dream.” See Peoples Faith Chapel, Inc. v. Limbach, 480

N.E.2d 781, 782 (Ohio 1985) (allowing a church’s exemption for adjacent land planned for a

school because the project was “one of substance and not a mere dream” (internal quotation

marks and citation omitted)); Trinity Episcopal Church, 694 N.E.2d at 818-19 (holding that a

church was entitled to an exemption for a building being remodeled as a community mental

health center because the use “was more than a dream, and that [the taxpayer] did more than

merely own the building . . . [by having] taken concrete steps at great expense to prepare the

building for use”).

{25} In the current case, the Court of Appeals refused to recognize Taxpayer’s efforts to lease

the building to a school as actual use. See CAVU Co., 2013-NMCA-050, ¶ 24 (“We recognize

that Taxpayer sought to negotiate with educational tenants during [the relevant] period.

Nevertheless, because such negotiations reflect intent for future use of the property rather than

‘present and actual’ use, we conclude that the property did not qualify for an educational use

exemption in 2010.”).

{26} Because the facts in this case reflect more than intent alone, we disagree. Active

negotiations to continue the educational use of the building are clearly distinguishable from

Taxpayer’s “mere dream” or “declared objects and purposes.” The evidence demonstrates that
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Taxpayer actively sought out and engaged interested educational tenants during all of 2009,

negotiating the terms of a lease with at least one—Desert Academy—and turning down a

proposed commercial lease from a film company. By working with various potential tenants and

negotiating a deal for the educational use of the Property, Taxpayer used the temporarily vacant

property in a direct and immediate effort to further its educational use. Taxpayer’s rejection of

a commercial tenant also advanced the exempt purpose of the Property.

2. The Use Must Embrace Systematic Instruction

{27} The use must “embrace[] systematic instruction in any and all branches of learning.”

NRA, 1978-NMCA-096, ¶ 35. When our appellate courts have focused on what types of

instruction qualify as educational, they have concluded that “education is a broad and

comprehensive term . . . [that] must be taken in its broad sense.” Id. ¶ 26 (internal quotation

marks and citation omitted); see also Temple Lodge, 1933-NMSC-013, ¶ 39 (“In a broad sense,

a golf professional, a riding master, or a boxing instructor, is engaged in education.”). Even NRA

declined to define the term too closely, stating that “matters of education are not restricted to

academic curricula or to ivy covered halls.” See 1978-NMCA-096, ¶ 26 (internal quotation

marks and citation omitted). In short, “virtually any aspect of the human experience can be

considered educational.” Georgia O’Keeffe Museum, 2003-NMCA-003, ¶ 41.

{28} Our focus here, however, is not on the type of educational instruction. Our concern is

whether Taxpayer embraced educational instruction through use of the Property in 2009, and

there is evidence that Taxpayer fulfilled this requirement in both the letter and the spirit of the

law. Taxpayer embraced systematic instruction by negotiating to lease the Property to Desert

Academy, an established college preparatory school that clearly practices “‘systematic

instruction in any and all branches of learning.’” See NRA, 1978-NMCA-096, ¶ 35. Taxpayer

not only pursued a lease with Desert Academy throughout 2009 but refused to lease the Property

to a film company in November of that year, furthering the Property’s exempt purpose and

demonstrating Taxpayer’s commitment to that purpose. Taxpayer reinforced these actions by

expressly stating as part of its rejection of the film company that “any lease, however attractive,

other than to an educational facility will have to be passed up.” While Taxpayer’s own affidavit

is the source of this evidence, other parties were engaged, and the Board remains free to ask

Taxpayer to provide more evidence of these matters on remand.

{29} The Board is also in a better position than this Court to weigh any evidence of

Taxpayer’s pursuit of an educational tenant during 2009 against evidence of Taxpayer’s listing

of the Property for sale to a commercial or residential tenant. We note that it is not clear from

the record whether the Property was ever for sale in 2009, the relevant year in question. We also

note that even if Taxpayer had succeeded in leasing or selling the Property to a noneducational

tenant, this would not bar exemption if the direct, immediate, primary, and substantial use of the

Property still embraced education. See Georgia O’Keeffe Museum, 2003-NMCA-003, ¶ 40

(“[T]he phrase ‘all property used for educational or charitable purposes’ is not limited, as are

other phrases, by the words ‘not used for commercial purposes’ or by the words ‘not used or

held for private or corporate profit.’”); Grand Lodge of Ancient & Accepted Masons of N.M. v.
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Taxation & Revenue Dep’t, 1987-NMCA-081, ¶ 17, 106 N.M. 179, 740 P.2d 1163 (“To be

exempt from property taxes, property need not be used exclusively for charitable or educational

purposes, but those must be the primary or substantial uses.”). A question before the Board is

whether Taxpayer embraced education through use of the Property that ultimately furthered its

educational purpose as a school campus.

3. The Use Must Create a Substantial Public Benefit

{30} A “substantial public benefit” must be “derived” from the use. NRA, 1978-NMCA-096,

¶¶ 35-36. Considering the rationale for the exemption provision, courts have emphasized the

significance of the implicit quid pro quo between the State and an exempt organization. See

Georgia O’Keeffe Museum, 2003-NMCA-003, ¶ 46 (describing the purpose of the exemption

as “encourag[ing] private citizens to engage in educational pursuits from which the public

derives a substantial benefit”); see also 71 Am. Jur. 2d State and Local Taxation § 269 (2012)

(“The fundamental ground upon which the exemption is based is the benefit conferred upon the

public by such institutions and the consequent relief, to some extent, of the burden imposed on

the State to care for and advance the interest of its citizens.”). In other words, “all property

should bear its share of the cost of government. Property which is exempt from taxation does not

share in the burden. Therefore, in exchange for its exempt status, such property must confer a

substitute substantial benefit on the public.” NRA, 1978-NMCA-096, ¶ 38.

{31} NRA defined substantial public benefit to mean “[a] benefit of real worth and importance

to an indefinite class of persons who are a part of the public, which benefit comes to these

persons from the use of property.” Id. ¶ 45. Here, we must consider whether Taxpayer’s efforts

to lease the building to an educational tenant—to the extent of rejecting a commercial

tenant—resulted in a substantial public benefit. We conclude that they did. Taxpayer’s twentysix-acre school property is one of a limited number of large campuses in the county built and

equipped to accommodate a student body of its size. Even while the Property was temporarily

vacant between educational tenants, Taxpayer used it as an educational magnet, drawing

potential school tenants into negotiations, all in furtherance of its educational purpose. In light

of Taxpayer’s efforts, the Property retained the type of “intrinsic educational value” to the

community that the Court of Appeals identified in Georgia O’Keeffe Museum. See 2003-NMCA003, ¶ 56. This intrinsic educational value was “inextricably interconnected with the” Property

even while the classrooms were empty. See id. Because of Taxpayer’s efforts, one school

ultimately leased the Property and another later bought it and still occupies it today. Each year,

between SFIES and Desert Academy, hundreds of students have been educated on the Property

in part because Taxpayer persisted in seeking out an educational tenant to eventually lease and

buy the building. It is for the Board to determine whether Taxpayer’s efforts resulted in a

substantial public benefit, but it is clear from the evidence that Taxpayer’s efforts and use of the

Property were applied towards its ultimate educational purpose.

III. CONCLUSION

{32} The appropriate inquiry into the validity of a property’s exemption from taxation under
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the exemption provision of Article VIII, Section 3 of the New Mexico Constitution must include

a determination of whether the use furthers the exempt purpose. Because the Board never

reached a formal decision regarding the Property’s eligibility for exemption, we remand to the

Board with directions to determine whether Taxpayer’s use of the Property was in furtherance

of its exempt purpose.

{33} IT IS SO ORDERED.

_______________________________________

CHARLES W. DANIELS, Justice

WE CONCUR:

____________________________________

BARBARA J. VIGIL, Chief Justice

____________________________________

PETRA JIMENEZ MAES, Justice

____________________________________

RICHARD C. BOSSON, Justice

____________________________________

EDWARD L. CHÁVEZ, Justice