Title: Minnesota State Bar Ass'n v. Com'r of Taxation
Citation: 240 N.W.2d 321
Docket Number: 45699
State: Minnesota
Issuer: Minnesota Supreme Court
Date: March 12, 1976

240 N.W.2d 321 (1976) MINNESOTA STATE BAR ASSOCIATION, Respondent, v. COMMISSIONER OF TAXATION, Relator. No. 45699. Supreme Court of Minnesota. March 12, 1976. Warren Spannaus, Atty. Gen., Arthur J. Glassman, Sp. Asst. Atty. Gen., Dept. of Revenue, St. Paul, for relator. Broeker &amp; Bachman, John M. Broeker and Steven R. Hedges, Minneapolis, for respondent. Considered and decided by the court en banc. PER CURIAM. This case is before the court pursuant to a writ of certiorari issued to the Tax Court *322 of the State of Minnesota. The commissioner of revenue issued an order denying the Minnesota State Bar Association's application for a certificate of exempt status for the purpose of the Minnesota sales and use tax, Minn.St. c. 297A. The Bar Association appealed to the Tax Court, which reversed the commissioner's order. The issue presented to us is as follows: Is the Minnesota State Bar Association entitled to exemption from the Minnesota sales and use tax under Minn.St. 297 A. 25, subd. 1(p), as an organization "organized and operated exclusively for charitable * * * or educational purposes"? At the time the commissioner of revenue issued his order, the Minnesota State Bar Association was an unincorporated association of lawyers. On July 2, 1973, the organization became a Minnesota nonprofit corporation. This change in form has no bearing on the organization's status in regard to the sales and use tax. Membership is voluntary and is limited for the most part to lawyers admitted to practice in the State of Minnesota. The Minnesota State Bar Association (hereinafter MSBA) was formed in 1883. The constitution of MSBA states the organization's objects: MSBA works through a structure of several standing and special committees. The policies of the association are determined at an annual convention. A board of governors serves as the association's executive body. MSBA is supported primarily by annual dues which are assessed each member. A legislative committee reviews and recommends legislation to be sponsored by MSBA. Another committee makes recommendations regarding reforms in court rules. Other committees are concerned with legal aid, community relations, judicial compensation, the unauthorized practice of law, and a wide variety of other legal areas. MSBA maintains a client-security fund to make retribution to clients victimized by dishonest attorneys. The association publishes a monthly magazine, Bench and Bar, as its official organ. MSBA also provides its members with a group insurance plan which includes life insurance, major medical benefits, disability income coverage, and professional liability coverage. That part of the sales and use tax statute which is at issue in this case is Minn.St. 297 A. 25, subd. 1(p), which states: *323 Charitable tax exemptions recently were discussed by this court in North Star Research Institute v. County of Hennepin, Minn., 236 N.W.2d 754 (1975), and Mayo Foundation v. Commr. of Revenue, Minn., 236 N.W.2d 767 (1975). As noted in those cases, this court has not adopted a single definition of "charity," but has determined each exemption on the basis of the particular facts of each case. The primary test for exemption involves an analysis of the activities of the pertinent organization. MSBA is involved in legislative lobbying, supporting legal education, offering legal aid, maintaining a client defense fund, publishing a monthly group magazine, and providing its members with group benefits such as group insurance. MSBA through its various committees reviews proposed and existing legislation. The Tax Court placed much emphasis on MSBA's support of legislation drawn in the public interest; e. g., prohibiting deceptive trade practices, prohibiting prejudgment garnishments, regulating collection agencies, the implied-consent law, modification of divorce law, the 1967 Human Rights Act, judicial discipline legislation, and providing free legal services to the indigent. MSBA members also have served as consultants to various legislative committees. The two MSBA activities of most direct public benefit are the provision for legal aid and the maintenance of a client-security fund. The legal aid is offered through Legal Assistance of Minnesota, an MSBA organization, and is available to those unable to pay for legal services. The security fund is available to protect clients from an attorney's malpractice. The Tax Court found that MSBA has implemented and supported educational programs for the public and for attorneys. The "Children and the Law" series supported by MSBA is an example of a public education program. MSBA argues that In re Junior Achievement of Greater Minneapolis, Inc., 271 Minn. 385, 390, 135 N.W.2d 881, 885 (1965), established a flexible definition of "charity": MSBA also notes that the Tax Court found that the association is conducted without any view toward making a profit and that, for Federal tax purposes, it is exempt as a nonprofit organization. We set out the following general criteria in North Star Research Institute v. County of Hennepin, Minn., 236 N.W.2d 754, 756: At the outset, we must say that since our continued existence as a democratic government depends upon our being faithful to the "rule of law," any organization that perpetuates our legal system should be highly commended. It remains imperative that such organizations exist. The bar associations in America have shouldered the main burden in effecting this purpose, but the test is whether the Minnesota bar association is organized and operated "exclusively for * * * charitable purposes." In State v. Willmar Hospital, Inc. 212 Minn. 38, 41, 2 N.W.2d 564, 566 (1942), we noted that the phrase "purely public charity" in Minn.St. 272.02, subd. 1(6), was to be construed as meaning "wholly" or "exclusively." A Federal case cited by the Tax Court in its memorandum defined "exclusively" in this context to mean that nonconforming activities are only incidental. See, St. Louis Union Trust Co. v. United States, 374 F.2d 427, 431 (8 Cir. 1967). Cf. Mayo Foundation v. Commr. of Revenue, Minn., 236 N.W.2d 767 (1975). Even under definition of "exclusively charitable" found in St. Louis Union Trust Co., MSBA is not entitled to tax exemption. The St. Louis case involved an estate tax on a bequest to the bar association of St. Louis. Public policy favors tax exemption for such bequests. Similarly, the other Federal case cited by the Tax Court, Dulles v. Johnson, 273 F.2d 362 (2 Cir. 1959), certiorari denied, 364 U.S. 834, 81 S. Ct. 54, 5 L. Ed. 2d 60 (1960), also involved an estate tax deduction for bequests to bar associations. The instant case arises in a different tax context. It is important to note that in the St. Louis case, Judge Blackmun stated: Other cases involving property taxes on professional associations have denied exemption. In Massachusetts Medical Society v. Assessors of Boston, 340 Mass. 327, 164 N.E.2d 325 (1960), the Supreme Court of Massachusetts found: The Massachusetts court cited Boston Chamber of Commerce v. Assessors of Boston, 315 Mass. 712, 54 N.E.2d 199, 152 A.L.R. 174 (1944), in which that court held that although the objectives of the chamber included the promotion of trade and commerce which the court recognized as "highly commendable and of great public benefit," 315 Mass. 718, 54 N.E.2d 202, nevertheless, since the primary benefit would accrue to the business community rather than to the public, the chamber was not entitled to exemption. See, also South Dakota State Medical Assn. v. Jones, 82 S.D. 374, 146 N.W.2d 725 (1966). A more recent case denied property tax exemption to a bar association. Association of the Bar of the City of New York v. *325 Lewisohn, 34 N.Y.2d 143, 153, 356 N.Y.S.2d 555, 562, 313 N.E.2d 30, 35 (1974), held: Counsel for MSBA contends that the New York case involved a unique background in which the legislature recently had passed a statute specifically allowing local governments to tax bar associations. The New York court noted that this statutory change was relevant, but pointed out that its decision was not based solely on that factor. In the instant case involving the sales and use tax, we must balance the commendable activities benefiting the public with the private interests also involved. The bar association mixes public and private purposes when it explains in its constitution that one of its objects is "to organize into one body the entire Bench and Bar of the State of Minnesota in the interests of the legal profession and of the public." Also, the record discloses that in the association's publication, Bench and Bar, January 1972 issue, it is stated: MSBA's Bench and Bar magazine consists chiefly of information useful only in the practice of law. The magazine contains official MSBA news, technical articles on practicing law, notes on personnel and address changes affecting local firms, a wantads section for attorneys, pointers on law office management, and an annual directory of MSBA members. While the contents of Bench and Bar may improve the overall quality of the practice of law, the magazine primarily appeals to the interests of the organization's members much like any other trade journal. MSBA also alleges that its educational activities qualify it for tax exemption under Minn.St. 297 A. 25. As this court noted in Junior Achievement of Greater Minneapolis, Inc., 271 Minn. 385, 389, 135 N.W.2d 881, 884 (1965), an organization need not be an "academy or seminary of learning" to qualify for tax exemption. Certainly MSBA's encouragement of continuing education for *326 attorneys,[1] its public distribution of legal pamphlets, and its public information programs such as the award-winning "Children and the Law" series are laudable; nevertheless, the bulk of these activities is aimed at the education of lawyers rather than of the general public. Even the pamphlets distributed by MSBA explain inter alia the advantages of an attorney's services in purchasing a home, preparing a will, probating an estate, or other events. These activities do not qualify MSBA as an organization operated "exclusively for educational purposes." Taking the association's activities as a whole and applying what this and other courts have said, it is difficult to categorize this organization as one "organized and operated exclusively for charitable * * * or educational purposes." The mixture of public and private interests in the Minnesota State Bar Association's lobbying, combined with the professional orientation of its other activities, is sufficient to deny tax exemption. The decision of the Tax Court is therefore reversed. TODD, J., took no part in the consideration or decision of this case. [1] For example, MSBA in 1974 petitioned this court to amend its rules for the practice of law in Minnesota to establish minimum requirements for the continuing education of lawyers and to discipline those who failed to meet these requirements.