Opinion ID: 1268867
Heading Depth: 2
Heading Rank: 7

Heading: programs operated by the church owner

Text: The City denied exemptions for three properties on which the churches operated programs for the general public. The programs included a Catholic radio station, a Methodist youth hostel and a Methodist thrift shop. The superior court reversed the City's decision on all three properties and remanded the case regarding the youth hostel and thrift shop for additional determinations. The City appealed these holdings. Two legal issues enter into this dispute: (1) What is a charitable purpose? and (2) When does payment for a service taint an otherwise exempt activity?
All property used exclusively for charitable purposes is exempted under AS 29.53.020 whether owned by a religious organization, AS 29.53.020(b)(2), or by some other person, AS 29.53.020(a)(3). Here, the churches could seek the charitable purpose exemption under either provision. We detect no sign that the legislature intended charitable purposes to have two different meanings or applications within one statute. Charitable purposes has the identical meaning and application in AS 29.53.020(a)(3) and AS 29.53.020(b)(2). [35] This court has previously defined charitable purposes. In King's Lake Camp, 439 P.2d 441, we interpreted it as used in former AS 29.10.336(a) (repealed 1972), the predecessor of AS 29.53.020(a)(3). [36] Recognizing that neither the constitution nor the general laws of this state defined the term, we resorted to the broad common law definition of charity: It is quite clear that what is done out of good will and a desire to add to the improvement of the moral, mental, and physical welfare of the public generally comes within this meaning of the word `charity.' To crowd out coarseness, cruelty, brutality from social man undoubtedly results in this betterment. King's Lake Camp, 439 P.2d at 445 (quoting Old Colony Trust v. Welch, 25 F. Supp. 45, 48 (D.Mass. 1938)). [37] In King's Lake Camp we decided that a nonprofit camp used by nonprofit charitable and religious groups for a nominal fee, fulfilled a charitable purpose under former AS 29.10.336(a). We concluded that provision of recreational facilities, such as accommodations for campers, is a charitable use of the property. 439 P.2d at 446. We stated: [i]n order to qualify as a charitable undertaking, it is not necessary that the beneficiaries of the charity be indigent or needy. Id. While former AS 29.10.336(a) has since been amended and recodified as AS 29.53.020(a)(3), the use of the term charitable purposes remains the same. Thus, the King's Lake Camp definition still applies.
Under AS 29.53.020(c), [38] otherwise exempt property which produces income is exempt only if that income derives solely from use of the property for classroom space. [39] We first interpreted the predecessor of this statute, former AS 29.10.336(c) (repealed 1972), [40] in King's Lake Camp, 439 P.2d 441. There we considered whether a nonprofit recreational camp was exempt as a charitable undertaking even though it charged user fees. The camp charged individual users $3.25 daily and group users $250 annually. Since these charges did not entirely defray the operational expenses of the camp, the camp owners accepted donations for that purpose. Id. at 443. We first determined that the camp operated exclusively for charitable purposes. We then held that it was exempt notwithstanding the fees because the receipt of income and rentals ... was incidental to and reasonably necessary for the carrying out of the primary charitable purposes of the camp. Id. at 445. In addition, such moderate user fees as were charged ... do not appear to have been inspired by a dominant profit motive. Id. We implicitly held that the fee accepted must not exceed the operational requirements of the exempt activity for which the payment is received. Id. at 444. [41] Although the statute interpreted in King's Lake Camp has since been amended and recodified as AS 29.53.020(c), nothing suggests that the legislature intended to modify the King's Lake Camp test for deciding when payment for a service taints an otherwise exempt property use. In sum, property will not lose an exemption under AS 29.53.020(a)(3) even if payment is received for the use of the property if: (1) the property is used exclusively for exempt purposes; (2) the payment is not sought as a result of a dominant profit motive; and (3) the payment is both incidental to and reasonably necessary for the accomplishment of the exempt activity and does not exceed the operating costs of the exempt activity for which payment is received. If all of the above are met, the property does not lose its exemption on account of the income. If (3) is not met, the property is only exempt if used for classroom space.
The Catholics seek to exempt the property on which KNOM radio station operates. They claim that the station is used exclusively for nonprofit religious, charitable, and educational purposes, and should be exempt under AS 29.53.020. The City denied the exemption for tax years 1979-82, and the superior court reversed. Because we conclude that KNOM was used exclusively for religious purposes, [42] we affirm the superior court's judgment exempting KNOM. KNOM is an AM radio station operated by the Catholic Bishop. The superior court found that it was operated to help the Alaska Natives maintain pride in their native culture and adapt to modern western society. In addition to broadcasting entertainment, sports, and news, KNOM's broadcasts included programs on religion, education, alcoholism, loss of identity, health, sanitation, transportation, Nome's economy, housing, juvenile problems, longrange planning and animal control. The superior court found that KNOM's four objectives were to educate, inform, inspire and entertain. During the tax years for which the exemption was sought, KNOM's staff included two paid employees  one full-time and one half-time  and several full-time volunteers. It presented no commercial matter on its programs and neither solicited nor accepted advertising to pay for programming. KNOM did solicit donations to help pay its operating costs. While it acknowledged these over the air, it neither accepted them in return for commercial time, nor made any agreement with the donor regarding the announcement of sponsorship. [43] The Catholics contend that KNOM has exclusively religious purposes. They argue that KNOM's goals are religious objectives, and that the amount of actual religious programming is irrelevant to KNOM's tax exempt status. They claim that all property used for religious purposes is statutorily exempt. They assert that the City's definition of the activities that are religious for taxation purposes excessively entangles government with religion in violation of the United States and Alaska Constitutions. We do not question the legitimacy of KNOM as a church activity. The Catholics' analysis, however, fails to recognize that Alaska law does not exempt all religious activities conducted by churches. Rather, it limits the exemption to specific religious activities. AS 29.53.020(b). If the Catholics cannot show that KNOM was used solely for public worship, charitable purposes ... [or] religious education, under AS 29.53.020(b)(2), the KNOM property is not exempt as property used solely for religious purposes. Application of the statute to the churches' activities does not involve a subjective judgment about religiousness. Rather, it requires an objective decision that the property's use fits into one of the categories of exempted religious purposes.
KNOM airs less than five percent public worship programming. To demonstrate that KNOM is used solely for public worship, the Catholics must show that KNOM's other programming was directly incidental to and vitally necessary for the effectiveness of the public worship programming. See supra section IV, A. The Catholics maintain that the other programming increases their listening audience. They assert that lengthy religious radio discussions are ineffective in the Nome area. Perhaps more people will listen to the religious programming if it is sporadically broadcast with entertainment, sports and news. But here, the religious worship is merely incidental to the nonreligious programming. Thus, our policy of strict construction prevents us from applying King's Lake Camp to KNOM. We do conclude, however, that KNOM was partially used for public worship.
We agree with the superior court that KNOM's programs on religion were for religious education. AS 29.53.020(b)(2). As with the public worship exemption, however, KNOM was not used solely for religious education. The vast majority of programming was secular entertainment, news and sports. These programs were not directly incidental to and vitally necessary for the religious education programming.
Aside from the programming for public worship and religious education, we affirm the superior court's finding that the remaining KNOM programming is for charitable purposes. Under the broad definition of charitable established in King's Lake Camp, we agree that KNOM's objectives  to educate, inform, inspire and entertain  are charitable. The broadcasts on subjects such as education, alcoholism, loss of native identity, health and sanitation are done out of good will and a desire to add to the improvement of the moral, mental, and physical welfare of the public generally. King's Lake Camp, 439 P.2d at 445 (quoting Old Colony Trust, 25 F. Supp. at 48). Much like the recreational camp exempted in King's Lake Camp, KNOM's entertainment programming is charitable; it is a gift to a general public use, which extends to the poor as well as to the rich. King's Lake Camp, 439 P.2d at 446 (quoting Lord Camden, Eighteenth Century Chancellor of England). In sum, we conclude that KNOM was used exclusively for religious purposes during tax years 1979-82 because it was used solely for a combination of public worship, religious education, and charitable purposes. [44] We agree with the superior court that the contributions received by KNOM do not taint KNOM's exemption. The limitations of AS 29.53.020(a)(3) regarding the receipt of income do not apply. In contrast to Evangelical Covenant Church, the contributions received are not in exchange for commercial air time, only for good will. Therefore, the KNOM station is used exclusively for exempt purposes. There are no allegations that the contributions are the product of a dominant profit motive on the Catholic Bishop's part or that the contributions exceed the station's operational requirements. Accordingly, we affirm the superior court's judgment.
The Methodists operated a Youth Hostel in various parts of the Community United Methodist Church Building. The space used depended upon current need. Affiliated with the American Youth Hostels, this Youth Hostel provided low-cost housing for transients, visitors to Nome traveling cheaply and others who were neither needy nor traveling cheaply. It received donations ranging from $2.50 to $5.00 per night, although no one was turned away if fees were not paid. The church operated the Youth Hostel for charitable purposes and made no profit. We agree with the superior court that the Youth Hostel was a charitable activity. The Youth Hostel closely parallels the camp operated for charitable purposes in King's Lake Camp. The Youth Hostel provides travelers temporary lodging for a low daily fee. Although some who stay at the Hostel are not needy and could pay more, no one is turned away if the fees are not paid. In this sense, the Youth Hostel is a gift to the general public. The income from the Youth Hostel does not taint the hostel's exempt status. The fees were received as payment for the exempt hostel services, were related to and necessary for the hostel's operation, did not exceed the hostel's operating costs, and were not motivated by profit making. Thus, the income limitations of AS 29.53.020(c) do not apply. The superior court determined that the Youth Hostel was exempt for tax years 1979-82. It remanded the decision for apportionment. We uphold the superior court's judgment.
The Methodists were denied an exemption for a Thrift Shop that they operated in part of the Community United Methodist Church Building (tax years 1979-82). The superior court reversed the exemption denial, and remanded for apportionment. The Thrift Shop distributes used clothing. The apparently slight income buys presents for prisoners, supports donations for mission projects and helps pay for the church's utilities. We agree with the superior court that provision of used clothing at prices affordable to the poor is a charitable activity under King's Lake Camp. The superior court concluded that the shop's income did not taint its exemption. The court ruled that it was not the product of a dominant profit motive, and that the use of the income was incidental to and reasonably necessary for the accomplishment of the shop's charitable purposes. The small income was used for charitable projects and to help defray the church's utility costs. The superior court stated that rare is the church that doesn't have some charitable activity to help needy people obtain food, clothing and shelter attended by rummage and bake sales, church bazaars and even bingo. We disagree in part with the superior court's analysis. If the Thrift Shop raised money that was unnecessary to either the shop's operation or use by its other charitable activities, then the Thrift Shop would not be exempt under AS 29.53.020(c) even though it is otherwise a charitable activity. King's Lake Camp, 439 P.2d at 445; Evangelical Covenant Church, 394 P.2d at 885. The superior court did not determine this point. We thus affirm the superior court's decision to remand the Thrift Shop decision. But before apportioning, the City should determine whether the Thrift Shop is exempt under this opinion.