Opinion ID: 1992198
Heading Depth: 1
Heading Rank: 4

Heading: MSBA's status as an educational organization

Text: In considering the meaning of the word educational, as contained in § 326(i), the Tax Court indicated that the term was to be given its usual meaning in law, citing State Tax Comm. v. Whitehall, 214 Md. 316, 320, 135 A.2d 298 (1957). The Tax Court correctly noted that, contrary to MSBA's contention, the issue of the proper construction of the term educational was not addressed by this Court in Md. State Fair v. Supervisor, 225 Md. 574, 172 A.2d 132 (1961). That case involved taxes sought to be levied against certain property of the Maryland State Fair and Agricultural Society, Inc., which operated the Maryland State Fair. It was conceded that the Society was an educational institution; the concession was based largely on an opinion of then Attorney General Hall Hammond that the Society was an educational organization entitled to a sales tax exemption under the statute. 36 Op.Att'y Gen. 303 (1951). It was there noted that the Society, in its conduct of the State Fair, was a nonprofit organization incorporated to save the State Fair for the benefit of Maryland farmers, breeders and those interested in the conservation of natural resources, as well as of the general public and the citizens of the State. Id. at 304. The opinion sets forth a number of cases throughout the country holding that a State Fair is an educational institution or organization, notwithstanding its incidental amusement programs. Those cases, according to the Attorney General, found State Fairs to be educational because they were planned and managed for the general welfare of the people to inform them about the resources of the region in matters pertaining to agriculture and industry, and methods by which they may be conserved, utilized, and improved. In finding the Society exempt from sales tax, the Attorney General stressed that the State Fair had been exempt from property taxes since 1867 and that this was a clear indication of a public policy that such organizations are entitled to exemption to further educational purposes. Id. at 309. Finding no such indication of a similar public policy in favor of exempting the MSBA, and after considering the evidence, the Tax Court concluded that that organization was not primarily educational. While the Tax Court purported to apply the usual meaning in law of the word educational, as used in § 326(i), we are unable to glean from its opinion what it found that meaning to be. In determining that the MSBA was not primarily an educational organization, the Tax Court emphasized that the Association has a professional orientation, that the bulk of its services are provided to its own members, and that the members pay dues to receive them. Upon this premise, the Tax Court appeared to make a per se determination that the MSBA's educational activities were but an incidental by-product of the Association's overall function to promote and protect the professional interests of its members. To apply such a test, we think, would constitute an error of law; it would propogate too restrictive a view of the educational organization exemption of § 326(i), one plainly at odds with the legislative intention. As in Supervisor v. Group Health Ass'n, supra , involving the meaning of the word charitable, whether an organization is primarily educational requires a careful examination of its stated purposes, the actual work performed by it, and in particular the nature and extent of its educational activities. Merely because education is provided to dues paying members of the Association and not directly to the public does not, contrary to the intimation in the Minnesota State Bar case, disentitle the organization to the exemption. In other words, because the MSBA's educational activities may be predominantly for its members is not alone determinative of whether the Association is an educational organization in the sense contemplated by § 326(i). To be entitled to an exemption based solely on the educational organization exemption, the organization's focus must be shown to be primarily educational. In the context of a tax exemption statute, Black's Law Dictionary 461 (5th ed. 1979) defines educational purposes of an educational organization to encompass systematic instruction in any and all branches of learning from which a substantial public benefit is derived. This is consistent with the general rule that exemption from taxation must be for a public purpose. Wilson v. Board of Co. Comm'rs, 273 Md. 30, 44, 327 A.2d 488 (1974); Katzenberg v. Comptroller, 263 Md. 189, 197, 282 A.2d 465 (1971); Kimball-Tyler v. Balto. City, 214 Md. 86, 97, 133 A.2d 433 (1957). See also 71 Am.Jur.2d State and Local Taxation, §§ 307, 362, and 382 (1973). Manifestly, the term educational institution or organization in § 326(i) is not limited to schools, colleges or universities. Through its various functioning parts, the MSBA does provide a measure of systematic instruction to and for its members to enhance their ability to better serve the public good, a well-recognized public purpose. And some of the Association's educational pursuits are aimed more directly at educating the public on law-related matters of substantial public importance. We thus look to the entity seeking exemption as an educational organization as a whole to ascertain its primary or dominant purpose. See, e.g., Annotation, Exemption of Charitable or Educational Organization from Sales or Use Tax, 59 A.L.R.3d 748-773 (1974); Annotation, What are Educational Institutions or Schools within State Property Tax Exemption, 34 A.L.R.4th 698-754 (1984). And see generally 68 Am.Jur.2d. Sales and Use Taxes § 116 (1973). We therefore shall direct that the case be remanded to the Tax Court to apply the proper legal test to the facts as it finds them in making this determination.