Court Opinion

ID: 9797260
Source: CourtListenerOpinion
Date Created: 2023-08-31 04:16:28.947119+00
Date Added: 2024-06-11T08:53:34.799495
License: Public Domain

Caplinger, J.,
dissenting: I respectfully disagree with the majority’s conclusion that SkillPath, an organization which conducts 1- and 2-day seminars based upon demand in various locations *680throughout our state and which is not a member of the North Central Association of Colleges and Schools (NCA), qualifies for sales tax exemption as an “educational institution” under K.S.A. 2007 Supp. 79-3602(1) and K.S.A. 2007 Supp. 79-3606(c).

The Majority Fails to Consider the Statute’s Ambiguity

The majority interprets K.S.A. 2007 Supp. 79-3602(1) to contain three requirements for exemption as an educational institution. I do not dispute the correctness of the first two elements: (1) The entity must be a nonprofit school, college, or university, and (2) the institution must offer an education at a level above thel2th grade. However, I disagree with the majority’s suggestion that the “plain language” of the statute permits an institution like SkillPath to qualify for sales tax exemption without accreditation under the NCA. Rather, according to the majority, the institution must simply “conduct regular classes and courses of study that meet NCA accreditation standards.” (Emphasis added.) 40 Kan. App. 2d at 673.
The flaw in the majority’s conclusion is that it ignores the ambiguity in the statute. As both parties concede, the NCA does not accredit individual courses based on content, regularity of classes, or any other particular characteristic. Rather, the NCA accredits institutions — a complex and lengthy process that, according to the materials submitted by SkillPath, requires the school to demonstrate five major criteria for accreditation: (1) development of a multifaceted school improvement plan; (2) development of an assessment-driven and comprehensive information system for collecting, monitoring, and analyzing information on students as they enter, progress, and exit the school, and a description of how student achievement and school effectiveness data is collected and analyzed; (3) a description of the “process of schooling,” including the process for curriculum development, review and revision, and the assessment system used by the school including information on classroom and standardized measures; (4) a description of how the school involves the community and communicates with the community regarding its goals and programs; and (5) a description of the school’s (a) physical resources, including space, facilities, environment, and personnel; (b) financial resources, including its *681funding, budgeting and auditing procedures, and the storing of permanent records; and (c) instructional resources, including the quantity and range of instructional media and technology available to the students and faculty. Once the school has completed its extensive application, an on-site visit or audit is conducted by the NCA.
Even Dr. Kathleen Clauson, who testified on behalf of SkillPath regarding NCA requirements, recognized that NCA accredits only institutions, not courses or programs and that this process is often a lengthy one, requiring several site visits and ongoing evaluations. The majority points out that Clauson testified regarding specific “course content” standards, but it neglects to mention that Clauson clearly did not suggest that NCA has ever evaluated an institution’s course content separate or apart from the entire accreditation process. In fact, Clauson specifically testified that as an NCA evaluator, she evaluates course content only as “part of’ the overall assessment of the university or institution seeking accreditation.
Clearly, K.S.A. 2007 Supp. 79-3602(1) refers to “regular classes and courses of study required for [NCA] accreditation . .. .” (Emphasis added.) Clauson implicitly recognized this when she pointed out that the NCA encourages institutions that are already accredited (like Graceland, SkillPath’s parent entity) to enhance their institutions by adding programs, such as those offered by SkillPath, that reach out to nontraditional students and members of the “global community.” That does not change the fact, however, that the NCA does not accredit individual courses and SkillPath, as a stand-alone entity, is not accredited by the NCA.
Thus, contrary to the majority’s suggestion, the content of individual classes is not considered in a vacuum by the NCA. Rather, courses and course content are considered, along with other extensive information regarding the institution, in determining whether the institution may be accredited by the NCA. Thus, I would find the legislature’s use of the phrase “regular classes and courses of study required for accreditation by, or membership in the [NCA]” in K.S.A. 2007 Supp. 79-3602(1) to be ambiguous. And because the phrase is ambiguous, we look to legislative history to interpret its meaning. See In re K.M.H., 285 Kan. 53, 79, 169 P.3d *6821025 (2007) (if a statute is unclear or ambiguous, courts apply canons of construction or rely on legislative history construing the statute to effect the legislature’s intent).

The Legislative History of the Statute Clarifies the Legislature’s Intent

The legislative history of K.S.A. 2007 Supp. 79-3602(1) confirms that the legislature’s intent was to require that an educational institution be accredited by the NCA in order to obtain tax exempt status under the statute.
Senate Bill 250, which defined “educational institutions,” was proposed in 1997 by the Kansas Department of Revenue (KDOR). The bill defined an educational institution to mean:
“[A]ny school, college and university that offers education at a level above the twelfth grade, and conducts regular classes and courses of study required for accreditation by, or membership in, the North Central Association of Colleges and Schools, the state board of education, or that otherwise qualify as an ‘educational institution,’ as defined by K.S.A. 74-50,103, and amendments thereto. Such phrase shall include: (1) A group of educational institutions that operates exclusively for an educational purpose; (2) nonprofit endowment associations and foundations organized and operated exclusively to receive, hold, invest and administer moneys and property as a permanent fund for the support and sole benefit of an educational institution; and (3) nonprofit entities, including but not limited to, trusts and foundations, organized and operated to hold and own receipts from intercollegiate sporting events and to disburse such receipts, as well as grants and gifts, in the interest of collegiate and intercollegiate athletic programs.” S.B. 250, sec. 1(s) (1997).
Significantly, KDOR’s Director of Policy and Research, Shirley Sicilian, testified before the Senate Committee on Assessment and Taxation and clearly stated the bill was intended to define educational institutions to include “post-secondary schools that are accredited” by the NCA. (Emphasis added.) See Minutes, Sen. Comm. on Assessment and Taxation, February 17, 1997 (S.B. 250).
Although Senate Bill 250 was favorably reported by the committee, it was eventually withdrawn from the calendar and re-referred to the committee. See Sen. J. 1997, p. 785. In 1998, Sicilian again testified before the committee. When questioned as to why the bill was needed, she explained that KDOR “often received *683questions regarding the interpretation of ’educational institution’ in the sales tax statutes” and because “there is no definition in the sales tax statutes, the [KDOR] is forced to look to other statutes for a definition. Therefore, this bill is needed to clarify the sales tax statutes.” Minutes, Sen. Comm, on Assessment and Taxation, January 15, 1998 (S.B. 250).
In the House Committee on Taxation, Kansas Board of Regents General Counsel Joseph Barron testified that the purpose of Senate Bill 250 was to clarify the tax exempt status of affiliated corporations of universities that had historically been exempt from sales tax, including athletic, research, and endowment associations and student unions, and to “ehminate any disparity of treatment among campuses undertaking the same activities.” Minutes, House Comm. on Taxation, March 19, 1998 (S.B. 250), attach. 3.
A memorandum to House Committee on Taxation Chair Phill Kline from Sicilian, dated March 19, 1998, again stated that Senate Bill 250 defines educational institutions to include “nonprofit post-secondary schools accredited by the North Central Association of Colleges and Schools, the Board of Education, or otherwise qualifying as ‘educational institutions’ under K.S.A. 74-50,103.” (Emphasis added.) Minutes, House Comm. on Taxation, March 19, 1998 (S.B. 250), attach. 2-1.
The language of amended Senate Bill 250 was eventually included in Senate Bill 493, which was passed by both houses and signed into law by the governor in 1998. See L. 1998, ch. 130, sec. 29(s).
Thus, a review of the history of the statute reveals that the clear purpose of the amendment was to clarify the treatment of organizations affiliated with universities, including athletic and endowment associations. There is simply no indication that the bill was intended to permit institutions not accredited by the NCA to obtain tax exempt status. Instead, the legislative histoiy verifies that KDOR, which proposed the legislation, intended that it apply to NCA “accredited institutions.”
Moreover, the majority’s interpretation of the statute to require sales tax exemption for institutions which “conduct regular classes and courses of study that meet NCA accreditation standards” *684places KDOR or, ultimately, BOTA in the untenable position of evaluating course content of all institutions seeking sales tax exemption to determine whether their courses “meet NCA accreditation standards.” This is an unreasonable and unworkable result that clearly was not anticipated or intended by the legislature. See Director of Taxation v. Kansas Krude Oil Reclaiming Co., 236 Kan. 450, 458, 691 P.2d 1303 (1984) (in determining legislative intent, courts are not limited to mere consideration of the statutory language employed and may properly look to the purpose to be accomplished and the effect the statute may have under various constructions suggested).

The Majority’s Interpretation of the Statute Fails to Give Due Deference to the Agency

Even if the majority correctly concluded that K.S.A. 2007 Supp. 79-3602(1) requires KDOR and BOTA to evaluate every application seeking sales tax exemption under the statute to determine the content of courses and whether they “meet NCA standards,” I would nevertheless uphold BOTA’s determination that the courses taught by SkillPath do not qualify under the statute.

(1) BOTA’s definition of “regular”

Applying a definition of “regular” which makes sense when applied in the educational context, BOTA found SkillPath’s classes were not regular. Specifically, BOTA defined “regular” as “recurring, attending, or functioning at fixed or uniform intervals.” See Webster’s Ninth New Collegiate Dictionary 992 (1991).
SkillPath’s witness, Chad Braymer, testified that “what determines” where and when a course is offered is “how many people are interested in that course.” Further, Braymer “measures” demand by “attempting a course” in a particular location. Thus, BOTA found that while SkillPath occasionally repeats its class offerings in some cities, that repetition is based upon demand for the class in a particular geographic area. BOTA concluded that the occasional repetition of a course in some cities based upon demand does not constitute regular classes as defined in the statute.
Despite the Board’s logical interpretation of the adjective regular as used to modify classes, and its specific factual finding that *685SldllPath’s courses did not meet this definition, the majority suggests that the legislature “should have” employed the phrase “with regularity” to better express its intent. The majority then concludes, based upon a review of other statutes, that “regular,” as it is used in K.S.A. 2007 Supp. 79-3602(1), “simply means the classes and courses of study are not out of the ordinary and conform to NCA accreditation standards.” 40 Kan. App. 2d at 676.
The majority’s reliance on other statutes to define the term “regular” in this statute is curious, in light of the legislature’s purpose in enacting the statutory definition of “educational institution.” As discussed above, that definition was proposed by KDOR because there was no definition of that term in the sales tax statutes and KDOR no longer wanted to be “forced” to look to other statutes for a definition.
Moreover, the majority’s decision fails to give any deference— much less “great judicial deference” — to BOTA, as we are required to do. See Denning v. KPERS, 285 Kan. 1045, 1048, 180 P.3d 564 (2008) (administrative agency’s legal interpretation of a statute that the agency is authorized to enforce is generally entitled to great judicial deference). Nor does it apply the general rule that we must construe tax exemption statutes strictly in favor of imposing tax and against allowance of exemption for one who does not clearly qualify. See Kansas Krude Oil Reclaiming Co., 236 Kan. at 454. Instead, the majority has simply substituted its view regarding the meaning of the phrase “regular classes” for BOTA’s view.
The majority also suggests that even if this court were to adopt B OTA’s definition of regular, SkillPath’s occasional repetition of some courses in some cities across the nation would meet that definition. The majority cites Braymer’s testimony that SkillPath offers one particular course “approximately every three months” in Chicago based upon demand, but that same course in Topeka would not be offered “maybe [no] more than once a year” based upon lower demand. Again, I think the majority’s rationale fails to give any deference to BOTA’s interpretation of the term “regular” with respect to courses offered by an education institution.
BOTA defined “regular” as “recurring, attending, or functioning at fixed or uniform intervals.” The testimony cited by the majority *686only reinforces BOTA’s finding that SldllPath’s course offerings are anything but regular under this definition. Instead, the courses are entirely based upon demand in a particular location. While SkillPath might offer one course three times a year in one city, that same course might be offered once a year or less in another city. Importantly, SkillPath’s class schedule is not set in advance; it is determined based upon demand in each location.
Therefore, I would conclude that if we appropriately give deference to BOTA’s definition of the term “regular,” the testimony supports BOTA’s conclusion that SldllPath does not offer regular classes and does not qualify for sales tax exemption as an educational institution under K.S.A. 2007 Supp. 79-3602(1) and K.S.A. 2007 Supp. 79-3606(c).

(2) BOTA’s definition of “courses of study”

I would also find the majority fails to give deference to BOTA’s definition of the phrase “courses of study” in the statute. BOTA concluded SkillPath does not offer courses of study because “most customers of SkillPath are not looldng for a college degree” and the “individual classes offered generally do not lead to any ultimate conclusion outside of themselves.”
Again, the majority has looked to other statutes to determine that courses of study as used in K.S.A. 2007 Supp. 79-3602(1) does not include a requirement that the courses of study lead to a degree, as BOTA found. I would give judicial deference to BOTA’s definition of the phrase “course of study,” particularly when, as here, that phrase is connected to a reference to NCA accreditation. As discussed above, NCA accreditation clearly requires that an educational institution provide courses of study leading to a degree in order to be accredited.
In summary, I would affirm BOTA because: (1) The majority’s reversal of BOTA does not recognize the ambiguity of the statute regarding the reference to NCA accreditation or consider the legislative history of the statute in resolving that ambiguity; and (2) the majority’s decision fails to give due deference to BOTA’s interpretation of the statute.