Court Opinion

ID: 9740624
Source: CourtListenerOpinion
Date Created: 2023-08-26 20:38:48.945431+00
Date Added: 2024-06-11T07:24:19.231283
License: Public Domain

HANSON, Judge
(dissenting).
In my opinion, a privately owned business school operated for private gain, like any other commercial concern, is not exempt from taxation in South Dakota.
Taxation of property is the rule and exemption is the rare exception. The implications arising from this rule are well expressed in 2 Cooley on Taxation (4th Ed.) Section 672, p. 1403: "An intention on the part of the legislature to grant an exemption from the taxing power of the state will never be implied from language which will admit of any other reasonable construction. Such an intention must be expressed in clear and unmistakable terms, or must appear by necessary implication from the language used, for it is a well-settled principle that, when a *402special privilege or exemption is claimed under a statute, charter or act of incorporation, it is to be construed strictly against the property owner and in favor of the public. This principle applies with peculiar force to a claim of exemption from taxation. Exemptions are never presumed, the burden is on a claimant to establish clearly his right to exemption". Claimant failed to sustain that burden.
In order to enjoy the extraordinary privilege of tax exemption a school must come within the meaning of the term "educational institution" used in our tax exemption statute. Property belonging to educational institutions has been exempt from taxation in this state since 1897 and the statute granting the same should be construed in the light of its historical background and constitutional relationship. See Sec. 5, Ch. 28, Laws of 1897. Sections 5 and 6 of Art. XI, S.D.Const. authorizing specific tax exemptions class relates property used for school purposes with:
(1) Property of the United States, the state, counties, and municipalities,
(2) Property used exclusively for agricultural and horticultural societies, and
(3) Property used exclusively for religious, cemetery, and charitable purposes.
The common denominator of these specific exemptions is public ownership or use of property for a public purpose.
In Dakota Lodge No. 1, I.O.O.F. v. Yankton County, 56 S.D. 234, 228 N.W. 238, this court was concerned with the meaning of the word "benevolent" as it is used in our exemption statute. The court said "we must presume that the word was used in the same sense as it is used by the Legislature in other kindred statutes; not merely in statutes on the same subject, but in statutes on cognate subjects." Reference was then made to our statutes relating to "Religious, Educational, and Benevolent Corporations" from which the court concluded' that the word "benevolent" was not used synonymously with the word "charitable" in our exemption statute. Apropos to this case the court *403concluded that "The meaning thus attached by the Legislature, through a long period of years, to the word 'benevolent', as used in designating the character of societies for the purpose of incorporation, cannot be ignored in endeavoring to ascertain the meaning attached to the use of the same word in designating the societies whose property shall be exempt from taxation". The same reasoning should apply in determining the meaning of the term "educational institutions" in our tax exemption statute.
It is provided in the chapter dealing with Educational Corporations that the articles of incorporation of an institution of learning must set forth, among other things, "the particular branch or branches of science, literature, and the arts proposed to be taught", SDC 11.-1701 and such corporation "shall hold the property of the institution solely for the purposes of education arid not for the individual benefit of itself or any contributor to the endowment thereof * * SDC 11.1703. From a historical standpoint and from its relationship to kindred statutory and constitutional provisions, tax exemption for educational institutions was intended to apply only to private schools which:
(1) offer a general course of study conforming to the standards and requirements of education imposed upon our publicly supported schools of comparable grade, and
(2) own and use their property and all income therefrom for educational purposes.
In denying tax exemption to a private school offering a course of study in the fields of electricity, radio, radar, and electronics, the Illinois court in Coyne Electrical School v. Paschen, 12 Ill.2d 387, 146 N.E.2d 73, pertinently stated "it is manifest that two things are necessary to qualify a private institution for tax exemption as a school: first, a course of study which fits into the general scheme of education founded by the State and supported by public taxation; second, a course of study which substantially lessens what would otherwise be a governmental function and obligation. In the case at bar there is neither a claim nor a showing that plaintiff's course of study fits into the *404scheme of education offered by public schools. Neither is there a showing that the instruction given by plaintiff substantially lessens the burden of taxation occasioned by our public school system. Thus whether plaintiff's activities are measured by the restrictive meaning which has attached to the constitution and exempting statutes, or by the public gain which must inure before property is released from bearing its proportionate share of taxes as required by section 1 of article IX of the constitution, it is apparent that its claim to exemption must fail."
To hold otherwise allows a private business school exemption from taxation without the corresponding duty of utilising its property and resources exclusively for educational purposes and without the burden of conforming to any regulatory educational standards or requirements. It, furthermore, discriminates against South Dakota educational corporations which must hold and use their property "solely for the purposes of education and not for the individual benefit of itself or any contributor."
This court has said "An exemption of this type is granted as a concession by government in return for unselfish ministrations to human welfare." South Dakota Sigma Chapter House Ass'n. For Refund of Taxes v. Clay County, 65 S.D. 559, 276 N.W. 258. This fundamental justification for tax exemption is totally lacking here.