property tax bulletin no.5

(Published under Appropriation No. 1037.1)

Issued August 1, 1980

SUBJECT: TAX EXEMPTIONS FOR CHARITABLE AND BENEVOLENT
INSTITUTIONS/ORGANIZATIONS

REFERENCES: Title 36 MRSA, section 652, subsection 1, paragraph A, B and C

NOTE: The provisions of Section 652 are broad and undefined, specifically those for institutions and organizations incorporated by the State of Maine for charitable and benevolent purposes. (This bulletin has been prepared in outline form with case law presentation, to assist the local assessor in determining the exempt status of property of charitable and benevolent institutions and organizations). The statute addresses several key requirements for exemption qualification. The tax exemption of real estate and personal property must satisfy the prerequisites of ownership and occupancy or use solely for their own purposes, and be incorporated by this State.

1. Definitions

a. Ownership. It is necessary to the exemption that the institution or organization own and occupy the property. Ownership of the property by the institution or organization is essential to the exemption and such ownership must be exclusively charitable since the State of Maine provides for the exemption of property for charitable purposes by statute. The property deed will show ownership.

b. Occupancy. The word occupancy is used in its natural sense to mean an actual occupation; i.e., possessing, holding, in possession of, land/building holder and is not synonymous with used or appropriated. The occupation of real estate by an institution which entitles it to exemption is possession or holding for charitable purposes for which it is incorporated. Ownership of the property must be concurrent with occupancy for exemption of the property tax.

Maine law permits the exemption to an otherwise qualifying charitable and benevolent institution or organization that occupies or uses the real and personal property of the charitable institution or organization of recorded ownership. If there is an existing lease, the agreement will show occupancy by a qualifying institution or organization. The institution is not entitled to the exemption with respect to property owned by it, but not occupied by it, unless occupancy is by another qualifying institution or organization. Case law indicates that the courts will consider the extent of the use and the nature of the occupation; the requirement of occupancy is not satisfied by mere trivial and negligible use. Possession of a building with a plan and purpose for future charitable and benevolent use is insufficient to qualify for the exemption.

c . Used solely for charitable/benevolent purposes - The charitable use of the property must be a prerequisite to exemption from the property tax. The general exemption has been construed by the courts as applying only to property used for the purpose for which the institution or organization was created. Under statutory provisions for exemption of property used for charitable purposes, the property must be used for which it is, in fact, dedicated as defined in the corporate charter. The property so held by the institution must be dedicated to the public, instead of private, advantage or gain, and is devoted to the public use. Where property is owned by charitable institutions and used solely for charitable purposes ownership is not the sole test for exemption, but use is the dominant factor on which the exemption is based. Property held by charitable institutions is not exempt unless it is used for charitable purposes.

d. Incorporated by the State of Maine - 36 MRSA, section 652, paragraph 1A, states in part - benevolent and charitable institutions incorporated by this State. The Maine Non-Profit Corporation Act, Title 13B, MRSA, provides the vehicle for organizing, registering and filing the Articles of Incorporation with the Secretary of State. The institution or organization requesting exemption from the property tax could possibly be organized and receive its charter pursuant to the Maine Business Corporation Act, Title 13A, MRSA or by special act of the Legislature. Failure to incorporate in this State prohibits exemption from the property tax.

2. The above discussion has been offered to acquaint the assessors with definitions of ownership, occupancy and use. These definitions should be considered in their broad terms with specific clarification given to the statue Section 652. Recent changes to Section 652 by Chapter 467, Public Laws of 1979 are offered below and shall be considered by the assessor when determining the exempt status of property. Title 36, MRSA, section 652, § 1, paragraph F, G and H, have been amended by inserting the following at the end of each paragraph.

a. No director, trustee, officer or employee of any organization claiming exemption shall receive directly or indirectly any pecuniary profit from the operation thereof, excepting reasonable compensation for services in effecting its purposes or as a proper beneficiary of its purposes;

b. All profits derived from the operation thereof and the proceeds from the sale of its property are devoted exclusively to the purposes for which it is organized; and

c. The institution, organization or corporation claiming exemption under this subchapter shall file with the tax assessors upon their request a report for its preceding fiscal year in such detail as the tax assessor(s) may reasonably require.

NOTE: A copy of the financial statement of the organization or institution requesting exemption would satisfy the requirement of 2.c. above.

3. Maine Case Law. The following abbreviated comments are taken from notes of decisions from cases pertaining to exemptions based upon the provisions of Section 652, paragraph 1A. The cases cited are in amplification of the above discussion under "Definitions" in order to assist the local assessor in making a determination and decision to grant exempt status to property based upon benevolent and charitable reasons. For further discussion, the assessor is encouraged to review the Case Law as cited in Section 652, MRSA.

a. Nature Conservancy of Pine Tree State, Inc. v. Town of Bristol (1978) Me., 385A, 2nd 39.

(1) Property used solely for a charitable institution's own purposes where the grantors attempt to reserve private rights of use without the accompanying burden of paying property taxes has the effect of denying the exemption. The grantor(s) may not retain any private privilege or benefit in terms of use; otherwise the exempt status is defeated.

(2) Charitable institution was subject to grantor private entity's custodial control of the use of donated premises, notwithstanding that such control was to be harmonious with charitable institution purpose, was inconsistent with the "sole use" condition for tax exemption.

(3) Land held in its natural state does not become tax exempt by transfer to a charitable institution where the grantor retains the rights to access, passage or custodianship.

b. Maine Medical Center v. Lucci (1974) Me., 317 a. 2d-1.

(1) The utilization of property must be reasonable to the major purpose for which a benevolent and charitable institution is incorporated and the use not oriented toward pecuniary profit but, rather, toward providing necessary services and facilities will permit exemption from taxation.

(2) The fact that the medical center charged a variety of parking fees to staff, employees, patients and patients' visitors did not defeat rights to tax exemption where dominant purpose of parking lot and garage was eleemosynary (relating or devoted to charity or alms).

c. Holbrook Island Sanctuary v. Inhabitants of Town of Brooksville (1905) 161 Me. 476, 214 A. 2d 660.

(1) In the above case, the court held that "benevolent" relating to benevolent and charitable institutions is synonymous with "charitable" and defines and limits the nature of charity intended.

(2) The motive of donor who gave the property to the intended benevolent and charitable institution was not material in determining whether the property was tax exempt.

d. Green Acre Baha'i Institute v. Town of Eliot (1963) 159 Me. 395, 193A. 2d 564.

(1) Denial of exemption to property of a Maine benevolent and charitable corporation conducted or operated principally for the benefit of nonresidents was constitutional.

(2) Missionary societies possess the attributes (standing) of benevolent and charitable institutions for property tax exemptions.

(3) Exemption of property of benevolent and charitable institutions from taxation is not defeated by the fact that use of property by a charitable institution for its own purposes is seasonal.

e. Osteopathic Hospital of Maine v. Inhabitants of City of Portland (1942 139 Me. 24, 26A. 2d 641.

(1) The actual appropriation of property of benevolent and charitable institutions for purposes for which institution was incorporated, and not a physical use on exact date of assessment, controls in determining whether property is exempt from taxation.

f. Calais Hospital v. City of Calais (1942) 138 Me. 234, 24A 2d 489.

(1) The hospital, a charitable institution, permitted the use of a room in the hospital by the treasurer and manager as his headquarters in connection with service to the institution, and in addition to carrying on private medical practice did not interfere with the general use and occupation of the building - so as to exclude room from exemption from taxation where use of room was for mutual convenience of hospital and physician.

g. Camp Emoh Associates v. Inhabitants of Lyman (1933) Me. 67, 166A 59.

(1) A benevolent and charitable corporation under the laws of this State, whose members are nonresidents and whose clerk is the only officer residing in this State, is not thereby deprived of the right of exemption.

(2) Property of benevolent and charitable institution is exempt from taxation, when occupied or used thereby for its own purposes.

(3) Immunity of property of benevolent and charitable institution from taxation depends on such exclusive occupation thereof as contributes immediately to promotion of benevolence and charity.

(4) Property of a benevolent and charitable institution need not be in actual use on day of assessment to be exempt from taxation.

h. Pentecostal Assembly of Bangor v. Melvin H. Maidlow and the City of Bangor (Supreme Judicial Court of Maine, May 19, 1980).

(1) Independent local church organized as a corporation in 1950 pursuant to the provisions of Chapter 53, Revised Statutes 1944.

(2) Plaintiff contended that the property (real) should be exempt as "real estate owned and occupied or used solely by a benevolent and charitable institution" within the meaning of subsection (1)(A) of 36 MRSA, section 652.

(3) Even if some activities of the Pentecostal Assembly may be properly classified as benevolent and charitable, it does not meet the condition for exemption prescribed by the quoted subsection,

"Any corporation claiming exemption under paragraph A (section 652) shall be organized and conducted exclusively for benevolent and charitable purposes."

(4) The Pentecostal Assembly was organized as a church in 1950 and is still conducted primarily as a church.

(5) It is well settled that for purposes of exemption from property taxation, religious purposes are not to be equated with benevolent and charitable purposes.

4. Proof of Entitlement for Property Tax Exemption.

The statute is vague on what constitutes proof of entitlement for property tax exemption for charitable and benevolent institutions. The problem of proof is compounded when we consider the constant change in elected and appointed assessors within the municipality.

The attachment to this bulletin "Application for Exemption from Local Taxation" will permit the assessor to have proof on record that a charitable and benevolent organization has been granted a property tax exemption for the purposes stated. Each application should be reviewed annually.

It is suggested that copies of the Articles of Incorporation, Property deed and By-Laws accompany the application for property tax exemption.

Attachment 1 was designed to document proof of property tax exemption for charitable and benevolent institutions. However, the assessor may wish to redesign this form and/or use the form for other categories of exempt properties.

NOTE: This bulletin is intended solely as advice to assist persons in determining, exercising or complying with their legal rights, duties or privileges. If further information is needed contact the Property Tax Division, Maine Revenue Services.

The Department of Administrative and Financial Services does not discriminate on the basis of disability in admission to, access to, or operation of its programs, services or activities. This material can be made available in alternate formats by contacting the Department's ADA Coordinator at (207)287-9437(voice) or (207)287-4537(TTY).

Services

Applications

Doing Business

Maps

Tax Relief

Tax Roll

Q & A

browse city services a-z

browse facts and links a-z

search this site

links

property tax bulletin no.5