Community Care Services v. Board of Assessors of Berkley (June 29, 2011)

COMMONWEALTH OF MASSACHUSETTS
APPELLATE TAX BOARD

COMMUNITY CARE SERVICES, INC.	 v.    BOARD OF ASSESSORS OF
               	 			  THE TOWN OF BERKLEY
		   									  
Docket No. F293959				  Promulgated:
							  June 29, 2011



This is an appeal filed under the formal procedure pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65, from the refusal of the Board of Assessors of the Town of Berkley ("assessors" or "appellee") to grant an exemption under G.L. c. 59, § 5, Third ("Clause Third") and abate taxes on certain real estate located in Berkley owned by and assessed to Community Care Services, Inc. ("appellant") under G.L. c. 59, §§ 11 and 38, for fiscal year 2008 ("fiscal year at issue").  
	Commissioner Mulhern heard the appeal.  A decision was issued on October 14, 2010 which was, because of an administrative error, incorrectly issued in favor of the appellee.  Chairman Hammond and Commissioners Scharaffa, Egan and Rose now join Commissioner Mulhern in this Revised Decision in favor of the appellant, which is promulgated simultaneously with this Findings of Fact and Report.
	This Findings of Fact and Report is issued at the request of the appellant under G.L. c. 58A, § 13 and 831 CMR 1.32.
	David C. Mangoonian, Esq. for the appellant.

David T. Gay, Esq. for the appellee.
  

			FINDINGS OF FACT AND REPORT 
Based on the testimony and exhibits offered into evidence in this appeal, the Appellate Tax Board ("Board") makes the following findings of fact.
On July 1, 2007, the relevant date for qualification for the exemption under G.L. c. 59, § 5, Third ("determination date"), the appellant was the owner of a 282,593-square-foot parcel of land improved with a single-family residential dwelling located at 1 Vary Way in Berkley ("subject property").  For the fiscal year at issue, the assessors valued the subject property at $756,800 and assessed taxes thereon, at the rate of $7.55 per $1,000, in the total amount of $5,713.84.  The appellant did not pay the assessed taxes and on February 11, 2008, within three months of the date of the tax bill, seasonably filed a direct appeal with the Board, pursuant to G.L. c. 59, § 5B.  On the basis of these facts, the Board found and ruled that it had jurisdiction to hear and decide this appeal.  
The parties stipulated that the appellant was at all material times a Massachusetts not-for-profit corporation organized and operated for charitable purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code.  On June 16, 2006, the appellant purchased the subject property for $595,000.00.  At the time of the purchase, the appellant intended to use the subject property for its residential program known as the "Lindencroft program."  The Lindencroft program, which was operating on another property owned by the appellant in Berkley when the subject property was purchased, is a residential program offering behavioral interventions for adolescent girls.   
Shortly after it purchased the subject property, the appellant contracted with an architect for architectural services in late July, 2006 and with engineering firms in late August and mid-September, 2006.  The proposed renovations included a new septic system, parking, upgraded kitchen facilities, office space, and additional living space.  The appellant undertook the renovations to adapt the dwelling to a 14-bed facility which would be able to accommodate up to 14 adolescent girls, as well as the necessary staff.  
As of the determination date, the appellant was proceeding with the preliminary measures necessary for the establishment of the program at the subject property.  A letter from the Building Commissioner and Zoning Officer for Berkley indicates that no Occupancy Permit had yet been issued as of April 29, 2008, and that the building renovations were "not complete" as of that date.  However, the appellant established that it had entered into contracts for architectural services, engineering services, and had proceeded with the necessary permitting procedures, including filings with the Town's Conservation Commission and Board of Health and with the Massachusetts Division of Fisheries and Wildlife.  The appellant also chose a contractor for the renovation of the existing structure on the subject property, mediated settlements of two appeals by abutters and had gained approval to commence work on the 

subject property as of the hearing date of this appeal.
The appellant contended that its active and diligent pursuit of permits and other preliminary measures necessary to establish the program at the subject property qualifies as its "occupancy" of the subject property for purposes of the Clause Third exemption.  The appellee disagreed and cited the fact that no permit of occupancy had been issued as of the relevant determination date as evidence that the appellant was not occupying the subject property during the fiscal year at issue.  
The Board found that the appellant purchased the subject property with the intent to use it in the furtherance of its charitable purpose, which was to operate a residential facility offering a program of behavioral services to adolescent girls, known as the "Lindencroft program."  The Board further found that, as of the relevant determination date, the appellant was diligently pursuing the preliminary measures that were necessary for establishing its Lindencroft program at the           subject property, including entering into contracts for architectural and engineering services, proceeding with necessary filings with the various Town and Commonwealth boards, and settling lawsuits that would have otherwise prevented construction and use of the subject property for its intended purpose.  Therefore, for the reasons stated in the following Opinion, the Board found and ruled that, despite the fact that no Occupancy Permit had yet been issued, the appellant did "occupy" the subject property for purposes of the Clause Third exemption.  Accordingly, the Board issued a revised decision for the appellant and granted an abatement in the amount of $5,713.84.
OPINION
The Clause Third exemption applies to "[r]eal estate owned by or held in trust for a charitable organization and occupied by it or its officers for the purposes for which it is organized." (emphasis added).  The organization bears the burden of proving the elements necessary to qualify for the exemption, including its occupation of the property in furtherance of the charitable purposes for which it was organized.  See Assessors of Hamilton v. Iron Rail Fund of Girls Club of America, Inc., 367 Mass. 301, 306 (1975); Mary Ann Morse Healthcare Corp. v. Assessors of Framingham, 74 Mass. App. Ct. 701, 703 (2009).
In the instant appeal, it is undisputed that the appellant's use of the property was its preparation of that property for use in its charitable endeavors.  The appellant contended that the use of the property, as of the determination date of July 1, 2007, extended beyond "simple ownership and possession" and qualified as an active appropriation of the subject property for its charitable purposes, thus qualifying as an "occupation" of the property for purposes of the Clause Third exemption.
The issue in the instant appeal - whether the appellant's occupancy can include its presence at the subject property during preparations for use in its charitable endeavor - was addressed by the Supreme Judicial Court in New England Hospital for Women and Children v. City of Boston, 113 Mass. 518 (1873).  The appellant there, a charitable organization, purchased the property "for the purposes of establishing and maintaining a hospital for the treatment of the diseases of women and children, and of giving therein clinical instruction to female students of medicine, and of training nurses."  Id.  The relevant date for determining qualification for the exemption, which was the predecessor of the Clause Third exemption, was May 1, 1871.  Within a period of about a month from its purchase in April, 1871, the appellant had hired an architect, who had prepared plans and specifications for the hospital, which the appellant approved, and by May 27, 1871, the architect had staked off the property in preparation for digging the foundation.  Id.  The Supreme Judicial Court found that the appellant, as of the relevant determination date, was "diligently proceeding with the preliminary measures necessary to the erection" of the hospital, and accordingly, did "occupy" the property in accordance with the statute as of that time.  Id. at 521.  
In Trinity Church v. City of Boston, 118 Mass. 164 (1875), the subject property was purchased to house a church to replace one that had been destroyed by fire.  Trinity Church sought exemption for its property as a "house of religious worship" although, as is the case in the present appeal, work was on-going on the property at issue.  As of the relevant determination date in that appeal, the work done consisted of driving piles for the foundation, which was all that could be accomplished before the winter.  According to the agreed statement of facts, "[i]t was then, and is now, the intention of the proprietors of the plaintiff corporation to use the lot on St. James Avenue for purposes of religious worship only; and they have caused the work of building the new church to be carried on with all reasonable diligence."  Id.  Citing New England Hospital, the Court declared that actual use was not required by the statute, and under the facts of that case, sufficient steps had been taken towards actual use of the property to qualify it for the real estate exemption.  Id. at 165-66.  More recently, the Massachusetts Appeals Court, in Mt. Auburn Hospital v. Assessors of Watertown, cited New England Hospital as reflecting "a less rigid formulation [with respect to occupancy] focusing on the organization's intentions and diligence."  Mt. Auburn Hospital v. Assessors of Watertown, 55 Mass. App. Ct. 611, 622, n.11 (2002) ("although construction had not commenced yet, planning had been undertaken with due diligence and the hospital had not leased the premises or derived a profit therefrom; exemption allowed").  See also The Children's Hospital Medical Center v. Assessors of Boston, 353 Mass. 35, 37-8 (1967) (finding that, even prior to the conversion of the subject property from a garage to a hospital laundry facility, "[a]ctual occupation by Children's was made . . . when two employees of Children's moved into the premises and supervised arrangements for the conversion.").
The appellee cited Boston Society of Redemptionist Fathers v. City of Boston, 129 Mass. 178 (1880) to support its contention that an organization's intent to use a property for charitable purposes at some time in the future is not sufficient to qualify for the exemption.  In that case, a religious organization owned property adjacent to the property upon which its church was erected.  The plaintiff found the property to be unsuitable for its church, but claimed that it intended to use the property at some time in the future "for school purposes."  Id. at 181.  In denying the application of the charitable exemption, the Court found that the plaintiff's intent to occupy for a specific charitable purpose was not sufficiently formulated at of the relevant assessment date: 
The most that can be said is that the plaintiff intends that it shall be so occupied at some time; but to all appearance the time of such occupation is left wholly indefinite, and there is nothing to prevent the plaintiff from changing its plans and alienating the property whenever it pleases.  Without insisting on the strictest and most literal interpretation of the word "occupied," as found in the third clause, we cannot avoid the belief that some actual appropriation of the land to the purpose for which the plaintiff was incorporated must be unequivocally shown, in order to exempt it from taxation, and that an intent to do so at some wholly indefinite future time is not sufficient for that purpose.  It should at least appear that it had begun to build.

Id. at 181-82 (emphasis added) (citing New England Hospital v. Boston, 113 Mass. 518 (1873)).  In the instant appeal, by contrast, the Board found several instances of the appellant taking active steps to prepare the property for use in its Lindencroft program, including engaging architectural and engineering services for necessary renovations of the property and seeking permits with the appropriate Town and Commonwealth boards.  The Board found that these steps sufficiently demonstrated the appellant's appropriation of the subject property for its use as soon as possible for the appellant's charitable purpose, and thus established the "occupation" of the property for purposes of the Clause Third exemption.  
The parties agreed that the appellant purchased the subject property for the operation of its Lindencroft program, which at the time of purchase was operating on a different parcel of land.  To be used for the Lindencroft program, the subject property, which contained a single-family residence at the time of purchase, required significant modifications.  The Board found that the appellant was actively pursuing the necessary modifications as of the relevant determination date for the Clause Third exemption.  The Board thus found that the appellant established occupation of the subject property as of the determination date in furtherance of its charitable purpose, the operation of the Lindencroft program.  The Board further found that, while no Occupancy Permit had been issued as of the relevant determination date, the appellant was nevertheless "diligently proceeding with the preliminary measures necessary" to establish the Lindencroft program as soon as possible at the subject property, and thus occupied the subject property for purposes of the Clause Third exemption.  New England Hospital, 113 Mass. at 521. 
On the basis of its findings and rulings, the Board issues a Revised Decision in favor of the appellant.
 

     APPELLATE TAX BOARD


				 By:	_________________________________
					Thomas W. Hammond, Jr., Chairman




A true copy,

Attest: ____________________________
	       Clerk of the Board

  Where, as here, a tax bill is issued for property that the appellant claims is exempt under the Clause Third exemption, the appellant has two choices:  it may apply to the assessors for an abatement under G.L. c. 59, § 59, with timely payment of the tax, or it may appeal directly to the Board under G.L. c. 59, § 5B with or without timely payment of the tax.  See generally Trustees of Reservations v. Assessors of Windsor, Mass. ATB Findings of Fact and Reports 1991-22, 25.

  On or about March 19, 2007, abutters appealed the issuance of the Order of Conditions for the Premises that was issued by Berkley's Conservation Commission.  On or about June 15, 2007, the Massachusetts Department of Environmental Protection ("DEP") issued a Superseding Order of Conditions approving the appellant's work on the subject property.  On or about June 29, 2007, abutters once again appealed the Superseding Order of Conditions and requested an adjudicatory hearing.  The appellant reached a settlement agreement with the abutters on September 13, 2007.    
  The statute in effect at that time was Gen. Sts. c. 11, § 5, cl. 3, the predecessor to Clause Third.
  Gen. Sts. c. 11, § 5 cl. 7.

ATB 2011-720