Straight Ahead Ministries v. Board of Assessors of the Town of Hubbardston (January 5, 2009)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD



STRAIGHT AHEAD MINISTRIES, INC.  v.  BOARD OF ASSESSORS OF 
  THE TOWN OF HUBBARDSTON

Docket No. F293888				  Promulgated:
							  January 5, 2009



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 Hubbardston ("assessors") to grant an exemption under   G.L. c. 59, § 5, Third ("Clause 3") and abate the full amount of real estate taxes on property assessed to Straight Ahead Ministries, Inc. ("SAM" or "appellant"), under G.L. c. 59, §§ 11 and 38, for fiscal year 2008.  
Commissioner Egan heard this appeal.  Chairman Hammond and Commissioners Scharaffa, Rose, and Mulhern joined her in the decision for the appellant.  
These findings of fact and report are promulgated at the request of the appellee, pursuant to G.L. c. 58A, § 13 and 831 CMR 1.32.

Henry J. Lane, Esq. for the appellant.
Ellen Hutchinson, Esq. for the appellee.  

FINDINGS OF FACT AND REPORT
On January 1, 2007, SAM was the assessed owner of certain real estate in the Town of Hubbardston located at 39 Burnshirt Road ("subject property").  The subject property consists of approximately 6.5 acres and is improved with multiple buildings.  For fiscal year 2008, the assessors assessed a tax on the subject property, at the rate of $9.43 per $1,000, in the total amount of $18,625.29, which included a $261.31 assessment under the Community Preservation Act ("CPA").   
On February 13, 2007, in accordance with Clause 3, the appellant timely filed its Form 3ABC for fiscal year 2008, with a copy of its Form PC attached, with the assessors.  On September 24, 2007, the assessors determined that the appellant was not eligible for the exemption under    Clause 3.  On December 24, 2007, in accordance with G.L. c. 59, § 5B, the appellant seasonably filed its direct appeal of the assessors' determination with the Appellate Tax Board ("Board").  
At the hearing of this appeal, the appellant presented its case-in-chief through the testimony of John Kingsley, SAM's New England Director and Director of Outreach, and the submission of several exhibits, including: a brochure describing SAM's Straight Ahead Academy ("Academy"); a memo to the assessors in support of SAM's request for exemption; certain financial statements for tax years ending March 31, 2006 and 2007; and a certificate of exemption from Massachusetts sales tax (Form ST-2).  In support of their denial of the exemption, the assessors did not call any witnesses, but submitted several jurisdictional documents and a print-out of a web page from SAM's website, as well as an affiliation agreement.  The assessors also cross-examined Mr. Kingsley.  Neither party submitted pre- or post-trial briefs.  Based on the evidence and logical inferences drawn therefrom, the Board made the following findings of fact.  
At all relevant times, SAM was a faith-based organization that was organized for charitable purposes and was granted tax-exempt status for federal tax purposes under Internal Revenue Code ("IRC") 501(c)(3).  SAM's mission included ministering to juvenile offenders' spiritual, educational, and physical needs.  SAM was also a Massachusetts corporation that had as one of its purposes the ownership and operation of the Academy, which was a temporary group home for young men who had recently been in a juvenile detention center.  The Academy was not a separate corporation or entity.  
At all relevant times, there were nine buildings on the subject property's 6.5-acre parcel.  The buildings were used for various housing, educational, and related purposes.  One of the buildings was used as a dormitory for the youth residing at the Academy; another was the Academy Director's home; and there was a three-bedroom apartment for the Vocational Director.  Additionally, there was a pool house, a warehouse used for carpentry vocational training, and an automotive and small engine shop, plus several storage or utility buildings.  The young men who attended the Academy occupied their rooms in the dormitory at the Academy in a similar way that college students occupy their dormitory rooms at their college.  SAM retained virtually complete control over the subject property and the improvements; it both used and integrated them into its charitable mission deployed at the Academy.        
At all relevant times, there were two primary components to SAM's revenue -- the larger part consisted of tax-deductable gifts or donations while the other was made up of government payments and grants.  The government contributions included tuition payments from the Commonwealth.  In addition, SAM's employees raised financial support from a variety of sources to fund their modest stipends for working at the Academy.  
At all relevant times, the Academy provided young men who had recently been discharged from juvenile detention facilities with transitional, educational, and vocational training and opportunities with a view toward returning them, as productive members, to the community.  It was a short-term residential program based on Judeo-Christian religious principles.  The Academy provided these services to young men who were between the ages of 16 and 20, were interested in leadership, had been approved by the Department of Youth Services ("DYS") to attend, and were open to spiritual growth.  At all relevant times, there were less than a dozen students attending the Academy.  The Massachusetts judicial system oversaw the young men who attended the Academy and assigned them case workers.  DYS paid tuition for each of the young men attending the Academy, which covered only a portion of the costs associated with the program.  There were no benefits, other than modest salaries paid to the Academy's employees, that flowed to the employees, officers, directors, or shareholders of SAM.  
The assessors argued that the subject property was not exempt from real estate tax because the Academy was not, in their view, a charitable venture and the work performed at the Academy was not consistent with SAM's charitable mission.  Based on all of the evidence and for reasons set out more fully in the Opinion below, the Board found and ruled that, at all relevant times, SAM was a charitable organization within the meaning of Clause 3 and SAM occupied the subject property, through the Academy, for the charitable purposes for which it was organized.  Accordingly, the Board found that SAM was entitled to the Clause 3 exemption for the subject property for fiscal year 2008, and therefore decided this appeal for the appellant.  On this basis, the Board granted an abatement for the full amount of the tax assessed.  

OPINION 
Clause 3 provides an exemption for:
Real 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 or by another charitable organization or organizations or its or their officers for the purposes of such other charitable organization or organizations.
 
A taxpayer claiming exemption under Clause 3 must demonstrate that the property fulfills three requirements: the property must be owned by a charitable organization; the property must be occupied by a charitable organization; and the property must be used to further a charitable purpose.  See Jewish Geriatric Services, Inc. v. Assessors of Longmeadow, Mass. ATB Findings of Fact and Reports 2002-337, 351, aff'd, 61 Mass. App. Ct. 73 (2004) (citing Assessors of Hamilton v. Iron Rail Fund of Girls Club of America, 367 Mass. 301, 306 (1975)).  "Any doubt must operate against the one claiming an exemption, because the burden of proof is upon the one claiming an exemption from taxation to show clearly and unequivocally that he comes within the terms of the exemption."  Boston Symphony Orchestra, Inc. v. Assessors of Boston, 294 Mass. 248,   257 (1936).  "It is well established that a party claiming exemption bears a grave burden of proving the claim." Kings' Daughters and Sons Home v. Assessors of Wrentham, Mass. ATB Findings of Fact and Reports 2002-427,         452 (citing Meadowbrooke Daycare Center, Inc. v. Assessors of Lowell, 374 Mass. 509, 513 (1978)). 
I.	At all relevant times, SAM was a charitable organization under Clause 3 and operated the Academy as a public charity for purposes of Clause 3.
 
"For purposes of local property tax exemption, the term 'charitable' includes more than almsgiving and assistance to the needy."  New England Legal Foundation v. City of Boston, 423 Mass. 602, 609 (1996).  The definition accepted by the Massachusetts Courts and this Board is that charity is: 
a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing their minds or hearts under the influence of education or religion, by relieving their bodies from disease, suffering or constraint, by erecting or maintaining public buildings or works or otherwise lessening burdens of government. (Emphasis added.)
 
Boston Symphony Orchestra, 294 Mass. at 254-55 (quoting Jackson v. Phillips, 96 Mass. 539, 14 Allen 539,         556 (1867)).  
However, espousing a recognized charitable purpose does not, in itself, mean that an organization operates as a public charity.  See American Inst. for Economic Research v. Assessors of Great Barrington, 324 Mass. 509,         513 (1949).  The organization "must prove that it is in fact so conducted that in actual operation it is a public charity."   Jacob's Pillow Dance Festival, Inc. v. Assessors of Becket, 320 Mass. 311, 313 (1946).  The test for determining whether an organization is operating as a public charity is two-fold: 
"An institution will be classed as charitable if the dominant purpose of its work is for the public good and the work done for its members is but the means adopted for this purpose.  But if the dominant purpose of its work is to benefit its members or a limited class of persons it will not be so classed, even though the public will derive an incidental benefit from such work." 

Harvard Community Health Plan v. Assessors of Cambridge, 384 Mass. 536, 543 (1981) (quoting Mass. Medical Soc'y v. Assessors of Boston, 340 Mass. 327, 332 (1960). 
A.	The services provided by SAM at the Academy relieved some burdens of government and were traditionally charitable in nature.
  
The first component of the above-recited charitable test requires the organization to "perform activities which advance the public good, thereby relieving the burdens of government to do so."  Sturdy Memorial Foundation v. Assessors of North Attleborough, Mass. ATB Findings of Fact and Reports 2002-203, 224, aff'd, 60 Mass. App. Ct. 573 (2004) (citing Molly Varnum Chapter DAR v. City of Lowell, 204 Mass. 487 (1909)).  "The fact that an organization provides some service that would, in its absence, have to be provided by the government, 'is frequently put forward as the fundamental reason for exempting charities from taxation.'"  Western Mass. Lifecare Corp. v. Assessors of Springfield, 434 Mass. 96, 105 (2001) (quoting Assessors of Quincy v. Cunningham Foundation, 305 Mass. 411,          418 (1940)).  
Ordinarily, the Court examines and weighs a number of "non-determinative factors" in determining whether an organization is charitable. See New Habitat, Inc. v. Tax Collector of Cambridge, 451 Mass. 729, 732 (2008).  These factors include, but are not limited to, whether the organization provides low-cost or free services to those unable to pay, see New England Legal Found., 423 Mass. at 610; whether it charges fees for its services and how much those fees are, see Assessors of Boston. v. Garland Sch. Of Home Making, 296 Mass. 378, 390 (1937); and whether it offers its services to a large or "fluid" group of beneficiaries and how large and fluid that group is.  See New England Legal Found., 423 Mass. at 612; Cummington School of the Arts, Inc. v. Assessors of Cummington,     373 Mass. 597, 601 (1977).  The significance of these factors depends on the dominant purposes and methods of the organization. New Habitat, Inc., 451 Mass. at 733.  The closer an organization's dominant purposes and methods are to "traditionally charitable" purposes and methods, the less significant these factors will be in the determination of the organization's charitable status under Clause 3.  See New Habitat, Inc., 451 Mass. at 733.  The further an organization's dominant purposes and methods are from traditionally charitable purposes and methods, the more significant these factors will be.  See id.  
In New Habitat, Inc., the appellant provided long-term housing for persons with acquired brain injury and promoted the well-being of its residents by providing them with educational programs, personal assistance programs, and programs to improve their physical and psychological health.  The organization, which could accommodate a maximum of four residents, received only three applicants for admission.  Id. at 730.  The Court found that New Habitat, Inc. had purposes and methods close to traditionally charitable ones because it tended to the injured and sought to relieve them of the hardships and constraints that afflict those with acquired brain injury.  Id. at 734.  The Court further found that because New Habitat's dominant purposes and methods were traditionally charitable, the fact that the organization charged fees for its services played a less significant role in the determination of its charitable status.  Id.  Moreover, the Court noted that the number of its beneficiaries was also less significant the closer its dominant purposes and methods were to traditionally charitable ones.  Id. at 737.  The Court held that New Habitat's purposes and methods coincided with traditionally charitable ones and the fact that it had a relatively small number of beneficiaries and charged a fee played less significant roles in the determination of its charitable status.  Id. at 734-37.   
In the present appeal, SAM operated the Academy, which served as a temporary group home for young men, between the ages of 16 and 20, who had recently been in a juvenile detention center.  SAM was granted IRC § 501(c)(3) tax-exempt status, which is another non-determinative factor in determining eligibility for an exemption under Clause 3.  See, e.g., H-C Health Services v. Assessors of South Hadley, 42 Mass. App. Ct. 596, rev. denied, 425 Mass. 1104 (1997).  The Academy was funded primarily by governmental grants and tuition payments, as well as private gifts or donations.  There were no revenues or assets, other than modest salaries, that were distributed to employees, officers, directors, or shareholders of SAM or the Academy.  Furthermore, the employees raised their own stipends from other organizations such as churches and non-profit organizations, and often worked for less than their projected salaries.  Moreover, the young men committed to the Academy by DYS were each assigned a caseworker who oversaw and provided input into their individual programs to insure that the programs met any of the judicial system's requirements and individual rehabilitative needs.  The young men were placed in the Academy by a state agency, and the agency paid a modest fee for each young man who attended.  The Board found that, at all relevant times, the Academy was committed to preparing youth for a healthy transition out of the juvenile judicial system into society.  SAM's work through the Academy benefited society in general and eased the burden on government.  It enabled the Commonwealth to meet its burden of rehabilitating wayward young men and helping them successfully transition back into society.  Furthermore, the Commonwealth helped pay for the young men to attend the Academy.  
The Board found that, in this instance, it was logical for it to infer that where the government financially contributed to SAM to perform services for it through the Academy, SAM was assuming a "burden" of government.  SAM's purposes and methods in running the Academy were very similar to traditionally charitable ones, such as those that attend to social, vocational, spiritual, and/or educational needs.  Therefore, the Board recognized that the dominant work done by SAM at the Academy was for the public good and was synonymous with a traditionally charitable endeavor.  Accordingly, the Board found and ruled here that, at all relevant times, the services provided by SAM at the Academy relieved some burdens of government and were traditionally charitable in nature.
B.	SAM's benefits were available to a sufficiently broad segment of the population to qualify as a public charity.
  
The second component of the above-recited charitable test requires that "the persons who are to benefit must be 'of a sufficiently large or indefinite class so that the community is benefited by its operations.'" Western Mass. Lifecare, 434 Mass. at 103-104 (quoting Harvard Community Health Plan, 384 Mass. at 543).  "An organization 'operated primarily for the benefit of a limited class of persons,' such that 'the public at large benefits only incidentally from [its] activities,' is not charitable." Western Mass. Lifecare, 434 Mass. at 104 (quoting Cummington School of the Arts, Inc., 373 Mass. at 600).  "While there is no 'precise number' of persons who must be served in order for an organization to claim charitable status, and 'at any given moment an organization may serve only a relatively small number of persons,' membership in the class served must be 'fluid' and must be 'drawn from a large segment of society or all walks of life.'"  Western Mass. Lifecare, 434 Mass. at 104 (quoting New England Legal Found.,      423 Mass. at 612).  Even though, at any given time, an organization may serve only a relatively small number of persons, it nevertheless may be considered or remain a charitable organization.  New England Legal Found.,      423 Mass. at 612.  The fact that there are a relatively small number of beneficiaries plays a less significant role in the determination of its charitable status if the organization's purposes and methods are close to traditionally charitable one.  New Habitat, Inc., 451 Mass. at 737.  "[S]election requirements, financial or otherwise, that limit the potential beneficiaries of a purported charity will defeat the claim for exemption." Western Mass. Lifecare, 434 Mass. at 104.  But "[t]he fact that an organization charges fees for its services does not preclude a determination that the organization is charitable."  Id. (citing Garland School of Home Making, 296 Mass. at 389; New England Sanitarium v. Assessors of Stoneham, 205 Mass. 335, (1910)).  However, when the fees charged effectively limit access to the services provided, an organization cannot be regarded as charitable.  Western Mass. Lifecare, 434 Mass. at 105; Boston Symphony Orchestra, 294 Mass. at 256; New England Sanitarium,     205 Mass. at 341. 
The appellant here contended that the services it provided were inclusive to a sufficient segment of the population.  At all relevant times, the Academy was open to young men, ages 16 and 20, who were planning on independent living and were interested in spiritual growth and leadership. Furthermore, there was no religious test or requirement that the youth have a Judeo-Christian background before being accepted into the Academy.  The assessors contended that the Academy was not available to a wide enough range of persons because of the age requirement and the fact that there were very few youth who actually benefited from the Academy.  Conversely, the appellant contended that there are private high schools, such as St. John's High School in Shrewsbury, and many colleges, such as Smith College, that are limited to men or women, have age requirements, and whose applicants have to show leadership characteristics before they are accepted.  See, e.g., Smith College v. Board of Assessors, 385 Mass. 767 (1982); Mt. Herman Boys' School v. Gill, 145 Mass. 139 (1887).  These institutions are exempt and have been classified as charitable organizations.  Furthermore, the Academy's requirements are similar to many other religious-based exempt institutions that provide educational and spiritual services. See, e.g., South Lancaster Academy v. Lancaster, 242 Mass. 553, 558 (1922); Assessors of Dover v. Dominican Fathers Province of St. Joseph, 334 Mass. 530, 540 (1956).  See also Springfield Y.M.C.A. v. Board of Assessors, 284 Mass. 1, 3 (1933).  
Moreover, the fees charged by SAM for attendance at the Academy did not limit access to the services that it provided.  A state agency paid a modest fee for each student to attend the Academy.  That fee was supplemented by SAM's fundraising to meet SAM's cost of servicing the students at the Academy.  The Board found and ruled that SAM's acceptance of the modest fees paid by a state agency indicated, as with nursing homes that accept a relatively high percentage of patients who require government subsidized Medicaid payments, see, e.g. H-C Health Services, Inc. v. South Hadley, 42 Mass. App. Ct. at 598 and Fairview Extended Care Services, Inc. v. Assessors of Danvers, Mass. ATB Findings of Fact and Reports 1997-800, 805, that, at all relevant times, the Academy's benefits were available to a broad range of people.  Furthermore, SAM's fee structure and screening procedure did not significantly narrow the pool of potential young men who could utilize its services and programs.  At any rate, because SAM's dominant purposes and methods were traditionally charitable, these factors hold less significance.  See New Habitat, Inc., 451 Mass. at 733. 
Accordingly, the Board found and ruled that the appellant met its burden of proving that its benefits were available to a sufficiently broad segment of the population to qualify as a public charity. Further, the Board found and ruled that SAM not only provided services to a sufficiently broad population of young men, but that it also relieved some government burden.  Therefore, the Board found and ruled that, at all relevant times, SAM was a charitable organization for purposes of Clause 3.    
II.	At all relevant times, the subject property was occupied by SAM through the Academy.
 
This part of the three-prong test under Clause 3 was never in dispute in this appeal.  Regardless, an examination by the Board of SAM's occupation of the subject property (through its Academy) is still appropriate.  
In the instant appeal and at all relevant times, SAM, through the Academy, ran a short-term residential program for young men who had been recently released from a juvenile detention facility.  The young men lived in a dormitory along with members of the staff.  There also were living quarters for the Academy's administration and buildings devoted to educational, vocational and related ancillary uses.  The Board found and ruled that the dormitory and other buildings were occupied by SAM, through the Academy, and not the young men who were afforded a temporary home there.  The young men had no interest in their dormitory rooms and no statutory protection from eviction; they were merely lodgers.  The young men's occupation of dormitory rooms at the Academy was equivalent to a college student's occupation of a college dormitory room.  SAM retained virtually complete control over the subject property and the improvements and used and integrated them into its charitable mission deployed at the Academy.  Therefore, the Board found and ruled, in conformity with Franklin Square House v. Boston, 188 Mass. 409, 411 (1905) ("The occupation of the property [a home for working girls at moderate cost] is that of the corporation itself, and not of those to whom it affords a home, just as the occupation of a college dormitory or refectory is that of the institution of learning rather than that of its students") and G.L. c. 59, § 5, cl. 3(e), that SAM occupied the subject property and the improvements thereon for the purposes of Clause 3.  See also M.I.T. Student House, Inc. v. Assessors of Boston, 350 Mass. 539, 540 (1966).     
III.  At all relevant times, the subject property was used to further SAM's charitable purpose.
 
The evidence reveals that at all relevant times, SAM's primary mission, function and purpose, was "to provide spiritual and educational services to troubled teens while in institutions and upon release to the community."  SAM's witness, John Kinsley, testified that the charitable purpose of SAM was to provide educational and vocational benefits and spiritual direction to young men who had been in a juvenile detention center and to help them transition back into society.  At the hearing, SAM also introduced an independent auditor's report into evidence, which described SAM as "a non-profit educational organization."  The evidence revealed that the Academy had several different educational components, including, a GED program for the young men who did not have their high-school diploma and vocational programs in which the young men learn basic carpentry, automotive, and auto-body repair skills.  In addition, the staff at the Academy assisted the young men with job applications and interviewing skills.  
In response to the assessors' contention that the appellant was also a religious organization, which somehow conflicted with its education component, and, therefore, rendered it ineligible for a Clause 3 exemption, the Board noted that SAM readily admitted that it was a faith­based organization like every other religious college, but it also convincingly demonstrated that the Academy was an educational institution.  Moreover, the Board found and ruled that the fact that there was a religious component to the Academy's program did not disqualify the appellant from a Clause 3 tax exemption for the subject property.  See Boston Symphony Orchestra, 294 Mass. at 254-55 ("[charity is a] gift . . . . by bringing [] hearts under the influence of education or religion").  See also South Lancaster Academy, 242 Mass. at 558-59; cf. Wesleyan Academy, 99 Mass. at 602-604.  In addition, the Academy had no religious test or requirement that the young men have a Judeo-Christian background before being accepted into the Academy; the young men must simply be open to spirituality.  Despite the assessors' protestations, the Board found that the Academy was quite clearly an educational institution, with a religious component, that was partially funded by the government to provide GED, vocational, and personal-growth programs to young men recently released from juvenile detention facilities.  On the basis of all of the evidence, the Board found and ruled that, at all relevant times, the subject property was used for educational purposes, in furtherance of SAM's charitable purpose.  Accordingly, the Board found and ruled that SAM used the subject property to further its charitable purpose. 
IV.  Conclusion 
In sum, the Board found and ruled that, at all relevant times, the dominant purpose of SAM's work was charitable; that the programs and services, which SAM offered at the subject property through the Academy, were available to a sufficiently broad cross-section of the population and did relieve some burden of government.  Furthermore, the Board found and ruled that, at all relevant times, SAM, not the individual participants in the Academy's programs, occupied the subject property.  Finally, the Board found and ruled that, at all relevant times, the appellant used the subject property and all of the buildings thereon in furtherance of its charitable purpose, which was "traditional" in nature.  Therefore, for fiscal year 2008, the Board found and ruled that SAM qualified as a charitable organization under Clause 3 and for the Clause 3 exemption on the subject property, which SAM used for the Academy. 

On this basis, the Board decided this appeal for the appellant and granted an abatement of the full amount of the taxes assessed for fiscal year 2008.

						APPELLATE TAX BOARD

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



A true copy,

Attest:  __________________________________
	    Clerk of the Board

 While neither the actual tax bill nor the property record card were introduced into evidence, the Board did determine that the subject property was likely assessed at $1,947,400 after considering the amount of tax (not including the amount attributable to the CPA) paid and after taking judicial notice of the tax rate.            
 The appellant also timely filed its Form PC with the Division of Public Charities within the Massachusetts Office of the Attorney General.
 Pursuant to G.L. c. 59, § 5B, the "three months," within which a taxpayer must appeal a determination by the assessors that the Clause 3 exemption does not apply, means three calendar months measured from, but excluding, the date of the assessors' determination.  See Berkshire Gas Co. v. Assessors of Williamstown, 361 Mass. 873 (1972)(rescript).        
  
 As of January 1, 2007, part of the lower portion of the building in which the Vocational Director resided was used for storage by a non-charitable entity.  As of July 1, 2007, "the date of determination as to age, ownership or other qualifying factors required by [Clause 3]" for fiscal year 2008, that use had apparently ended.    

ATB 2009-23