Community Involved in Sustainable Agriculture, Inc. v. Board of Assessors of the Town of Deerfield (May 28, 2013)

COMMONWEALTH OF MASSACHUSETTS
APPELLATE TAX BOARD

COMMUNITY INVOLVED IN 		  v.		  BOARD OF ASSESSORS OF SUSTAINABLE AGRICULTURE, INC. 		  THE TOWN OF DEERFIELD

Docket No. F310309					  Promulgated:
						       May 28, 2013


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 Deerfield ("assessors" or "appellee") to grant an exemption under G.L. c. 59 § 5, Third ("Clause Third") and abate real estate tax on property assessed to Community Involved in Sustainable Agriculture, Inc., ("CISA" or "appellant"), under G.L. c. 59, § 11 and 38, for fiscal year 2010 ("fiscal year at issue"). 
Commissioner Egan heard the appeal and issued a single-member decision for the appellee in accordance with G.L. c. 58A, § 1A and 831 CMR 1.20.
These finding of facts and report are promulgated at the request of the appellant, pursuant to G.L. c. 58A, § 13 and 831 CMR 1.32. 

Mark A. Tanner, Esq. for the appellant. 

Adam J. Costa, Esq. for the appellee.

FINDINGS OF FACT AND REPORT
At all material times, CISA was the owner of real property located at 1 Sugarloaf Street in South Deerfield, Massachusetts ("subject property"). The subject property is improved with a multi-story office building, 70% of which is used by the appellant for its operations and 30% of which is leased to third-party tenants. 
For the fiscal year at issue, CISA timely filed with the assessors its Form 3 ABC and a copy of its Form PC. CISA paid the tax due on the subject property without incurring interest. On September 15, 2010, CISA timely filed an Application for Statutory Exemption with the assessors, which they denied on October 5, 2010.  The appellant seasonably filed an appeal with this Board on November 22, 2010. Based on the foregoing, the Presiding Commissioner found and ruled that the Board had jurisdiction to hear and decide the appeal. 
CISA is a Massachusetts not-for-profit corporation established in 1998 under G.L. c. 180 and recognized for federal tax purposes as a 501(c)(3) non-profit corporation. CISA describes itself in an amendment to its Articles of Organization as a non-profit corporation organized for:
[C]haritable, educational and scientific purposes, including . . . the study, research, development and testing of agricultural, marketing and related business techniques, systems and models that will enhance the quality and sustainability of agricultural products . . . to support the advancement of understanding of farms and farming, and their benefits and relationship to the environmental, economic, nutritional and social well-being of surrounding communities; and . . . to educate farmers, consumers and the general public on issues related to farming.

At the hearing of this appeal, CISA presented its case principally through the testimony of its executive director, Philip Korman, and numerous exhibits providing information about the organization. The exhibits included annual reports, informational brochures, a locally grown farm products guide, CISA's by-laws, verification of its 501(c)(3) status, its Articles of Organization, and an amendment to its Articles of Organization. The assessors presented evidence that included the relevant jurisdictional documents as well as excerpts from CISA's website describing its mission and programs.
According to CISA's by-laws, anyone who paid an annual membership fee could join CISA. CISA's by-laws allowed the organization to waive the membership fee "if the individual's membership is otherwise in the best interest of the organization." The appellant did not submit any evidence showing that the membership fee had been waived for any of its members. CISA's annual report stated that during the fiscal year at issue, CISA's members included retailers, institutions, individuals, restaurants, farmers, and landscape and garden centers. 
CISA's by-laws required a Board of Directors comprised completely of members of CISA. The by-laws also divided the Board of Directors into farmer and non-farmer directors. The by-laws specified that at least one-third of the members of the Board of Directors must be farmers. If the number of farmer directors dropped below one-third of total board members, no new non-farmer director could be elected to the board until the one-third farmer requirement was satisfied. 
Both parties submitted evidence touting the success of CISA's "Be a Local Hero, Buy Locally Grown" ("Local Hero") marketing program. According to the evidence, the Local Hero program was in place for at least a decade prior to the fiscal year at issue. The program promoted local farmers and their products to consumers using newspaper and radio advertising, direct mail, bus board signs, buttons, bumper stickers, and point of purchase materials in grocery stores. The materials placed in evidence highlighted that the slogan "Be a Local Hero, Buy Locally Grown" became a household phrase. Membership in the Local Hero program was available for an annual fee separate from the fee required to be a member of CISA. Benefits of joining the Local Hero program included the ability to use its logo for marketing products, admission to members-only networking events, access to members-only newsletters, and access to "CISA marketing expertise and technical assistance."
In conjunction with its Local Hero program, CISA published a locally grown farm products guide. An individual did not need to be a member of CISA to obtain a copy of the guide. The guide contained information about how to join both the Local Hero program and CISA and explained the benefits of joining each entity. It also contained listings of local food producers, landscape and garden centers, farm festivals, farmers' markets, specialty products, and restaurants and retailers that participated in the Local Hero program. There were also advertisements for organizations and businesses catering to readers of the guide. 
In addition to the Local Hero program, both parties introduced evidence regarding CISA's "Senior FarmShare" program. A fact sheet explained that most senior citizens who were part of the Senior FarmShare program paid $10 to participate. In exchange for the payment, the senior citizens received fresh produce from local farms for ten weeks during the summer months. The fact sheet stated CISA "has been offering free shares . . . to low-income seniors," but none of the evidence submitted indicated how many seniors, if any, were given these free shares. None of the evidence explained how eligibility for participation in the program was determined. The fact sheet did point out that between the program's inception in 2004 and 2010, farmers who supplied the food received over $205,000 in income from the program. Excerpts from CISA's website explained that while the program provided access to local food and improved community ties, it also "offer[ed] farmers a reliable source of income." 
The CISA website included information about some of CISA's other objectives. CISA listed among its goals: establishing new business markets for farmers; strengthening existing business markets for farmers; and increasing restaurant and institutional purchases of locally grown food. To achieve these goals, one website excerpt explained that CISA offered workshops, one-on-one training sessions, farm visits, and referrals "to help local farmers and other CISA members build their businesses." 
An additional website excerpt contained information about another one of CISA's programs, "Farm to School." The materials created by CISA stated that the Farm to School program "benefits farmers by opening new avenues through which they can sell their products locally and benefits the community by increasing access to fresh, local foods for school children." The program expanded over time, so CISA collaborated with other organizations to "offer intensive, pragmatic training designed to prepare more community-based agricultural professionals and others to decide if and how to sell to schools." The informational brochures and annual reports submitted by CISA also mentioned the program. 
On the basis of all the evidence, the Presiding Commissioner found that the dominant purpose of the appellant was to create a business market for local farmers. Although the programs and services provided an ancillary benefit to the public, the appellant's dominant purpose was commercial, not charitable.  Accordingly, for reasons set out more fully in the Opinion below, the Presiding Commissioner found and ruled that CISA was not a charitable organization within the meaning of Clause Third and issued a decision for the appellee in this appeal. 

OPINION
Clause Third provides, in pertinent part, that "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" is exempt from property taxation. The burden of establishing entitlement to the charitable exemption lies with the taxpayer. New England Legal Found. v. City of Boston, 423 Mass. 602, 609 (1996). "The burden of proof is upon the one claiming an exemption from taxation to show clearly and unequivocally that he comes within the terms."  Boston Symphony Orchestra, Inc. v. Assessors of Boston, 294 Mass. 248, 257 (1936).
"'Exemption from taxation is a matter of special favor or grace.  It will be recognized only where the property falls clearly and unmistakably within the express words of a legislative command.'" Mass. Med. Soc'y v. Assessors of Boston, 340 Mass. 327, 331 (1960) (quoting Boston Chamber of Commerce v. Assessors of Boston, 315 Mass. 712, 718 (1944)).  
An organization may be considered a charitable organization for the purposes of Clause Third if:
[T]he 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 Cmty. Health Plan v. Assessors of Cambridge, 384 Mass. 536, 544 (1981) (quoting Mass. Med. Soc'y, 340 Mass. at 332); see also Western Mass. Lifecare Corp, 434 Mass. 96, 102-03 (2001).  
In New Habitat, Inc. v. Tax Collector of Cambridge, 451 Mass. 729 (2008), the Supreme Judicial Court offered a new "interpretive lens" through which to view Clause Third exemption claims. See Mary Ann Morse Healthcare Corp. v. Assessors of Framingham, 74 Mass. App. Ct. 701, 703 (2009). Specifically, New  Habitat "conditions the importance of previously established factors on the extent to which 'the dominant purposes and methods of the organization' are traditionally charitable."  Mary Ann Morse Healthcare Corp., 74 Mass. App. Ct. at 703 (quoting New Habitat, 415 Mass. at 733). In other words, "[t]he farther an organization's dominant purposes and methods are from traditionally charitable purposes and methods, the more significant these factors will be." Mary Ann Morse Healthcare Corp., 74 Mass. App. Ct. at 705.   
In determining whether an organization's dominant purposes and methods are charitable, "more care" must be taken "where the alleged charity operates in the fields of trade and commerce." Boston Chamber of Commerce, 315 Mass. at 718. In Boston Chamber of Commerce, although the objectives of the chamber of commerce included the promotion of trade and commerce, which the Court found to be "highly commendable and of great public benefit," the Court held that no exemption was warranted because the primary benefit accrued to the business community and not to the public.  Id. The Court also noted that of the "multitude" of trade organizations and associations in all branches of commerce "few" could qualify as charitable under Clause Third.  Id.
Even where the public may derive a benefit from an organization's activities, the Clause Third exemption has been consistently denied where the organization's members derive a commercial benefit. See, e.g., Massachusetts Medical Society, 340 Mass. at 333 (upholding Board's denial of exemption to professional association despite "most laudable" goal of improving medical profession); American Institute for Economic Research v. Assessors of Great Barrington, 324 Mass. 509, 513-14 (1949) (upholding Board's denial of exemption to organization that analyzed and disseminated information to members concerning economic cycles and trends); Sturdy Memorial Foundation, Inc. v. Assessors of North Attleborough, Mass. ATB. Findings of Fact and Reports 2002-203, 216, aff'd 60 Mass. App. Ct. 573 (2004) (ruling that an association's operation of a "turn-key" medical practice for employee physicians located adjacent to hospital was not entitled to the Clause Third exemption even though it served a need in the community); Harvard Student Agencies, Inc. v. Assessors of Cambridge, Mass. ATB Findings of Fact and Reports 2000-925, 940-41 (ruling that a Harvard affiliate which organized and managed student-staffed businesses selling goods and services to the public at market prices was a commercial and not charitable organization). 


The evidence in the present appeal supports a finding that the dominant purpose of CISA's work was to benefit its members by promoting the purchase of locally grown food, and any benefit derived by the public was incidental.  The primary beneficiaries of CISA's activities were farmers and other purveyors of locally grown food and related products who were members of CISA. CISA itself stated in its brochures and annual report that its goal was to build a thriving local agriculture economy, particularly through its Local Hero program. The purpose of that program was to encourage consumers and businesses to purchase locally grown food and related products. Additionally, CISA listed among its goals establishing new business markets for farmers, strengthening existing business markets for farmers, and increasing restaurant and institutional purchases of locally grown food. 
	Further, the workshops and other technical support provided to local farmers, the locally grown farm products guide, and even the Senior FarmShare program were designed and implemented with these goals in mind. The website excerpts and fact sheets admitted into evidence showed that the Senior FarmShare and Farm to School programs created a steady source of income and new avenues for farmers to sell their products. CISA's extensive advertising and marketing efforts through the Local Hero program, including the bus boards, point of purchase materials in grocery stores, newspaper and radio advertising, direct mail, bumper stickers, and the locally grown farm products guide, were designed to encourage consumers to purchase locally grown food products, thereby principally benefitting the farmers and other businesses that were members of CISA. 
CISA maintained that increasing the availability of locally grown food provided a benefit to the public.  However, while there may have been some incidental benefits to the public at large from CISA's programs, the primary beneficiaries were the farmers and other producers of locally grown food whose products CISA sought to promote, and any public benefit from a more robust local agriculture economy was incidental. See Mass. Youth Soccer Ass'n v. Assessors of Lancaster, Mass. ATB Findings of Fact and Reports 2012-660, 680 (ruling that if the dominant purpose of an organization is to benefit its members then an incidental benefit to the public will not make it charitable).
	CISA also pointed to its provision of reduced-cost or free services to those unable to pay as an indication that it was a charitable organization. Although it appears that CISA may have provided some free or reduced-cost food, any such activities were ancillary to CISA dominant purpose of creating markets for its members to sell their products.  Further, even if one or more of CISA's programs were providing enough reduced or no-cost food to qualify that program as a charitable organization if it were a stand-alone organization, the overall purposes and activities of CISA must be evaluated to determine whether its dominant purposes and methods were charitable. See Boston Chamber of Commerce, 315 Mass. at 718-19 (holding that an organization with a "dominant purpose" of bolstering business in Boston would not be charitable even if, considered individually, some of its programs were charitable).
	In sum, the Presiding Commissioner found that CISA's dominant purpose was to benefit its members by promoting the purchase of locally grown food, with only an incidental benefit to the public. On the basis of all of the evidence and her findings and rulings, the Presiding Commissioner ultimately found and ruled that the appellant failed to meet its burden of proving that it was a charitable organization for the purposes of Clause Third. 
	Accordingly, the Presiding Commissioner issued a single-member decision for the appellee in this appeal. 

					   	   APPELLATE TAX BOARD

						By:			_____	_____
						   Nancy T. Egan, Commissioner
A true copy,

Attest:					___
		Clerk of the Board

 According to the fact sheet, additional funding for the program was provided by "individual contributions, Local Hero farm members, The Executive Office for Elder Affairs, and by grants from church communities." 
 "These factors include, but are not limited to, whether the organization provides low-cost or free services to those unable to pay[;] whether it charges fees for its services and how much those fees are[;] whether it offers its services to a large or 'fluid' group of beneficiaries and how large and fluid that group is[;] whether the organization provides its services to those from all segments of society and from all walks of life[;] and whether the organization limits its services to those who fulfill certain qualifications and how those limitations help advance the organization's charitable purposes." New Habitat, 451 Mass. at 732-33 (citations omitted). 

ATB 2013-395