December 13, 2012

Hebron Academy tax case being watched by Maine nonprofits

The town of Hebron argues in court that the school should pay property taxes on facilities it rents out for income, which could have implications for schools, hospitals, churches and other nonprofits.

By Noel K. Gallagher ngallagher@pressherald.com
Staff Writer

PORTLAND – Nonprofits are closely watching a Maine Supreme Judicial Court case about whether Hebron Academy, a private boarding school, must pay property taxes on facilities it rents to outside groups.

Today's poll: Taxing nonprofits

Should towns be able to collect property taxes from nonprofits on facilities that are rented out for outside use?

Yes

No

View Results

click image to enlarge

Nonprofits are closely watching a Maine Supreme Judicial Court case about whether Hebron Academy, a private boarding school pictured above, must pay property taxes on facilities it rents to outside groups.

Hebron Academy photo

click image to enlarge

Nonprofits are closely watching a Maine Supreme Judicial Court case about whether Hebron Academy, a private boarding school pictured above, must pay property taxes on facilities it rents to outside groups.

Hebron Academy photo

Related headlines

If the court rules broadly that an institution loses its tax exemption for a facility if it charges fees for its use, the ruling could have implications for many schools, hospitals, churches and other nonprofits that rent out their facilities to offset costs.

On Wednesday, the court heard arguments in the town of Hebron's appeal of a Superior Court judgment that Hebron Academy is a "literary and scientific" institution and that most of its real estate is exempt from property taxes.

The town argues that it should be able to collect property taxes on the ice rink and other facilities the school rents out for events ranging from weddings and banquets to summer football camps.

The school argues that it meets the legal standard for occupying and using all of the facilities, and that any revenue it receives is incidental.

Bryan Dench, the attorney representing the town, said the school's website lists venues for rent and has downloadable brochures to solicit wedding parties or other events, showing pictures of brides on campus.

"Perfect for parties large or small, Hebron offers savory cuisine and a beautiful, expansive setting. Let us turn your dreams into memories," the site reads, listing virtually all campus spaces, from a climbing wall in the gym to dormitories and dining halls for summer conferences.

"When you go into business, as Hebron has, you have a problem," Dench told the court.

Most of the discussion in court was about the school's ice rink.

John Conway, the attorney for Hebron Academy, said the revenue is "incidental," considering that the school takes in about $30,000 a year on rink rentals while the annual operating cost is about $370,000.

"Almost all of (the annual revenue) is less than the cost of operating (the rink)," Conway told the justices.

"It was not an unsubstantial amount," Dench countered.

The justices did not indicate Wednesday when they will issue their decision.

National nonprofit executives say the case illustrates how cash-strapped municipalities and states are increasingly seeking revenue from hospitals, schools, churches and other tax-exempt organizations.

"This is happening all over the place," said Jennifer Chandler, a vice president of the National Council of Nonprofits, based in Washington, D.C.

Hospitals and colleges, with large facilities and campuses, are particularly tempting targets, she said.

State and municipal governments "are looking everywhere," she said, "including to the charitable community, for revenue, ignoring the historic and valuable partnership that exists between government and charitable nonprofits."

One community in the Midwest, she said, has instituted a "light post" fee for nonprofits, in which the municipality may charge for a nonprofit's use of city infrastructure on its property.

Other cities are exploring payments in lieu of taxes from nonprofits that have large endowments or pay executives hefty salaries, indicating that they can afford to pay some taxes.

In Portland, MaineHealth makes payments in lieu of taxes for some of its property. The city still loses considerable revenue: In 2011, nearly $1 billion of the city's $7 billion tax base was owned by private, tax-exempt organizations including hospitals, colleges, schools, churches, museums and social service agencies, according to city data.

Even the federal government makes payments. For example, the Department of the Interior paid the state of Maine $316,048 in 2012 on non-taxable federal land in the state.

Conway told the justices that Hebron Academy tried to make payments in lieu of taxes after the town's initial complaint in 2009. The check was returned to the school, he said.

(Continued on page 2)

Were you interviewed for this story? If so, please fill out our accuracy form

Send question/comment to the editors




Further Discussion

Here at PressHerald.com we value our readers and are committed to growing our community by encouraging you to add to the discussion. To ensure conscientious dialogue we have implemented a strict no-bullying policy. To participate, you must follow our Terms of Use.

Questions about the article? Add them below and we’ll try to answer them or do a follow-up post as soon as we can. Technical problems? Email them to us with an exact description of the problem. Make sure to include:
  • Type of computer or mobile device your are using
  • Exact operating system and browser you are viewing the site on (TIP: You can easily determine your operating system here.)


Today's poll: Taxing nonprofits

Should towns be able to collect property taxes from nonprofits on facilities that are rented out for outside use?

Yes

No

View Results