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.

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.

He noted that the school also pays property tax for a postal office that is on school grounds because all parties agree that property would not be tax-exempt.

Several groups representing private schools, colleges and hospitals have filed briefs supporting Hebron Academy.


“The case between Hebron Academy and the town of Hebron is one of critical importance to Bates and to other colleges and universities throughout the state and country,” said a statement from Bates College in Lewiston.

“The tax-exemption is fundamental to the ability of nonprofit colleges and universities to provide affordable access to higher education and community benefits in the form of jobs, cultural activities, recreation, and other contributions,” the statement said.

Janet Mills, Maine’s incoming attorney general, also filed a brief in support of the school, saying, “A decision to so narrowly construe the exemption as to disallow incidental rental income for qualified institutions would inflict a major blow to the viability of these historic educational institutions.”

Brenda Peluso, director of public policy for the Maine Association of Nonprofits, said the ruling could affect many of Maine’s roughly 5,000 nonprofits.

“A lot of nonprofits in this day and age are being called to act more like businesses,” she said. “They do that by doing multi-purpose uses (of their facilities), like Hebron. It’s quite a benefit to the community.”

Peluso said association members are reporting that “some towns are more aggressive than others” in determining whether a nonprofit should pay taxes. Some towns, for example, have created “pretty intense” application forms that nonprofits must fill out to get or maintain tax-exempt status locally.


Peluso said it would hurt communities if nonprofits couldn’t offer their facilities for outside use.

“They give property tax exemptions for a reason. We provide a public service. And charging a tax on one public service to provide another public service is just eating from the same pie,” she said.

If the court rules against Hebron Academy, the school will have to stop renting its facilities to outside groups, said Head of School John King after the hearing.

“As a nonprofit, we struggle every year,” he said. “It doesn’t make any sense to continue (to allow outside use of facilities) if it’s going to put our tax-exempt status in jeopardy.”

He said the revenue is roughly equal to what the school would pay in taxes, so renting wouldn’t make sense. The school earned about $686,000 over the last six years for all facility rentals, he said.

This is not the first time Maine courts have been asked to decide whether a municipality can collect taxes from a school, Dench said.


In the 1980s, Waterville unsuccessfully sought to tax a Colby College fraternity, arguing that it didn’t serve an academic function.

Dench said the Hebron Academy case is different because the school markets its facilities and collects fees.

The town’s attorney and Selectman Daniel Eichorn, who were at the court hearing, said they are simply asking for taxation as the law allows. They declined to speculate on what it might mean for other nonprofits in Maine if the town wins the case.

Eichorn said after the hearing that the town’s interest is only in collecting what is due. “As a small town, any dollars help.”


Staff Writer Noel K. Gallagher can be contacted at 791-6387 or at:



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