Bridgewater State College Foundation v. Board of Assessors of the Town of Bridgewater (February 4, 2010)

 COMMONWEALTH OF MASSACHUSETTS

   APPELLATE TAX BOARD

  
BRIDGEWATER STATE 			v.	   BOARD OF ASSESSORS OF
COLLEGE FOUNDATION		  	        THE TOWN OF BRIDGEWATER

Docket Nos.: F287957-F287962 (07)
             F293903-F293905 (08)	   
             F294589-F294591 (08) 	   Promulgated:
							   February 4, 2010

	
	These appeals, which involve fiscal years 2007 and 2008 ("fiscal years at issue"), concern certain real property located in Bridgewater owned by and assessed to the Bridgewater State College Foundation ("BSCF" or "appellant").  Docket Nos. F287957-F287962, which are fiscal year 2007 appeals, and Docket Nos. F293903-F293905, which are fiscal year 2008 appeals, are appeals under G.L. c. 59, §§ 64 and 65, from the refusal of the assessors to abate the taxes assessed on that real property. Docket Nos. F294589-F294591, which are fiscal year 2008 appeals, are appeals under G.L. c. 59, § 5B, from the determination of the assessors that the real property was not eligible for exemption under G.L. c. 59, § 5, Third ("Clause Third").  
Commissioner Rose heard these appeals.  Chairman Hammond and Commissioners Scharaffa, Egan, and Mulhern joined him in the decisions for the appellant.   
These findings of fact and report are made at the request of the appellee pursuant to G.L. c. 58A, § 13 and 831 CMR 1.32.

Richard C. Dailey, Esq. and Amy L. Hanson, Esq. for the appellant. 

Mark C. Gildea, Esq. for the appellee.  

FINDINGS OF FACT AND REPORT
On the basis of the Statement of Agreed Facts, briefs, and exhibits entered into the record in these appeals, the Appellate Tax Board ("Board") made the following findings of fact.  
On January 1, 2006 and January 1, 2007, the relevant assessment dates for the fiscal years at issue, BSCF was the owner of six parcels of land (collectively, the "subject property" or "parcels at issue") in Bridgewater, all of which were contiguous to the Bridgewater State College ("BSC") campus.  The parcels at issue include 25 Park Terrace, 29 Park Terrace (together, the "Park Terrace parcels"), 180 Summer Street, and also three undeveloped parcels located on Plymouth Street (collectively, the "Plymouth Street parcels").  

25 Park Terrace is known as the Davis Alumni Center.  It houses BSCF's offices and BSC's Alumni Office.  180 Summer Street houses the BSC political science department. 29 Park Terrace was formerly the residence of BSC's president, but during the fiscal years at issue, it was not occupied by the college president. During that time, it was used for BSC and BSCF receptions and donor events.  The Plymouth Street parcels, which were acquired by BSCF in 1992, were undeveloped.  During the fiscal years at issue, they were used for recreational purposes by BSC students and student clubs.  
BSCF leased 180 Summer Street and 25 Park Terrace to BSC for five years, beginning July 1, 2003, for a nominal fee of $1.00 per year for each building.  No lease agreements for 29 Park Terrace or the Plymouth Street parcels were ever executed.  BSC used these parcels for free with BSCF's permission.   
For fiscal year 2007, the parcels at issue were taxed at a rate of $9.60 per thousand.  The assessed value and total tax assessed for each of the parcels at issue for fiscal year 2007 is set forth in the following table:


	25 Park
Terrace	180 Summer
Street	29 Park
Terrace	Plymouth
Street
(Parcel 1)	Plymouth
Street
(Parcel 2)	Plymouth
Street
(Parcel 3)	
Assessed
Value	$773,000	$421,300	$630,700	$97,000	$215,400	$84,400	
Total
Tax	$7,569.22	$4,106.17	$6,156.61	$931.20	$2,090.00	$810.24	

The appellant timely filed its Forms 3ABC and PC for fiscal year 2007. The appellant timely paid the tax due on each of the parcels and timely filed its Applications for Abatement on November 1, 2006.  The assessors denied the Applications for Abatement on January 30, 2007, and the appellant timely filed its petitions with the Board on March 12, 2007.  
For fiscal year 2008, the parcels at issue were assessed at a rate of $10.35 per thousand.  The assessed value and total tax assessed for each of the parcels at issue for fiscal year 2008 is set forth in the following table:

	25 Park
Terrace	180 Summer
Street	29 Park
Terrace	Plymouth
Street
(Parcel 1)	Plymouth
Street
(Parcel 2)	Plymouth
Street
(Parcel 3)	
Assessed
Value	$742,200	$404,600	$634,400	$93,600	$208,600	$81,000	
Total
Tax	$7,835.41	$4,250.66	$6,566.04	$968.76	$2,159.01	$838.35	

For fiscal year 2008, the assessors' records indicated that the appellant's fiscal year 2008 Forms 3ABC and PC were filed late.  However, the appellant submitted an affidavit of its Director of Foundation Administration, in which she stated that she hand-delivered the fiscal year 2008 Forms 3ABC and PC on or before the due date, as was her customary practice.  The assessors presented no evidence to rebut this sworn statement or otherwise dispute its accuracy.  Based on the foregoing, the Board found that the appellant timely filed its fiscal year 2008 Forms 3ABC and PC.  
For fiscal year 2008, the appellant failed to pay the tax due on all of the parcels at issue.  The tax assessed on three of those parcels (Docket Nos. F294589-F294591) was less than $3,000, and thus the failure to timely pay the tax in full was not an impediment to the Board's jurisdiction to hear those appeals.  G.L. c. 59, § 64.  The tax due on each of the three remaining parcels (Docket Nos. F293903-F293905) exceeded $3,000.  However, because BSCF was aggrieved by the assessors' determination that its property was not eligible for exemption under Clause Third, it chose to take a direct appeal to the Board under G.L. c. 59, § 5B, obviating the need to timely pay the tax at issue to preserve the Board's jurisdiction.  See Trustees v. Board Assessors of Windsor, Mass. ATB Findings of Fact and Reports 1991-225, 234.   Based on the foregoing, the Board found and ruled that it had jurisdiction to hear and decide these appeals.  

BSCF is a Massachusetts charitable foundation created in  1984 under G.L. c. 15A, § 37 ("§ 37"). It is 
"organized and operated exclusively for the benefit of" BSC.  G.L. c. 15A, § 37.  BSC is a "public institution of higher learning" created pursuant to G.L. c. 15A, § 5.  BSCF's operating agreement ("operating agreement") with BSC, dated June 28, 2000, provides that "[BSC] exists to provide education and related services and benefits to the citizens of the Commonwealth; and [BSCF], being a foundation within the meaning of [§ 37], of the General Laws of the Commonwealth, is organized and operated exclusively for the benefit of the College."  
The operating agreement further provides that:
[BSCF] shall hold, manage and invest its moneys and other assets, including any endowment or endowments, in accordance with the Uniform Management of Institutional Funds Law (chapter 180A of the General Laws, as amended from time to time), and, in accordance with such provisions, with the provisions of [§ 37], and with the provisions of this Agreement, it shall expend and apply such moneys and other assets solely for the benefit of [BSC] and not otherwise. (emphasis added). 
 
BSCF is exempt from Federal income taxes under Internal Revenue Code § 501(c)(3).  It has no shareholders or capital stock.  No part of its income inures to the benefit of anyone associated with the appellant, nor is its income used for anything other than its charitable purposes.  
BSCF's activities include the oversight of BSC's annual fund, the creation of an endowment for the benefit of BSC, administration of BSC's scholarship programs and assistance with other activities related to BSC's educational mission.  
The parties did not dispute, and the Board found, that the subject property was owned by BSCF, which was a charitable organization within the meaning of Clause Third.  Further, the Board found that BSCF's sole charitable purpose was to support the advancement of BSC's educational mission.  The assessors' primary argument was that the subject property was not exempt under Clause Third because it was not "occupied" by a charitable organization; rather, they argued, it was occupied by BSC, which, as a governmental entity, cannot be a charitable organization within the meaning of Clause Third.  The assessors also argued that the Plymouth Street parcels, which were acquired by BSCF in 1992, remained unoccupied by BSCF more than two years after their acquisition, and therefore, were not exempt under Clause Third.  
On the contrary, the Board found that each of the parcels at issue was occupied by BSCF for its charitable purpose during the fiscal years at issue.  With respect to the Plymouth Street parcels, the Board found that they were occupied by BSC students and student groups for recreational purposes.  The Board found that this use promoted the "physical training, and the social, moral and aesthetic advancement" of the students of BSC and was consistent with the charitable purpose of BSCF, which was the support of BSC's educational mission.  Emerson v. Trustees of Milton Academy, 185 Mass. 414, 417 (1904).  As for the remaining parcels, the evidence established that 25 Park Terrace was occupied in part by BSCF for its offices and in part by BSC's Alumni Office, while 180 Summer Street housed BSC's Political Science Department.  29 Park Terrace, the former president's residence, was used by both BSC and BSCF for fundraising events and receptions.  The Board found that each of these uses advanced the charitable educational mission of BSC, which was the sole purpose of BSCF's organization and operations.  Thus, the Board found that the parcels at issue were exempt under Clause Third as they were owned and occupied by a charitable organization in furtherance of its charitable purpose.   
Accordingly, the Board issued decisions for the appellant in these appeals, and ordered abatements in the following amounts:
Docket No. 	Abatement 	Docket No. 	Abatement	
F287957	$7,569.22	F293903	$6,676.66	
F287958	  $931.20	F293904	$4,250.66	
F287959	$4,106.17	F293905	$7,835.41	
F287960	$2,090.00	F294589	  $838.35	
F287961	  $810.24	F294590	  $968.76	
F287962	$6,156.61	F294591	$2,181.49	


                         OPINION 
I.   The Subject Property was Exempt Under Clause Third
	
Clause Third 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."  G.L. c. 59, § 5, Third.  A taxpayer claiming exemption under Clause Third therefore must demonstrate that the property is owned by a charitable organization and occupied by a charitable organization to further its charitable purpose. See Jewish Geriatric Services, Inc. v. 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)).  For the purposes of Clause Third, a "charitable organization" is "(1) a literary, benevolent, charitable or scientific institution or temperance society incorporated in the commonwealth, and (2) a trust for literary, benevolent, charitable scientific or temperance purposes." G.L. c. 59, § 5, Third.  
In the present appeals, the subject property was owned by BSCF, which is a charitable foundation organized under § 37.  The parties did not dispute, and the Board found and ruled, that the subject property was owned by a charitable organization for purposes of Clause Third.  The dispute between the parties lies in the occupation of the parcels at issue and the nature of the entity occupying those parcels.  First, the assessors contended that the Plymouth Street parcels were not exempt under Clause Third because that clause exempts property purchased by a charitable organization for such organization's "removal thereto" for only two years from the date of its purchase.  The assessors argued that the Plymouth Street parcels, which were acquired by BSCF in 1992, remained unoccupied during the fiscal years at issue and were therefore not exempt.  Second, the assessors claimed that none of the parcels at issue was occupied for charitable purposes because they were predominantly occupied not by a charitable organization, but by an instrumentality of the government.  The Board disagreed on both counts.
The Plymouth Street Parcels were Occupied for the Purposes of Clause Third During the Fiscal Years at Issue

The assessors argued that the Plymouth Street parcels were not exempt under Clause Third because that clause exempts property "purchased by a charitable organization with the purpose of removal thereto, until such removal, but not for more than two years after such purchase."  G.L. c. 59, § 5, Third.  The assessors contended that because the Plymouth Street parcels were purchased by BSCF in 1992, but remained unoccupied as of the fiscal years at issue, they were not exempt under Clause Third.  
However, the two-year removal provision is not the only mechanism for exemption in Clause Third.  That provision merely contains an additional mechanism for the exemption of property owned by charitable organizations, and states an exception to the general rule of Clause Third, which is that property must be occupied in order to be exempt.  
Occupancy for purposes of Clause Third means use for the purpose for which the charity is organized.  See Babcock v. Leopold Morse Home for Infirm Hebrews and Orphanage, 225 Mass. 418, 421 (1917); Emerson, 185 Mass. at 415.  The decision of a charitable organization concerning how to occupy its property in connection with its charitable mission is entitled to a substantial degree of deference upon judicial review.  Emerson, 185 Mass. at 415.  Strict necessity is not the guidepost.  Id. at 418.  Moreover, in the context of educational institutions, a long line of cases demonstrates that the range of uses which has qualified property for exemption is broad.  
In Emerson, at issue were three large parcels of land owned by an educational institution, some of which consisted of "low and swampy" or wooded land, and some of which housed athletic fields, among other things.  Emerson, 185 Mass. at 417.  The evidence in that case showed that "pupils [did] in fact constantly use the unimproved parts of the fields . . . as recreation grounds, walking and roaming over them, playing games that do not require grounds to be improved."  Id.  The Court held that the parcels were occupied for the purposes of the exemption, because it was within the charitable purposes of an educational institution to "provide liberally for the physical training, and the social, moral and aesthetic advancement of the pupils who are entrusted to its charge."  Id. at 418.  
Similarly, in Wheaton College v. Town of Norton, 232 Mass. 141, 148 (1919), land containing an "unenclosed grove" of pine trees and "a few benches," which was used by students who wished to "walk, stroll or saunter" therein, was found to be occupied for the purposes of the exemption because it supported the charitable purpose of the college.  See also Assessors of Dover v. Dominican Father Province of St. Joseph, 334 Mass. 530, 538 (1956).  
In the present appeals, the record established that, much like the property at issue in Emerson and Wheaton College, the Plymouth Street parcels were used for recreational purposes by BSC students and student clubs.  The Board found that this use promoted the "physical training, and the social, moral and aesthetic advancement" of the students of BSC, and therefore was a use which furthered the charitable purpose of BSCF.  Emerson, 185 Mass. at 417.  Accordingly, the Board found and ruled that the Plymouth Street parcels were occupied for the purposes of Clause Third during the fiscal years at issue and were therefore eligible for exemption under the general provisions of Clause Third.  The Board therefore rejected the assessors' argument.  

The Subject Property was Occupied by BSCF in Furtherance of its Charitable Purpose 

Having determined that each of the parcels at issue was occupied for the purposes of Clause Third, the Board next considered by whom they were occupied and for what purposes.  Again, occupancy for the purposes of Clause Third means use for the purpose for which the charity is organized.  See Babcock, 225 Mass. at 421 ("Occupancy means . . . appropriation to the immediate uses of the charitable cause for which the owner was organized.")  Further, "'it is the character of the use to which property is put, and not of the party who uses the property, that settles the question of exemption from taxation.'"  Assessors of Boston v. Boston R.B. & L.R. Co., 319 Mass. 378, (1946) (quoting Milford Water Co. v. Hopkinton, 192 Mass. 491, 495-97 (1906)).  Thus, the fact that the property at issue may be inhabited or used by individuals or an entity other than a charitable organization does not defeat the claim for exemption, so long as such inhabitation or use is consistent with the purpose of the charitable organization that owns the property.     
In M.I.T. Student House, Inc. v. Board of Assessors of Boston, the property at issue was a rooming house inhabited by "needy" students attending the Massachusetts Institute of Technology ("M.I.T."), but owned by a charitable corporation.  M.I.T. Student House, Inc. v. Board of Assessors of Boston, 350 Mass. 539, 539 (1966).  Despite the fact that the rooming house was physically inhabited by M.I.T. students, the Court ruled that the property was exempt because it was being used to further the corporation's charitable purpose.  Id. at 541.  The resolution of the issue of occupation, therefore, requires a close examination of the purpose of the charitable organization at issue.
The evidence established that BSCF's sole purpose was to support the educational mission of BSC.  There is no doubt that the provision of education is a charitable purpose.  It has long been "settled [that] educational institutions of a public charitable nature are within the class of 'literary, benevolent, charitable and scientific institutions' which are exempt from taxation under" Clause Third.  Assessors of Boston v. Garland School of Home Making, 296 Mass. 378, 392-93 (1937).  See also Assessors of Dover, 334 Mass. at 538.  Further, as a foundation created under § 37, BSCF was "organized and operated exclusively for the benefit of" BSC, and was required by statute to be "certified by the board of trustees of [BSC] to be operating in a manner consistent with the goals and policies of [BSC]."  G.L. c. 15A, § 37.   Accordingly, the Board found and ruled that, much like the corporation in M.I.T. Student House, which existed to provide housing for needy M.I.T. students, BSCF's charitable purpose was to provide for BSC's institutional needs.  There was no evidence in the record indicating that the parcels at issue were used for any purpose other than to further BSC's charitable educational mission.  
The record revealed that the parcels at issue were used: as offices for BSC's political science department; as BSC's alumni office; as BSCF's office; for BSCF and BSC donor events and receptions; for recreational use by BSC students and student clubs; and for possible future development by BSC.  Uses similar to these uses have been held to constitute charitable uses.  See Trustees v. Board of Assessors of Windsor, Mass. ATB Findings of Fact and Reports 1991-225, 228, 242 (finding that use of "main house" on an expansive farm property for occasional meetings and community social functions was a qualifying use by the charitable organization in question) (citations omitted)). See also Emerson, 185 Mass. at 417.  Moreover, the Board found and ruled that each of these uses was consistent with BSCF's charitable purpose, which was the advancement of BSC's charitable educational mission.  
The argument advanced by the assessors in the present appeals was contrary to the established legal precedent.  Under Clause Third "occupation and use . . . [are] determinative of whether particular real estate should be exempt."  Town of Milton v. Ladd, 348 Mass. 762, 765 (1965).  Indeed, the Court has employed a "functional analysis" to determine eligibility for a variety of the exemptions granted under G.L. c. 59, § 5.  For example, in H-C Health Services, Inc. v. Assessors of S. Hadley, the Court focused on the "'declared purposes and actual work performed'" by the organization in question in ruling that real property owned by a business corporation, but which was occupied by a nursing facility for the elderly and infirm, qualified for the exemption in Clause Third.  H-C Health Services, Inc. v. Assessors of S. Hadley, 42 Mass. App. Ct. 596, 599 (1997) (quoting Assessors of Boston v. Vincent Club, 351 Mass. 10, 12 (1966)).  See also Brown, Rudnick Freed & Gesmer v. Assessors of Boston, 389 Mass. 298, 302-03 (1983); Middlesex Retirement System, LLC v. Assessors of Billerica, 453 Mass. 495, 502 (2009).  In the present appeals, the assessors did not analyze the occupation of the subject property in the context of the purposes of BSCF, and their conclusion that the subject property was not exempt merely because much of it was being used by BSC was erroneous.  
Additionally, the assessors' argument as to the occupancy of the subject property was flawed because occupancy for purposes of Clause Third has a broader meaning than that suggested by the assessors. In M.I.T. Student House, although the rooming house at issue was physically inhabited by M.I.T. students, the Court stated that "'[t]he occupation of the property 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.'"  M.I.T. Student House, 350 Mass. at 542 (quoting Franklin Square House v. Boston, 188 Mass. 409, 411 (1905)).  This interpretation of the term "occupied" gives effect to the intent of the Legislature, as the statutory language suggests that all of the real property of a charitable organization should be exempt as long as it is used to further the organization's charitable purpose.  Using this interpretation of the term "occupied," the Board found and ruled that the occupation of the subject property was that of BSCF itself, for its charitable purpose.  To hold otherwise would be to narrow the scope of the exemption in a way not intended by the Legislature.  
Moreover, bearing in mind the legislative intent behind Clause Third, the Board found and ruled that this construction of the term "occupied" is particularly appropriate in the present appeals.  It has been held that the reason for the charitable exemption is that charitable organizations '"lessen[] the burdens of government'" in that they provide services for which the government would otherwise be responsible.  Western Massachusetts Lifecare Corporation v. Board of Assessors of Springfield, 434 Mass. 96, 102 (2001) (quoting Boston Chamber of Commerce v. Assessors of Boston, 315 Mass. 712, 716 (1944)) (other citations omitted).  In the present appeals, the subject property was being used directly to support the mission of a governmental institution.  To deny the exemption in these appeals would wholly frustrate the purpose of the statute.  
Accordingly, the Board found and ruled that the parcels at issue were exempt under Clause Third because they were owned and occupied by BSCF in furtherance of its charitable purpose during the fiscal years at issue. 
 
          Conclusion

	On the basis of all of the evidence, the Board found and ruled that, during the fiscal years at issue, the subject property was owned by BSCF and occupied by BSCF for its charitable purpose, which was the support and advancement of BSC's educational mission.  The Board therefore found and ruled that the subject property was exempt under Clause Third.  


Accordingly, the Board issued decisions for the appellant in these appeals, and ordered abatements in the following amounts:
Docket No. 	Abatement 	Docket No. 	Abatement	
F287957	$7,569.22	F293903	$6,676.66	
F287958	  $931.20	F293904	$4,250.66	
F287959	$4,106.17	F293905	$7,835.41	
F287960	$2,090.00	F294589	  $838.35	
F287961	  $810.24	F294590	  $968.76	
F287962	$6,156.61	F294591	$2,181.49	



			        APPELLATE TAX BOARD
	
					By:________________________________
					   Thomas W. Hammond, Jr., Chairman
	


A true copy:
Attest: ___________________________
	       Clerk of the Board

 The parties agreed to waive the hearing and instead submitted these appeals on documentary submissions.  
 Where applicable, the amounts assessed include a Community Preservation Act Tax.
 G.L. c. 15A, § 37 provides in relevant part:
(a) As used in this section, the following words shall have the following  meanings unless the context clearly requires otherwise:

"Foundation", an organization which is (a) either (i) a corporation within the meaning of clause (c) of section two of chapter one hundred and eighty and subject to the provisions of said chapter one hundred and eighty, except as herein provided, or (ii) a public charitable trust constituted and operating as such and subject to the requirements of law governing such trusts, except as herein provided; (b) organized and operated exclusively for the benefit of an institution of public higher education; and (c) certified by the board of trustees of the institution which it supports to be operating in a manner consistent with the goals and policies of the institution.

"Institution", a public college or university in the commonwealth.

ATB 2010-76