Healthtrax International, Inc. and Hanover Club Properties, Inc. v. Board of Assessors of the Town of Hanover and South Shore Young Men's Christian Association (May 14, 2001)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD



HEALTHTRAX 						BOARD OF ASSESSORS
INTERNATIONAL, INC.					OF THE TOWN OF
and	HANOVER
HANOVER CLUB				v.		and
PROPERTIES, INC.					SOUTH SHORE YOUNG
					MEN'S CHRISTIAN 
ASSOCIATION
										

Docket No. F250750		 			Promulgated:
		               			May 14, 2001


	This is an appeal under the formal procedure pursuant to G.L. c. 59, § 5B, from the determination of eligibility for a charitable exemption from real estate tax under G.L. c. 59, § 5, cl. 3, made by the Board of Assessors of the Town of Hanover in favor of the South Shore YMCA's Mill Pond facility for fiscal year 1999.  
 	Commissioner Rose heard the appeal and was joined by Chairman Burns and Commissioners Scharaffa, Gorton, and Egan in a decision for the appellee.  
These findings of fact and report are promulgated at the request of the appellants pursuant to G.L. c. 58A, § 13 and 831 CMR 1.32. 
 
J. Alexander Watt, Esq., for the appellants.

Paul Barbadoro, Esq., for the appellee.

Elizabeth Marzelli Zimmer, Esq., for the Intervenor.

FINDINGS OF FACT AND REPORT
This appeal challenges a decision made by the Board of Assessors of the Town of Hanover ("Assessors") to grant a charitable exemption to the South Shore Young Men's Christian Association ("SSYMCA") for Plan 18, Lot 25 on the Assessors' map located at 75 Mill Street in Hanover for fiscal year 1999 ("Mill Pond facility" or "subject property").  Pursuant to G.L. c. 59, § 5B, Healthtrax International, Inc. and co-appellant Hanover Club Properties, Inc. (together "Healthtrax") challenged the Assessors' decision to exempt the subject property.  The basis of the challenge was that Healthtrax claimed SSYMCA's Mill Pond facility was an athletic facility not utilized for charitable purposes and in direct competition with Healthtrax, an entity paying tax in Hanover.
  The Board allowed SSYMCA's motion to intervene in the appeal as an interested party.  Based on testimony and exhibits offered at the hearing of this appeal, the Appellate Tax Board ("Board") made the following findings of fact.

I.  Jurisdiction
	SSYMCA purchased the subject property on May 29, 1998. At a public meeting on June 22, 1998, the Assessors voted to grant a charitable exemption to the subject property.  The tax bill, which was sent out on or about October 7, 1998, reflected the exemption.  By appeal to this Board dated September 28, 1998, Healthtrax challenged the Assessors' decision to exempt the subject property.
	The Board determined that, under the circumstances present in this appeal, the appeal period began to run when the tax bill reflecting the exemption was sent on October 7, 1998.  On this basis, pursuant to G.L. c. 59, § 5B, the Board found that Healthtrax filed a timely, although premature, direct appeal to this Board on September 28, 1998.  Accordingly, the Board found that it had jurisdiction to hear the fiscal year 1999 appeal which challenged the Assessors' decision to grant SSYMCA a charitable exemption for the Mill Pond facility. 

II. 	Merits of the Challenge to Exemption Determination
In its challenge to the Assessors' decision to grant a charitable exemption to SSYMCA for its Mill Pond facility, Healthtrax conceded that SSYMCA is a charitable organization, but argued that the Mill Pond facility was not utilized for SSYMCA's charitable purpose and that a significant portion of the facility was operated as an "athletic facility . . . in direct competition with" Healthtrax.  
Testimony was taken from Deborah Stuart, David Bond, Ralph Yohe, Nathalie Sheard, April Rose and Brian Cassidy.  Deborah Stuart was the Assistant Executive Appraiser for Hanover at the time the exemption decision was made. David Bond was Chair of the Board of Assessors at the time relevant to this appeal.  Ralph Yohe was President of SSYMCA.  Nathalie Sheard was Executive Director of the Mill Pond facility.  April Rose held a family membership at the Mill Pond facility.  Brian Cassidy was Executive Director of Healthtrax of Hanover.  Based on the testimony from these witnesses, the Board made the following findings of fact.  
Deborah Stuart had been the Assistant Executive Appraiser for Hanover for almost seven years, including the time period at issue.  Her job responsibilities included valuing real and personal property in the town, reviewing all sales transactions, keeping current with legislation and regulations, and making recommendations to the Assessors.  Pursuant to the Assessors' practice, SSYMCA was not required to file a written application requesting exemption for the Mill Pond property because SSYMCA purchased the property after the March deadline for filing Form 3ABC but before the July 1 date used to determine qualification for exemption pursuant to G.L. c. 59, § 5.  
Ms. Stuart investigated SSYMCA's purchase of the Mill Pond facility in order to present the question of exemption to the Assessors.  To this end, she procured a copy of the deed, and spoke with Ralph Yohe and Natalie Sheard from SSYMCA regarding the intended use, and time frame for occupation, of the subject property.  Ralph Yohe indicated that SSYMCA would continue operating the four tennis courts on the property and develop an indoor facility with adult and children's fitness accommodations.  Ms. Sheard indicated that SSYMCA also planned to renovate the existing structure to house a family facility with gymnastics, youth, fitness, family and tennis activities.  
In further considering the question of exemption for the Mill Pond facility, Ms. Stuart consulted the regulations at 830 CMR 59.5.1, which were promulgated by the Department of Revenue for assessors to use in determining the eligibility of a charitable organization for the exemption of athletic property.  She questioned Mr. Yohe and Ms. Sheard regarding factors indicated under the regulations.  Her questions concerned the occupation, management and control of the facility as well as a description of the activities intended for the property. Ms. Stuart understood that the property would be immediately and exclusively occupied and managed by SSYMCA according to its principles and guidelines.  She determined that, under the regulation, SSYMCA was eligible for the exemption of its Mill Pond facility.  
Ms. Stuart could not review receipts and expenditures for the property because the facility was not yet open at the time of the exemption decision.  Ms. Stuart was aware that SSYMCA had submitted a tax return to the town related to another parcel it owned in Hanover, and that the other parcel was exempt from property taxation.  She admitted that she had not obtained or reviewed Federal tax information on the subject property prior to recommending exemption to the Assessors.  Ms. Stuart also conceded that although the regulation that used the YMCA as an example of an exempt entity was influential in her recommendation, it was not determinative or her only consideration.  
Based on the information that Ms. Stuart received from SSYMCA officials and her own research, she recommended to the Assessors that SSYMCA receive a charitable exemption from property tax for its Mill Pond facility.  After she informed the Assessors of the results of her investigation, they voted to exempt the facility from property tax.  The Board found that Ms. Stuart was a credible witness. 
David Bond, chair of the Assessors testified that they discussed the issue of exempting the Mill Pond facility and voted to exempt the property on June 22, 1998.  Deborah Stuart spoke to the Assessors on that date, providing information and recommendations about the Mill Pond facility in relation to the exemption consideration.
Based on documentary evidence and confirmed by the testimony of Ralph Yohe, president of SSYMCA, the Board found that the corporate purpose of SSYMCA was to build Christian character by improving the spiritual, intellectual, and physical condition of persons of all ages.  The Board found that the mission of SSYMCA was as follows: 
The South Shore YMCA is a not-for-profit association of individuals dedicated to improving the quality of life for all through programs that promote healthy body, mind and spirit.  Rooted in Christian tradition and values, the YMCA seeks to serve all people, regardless of age, sex race, religion or economic circumstance.  Our programs and services strive to strengthen the family, guide the youth of today, and meet the ever-changing needs of our community.

The Board found that there were charges for the unrestricted use of the entire Mill Pond facility in the form of membership dues of approximately $445 per year for an individual and $720 per year for a family.  There was a $75 initiation fee for memberships.  The cost of a basic membership was ten dollars for youths and twenty dollars for adults, which entitled the member to participate in program offerings for a separate fee.  Approximately 57% of participants at the Mill Pond facility were seventeen years old or younger.  Mr. Yohe testified that no one was turned away due to inability to pay.  Instead, the potential member was given a financial assistance form to complete. 
During SSYMCA's 1998-1999 fiscal year, its three branches awarded $322,000 in financial assistance, with 37% 
applied to memberships, 10% applied to child care, 9% applied to after school child care, 23% applied to day camps, 19% applied to resident camps, and 2% applied to other programs.  Further, SSYMCA offered reduced or subsidized cost programs, costing it approximately $300,000 for its 1998-1999 fiscal year.
The fiscal year 1998-1999 Federal Form 990 (Return of Organization Exempt from Income Tax) showed that SSYMCA's revenue was $8,339,160, and its expenses were $7,426,194.  However, revenue included public support of $1,483,205.  Based on testimony supported by the Federal Return of Organization Exempt from Income Tax Form 990, the Board found that SSYMCA would have run at a loss of $530,239 without public monetary support.  The Board further found that the fees generated from membership dues and program fees were used to fund programs, and there was no surplus.  At any rate, any surplus would have been returned to the organization to run additional programs. 
According to Mr. Yohe, the Mill Pond experience was and has always been different from that of other non-charitable or for-profit fitness facilities because of SSYMCA's dedication to its mission and its promotion of its core values of caring, honesty, respect and responsibility, through its various program offerings.  He testified that since SSYMCA's incorporation in 1892, it has been dedicated to benefiting the community through programs that developed the individual as a whole person in mind, body, and spirit.  During the early years of the SSYMCA, the offerings that promoted its charitable purpose included contemporary sporting activities such as basketball, volleyball and racquetball. 
Mr. Yohe maintained that at the modern SSYMCA, each activity undertaken by volunteers and staff strove to further the purposes of community and character development.  He believed that a central component of SSYMCA was the atmosphere created by trained staff and volunteers who worked together to better the community through the organization's offerings.  The Board found that Mr. Yohe was a credible witness, and the operational goals that he outlined in his testimony were consistent with SSYMCA's charitable purpose and mission.  
Nathalie Sheard had been employed by SSYMCA for 12 years, and had acted as executive director of the Mill Pond facility since its purchase in June of 1998.  At Mill Pond, she ran operations, hired staff, maintained the budget, raised funds, and developed programs geared toward the needs of the community. 
Based on Ms. Sheard's testimony, the Board found that the indoor facility consisted of approximately 56,000 square feet.  The building contained a front desk area, offices, an exercise studio used for line dancing, aerobics, and power cycling, four indoor tennis courts, a gymnastics area, a kid's gym, a youth activities area also used for art programs, a babysitting area, a multi-purpose conference room used for member orientation, a multi-purpose youth room with pool and ping-pong tables, a teen center with a large screen TV and video games, a gym area with nautilus, cardiovascular, and youth strength training equipment, a free weight room, and a multi-purpose gymnasium area that was used for basketball and other youth and family programs.  
By Ms. Sheard's calculations, one eighth or less of the entire facility was devoted to the adult and children's fitness equipment.  Of the approximately 5,000 to 7,000 square feet of fitness equipment, the equipment designed specifically for children aged eight through twelve occupied 1,400 square feet.  The free weight area occupied approximately 1,750 square feet.
The Board found that the Mill Pond facility offered many supervised programs for children and young adults such as toddler movement, gymnastics for children, co-ed indoor basketball, co-ed soccer, after school drop-in center for children and teens, art programs, tae kwon do, tennis, and teen leadership.  The Mill Pond facility periodically provided a supervised teen night in which member and non-member teens paid a dollar or two to use any part of the facility on a Friday night.  Ms. Sheard testified that between 55-60% of the participants at the Mill Pond facility were youths seventeen years of age or younger.
Two afternoons a week for one hour and fifteen minutes each session, Mill Pond provided a reduced-fee, supervised program for Downs Syndrome children where the children engaged in various activities at the facility, such as dance, basketball, and exercise on the fitness equipment.  There was also a reduced-fee program for persons with disabilities who needed one-on-one assistance in the fitness area.  Programs were offered for families and the community such as family night where families participated in organized fitness activities and a pizza party.  The Mill Pond facility had wellness programs including a nutrition program with a fitness component.
Like Mr. Yohe, Ms. Sheard testified that expenses were greater than the revenue taken in for programs, and that $34,000 of financial assistance was given out by the Mill Pond facility from November 1998 through August of 1999.  A majority of the financial assistance was awarded for membership fees.  According to Ms. Sheard, the amount of financial assistance grew significantly through the next fiscal year.  She testified that the facility would operate at a loss if not for uncompensated volunteers and donations.  There were four to fifteen volunteers at the facility at any one time.  The volunteers were trained in the principles and mission of SSYMCA through the same training received by staff.  This training focused on how to conduct programs using the four core values of caring, respect, honesty and responsibility.  On the basis of Ms. Sheard's testimony, the Board found that SSYMCA offered financial assistance to allow participation by those who could not afford its fees.
Ms. Sheard testified that the core values related to the mission statement and charitable purpose by simplifying for easy comprehension the larger philosophies expressed in those documents.  She recounted the various ways the organization reinforced these principles for the members.  For example, during the orientation process, new members were taught about the core values and the colors associated with each of the values through a slide show and literature.  SSYMCA displayed posters, member newsletters and brochures throughout the facility that depicted the YMCA's red triangle logo, which signified the three sides of a balanced human being - body, mind, and spirit.  The displays included a character development quotation and the four core values and their associated colors.  
Further reinforcement of the core values was evident in the children's gym area through the painted cartoons and designs that visually depicted the four core values of SSYMCA.  Likewise, cartoon characters adorned the walls of the multi-purpose area used for after-school children's activities.  The children's program also used a colored bead reward system to teach the core values. 
Ms. Sheard testified that although the fitness activities offered at the Mill Pond facility and Healthtrax might be called by the same name, the delivery of that activity was and is different because of SSYMCA's focus on inculcating the core values, mission and purpose to every member during every activity.  As an example, she pointed to Mill Pond's purchase of youth strength training equipment which was designed to accommodate children and was intended to teach children the benefits of strength training at an early age so they might continue the physical pursuit as a part of developing into a balanced and whole person.  She maintained that, through its programs and offerings, SSYMCA strove to promote the balance of body, mind, and spirit, and to emphasize the four core values and the mission of SSYMCA to build a community of strong children and strong families.  Based on this testimony, the Board found that the operation and use of the Mill Pond facility was consistent with SSYMCA's charitable purpose and mission.  The Board found that  Ms. Sheard's testimony was credible and adopted it in full.     
  April Rose, a single mother with a family membership at the Mill Pond facility testified that she joined SSYMCA as a member shortly after she qualified for financial aid for a camp program at the Mill Pond facility.  She testified that without the financial aid her family would not have been able to participate in SSYMCA's programs.  She felt that membership at the Mill Pond facility and the programs in which she and her son have participated had a positive effect on her family.  She stated that she chose the Mill Pond facility because of her son's positive experience with the camp, the broad spectrum of programs offered at the facility and the financial aid available.  The Board found that Ms. Rose's testimony was credible.
Based on the testimony of Brian Cassidy, Executive Director of Healthrax, the Board found that Healthtrax was a for-profit business that operated a full-service health club and wellness center primarily focused on exercise.  Individual, family, and corporate memberships were available, all bearing an associated fee.  All seminars bore a charge for non-members.  Unlike SSYMCA, Healthtrax offered no financial aid to assist people who could not afford the full membership fee.  Mr. Cassidy testified that he did not know the corporate purpose of the Healthtrax organization, but admitted that the organization had a profit-seeking motive.  
Based on Mr. Cassidy's testimony, and in contrast to the Mill Pond facility, the Board found that Healthtrax had no equipment for children under twelve, but Healthtrax did allow children under twelve to use general Nautilus equipment through the junior fitness program.  Healthtrax had no members under the age of seventeen, but individuals under seventeen could join the facility as a part of a family membership.  Healthtrax had "family time" at its facility, where families could use the swimming pool and basketball courts together, but offered no organized family programs.  Few children's programs were offered outside of the activities at the babysitting center.  Some children's camps were offered during school vacations, for which participants paid a fee to attend.  No testimony was offered to elaborate upon the frequency of, or activities offered by, the children's camps or programs.  Thus, the Board lacked any basis for comparing the Mill Pond and Healthtrax children's programs and camps. 
The Mill Pond facility was located approximately two miles from Healthtrax.  Mr. Cassidy considered SSYMCA a competitor because the services offered and equipment available were similar, and because members joined his facility after having been members at the Mill Pond facility.  Further, Mr. Cassidy believed that members of other area for-profit health clubs had left those clubs to join Mill Pond.  He provided no evidence that any member had left Healthtrax to join the Mill Pond facility. Nor did he provide specific evidence proving that members left any for-profit health club for the Mill Pond facility.  The Board found that Mr. Cassidy provided inadequate evidence to support his assertion that the Mill Pond facility and Healthtrax competed for members.  Further, Mr. Cassidy did not demonstrate that Healthtrax's primarily fitness-related offerings were in competition with, Mill Pond's varied program offerings for families, children or the community.  He asserted that the Mill Pond facility profited from charging membership and program fees.  However, the Board found that Healthtrax did not provide any evidence to support this assertion.
On the basis of all of the evidence, the Board made the following additional findings of fact.  The Assessors gathered the requisite information to make a determination to exempt the Mill Pond facility from property tax on the basis of charitable use and occupancy.  The Board found that SSYMCA presented ample evidence that it operated and occupied its Mill Pond facility in furtherance of its charitable purpose - to promote and encourage the development of well-balanced individuals, strong and healthy families, and a strong and healthy community.  The Board further found that Healthtrax did not meet its burden of proof challenging either the Assessors' decision or the assertion that the Mill Pond facility was not used and occupied in furtherance of its charitable purpose.  At any rate, had the burden of proof been on SSYMCA to demonstrate its eligibility for exemption in this appeal, the Board found that SSYMCA convincingly showed its eligibility for the property tax exemption at issue.  Therefore, the Board found no error in the Assessors' decision to exempt the Mill Pond facility and sustained the Assessors' exemption decision.  On this basis, the Board issued a decision for the appellee Assessors for fiscal year 1999.


OPINION
I.  Jurisdiction
	G.L. c. 59, § 5, cl. 3 (b) states: 
A corporation coming within the foregoing description of charitable organization or trust . . . shall not be exempt for any year in which it omits to bring in to the assessors a list, statements and affidavit required by section twenty-nine and a true copy of the report for such year required by section eight F of chapter twelve to be filed with the division of public charities in the department of the attorney general, nor shall it be exempt for that athletic property or portion thereof for the part of the year which the assessors have determined to be utilized for other than literary, educational, benevolent, temperance, charitable or scientific purposes in direct competition with a person engaged in the same activity and subject to the tax imposed by this chapter on properties so used.  (Emphasis added.)

	Although Healthtrax did not pursue SSYMCA's failure to include the subject parcel on the forms required for submission to the Assessors by March 1, the Board reached this issue because it involved a question of jurisdiction.  See Children's Hospital Medical Center v. Assessors of Boston, 388 Mass. 832, 837 (1983) (filing of list, statements, and affidavits required by G.L. c. 59, § 5,   cl. 3 is jurisdictional prerequisite).
 	For fiscal year 1999, pursuant to Chapter 59, § 5,  cl. 3(b), SSYMCA complied with the requirements of the charitable exemption statute by timely filing the list, statement and affidavit required by section twenty-nine ("Form 3ABC") and a copy of the report required to be filed with the Attorney General's Public Charity Division ("Form PC") listing the property it owned as of the March 1, 1998 due date.  Since the Mill Pond property had not been purchased prior to the March 1, 1998 due date, SSYMCA was not required to include, and could not have included, the Mill Pond property on the forms it submitted.  
	The Board did not find any reported cases that addressed the issue of whether a charitable organization which has otherwise complied with the filing provisions of G.L. c. 59, § 5, cl. 3 must be denied an exemption for property which it acquires after the March 1 filing deadline.  The Board noted that the statute denies the exemption to "a corporation" which has not filed the necessary forms with the Assessors by the March 1 deadline and does not explicitly deny exemption to a parcel not included on the Form 3ABC.  Indeed, G.L. c. 59, § 29 requires that the Form 3ABC, due to be filed with the Assessors on March 1, must list all property held by the corporation in furtherance of its charitable purpose on January 1.  
	In the present case, SSYMCA complied with the provisions of § 5, cl. 3 and § 29.  Where, as here, a corporation has complied with the literal terms of § 5,  cl. 3 and § 29, the Board ruled that the corporation's failure to include property acquired after the relevant date for filing the Form 3ABC will not deprive the Board of jurisdiction.  The Board did not need to reach the question of whether it would have jurisdiction where a corporation purchases otherwise exempt property after January 1, but before the March 1 filing deadline.
Chapter 59, § 5, states "the date of determination as to . . . ownership and other qualifying factors required by any clause shall be July 1st of each year unless another meaning is clearly apparent from the context."  SSYMCA's May 29, 1998 acquisition of the Mill Pond facility occurred after the due date for the Form 3ABC and Form PC, but prior to the July 1, 1998 date by which the qualifying factors for charitable status for fiscal year 1999 must be met.  Accordingly, having met the qualifying factors under Chapter 59, § 5, cl. 3, by July 1, 1998, the Assessors did not err in considering the Mill Pond facility's charitable exemption status.  Contrast The Church in Cambridge, Inc. v. Board of Assessors of the City of Cambridge, 24 Mass. App. Tax Bd. Rep. 257 (1998) (Assessors were correct in denying charitable exemption because the church did not own subject property on the date required to fulfill the qualifying factor of ownership).  
In seeking the charitable exemption for its newly purchased property, SSYMCA participated in discussions with Assessor Deborah Stuart regarding its intended utilization of the subject property.  As a result of the discussions and information provided by SSYMCA to Deborah Stuart and relayed to the Assessors, the Assessors voted on June 22, 1998, prior to issuing the fiscal year 1999 tax bills, to exempt the property from real estate tax based on SSYMCA's charitable utilization of the subject property.  
Pursuant to G.L. c. 59, § 5B, Healthtrax filed a direct appeal to this Board challenging the Assessors determination to exempt SSYMCA on the ground that SSYMCA was utilizing the athletic property for "other than . . . charitable . . . purposes in direct competition" with Healthtrax, an entity which paid real estate tax on its athletic property to the Town of Hanover.  See G.L. c. 59, § 5, cl. 3.  G.L. c. 59, § 5B states:
Any person of a city or town aggrieved by a determination of the board of assessors as to the eligibility or noneligibility of a corporation or trust for the exemption granted pursuant to the clause Third of section five may appeal therefrom by filing a petition with the clerk of the appellate tax board in accordance with the provisions of section seven of chapter fifty-eight A within three months of said determination.  As used in this section the term "person" shall mean the corporation or trust applying for the exemption or an individual, corporation, or trust engaged in a business activity in direct competition with an activity conducted by the charitable corporation or trust.

	The Assessors' June 22, 1998 vote to exempt the subject property from tax was reflected on the tax bill mailed on October 7, 1998.  The Board found that the mailing of the tax bill signified the necessary determination by the Assessors that triggered Healthtrax's appeal rights under G.L. c. 59, § 5B and that the appeal period began to run on that date, October 7, 1998.  See Trustees of Reservations v. Board of Assessors of the Town of Windsor, 14 Mass. App. Tax Bd. Rep. 22, 28 (1991)(Board held that for purposes of G.L. c. 59, § 5B, the word "determination . . . include[s] the issuance of the tax bills for both charitable organizations applying for the Clause Third exemptions and their competitors.")  Thus, pursuant to G.L. c. 59, § 5B, the determination by which Healthtrax was "aggrieved," and from which Healthtrax properly appealed, was the mailing of the October 7, 1998 tax bill.  
An appeal filed within three months of the date of determination is timely.  G.L. c. 59, § 5B.  Healthtrax filed its appeal under § 5B on September 22, 1998, several days prior to the October 7, 1998 date of determination.  The Board determined that the premature filing did not destroy its jurisdiction over the appeal.  "It is well settled in similar cases, where a statute required action within a certain time 'after' an event, that the action may be taken before the event.  Such statutes have been construed as fixing the latest, but not the earliest, time for taking of the action."  Beckton, Dickinson & Co. v. State Tax Commission, 374 Mass. 230, 234 (1978) (quoting Tanzilli v. Casassa, 324 Mass. 113, 115 (1949)).  Since "it is a general policy of the law to prevent loss of valuable rights, not because something was done too late, but rather because it was done too soon," the prematurity in filing did not destroy jurisdiction.  Id. at 234.  The Board determined both that the appeal was filed timely and that it had jurisdiction to hear the claim.   

II. 	Healthtrax Bore Burden of Proof 
 Cities and towns are authorized to impose a tax upon "[a]ll property, rea1 and personal, situated within the Commonwealth, . . . unless expressly exempt. . . ."  G.L. c. 59, § 2.  Section 5 of Chapter 59 lists the numerous classes of property which "shall be exempt from taxation . . ."  G.L. c. 59, § 5.	 Section 5, cl. 3 exempts from taxation all "personal property of a charitable organization . . . and  real estate owned by .  .  . and occupied by it or its officers for the purposes for which it is organized."  However, the statute also provides that the exemption shall not be available for "that athletic property . . . which the Assessors have determined to be utilized for other than . . . charitable .  . . purposes in direct competition with a person engaged in the same activity and subject to the tax imposed by this chapter on properties so used." G.L. c. 59, § 5, cl. 3(b) (emphasis added). 
Healthtrax argued that SSYMCA bore the burden of proving its qualification for the exemption before the Board.  However, prior to the direct appeal to the Board by Healthtrax, SSYMCA had demonstrated to the satisfaction of the Assessors, and the Assessors had determined, that the Mill Pond facility qualified for the charitable exemption.  The seemingly unique procedural situation of a competitor challenging the Assessors' decision to grant a charitable exemption is analogous to the more common situation of an organization challenging the Assessors' denial of its own request for a charitable exemption.  In both situations, the burden of proof lies with the party challenging the Assessors' exemption decision.  The "burden falls where general principles of law would naturally and logically cause it to fall.  The burden of proving the taxability . . . is therefore upon the [party] who seeks to establish the tax."  Horvitz v. Commissioner of Revenue, No. 99-P-549, 2001 WL 409519, at *4. (Mass. App. Ct. April 24, 2001) (quoting New England Trust Co. v. Commissioner of Corps. & Taxn., 315 Mass. 639, 642 (1944)).  "The burdens of pleading and proof with regard to most facts have been and should be assigned to the plaintiff who generally seeks to change the present state of affairs and who therefore naturally should be expected to bear the risk for failure of proof or persuasion."  Waban, Inc. D/B/A BJ'S Wholesale Club v. Commissioner of Revenue, 22 Mass. App. Tax. Bd. Rep. 31, 35-36 (1997). 
Moreover, "it is taken for granted that conduct of public officers is according to law unless the contrary is made to appear."  Nevins v. City Council of Springfield, 227 Mass. 538, 541 (1917).  Thus, in reviewing the Assessors' decision, the Board may "presume that the valuation made by the Assessors was valid unless the taxpayer sustained the burden of proving the contrary."  Schlaiker v. Board of Assessors of Great Barrington, 365 Mass. 243, 245 (1974).  In this appeal, the Assessors determined that SSYMCA utilized the Mill Pond facility in a charitable manner, and granted an exemption on this basis.  Thus, the Board presumed that the Assessors' decision was correct, and that, therefore, Healthtrax had the burden of proving otherwise.  Id.  At any rate, had the burden of proof been on SSYMCA to demonstrate its eligibility for exemption, the Board found that SSYMCA convincingly showed its eligibility for the property tax exemption at issue in this appeal.

III.	Healthtrax Failed to Meet Burden of Proof
G.L. c. 59, § 5, cl. 3 (b) states: 
A corporation coming within the foregoing description of charitable organization or trust . . . shall not be exempt for any year . . . for that athletic property or portion thereof for the part of the year which the Assessors have determined to be utilized for other than literary, educational, benevolent, temperance, charitable or scientific purposes in direct competition with a person engaged in the same activity and subject to the tax imposed by this chapter on properties so used.  (Emphasis added.)
 
Healthtrax argued that the Mill Pond facility was predominantly an athletic facility which provided the same services to the same membership demographic as Healthtrax, and therefore, the Mill Pond facility was not used in furtherance of SSYMCA's charitable purpose but was in direct competition with Healthtrax.  Healthtrax argued that the spiritual messages, and atmosphere of care, honesty, responsibility, and respect provided through the programs at SSYMCA's Mill Pond facility did not make the activities offered at the Mill Pond facility any different than those provided at Healthtrax.  Healthtrax maintained that it held the qualities espoused at the Mill Pond facility in high regard and that SSYMCA did not hold a "monopoly" on such qualities or methods of teaching those qualities.  Further, Healthtrax argued that the Mill Pond facility was not charitable because it charged more for a membership than another area for-profit health club and because it turned a profit for its 1998 tax year.
A.  Occupation for Charitable Purpose
"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."  Massachusetts Medical Society v. Assessors of Boston, 340 Mass. 327, 332 (1960).  "[C]haritable occupancy means something more than that which results from simple ownership and possession.  It signifies an active appropriation to the immediate uses of the charitable cause for which the owner was organized. . . . [O]ccupation must . . . contribute immediately to the promotion of the charity and physically participate in the forwarding of its beneficent objects."  Babcock v. Leopold Morse Home for Infirm Hebrews and Orphanage, 225 Mass. 418, 421-22 (1917). 
Healthtrax conceded that SSYMCA was a charitable institution, but argued that the facility was not operated to further its charitable purpose.  However, SSYMCA demonstrated both to the Assessors and before the Board, that the entire Mill Pond facility, including the square footage devoted to fitness equipment, was operated to promote SSYMCA's charitable purpose.  That charitable purpose included the development of healthy and balanced individuals, families, and communities through programs open to people from all backgrounds and circumstances.  The qualities of caring, honesty, responsibility and respect were the concepts used to simplify and teach the charitable purpose.  They were not, as Healthtrax alluded, the primary charitable purpose.  
For example, the Mill Pond facility provided on-going programs promoting family togetherness and fitness through its family nights, where the SSYMCA further provided organized and supervised fitness activities, teen leadership, and children's and teen fitness and socialization.  It provided teen nights for the community where any teen that paid the dollar entrance fee could use any part of the facility without being a member.  In addition, it had an after-school drop-in teen center to promote a healthy and safe teen environment.  Moreover, reduced-fee membership were extended to different groups of disabled people, such as a group diagnosed with Down's Syndrome.  The SSYMCA provided those individuals with the opportunity to socialize at the Mill Pond facility while also receiving physical fitness training, including training on the fitness equipment.  The Mill Pond facility also provided a reduced-fee program for other severely disabled individuals needing one-on-one physical fitness supervision, including supervision on the equipment. 
The Mill Pond facility required each member to attend an orientation that included instruction about the YMCA's core values, message and purpose. Instructors received special training on how to incorporate the core values and purpose into teaching and supervising SSYMCA activities.  The Mill Pond facility provided financial aid so a wider segment of the community could avail themselves of the programs and services.  No one was turned away for inability to pay.  
Further, within the facility, the charitable purpose was reinforced through prominent visual displays of the trademarked red triangle signifying the three sides of a complete human being, mission statement, member newsletter, and murals depicting the cartoon characters associated with the core values.  Core values were taught to the children through a colored bead reward system.  These core values were SSYMCA's method of simplifying and teaching the charitable purpose to its members. 
Healthtrax's arguments regarding similar demographics and programs failed to demonstrate that SSYMCA's use of the Mill Pond facility was in direct competition with it.  At Healthtrax, individual membership was only available for those seventeen years old or older. Healthtrax had no members under the age of seventeen, and those under seventeen years of age were required to join as a part of a family membership.  Further, those who could not afford the membership fee could not join the facility.  Thus, at all relevant times, Healthtrax catered to a demographic of adults over the age of seventeen, who could afford to pay the fee.
In contrast to Healthtrax's membership demographics and program offerings, between 55-60% of the people who participated at the Mill Pond facility were youths, defined by SSYMCA as age seventeen and under.  Further, SSYMCA stressed participation in family and community, and provided a multitude of programs that promoted these values.  SSYMCA demonstrated that, compared to Healthtrax, it provided a broader range of programs to a broader clientele that included families, adults, teens, children, infants and the handicapped.  Thus, Healthtrax did not demonstrate that the Mill Pond facility provided similar enough services to a similar enough demographic to be in competition with Healthtrax.  Moreover, Healthtrax failed to produce any competent evidence to demonstrate that it lost any business to SSYMCA.  In fact, the only evidence Healthtrax introduced on the issue of competition showed that some individuals left SSYMCA and joined Healthtrax.  There was no showing that the opening of SSYMCA had any effects on the business of Healthtrax.
B.  Profits, Fees, and Commercial Use  
Healthtrax asserted that the Mill Pond facility was operated as a commercial entity in competition with it and was not operated in a charitable manner because it charged a membership fee and showed a profit for its 1998 tax year.  "The fact that an institution charges fees for its services does not make it other than charitable, provided no profits are distributed to members or stockholders." Assessors of Lancaster v. Perkins School, 323 Mass. 418, 422 (1948). "The distinction [between exempt and non-exempt property] is between activities primarily commercial in character carried on to obtain revenue to be used for charitable purposes . . . and activities carried on to accomplish directly the charitable purposes of the corporation, incidentally yielding revenue." Hairenik Association, Inc. v. City of Boston, 313 Mass. 274, 279 (1943) (citing McKay v. Morgan Memorial Co-operative Industries and Stores, 272 Mass. 121, 124 (1930)). 
Healthtrax produced no evidence to demonstrate that the Mill Pond facility returned profit to SSYMCA's stockholders, while SSYMCA both testified and presented the Federal Return of Organization Exempt from Income Tax Form 990 as evidence that no individual program turned a profit, and that without charitable donations and government support, the organization would have operated at a loss.  SSYMCA also showed that all revenue was returned to run its programs.  Healthtrax presented no evidence that Mill Pond's activities were carried on to yield revenue, while SSYMCA produced ample and convincing testimony of its commitment to operating the entire facility to further its charitable purpose.
Case law that addresses mixed commercial and charitable use of a property owned by a charitable organization is not applicable to this appeal.  Under the rule of proportionate exemption, Massachusetts courts recognize that commercial use of a charitable institution's property should not be exempted from taxation.  Proportionate exemption allows property to be taxed in part and exempted from tax in part if a property has both charitable and commercial use and occupancy.  See, e.g.,  Milton Hospital and Convalescent Home v. Assessors of Milton, 360 Mass. 63 (1971).  In Milton Hospital, physicians associated with the hospital rented suites in the tax-exempt hospital in which they conducted their private practices.  The Supreme Judicial Court ruled that the suites were taxable because they were occupied not by the hospital, but by individual doctors operating profit-making enterprises which did not further the hospital's charitable purpose.  Id. at 69-70.  However, the proportionate use cases are not applicable to the situation where use and occupancy fulfills a charitable corporate purpose and yields incidental profit.  Assessors of Boston v. Garland School of Home Making, 296 Mass. 378, 392 (1937) (exemption granted where school used profit made from tuition fees to pay the mortgage on buildings in which it housed its students). 
 The proportionate use cases do not apply in this appeal because Healthtrax did not show that the square footage of the fitness facility was isolated from or operated differently than the remainder of the building.  Nor did Healthtrax show that the fitness portion of the facility was operated to yield profit as a commercial enterprise.  Rather, SSYMCA demonstrated that the Mill Pond facility used its whole facility to promote SSYMCA's charitable purpose by encouraging the community, regardless of economic status, age or physical disability, to use the whole facility, including the fitness equipment.  
On this basis, the Board found and ruled that Healthtrax failed to prove that SSYMCA did not operate its facility to further its charitable purpose.  SSYMCA provided compelling evidence that it reached out to the community at large through inclusive financial aid policies, and programs tailored to a wide demographic of adults, teens, children and the disabled of all ages.  SSYMCA demonstrated that, through its programs and activities at the Mill Pond facility, it emphasized its charitable purpose of strengthening the individual, family, and community through development of the mind, the body and the spirit.  It also provided substantial evidence that it used member orientation, visual cues, and facility atmosphere to remind members of the charitable purpose.  On this basis, the Board found that the Assessors did not err in determining that SSYMCA's Mill Pond facility operated to promote its charitable purpose and mission and occupied the entire facility in accordance with its charitable purpose.  Given SSYMCA's convincing rebuttal testimony, and Healthtraxs' failure to prove that the Mill Pond facility was not operated and occupied in accordance with its charitable purpose, the Board found and ruled that Healthtrax did not meet its burden of proof.  At any rate, the Board found and ruled that if the burden of proof had been on SSYMCA in this appeal, it sustained its burden.

IV.	Regulatory Issues Raised By Healthtrax
Healthtrax relied on guidelines published at 830 CMR 59.5.1, to attack the Assessors' decision to exempt the property.  This regulation was promulgated by the Department of Revenue for assessors "to use to determine the eligibility of an otherwise exempt . . . charitable . . . organization, for the exemption of its athletic property or a portion thereof from taxation under M.G.L. c. 59, § 5, Third."  830 CMR 59.5.1 (1)(a).  The regulation further stated that "[n]o athletic property of such an [exempt] organization is exempt for any part of the Commonwealth's fiscal year if the organization . . . utilizes the property for other than a . . . charitable . . . purpose, or other than to serve a basic public need."  Id. at 59.5.1 (1)(b) (emphasis added). 
Specifically, Healthtrax asserted that the Mill Pond facility did not fulfill any of the criteria indicating exemption listed at 830 CMR 59.5.1(3) and fulfilled the factors indicating taxation found at 830 CMR 59.5.1 (5).  Further, Healthtrax asserted that the Assessors lacked requisite information to determine properly whether the Mill Pond facility qualified for the charitable exemption under 830 CMR 59.5.1 (4) and (6).
A.	Required Information - 830 CMR 59.5.1 (4)
Healthtrax argued that the Assessors' exemption decision was improper because they did not possess the information listed as necessary by 830 CMR 59.5.1 (4) to make such determination.  Healthtrax based this assertion on the Chair of the Assessor's testimony that the Assessors relied on the recommendation of Deborah Stuart in deciding to exempt the Mill Pond property.  The Board found and ruled that the Assessors, through Deborah Stuart, gathered the available, requisite information.  Ms. Stuart testified that she spoke to both Ralph Yohe and Natalie Sheard before and after SSYMCA's purchase of the Mill Pond property regarding its anticipated use.  Id. at (4)(c).  Ms. Stuart testified that SSYMCA communicated that it would be the sole direct user and exclusive manager of the property, and that SSYMCA planned to use the whole property and the yet to be renovated facility to provide community programs according to the principals of the YMCA. Id. at (4)(a), (b), (c), and (d).  Deborah Stuart also testified that she was aware of SSYMCA's 501(c)(3) status and the charitable nature of SSYMCA's organization through her familiarity with the programs and offerings at the outdoor facility in Hanover and the Quincy facility.    
Healthtrax faulted SSYMCA for neglecting to submit to the Assessors the amount of receipts and expenditures for the athletic property for which exemption was sought and a copy of the Federal tax return reporting unrelated business income taxable under IRC § 511. Id. at (4)(f) and (g).  Since the facility was not open for business due to renovation until November of 1998, documentation of receipts and expenditures was non-existent at the time of the exemption determination in June 1998.  Further Ms. Stuart testified that she was aware that SSYMCA had filed Federal tax returns indicating Federal charitable status.  Based on the testimony presented, the Board found and ruled that the Assessors properly considered the available information under 830 CMR 59.5.1 (4), and Healthtrax failed to prove that, under the circumstances, the Assessors' decision to exempt the subject property lacked factual basis, or the process of allowing the exemption was improper or inadequate.  Schlaiker v. Board of Assessors of Great Barrington, 365 Mass. at 245.         
B.  Factors Indicating Exemption - 830 CMR 59.5.1 (3) 
Healthtrax argued that SSYMCA failed to demonstrate entitlement to the exemption under the factors listed at 830 CMR 59.5.1 (3).  The regulation states that the organization must show one or more of the factors.  Among the factors listed is that the "property is used at all times to further a charitable purpose or serve a basic public need." 
Healthtrax asserted that the Mill Pond facility was not utilized to further a charitable purpose and did not serve a basic public need because it was not open to the general public but only to dues-paying members.  Further, Healthtrax contended that there was no evidence to show that charges for the activities were less than the direct expenses of providing the activities. 
It is well settled that membership or dues requirement does not destroy the charitable nature of an organization.  


"The element of indefiniteness in the recipients of a bounty is of course essential to the character of a public charity.  But the privilege of membership is open to all upon the payment of a moderate fee, without any other restriction . . ."  Little v. City of Newburyport, 210 Mass. 414, 417-418 (1912).  SSYMCA demonstrated that membership is open to all, and those who could not afford the fee could apply for financial aid programs.
  The Board found and ruled that Healthtrax did not demonstrate that the class of people eligible for membership was limited or that SSYMCA should not be classed a public charity.  Id.  The Board further found and ruled that Healthtrax did not prove that the dues requirement destroyed the charitable nature or operation of the Mill Pond facility.  Rather, the Board found and ruled that SSYMCA showed that it did not limit its membership, was a public charity, and operated the Mill Pond facility in furtherance of its charitable purpose.
It is also well-settled that the recognition of profit does not destroy classification as a public charity.  Assessors of Lancaster v. Perkins School, 323 Mass. at 422.  SSYMCA showed that all revenue was returned to the organization to promote its programs and operations.  As such, the Board found and ruled that SSYMCA's purpose in operating the Mill Pond facility was not, as Healthtrax asserted, profit seeking. 
The fundamental issue under G.L. c. 59, § 5, cl. 3, and accordingly, under 830 CMR 59.5.1(3), is whether SSYMCA occupied the Mill Pond facility in furtherance of its exempt purposes.  The Board found and ruled that Healthtrax failed to prove that SSYMCA's occupation was for other than its charitable purposes.  Accordingly, the Board found and ruled that Healthtrax also failed to demonstrate that the Assessors made an improper decision under the regulatory guidelines.  At any rate, the Board found and ruled that SSYMCA demonstrated that it occupied the Mill Pond facility in all respects in furtherance of its charitable purpose.
Factors Indicating Taxation - 830 CMR 59.5.1 (5)
Finally, Healthtrax asserted that the Mill Pond facility possessed all three of the factors indicating taxation under 830 CMR 59.5.1 (5).  These factors include that the taxpayer (Healthtrax) conducts a commercial activity within ten miles of the athletic property of the charitable organization, that the activity occurring at the charity's athletic property is in "direct competition" with the taxpayer's "similar activity or property," and that the charity charges an admission fee for use of the athletic property which warrants "further investigation" into profit and charitable utilization.  The regulations state that these factors merely provide a "basis for a[n assessors'] determination that an athletic property of a charitable organization is taxable."  830 CMR 59.5.1 (5).  Healthtrax did not establish a "direct competition" with its facility, and "further investigation" into profit and charitable utilization revealed that SSYMCA used the facility in furtherance of its charitable purpose and any profit was derived from charitable donations and government grants.  Further, all profits reverted to its charitable mission and did not inure to the benefit of SSYMCA shareholders, of which there were none anyway.  The Board found and ruled that the Assessors considered the facts presented to them, and did not err in determining that SSYMCA utilized the entire Mill Pond facility to further its charitable purpose. 

CONCLUSION
For the foregoing reasons, the Board found and ruled that Healthtrax did not sustain its burden of proof in challenging the Assessors' decision to grant to SSYMCA's Mill Pond facility an exemption from property tax based on charitable use. 
The Board further found and ruled that if the burden of proof had been on SSYMCA to show its eligibility for the property tax exemption, it did so.  Accordingly, the Board issued a decision for the appellee.

					The Appellate Tax Board



				By:______________________________
				    Abigail A. Burns, Chairman



A true copy,


Attest:_______________________
    Clerk of the Board
									

 Appellants.
 Respectively, Appellee and Intervenor.
 On January 31, 2000, Healthtrax, Inc. amended its petition to add Hanover Club Properties, Inc. as a party.  Amendment was necessary for jurisdiction, as the statute requires that the competitor be "subject to the tax imposed by this chapter."  G.L. c. 59, § 5, cl. 3(b).  Hanover Club Properties not only was the "person subject to tax," but also was the entity that paid the tax.  
 The witnesses testified in a different order than that which is reported in these findings of fact.  
 SSYMCA's three branch facilities were located in Hanover, Quincy and Sandwich.  
 Tae kwon do classes were open to individuals of all ages.
 The factors include: minimal gross revenue; no direct competition; charitable direct user; basic public need; and low cost facility.  The YMCA is listed as an example of a low-cost facility.

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ATB 2001 -  367