830 CMR 59.00: LOCAL ASSESSMENT
830 CMR 59.00 is amended by adding the following section:
830 CMR 59.5.1: Athletic Property Tax Exemption - Charitable Organizations
(a) The purpose of this regulation is to set forth the information necessary and the criteria for each board of assessors to use to determine the eligibility of an otherwise exempt literary, educational, temperance, benevolent, charitable or scientific organization, for the exemption of its athletic property or a portion thereof from taxation under General Laws Chapter 59, Section 5, Third.
(b) No athletic property of such an organization is exempt for any part of the Commonwealth's fiscal year if the organization or another direct user of such property utilizes the property during the organization's fiscal year for other than a literary, educational, temperance, benevolent, charitable or scientific purpose, or other than to serve a basic public need, where such non-charitable use is in direct competition with a person, including a business enterprise, engaged in the same activity and subject to the property tax imposed under General Laws Chapter 59 on properties so used. An athletic property is taxable in a circumstance where there is a competitive commercial use of such property for part of the organization's fiscal year. In such a case, the tax imposed shall bear the same proportion to the tax which would be applicable to such property if it were taxable for the Commonwealth's entire taxable year, as the time during the organization's fiscal year for which the organization allows use of such property in a non-exempt manner bears to the total time that the athletic property is normally available for use during the organization's fiscal year.
(a) " Athletic Property". An athletic property is real or tangible personal property or a portion of property, whether indoors or out-of-doors, which an organization owns and which is designed for and primarily used for the purpose of sports, physical fitness or a similar activity involving the exercise of physical skill, agility or stamina.
(b) " Basic Public Need". Basic public need includes, but is not limited to, access of the general public to athletic property for a charge which does not exceed the direct expense incurred in conducting the activity, or access to athletic property where a similar facility, activity or property is not otherwise available to the general public. For the purpose of this definition, advertising is not a direct expense.
(c) " Charitable Organization". An organization, including a corporation,, trust or other institution, which exists to further a literary, educational, temperance, benevolent, charitable or scientific purpose within the meaning of General Laws Chapter 59, Section 5, Third, is a charitable organization.
(d) " Commercial Activity". Any activity in which an organizational direct user engages which does not further a charitable purpose, nor serve a basic public need, is commercial activity.
(e) " Direct User". A person, including an organization, who uses, or has immediate managerial control over a person who uses, athletic property is the direct user of such property.
(f) " Taxpayer". For the purpose of this regulation, a taxpayer is a person, including a corporation or trust, who owns athletic property which is subject to taxation under General Laws Chapter 59.
(3) Criteria For Determining Eligibility For Exemption. The presence of one or more of the following conditions qualifies an athletic property of a charitable organization for a tax exemption:
(a) Gross Revenue is Minimal. Where the owner, or other direct user, of an athletic property does not receive more than $2,000.00 in gross revenue from the use of the athletic property during the owner's fiscal year, the property is exempt from taxation.
(b) No Direct Competition. Athletic property which is otherwise exempt from taxation is exempt from the property tax if the activity on such property is not in direct competition with a taxpayer in the same general area conducting a similar commercial activity. If there is no similar commercial activity within ten (10) miles of the activity on the athletic property of the charitable organization, there is a presumption that the activity on such property is not in direct competition with a taxpayer engaging in similar commercial activity within the general area. The burden of overcoming the presumption of non-competition rests with the challenger to the exemption. If there is similar commercial activity within ten (10) miles of the activity on the athletic property of the charitable organization, there is a presumption that the activity on the athletic property of such organization is in direct competition with a similar commercial activity in which a taxpayer's private enterprise engages. The burden of overcoming the presumption of direct competition rests with the organization seeking the exemption.
The activity on the athletic property is not in direct competition with a taxpayer unless the organizational owner or direct user provides a facility, activity, or property which is similar to that of a taxpayer in the same general area.
(c) Charitable Direct User. Where a charitable organization, whether or not it is the owner of the property, is the direct user of athletic property, such property is exempt from the property tax if at all times at which the property is available for use, a charitable organization uses it to further a charitable purpose or to serve a basic public need. An example of such use is the use of a college's athletic property by an alumni organization in connection with normal alumni activities.
(d) Basic Public Need. Where a charitable organization which owns athletic property allows the general public to use such property in order to serve a basic public need, the athletic property is exempt from taxation.
(e) Low Cost Facilities. Where a charitable organization organized for the primary purpose of providing athletic facilities at low charge to the general public is the owner or other direct user of the athletic property, such property is exempt from taxation when so used. Examples of such organizations include the Young Men's Christian Association, Boys' Clubs and the Young Women's Christian Association.
(4) General Information Necessary To Determine Eligibility for Exemption. In order to consider whether a particular athletic property of a charitable organization is exempt from taxation, the board of assessors shall obtain at least the following information
(a) An indication of whether the charitable organization is the exclusive direct user;
(b) The name of each direct user, if the charitable organization is not the exclusive direct user;
(c) A description of the activity which each direct user, including the charitable organization, conducts on such property;
(d) A description of the degree to which each direct user controls the management and operation of the activity, and the manner in which each direct user manages and conducts the activity which occurs on such athletic property;
(e) A description of any rental or leasing agreement between the owner and the direct user;
(f) The amount of receipts from and expenditures for each athletic property for which the charitable organization seeks a tax exemption.
(g) A copy of the federal tax return reporting unrelated business income taxable under Internal Revenue Code Section 511, the Commissioner of Revenue and each board of assessors shall separate such return from all other information which a charitable organization submits to a board of assessors in order to obtain an exemption; such return is confidential within the meaning of General Laws Chapter 62C, Section 21 and of 830 CMR 62C.21.
(5) Information Necessary To Indicate That Property Is Taxable. The following facts provide a basis for a determination that an athletic property of a charitable organization is taxable:
(a) A taxpayer conducts a commercial activity for profit within a radius of less than ten (10) miles from the activity upon the athletic property of the charitable organization;
(b) The activity occurring at the charitable organization's athletic property is in direct competition with a taxpayer's similar activity or property;
(c) The charitable organization or another direct user charges an admission fee to the public, a rental or leasing fee, or other charge for participation in the activity or for direct use of the athletic property. If the relationship of the annual gross receipts to operating expenses and overhead warrants further investigation, the board of assessors may request such additional information as is necessary to determine whether the activity is commercial, charitable, or in fulfillment of a basic public need.
(6) Information To Consider Before Allowing An Exemption. The following information provides a basis for a determination that an athletic property is exempt from the property tax:
(a) A description of the relationship between the direct user's administration and promotion of the activity, and the direct user's primary program for administration and promotion of activities in which it normally engages in furtherance of a charitable purpose or in fulfillment of a basic public need;
(b) Whether a direct user's activity is open to the public;
(c) Whether such publicly accessible activity serves a basic public need and, if so, a description of what the basic public need is;
(d) Whether there is a membership requirement for participation in the activity on the athletic property and, if so, a description of the membership requirement and its relationship to the following:
(i) A charitable purpose, or
(ii) A basic public need.
(e) Whether an individual who participates in such activity on the athletic property receives instruction, and the relationship between the instruction or uninstructed activity and the following:
(i) A charitable purpose; or
(ii) A basic public need.
(7) Determination of Tax. In order for the board of assessors to determine the amount of any tax, the organization applying for the exemption shall provide the following information:
(a) The total number of days that an athletic property was normally available for use during the organization's fiscal year last preceding the January 1 date of assessment of said property;
(b) The number of days the athletic property was in use during such fiscal year for a purpose which is commercial rather than either charitable or in fulfillment of a basic public need.
If an athletic property is in use for a commercial purpose for any part of a day, such use is a full day of commercial use, and if such property is normally available for use for any purpose for part of a day, this is a full day's availability. The tax is computed by multiplying the percentage which the number of days of commercial use represents in relation to the total number of days that such property was normally available for use for any purpose during such fiscal year by the amount of tax which would result if the property were subject to tax for the entire year.
(8) Emergency Provision. An organization which failed to submit the information required herein before March 1, 1978 or April 1, 1978, as applicable, shall not lose its exemption from property tax for failure to attach such information to its Form 3 ABC.
(9) Relationship to Prior Law. All other provisions of law relating to the taxation of athletic property of a charitable organization remain in effect, except in so far as modified by Chapter 992 of the Acts of 1977.
(10) Severability. If the Appellate Tax Board or any court of competent jurisdiction holds any provision of this regulation or the application thereof to be invalid or unconstitutional, such invalidity or unconstitutionality shall not affect the validity or constitutionality of any remaining provision of this regulation or of its application to a person or circumstance other than to those which the Appellate Tax Board or such court holds invalid.
Jones Corporation, a charitable corporation which manages and operates Jones University for the purpose of providing liberal arts education at the undergraduate and graduate levels, is the owner of twenty (20) indoor clay tennis courts.
During the University's fiscal year ending September 30, 1977, the tennis facility was open for 350 days. The Girl Scouts and Boy Scouts of the City of Notax were the exclusive users of the facility for 28 days during the summer at a fee of $3.00 per court/per hour.
The facility was open to the public, at no charge, for 40 Sundays during the year. During its fiscal year the University rented the facility to business enterprises which paid $15 per court/per hour to use the facility 4 hours per day, for 35 days, in order to hold professional indoor tennis tournaments. The two fee-generating activities provided gross revenues of approximately $50,000. The University students and staff used the facility for the remainder of the available time. Jones' indoor tennis courts are all located in Notax, Massachusetts. Less than ten (10) miles away, also in Notax, Massachusetts, Racket and Net, Inc., a privately owned business corporation, rents its indoor clay courts at $21.50 per court/per hour for professional tennis tournaments.
Prior to the Commonwealth's fiscal year 1979, the City has not assessed a tax on the property which houses the indoor courts of Jones Corporation. Racket and Net, Inc. pays a property tax for its facilities.
Jones Corporation fails to show that the professional tournament activity furthers any charitable purpose or serves a basic public need.
The City assesses a tax for the Commonwealth's fiscal year 1979 on Jones' indoor tennis facility in an amount which is ten (10) per cent of the tax which the assessed value of the property would require, if the tax were for the full year.
The facility is assessed at $1,000,000 and the tax rate is $30.00 per thousand. The tax on this athletic property for the Commonwealth's fiscal year 1979 is computed as follows:
Percentage of [ Days of commercial use ] x
Commercial Use [Days available for any use]
Full year tax liability [Assessed value x tax rate] = Tax
[ 35 days]
10% [350 days] x $30,000 [$1,000,000 x $30/1000] = $3,000
Greenacre College, a charitable corporation, which provides liberal arts education, with an emphasis on scientific and technological research, at the undergraduate level, is the owner of an ice hockey rink in Cool City, Massachusetts.
The college keeps the facility open and in use twenty (20) hours a day, 300 days a year. Its fiscal year is the same as the calendar year. The college uses the rink for its interscholastic and intramural sports program for 210 days per year. The Cool City High School and the Junior High School use the rink for a total of 60 days per year. The college charges them a $15 per hour rental fee to cover the expenses of maintenance and operation of the rink. On the remaining 30 days the rink is open free of charge to residents of Hodgeville, a mixed income community which is within Cool City and which surrounds Greenacre College.
The Cool Skaters Corporation, owner of the professional Cool Skaters Hockey Team, owns a rink of similar size in Cool City. The rink is about five (5) miles from Greenacre College. The Cool Skaters Corporation holds professional hockey games at its rink, charge $10 admission to the games, $5 an hour for general ice skating and $65 an hour to all groups which seek to rent the facility.
Greenacre College uses its rink for its general educational purposes and for meeting a basic public need for having access to a hockey rink at a nominal charge or at no charge.
The Greenacre College hockey rink is exempt from the property tax.
Emergency Regulation: 6/14/78
Date of Promulgation: 9/28/78