James Crowley, Esq.,
Bureau of Municipal Finance Law

There were two relatively recent Appellate Tax Board (ATB) decisions regarding charitable exemptions. The first case is Trustees of Boston College v. Board of Assessors of Boston, which was decided in February of this year. The case concerns Boston College and its new Brighton campus, which was purchased from the Archdiocese of Boston.

Boston College (BC) purchased 43 acres of the St. John's Seminary property in June 2004 for $99 million. Additional land was acquired from the Archdiocese in 2006 and 2007, but this case concerns the land sold to BC in June 2004. During its ownership by the Archdiocese, this property had been exempt from tax. As you might know, July 1 is the qualification date for exemption. The City of Boston decided to place BC's new campus on the tax rolls as of July 1, 2004. The City of Boston taxed the Foster Street portion of the Brighton campus for fiscal year 2005. For fiscal years 2005 to 2007 inclusive the City of Boston also taxed the Commonwealth Avenue portion of the land. For these three fiscal years BC paid the taxes on both parcels, and filed timely abatement applications which were not approved. Further appeals were then made to the ATB. BC timely filed its form of list ( Form 3ABC pdf format of 3abc.pdf
) together with the public charities form ( form PC) for each of these fiscal years. Hence, BC satisfied all the procedural requirements for exemption.

The City of Boston taxed BC's Brighton campus on the theory that BC had no certain fixed plans for the recently acquired property. Secondly, the City contended that any present use of the property by BC was trivial and incidental and did not justify an exemption. Third, the City argued that an exemption should be denied on policy grounds citing the large impact which tax exempt organizations have on the City's tax base.

The ATB recognized that for the parcel to be exempt, BC would have to satisfy the substantive tests for a charitable exemption under Chapter 59 Section 5 Clause 3. Clause 3 exempts real estate owned by a charitable organization and occupied by it or by another charitable organization for its charitable purposes. Alternatively, Clause 3 exempts real 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. Relying on the evidence presented, the ATB ruled that the Brighton parcels were owned and occupied by BC for charitable purposes. Consequently, it was not necessary for the ATB to decide whether BC had removed its operations to the site within two years of its purchase.

Courts in the Commonwealth have defined the term "occupancy" to mean use for the purpose for which the charitable organization was formed. In numerous decisions Massachusetts courts have given great deference to a charitable organization's use of property provided the organization acts in good faith and not unreasonably. According to the ATB, strict necessity does not govern what should be considered a charitable use of property. In the case at hand, evidence was presented that BC students used the vacant land on the Brighton campus for informal recreational activity. The college's rugby and track teams also used the property for training. In accordance with an earlier Supreme Judicial Court decision of Emerson v. Trustees of Milton Academy, 185 Mass. 414 (1904) which concerned the recreational use of school property, the ATB held that BC's use of the Brighton land promoted physical training and social and moral advancement of the students. The ATB therefore concluded this portion of the land was occupied for charitable purposes.

In discussing the Archbishop's former residence, the ATB determined the building was used in the fiscal years in question for one fundraising event and several trustees' meetings. On this evidence, the ATB ruled these uses of the building were in furtherance of BC's charitable purpose.

With regard to the parking lots, the ATB found that the Foster Street lot was used by BC employees who worked on the Brighton campus. In addition, paved areas on the Commonwealth Avenue side of the site were used for overflow parking for home football games, parents' weekend and the college's annual commencement exercises. In the ATB's view, use of all the Brighton parking lots facilitated college operations and furthered the college's charitable purposes.

Evidence was also presented that BC used portions of the Foster Street parcel and the Commonwealth Avenue/Residence parcels to maintain open, green space and serve as a buffer zone between the college and the Brighton residential neighborhood. In the ATB's view, this green space promoted the "aesthetic advancement" of the college; minimized any town-gown conflict, and thereby constituted a charitable occupancy.

The ATB held that BC had used the Brighton property for charitable purposes for the fiscal years in question. It did not matter that the uses may have been temporary or that BC's plans for the property continued to evolve over the years. The ATB also rejected the City's claim that BC's use of the property was trivial and did not warrant exemption. On the contrary, the ATB held that BC's various uses of the Brighton campus had advanced the charitable purposes of the college in a meaningful way. The ATB also dismissed the city's policy argument that granting a charitable exemption would undermine the City's tax revenues. According to the ATB, such policy arguments should be addressed to the Legislature. In fact, however, the Brighton property had been exempt for decades while it had been owned by the Archdiocese, and continuing the exemption under BC ownership would not result in any further decrease of the City's tax base.

Consequently, the ATB held that the Brighton campus was totally exempt under Clause 3 and BC received abatements and refunds for the years involved.

On the same date as this case was decided, the ATB rendered another charitable exemption decision entitled Bridgewater State College Foundation v. Board of Assessors of Bridgewater.

Bridgewater State College Foundation is a Massachusetts charitable foundation formed in 1984 under Chapter 15A of the General Laws for the exclusive benefit of Bridgewater State College. The Foundation owned six parcels of land which were contiguous to Bridgewater State College. The Town of Bridgewater's assessors taxed the parcels for fiscal years 2007 and 2008. For FY 2007 the Foundation paid the taxes and followed the ordinary abatement route. For FY 2008 the Foundation chose not to pay the taxes and filed a direct appeal to the ATB pursuant to Chapter 59 Section 5B. Form 3ABC and the PC form were filed for both fiscal years.

What is interesting about this case is the discussion of the term "occupancy." As discussed in the BC case, a parcel must be owned by a charitable organization and occupied by that charitable organization or by another charitable organization for its charitable purposes in order to enjoy exemption under Clause 3. The Bridgewater assessors taxed the Foundation's parcels because they were occupied by Bridgewater State College, which is a governmental entity and not a charitable organization as required by Clause 3.

The Foundation's vacant parcels were used for recreational purposes by students and student groups. The buildings owned by the Foundation were used as offices by the Foundation itself or were used by staff of Bridgewater State College. Regarding all the parcels, the ATB held there was occupancy by the Foundation in furtherance of its charitable purpose. The ATB blurred the ownership/occupancy test by holding that it does not matter which persons or entity uses the property, "so long as such inhabitation or use is consistent with the purpose of the charitable organization that owns the property." The ATB used a functional analysis to determine eligibility for exemption. Broadly reading the statute and prior court decisions, the ATB held that a parcel is exempt under Clause 3 "so long as it is used to further the organization's charitable purpose." In this case, the ATB believed denial of the charitable exemption would frustrate the purpose of Clause 3.

Consequently, the Foundation was granted the charitable exemption but it remains to be seen whether the Supreme Judicial Court will so apply a functional analysis test in other charitable exemption cases.