James Crowley, Esq., Bureau of Municipal Finance Law

If you have ever traveled to Cape Cod, you may have heard of the Cape Cod National Golf course, an 18-hole championship golf course located in the communities of Harwich and Brewster. When the owners of the course failed to convince both towns' boards of assessors to classify the property as Chapter 61B recreational land, which would mean reduced taxes; there were appeals to the Appellate Tax Board (ATB). The ATB issued its decision this summer in the case: Cape Cod Five Cents Savings Bank and William R. Enlow as Trustees of the John R. Pfeffer Family Trust and Cape Cod National Golf Foundation, Inc. v. Boards of Assessors of Harwich and Brewster, ( ATB docket #F277365, July 17, 2009).

The trustees held title to approximately 151 acres of land of which 70 acres were located in Brewster and 81 acres were located in Harwich. About 90 acres of the subject property were used as a golf course. In addition, the Cape Cod Commission required the trustees to maintain 50 acres of the parcel as a wooded wildlife habitat. Buildings in Brewster consisted of a clubhouse, the golf pro's residence and a maintenance building. Located in Harwich were a barn, a pump house to irrigate the golf course and restroom facilities.

The trustees tried to obtain recreational classification in fiscal years 2001 to 2004. During this time frame, the trustees leased the property to the Cape Cod National Golf Club, LLC (Club) which managed the property. The parcel could only be used by members of the Club and guests at the Wequassett Inn. Both boards of assessors rejected the applications for Chapter 61B status on the grounds that the subject property was not available to the general public as required by statute. The trustees appealed to the ATB, but then signed a written agreement in August 2004 with both boards of assessors not to pursue their claims for fiscal years 2001 to 2004. The trustees also agreed in writing not to apply for Chapter 61B status in future years for so long as the golf course was presently organized.

The importance of the latter provision became apparent in September 2004 when the Club conveyed its leasehold interest in the subject property to the Cape Cod National Golf Foundation, Inc. (Foundation), which was a Florida nonprofit corporation organized in April 2004 for very general charitable purposes. The bylaws of the Foundation stated that members of the Club were to be considered non-voting members of the Foundation. Conversely, all members of the Foundation were also members of the Club. The bylaws made the golf course available only to the members of the Club and to guests of the Wequassett Inn. Even though the Foundation was technically the lessee, the Club continued to manage the golf course and received revenue from Club memberships, greens fees, charges paid by patrons of the Wequassett Inn, and sales at the pro shop and clubhouse restaurant.

By agreement, the Club had to turn over to the Foundation all revenues less operating expenses, which did not include rent or real estate taxes. Under the terms of the lease, the Foundation was then required to pay to the trustees from net revenue (1) a rental payment which was tied to the allowable depreciation figure on the cost of improvements to the golf course, and (2) real property taxes on the subject parcel. Any balance remaining after payment of rent, taxes and other expenses was to be distributed by the Foundation for charitable purposes in accordance with the Foundation's corporate charter. Notwithstanding the provisions of the charter, the Foundation donated only $1,500 to two charitable organizations for calendar years 2004 and 2005.

Having restructured business operations, the trustees and the Foundation began phase two of the campaign to win Chapter 61B recreational classification of the golf course. The two boards of assessors were once again not convinced by the Foundation and denied their applications. There were then prompt appeals by the Foundation to the ATB for fiscal years 2006 to 2008 inclusive.

M.G.L. Ch. 61B Sec. 1 grants recreational classification to land not less than 5 acres in area (1) for passive use of land if retained in substantially a natural, wild or open condition or in a landscaped condition or (2) for active use if "available to the general public or to members of a non-profit organization." All parties agreed that the property was being used as a golf course. The assessors contended that only members of the Club and guests of the resort were granted access to the golf course. The assessors argued that the lease to Foundation was made solely to support a claim for M.G.L. Ch. 61B status and had no effect on the day to day operations of the golf course which continued to be managed by the Club.

The ATB agreed with the assessors. According to the ATB, the sole purpose of creating the Foundation and transferring the leasehold to it was to attempt to qualify for recreational classification. Furthermore, other than the $1,500 donation, there was no evidence the Foundation performed any other charitable activities during the fiscal years in question. Under the facts presented, the ATB ruled that the subject property did not qualify under M.G.L. Ch. 61B since it was not open to the general public or to members of a nonprofit organization within the mean of M.G.L. Ch. 61B.

The Foundation advanced a second argument contending that the parcel did meet the M.G.L. Ch. 61B requirements since the land was being kept in a natural, wild or open condition or landscaped. In the ATB's view, M.G.L. Ch. 61B Sec. 1 sets forth specific conditions for classification of land used for golfing and other recreational purposes and these conditions must be satisfied. The Foundation, therefore, could not avoid these conditions by relying on the general language of the statute.

Consequently, the ATB ruled in favor of the boards of assessors. This legal dispute continues, however, since the Foundation has appealed to the Appeals Court.