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Thursday, July 30, 2009

Ind. Decisions - "Tax Court ruling affects Indiana nonprofits that rent space"

The Tax Court decision July 24th in the case of Oaken Bucket Partners, LLC v. Hamilton County Property Tax Assessment Board of Appeals and Hamilton County Assessor (ILB summary here) is the focus of a story today by Carrie Ritchie in the Indianapolis Star. Some quotes:

The Indiana Tax Court has issued a decision that could benefit nonprofits across the state.

The tax court ruled that landlords who rent property to nonprofits can qualify for property-tax exemptions. Previously, properties leased by nonprofits were not granted exemptions.

The effects could be widespread, according to two experts on tax law, but they had no information on how many nonprofits could be affected.

Nonprofits that rent ultimately will benefit because most leases require the nonprofits -- not the landlords -- to pay the property taxes, the experts say.

The ruling could cut some nonprofits a financial break, but limit the government's property tax revenues for public services.

"As more people may qualify or seek these exemptions, it puts more property tax revenue at risk," said Marc Hetzner, a partner at Krieg Devault law firm. * * *

In 2004, Oaken Bucket petitioned the county for a property tax exemption on the portion of the building it rents to Heartland Church, but the county denied the request because it said Oaken Bucket leased the property for a profit. The Indiana Board of Tax Review sided with the county, and the case went to the state's tax court.

The court ruled in Oaken Bucket's favor because the company rents space to the church at a low rate, about half of the usual market price. The court said the low rate shows the company is supporting the church's charitable and religious purposes.

This ruling could encourage other landlords who rent to nonprofits to seek a property tax exemption, said Hetzner, a tax law specialist.

Based on his analysis of the ruling, Hetzner said future exemptions will be granted on a case-by-case basis, but landlords would need to prove participation in the charitable or religious purpose of their nonprofit tenant, such as by offering lower rent.

Attorney General Greg Zoeller, who's representing the Hamilton County assessor and the county's Property Tax Assessment Board of Appeals, plans to appeal to the Indiana Supreme Court, spokesman Bryan Corbin said.

"That's not what the Supreme Court has held in the past and that's not what the legislature intended," Corbin said of the Indiana Tax Court's ruling.

Posted by Marcia Oddi on July 30, 2009 01:01 PM
Posted to Ind. Tax Ct. Decisions