Krupp Place 1 Co-op, Inc. and Krupp Place 2 Co-op, Inc. v. Board of Review of Jasper County, Iowa
801 N.W.2d 9
Iowa2011Background
- Krupp Place 1 Co-op, Inc. and Krupp Place 2 Co-op, Inc. are housing cooperatives organized under Iowa Code chapter 499A, owning real estate with 24-unit buildings.
- Larry and Connie Krupp hold all membership interests and have certified ownership in each cooperative, plus proprietary leases for half the units.
- The Krupps sublease to subtenants who live in the apartments; rent from subtenants funds the Krupps’ lease obligations and cooperative expenses.
- Cooperatives are not tax-exempt or-for-profit; they file subchapter S elections, and net income is reported by the Krupps but not distributed.
- The Jasper County Assessor classified the properties as commercial for 2008 real estate tax; the Board of Review kept that classification after appeal.
- The district court initially ruled they were commercial, then, after a Rule 1.904 motion and additional evidence, concluded the properties should be residential under Iowa law, and the Board appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 441.21(11) requires residential classification for co-ops. | Krupps—organizational test grants residential status. | Board—no; analysis should be based on actual use. | Residential classification required by statute. |
| Whether the actual-use test applies to 499A cooperatives. | Statute uses organizational test; not required to show actual use. | Actual use dictates tax treatment to prevent abuse. | No actual-use test; 441.21(11) imposes organizational test. |
| Whether piercing the corporate veil is warranted to defeat residential status. | Veil piercing not shown; nonprofit operation per 499A. | Possible if cooperative is sham/for-profit. | veil piercing not established; not warranted. |
Key Cases Cited
- City of Newton v. Board of Review for Jasper County, 532 N.W.2d 771 (Iowa 1995) (addressed residential vs. commercial taxation under 499A (residency focus prior to amendment))
- Carroll Area Child Care Center, Inc. v. Carroll County Board of Review, 613 N.W.2d 252 (Iowa 2000) (actual-use test for charitable exemptions cited as contrast to organizational test)
- Rock v. Warhank, 757 N.W.2d 670 (Iowa 2008) (statutory interpretation: plain meaning governs)
- Fazio v. Brotman, 371 N.W.2d 842 (Iowa Ct. App. 1985) (piercing corporate veil discussion in context of corporate form)