228 Conn. 375 | Conn. | 1994
The issue in this property tax appeal is whether a nonprofit corporation that manages investment funds solely for tax exempt schools, colleges and universities is itself eligible for the tax exemption that General Statutes § 12-81 (7)
The facts relevant to this appeal are undisputed. The taxpayer is a New York nonstock corporation that, since 1971, has pooled the endowment or other investment funds of nonprofit private schools, colleges and universities in order to maximize investment returns for the participating educational institutions. The taxpayer has been able to generate enhanced investment income because the size of the total investment pool affords the taxpayer access to professional investment advice at a cost lower than that which would otherwise be charged to each participating educational institution individually. Only educational institutions benefit from the taxpayer’s investment activities, and the
The taxpayer has total assets approximating $12 billion. The chief executive officer of the taxpayer earns an annual salary of approximately $500,000, and its top eight executives earn annual salaries totaling $1,200,000.
In 1985, the taxpayer moved its operations from the state of New York to this state. Its principal office and place of business are now located in the defendant town. In 1988, the taxpayer’s real property was assessed for tax purposes at a value of $799,610, and its personal property, consisting primarily of office equipment and computers, was assessed at $280,020. Calculated on the basis of these assessments, the taxpayer’s annual tax bill for 1989 was approximately $8500.
The trial court concluded that the taxpayer had failed to prove that it is “a charitable institution within the meaning of the exemption statute [§ 12-81 (7)], as one organized and operating exclusively for charitable purposes.” Starting from the principle that a tax exemption is an act of legislative grace that must be strictly construed against the taxpayer, the trial court emphasized the significance of two facts: (1) the taxpayer is a corporate entity distinct from the participating educational institutions that it serves; and (2) the taxpayer charges the participating educational institutions a fee for the services that it renders. Accordingly, the trial court rendered judgment for the town.
In its appeal, the taxpayer continues to assert its claim for a property tax exemption under § 12-81 (7).
Resolution of the taxpayer’s claim for a tax exemption depends upon the proper construction of the language of § 12-81 (7). The provision of I.R.C. § 501 (f) that entitles the taxpayer to be treated as a charitable organization applies only “[f]or purposes of this title” and does not, therefore, confer an automatic state tax exemption upon the taxpayer. (Emphasis added.) See Waterbury First Church Housing, Inc. v. Brown, 170 Conn. 556, 558-59, 367 A.2d 1386 (1976). As a matter of .state law, the legislature bears the responsibility for establishing a proper balance between two worthy but competing policy goals: the protection of local tax revenues and the advancement of the charitable goals of corporate adjuncts to educational institutions. To ascertain the intention of the legislature with respect to a tax exemption, we employ three overlapping presumptions. “First, statutes that provide exemptions from taxation are a matter of legislative grace that must be strictly construed against the taxpayer. Second, any ambiguity in the statutory formulation of an
Although § 12-81 (7) establishes an exemption from local property taxes for “a corporation organized exclusively for . . . educational ... or charitable purposes,” this section contains no definition of what constitutes such a corporation. We must, therefore, inquire whether related provisions elsewhere in the General Statutes shed light on the scope of the § 12-81 (7) exemption. “Because the legislature is always presumed to have created a harmonious and consistent body of law, the proper construction of any statute must take into account the mandates of related statutes governing the same general subject matter.” Bart & Bogue Co. v. Slosberg, 202 Conn. 566, 575, 522 A.2d 763 (1987); Felia v. Westport, 214 Conn. 181, 187, 571 A.2d 89 (1990); State v. West, 192 Conn. 488, 494, 472 A.2d 775 (1984); Connecticut Light & Power Co. v. Costle, 179 Conn. 415, 422, 426 A.2d 1324 (1980).
For present purposes, a definition of eligibility for exemption from property taxes under § 12-81 (7) may be inferred from the provisions of General Statutes § 12-89a, which sets out the procedures that govern the pursuit of such claims. The section states: “Any organization claiming exemption from property tax in any municipality in which real or personal property belonging to such organization is situated, which exemption is claimed with respect to all or a portion of such property under the provisions of any of the subdivisions (7), (8), (10), (11), (12), (13), (14), (15), (16), (18), (27), (29),
Section 12-89a specifically limits a charitable or educational exemption under § 12-81 (7) to organizations that are exempt under I.R.C. § 501 (c) or (d). The cross reference in § 12-89a to specific subsections of I.R.C. § 501, rather than to I.R.C. § 501 in its entirety, parallels a similar usage found throughout the General Statutes. In numerous other circumstances in which the legislature has granted special exemptions from taxation or regulation to nonprofit organizations, eligibility for the state exemptions has been conditioned, in the first instance, on the nonprofit organizations’ federal exemption under I.R.C. § 501 (c). See, e.g., General Statutes §§ 7-185a (b), 12-412 (29), 12-498 (a) (14) and (15), 36-435Z, and 52-557m.
In the absence of a special state statute, however, the taxpayer’s current fee structure undermines its claim to a charitable exemption as a matter of state law. As a result of its fee collections, the taxpayer is a self-supporting entity. For the purpose of determining eligibility for a property tax exemption, a Connecticut property owner is not “a corporation organized exclusively for . . . charitable purposes”; General Statutes § 12-81 (7); if it is entirely self-supporting. United Church of Christ v. West Hartford, supra, 719-22; Waterbury First Church Housing, Inc. v. Brown, supra, 562-65. In accordance with these cases, the validity of which the taxpayer does not challenge,
The judgment is affirmed.
In this opinion the other justices concurred.
General Statutes § 12-81 provides in relevant part: “exemptions. The following-described property shall be exempt from taxation . . .
“(7) property used for scientific, educational, literary, historical or charitable purposes, exception. Subject to the provisions of sections 12-87 and 12-88, the real property of, or held in trust for, a corporation organized exclusively for scientific, educational, literary, historical or charitable purposes or for two or more such purposes and used exclusively for carrying out one or more of such purposes and the personal property of, or held in trust for, any such corporation, provided (a) any officer, member or employee thereof does not receive or at any future time shall not receive any pecuniary profit from the operations thereof, except reasonable compensation for services in effecting one or more of such purposes or as proper beneficiary of its strictly charitable purposes, and provided (b) in 1965, and quadrennially thereafter, a statement on forms prepared by the secretary of the office of policy and management shall be filed on or before the last day required by law for the filing of assessment returns with the local board of assessors of any town, consolidated town and city or consolidated town and borough, in which any of its property claimed to be exempt is situated. . . .”
General Statutes § 12-119 provides in relevant part: “remedy when PROPERTY WRONGFULLY assessed. When it is claimed that a tax has been laid on property not taxable in the town or city in whose tax list such property was set, or that a tax laid on property was computed on an assessment which, under all the circumstances, was manifestly excessive and could not have been arrived at except by disregarding the provisions of the statutes for determining the valuation of such property, the owner thereof or any lessee thereof whose lease has been recorded as provided in section 47-19 and who is bound under the terms of his lease to pay real property taxes, prior to the payment of such tax, may, in addition to the other remedies provided by law, make application for relief to the superior court for the judicial district in which such town or city is situated. . . .”
The taxpayer’s suit as originally filed challenged the validity of assessments on the date of October 1,1988. Subsequent amendments to the pleadings enlarged the taxpayer’s challenge to encompass as well the validity of the assessments on the dates of October 1, 1989, October 1, 1990, and October 1, 1991.
The parties disagree about whether the salaries paid to the taxpayer’s officers meet the requirement of General Statutes § 12-81 (7) (a) that “any officer, member or employee [of the taxpayer seeking an educational or charitable exemption] does not receive or at any future time shall not receive any pecuniary profit from the operations thereof, except reasonable compensation for services in effecting one or more of such purposes or as proper beneficiary of its strictly charitable purposes . . . .” The trial court made no finding on this issue, which has become moot as a result of our disposition of this appeal.
By virtue of amendments to the pleadings, the taxpayer has also challenged its taxability with regard to assessments dated October 1,1989, October 1, 1990, and October 1, 1991.
Title 26 of the United States Code, § 501 (f) provides: “cooperative SERVICE ORGANIZATIONS OF OPERATING EDUCATIONAL ORGANIZATIONS.—
“For purposes of this title, if an organization is—
“(1) organized and operated solely to hold, commingle, and collectively invest and reinvest (including arranging for and supervising the performance by independent contractors of investment services related thereto) in stocks and securities, the moneys contributed thereto by each of the members of such organization, and to collect income therefrom and turn over the entire amount thereof, less expenses, to such members,
“(2) organized and controlled by one or more such members, and
“(3) comprised solely of members that are organizations described in clause (ii) or (iv) of section 170 (b) (1) (A)—
“(A) which are exempt from taxation under subsection (a), or
“(B) the income of which is excluded from taxation under section 115 (a), then such organization shall be treated as an organization organized and operated exclusively for charitable purposes.”
The taxpayer’s sales and use tax exemption follows from chapter 219 of the General Statutes, entitled “Sales and Use Taxes.” General Statutes § 12-406 et seq. General Statutes § 12-412 (8) is one example of an exemption for charitable and religious organizations that the legislature chose not to limit to organizations that are exempt under I.R.C. § 501 (c) or (d).
The taxpayer urges that its tax treatment should be analogized to that afforded to the United Way. The record contains no information about the financial relations between the United Way and its beneficiaries, or about the tax status of real or personal property owned by the United Way. In the absence of such a factual record, we are not persuaded that we should assume a functional identity between a corporation that acts as a collecting agency for contributions to charitable organizations and a corporation that acts as an investment advisor of pooled investment and endowment funds for charitable organizations.