Bartholomew Cnty. Assessor v. Hous. Partnerships, Inc.

151 N.E.3d 821

BARTHOLOMEW COUNTY ASSESSOR, Petitioner,

v.HOUSING PARTNERSHIPS, INC., Respondent.

Cause No. 18T-TA-00021

Tax Court of Indiana.

Filed August 3, 2020

ATTORNEYS FOR PETITIONER: MARILYN S. MEIGHEN, ATTORNEY AT LAW, Carmel, IN, BRIAN A. CUSIMANO, ATTORNEY AT LAW, Indianapolis, IN

ATTORNEYS FOR RESPONDENT: MICHAEL N. RED, REBEKAH L. PHILLIPS, MORSE & BICKEL, P.C., Indianapolis, IN

WENTWORTH, J.

The Bartholomew County Assessor appeals the Indiana Board of Tax Review's final determination that Housing Partnerships, Inc. qualified for a charitable purposes exemption during the 2008, 2010, 2012, 2014, and 2016 tax years.¹ Upon review, the Court affirms the Indiana Board's final determination.

FACTS AND PROCEDURAL HISTORY

During the late 1980s, members of an adult Sunday school class of the First Presbyterian Church in Columbus, Indiana discussed how they could animate the biblical principle that they were "blessed to be a blessing to others in all eyes." (See Cert. Admin. R. at 4278, 4918-19.) After studying their community, they determined that there was a need for affordable housing and home rehabilitation services. (See Cert. Admin. R. at 4919.) Consequently, they solicited donations and began to rehabilitate the homes of people who, due to their age, physical condition, or financial means, were unable to do the work themselves. (See Cert. Admin. R. at 4278, 4919-20.) In 1990, they organized Housing Partnerships as an Indiana not-for-profit corporation.² (See Cert. Admin. R. at 1147-52, 4920.)

The founders organized Housing Partnerships exclusively for charitable purposes, declaring its "mission [was] to help neighbors rebuild their neighborhoods and improve their quality of life, with a primary focus on developing affordable housing." (See Cert. Admin. R. at 1150, 4278, 5062-65.) To further that mission, Housing Partnerships operates several programs, including 1) a homeownership program for low-income, first-time homebuyers; 2) a home construction program that provides various development, construction, and repair services on properties owned by municipalities, other not-for-profit organizations, and the elderly; and 3) a home rental program that provides affordable housing for low-income individuals and families. (See, e.g., Cert. Admin. R. at 1168, 4922-24, 4939-40, 5075-87, 5099-101, 5188-89.) Housing Partnerships funds its programs with the income it receives from donations, public and private grants, and the sale and rental of its properties. (Compare, e.g., Cert. Admin. R. at 4930 with Cert. Admin. R. at 1175, 1239, 1446, 1452, 1479, 1485-86.) (See also, e.g., Cert. Admin. R. at 5073-74, 5081-82, 5156-57.) This case concerns only Housing Partnerships' home rental program. (See, e.g., Cert. Admin. R. at 4922-23, 5188-90, 5195-96.)

During the years at issue, Housing Partnerships owned an office building, vacant lots, and several residential properties (i.e., single family homes, duplexes, and small apartment buildings) in both Columbus and Hope, Indiana (Bartholomew County). (See Cert. Admin. R. at 4080-226.) Under its home rental program, Housing Partnerships rented its residential properties (or the units in them) to individuals whose annual incomes were at or below 60% of the area median income (adjusted for family size).³ (See Cert. Admin. R. at 4939-40.) Its rental rates, which were annually verified, typically corresponded to 30% or less of an individual's or family's income. (See Cert. Admin. R. at 3058-60, 3072, 3074-79, 4964, 4996-97, 5046, 5048.)

Housing Partnerships filed Applications for Property Tax Exemption on its office building, vacant lots, and a varying number of its residential properties for one or more of the years at issue. (See Cert. Admin. R. at 12 -55, 191-267, 426-92, 650-724, 774-1037.) The applications claimed that all or a portion of the properties, along with the personal property in the office building, were entitled to the charitable purposes exemption because the properties were used to provide housing to low-income individuals and families. (See, e.g., Cert. Admin. R. at 874-81.) The Bartholomew County Property Tax Assessment Board of Appeals denied the applications. (Cert. Admin. R. at 9 - 11, 71-190, 298-425, 516-649, 770-73.)

Housing Partnerships subsequently filed several Petitions for Review with the Indiana Board, seeking a charitable purposes exemption on 40 properties for the 2008 tax year, 61 properties for the 2010 tax year, 65 properties for the 2012 tax year, 66 properties for the 2014 tax year, and 70 properties for the 2016 tax year.⁴ (See, e.g., Cert. Admin. R. at 1 - 3, 5 - 8, 56-67, 268-84, 504-15, 729-43.) The Indiana Board conducted a two-day hearing on Housing Partnerships' petitions in August of 2017. During the hearing, Housing Partnerships claimed that it qualified for the charitable purposes exemption because, among other things, its evidence showed that:

1) the government had assumed the burden of providing affordable housing to low-income persons and families;

2) it rehabilitated residences in blighted areas and rented housing at below-market rents to people living at or below 60% of the area median income;

3) it maintained below-market rents after it was no longer obligated to do so;

4) it helped its low-income tenants become financially independent and provided them with access to credit counseling, childcare referrals, and food, clothing, and utility assistance;

5) it provided tenants with rent concessions rather than evicting them for non-payment of rent and rented to tenants with poor credit histories, non-violent criminal offenses, and prior evictions even though other landlords declined to do so;

6) it used its own funds (secured from private donations, grants, the value of volunteer time, and the sale of certain homes) to operate its home rental program; and

7) its annual audits indicated that there was no private inurement.

(See, e.g., Cert. Admin. R. at 4903-07, 4922-23, 4927-29, 4932-59, 4963-72, 4888-5017, 5021-23, 5028-32, 5046-53, 5059-65, 5161-62, 5174-76, 5249-62, 5265-73, 5314-28, 5359-60, 5362-68, 5371-72.) (See also, e.g., Cert. Admin. R. at 1443-1602 (Housing Partnerships' audited financial statements) 1603-05 (Indiana Housing and Community Development Authority's ("IHCDA") mission statement), 2036-38 (Bartholomew County Section 8 properties), 2988-3011 and 4585-4609 (rental rate reports).)

In response, the Assessor characterized Housing Partnerships' evidence as speculative and conclusory, claiming, among other things, that it failed to show that 1) the government had assumed the burden of providing affordable housing, 2) it relieved any government burden when the government provided it with substantial amounts of grants and subsidies, or 3) its rental rates were consistently below-market.

(See, e.g., Cert. Admin. R. at 4642-49, 4680-89, 5067-97, 5136-44, 5147-54, 5178-80, 5373-77, 5442-76, 5504-25, 5545-46.) Moreover, the Assessor claimed that the evidence showed Housing Partnerships was nothing more than a typical landlord because its leases gave it the same rights to evict tenants and impose late fees as landlords in general. (See, e.g., Cert. Admin. R. at 4633-47, 4688.)

On June 29, 2018, the Indiana Board issued a final determination, explaining that although this was a "close case," the totality of the evidence demonstrated that Housing Partnerships owned, occupied, and used its properties exclusively for charitable purposes during the years at issue. (See Cert. Admin. R. at 4770 ¶ 101, 4771-72 ¶ 105, 4778-79.) Specifically, the Indiana Board determined that the record evidence showed that 1) the government had assumed the burden of providing affordable housing to low-income individuals and families in Bartholomew County, 2) Housing Partnerships provided relief from human want by using its properties in a manner unlike that of a typical landlord, and 3) Housing Partnerships relieved some of the government's burden even though it received government grants and subsidies. (See Cert. Admin. R. at 4761-70 ¶¶ 76-101.)

On August 10, 2018, the Assessor initiated this original tax appeal. The Court heard oral argument on June 13, 2019. Additional facts will be supplied as necessary.

STANDARD OF REVIEW

The party seeking to overturn an Indiana Board final determination bears the burden of demonstrating its invalidity. Osolo Twp. Assessor v. Elkhart Maple Lane Assocs., 789 N.E.2d 109, 111 (Ind. Tax Ct. 2003). Accordingly, the Assessor must demonstrate to the Court that the Indiana Board's final determination is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law; contrary to constitutional right, power, privilege, or immunity; in excess of or short of statutory jurisdiction, authority, or limitations; without observance of the procedure required by law; or unsupported by substantial or reliable evidence. See IND. CODE § 33-26-6-6(e)(1)-(5) (2020).

LAW

As a general rule, all tangible property in Indiana is subject to taxation. IND. CODE § 6-1.1-2-1 (2008). Nonetheless, Indiana's Constitution provides that the General Assembly may exempt property from taxation if it is used for municipal, educational, literary, scientific, religious, or charitable purposes. IND. CONST. art. 10, § 1 (c)(1). To that end, the General Assembly enacted a property tax exemption for real and personal property that is owned, occupied, and used for charitable purposes. See IND. CODE § 6-1.1-10-16(a), (c), (e) (2008) (amended 2016).

The term "charitable purpose" is defined and understood in its broadest constitutional sense. Starke Cty. Assessor v. Porter-Starke Servs., Inc., 88 N.E.3d 814, 817 (Ind. Tax Ct. 2017). Consequently, a charitable purpose generally will be found to exist "when a taxpayer provides probative evidence to the Indiana Board showing 1) ‘relief of human want ... manifested by obviously charitable acts different from the everyday purposes and activities of man in general[ ]’ and 2) that a benefit sufficient...