American College Testing Program, Inc. v. Forst

• Citation: 182 N.W.2d 826
• Decision Date: 15 December 1970
• Docket Number: No. 54195,54195
• Parties: AMERICAN COLLEGE TESTING PROGRAM, INC., Appellant, v. William H. FORST, as Director of the Department of Revenue of the State of Iowa, Appellee.
• Court: Iowa Supreme Court

Page 826

182 N.W.2d 826

AMERICAN COLLEGE TESTING PROGRAM, INC., Appellant, v. William H. FORST, as Director of the Department of Revenue of the State of Iowa, Appellee.

No. 54195.

Supreme Court of Iowa.

Dec. 15, 1970.

Robert W. Jansen, of Trott & Jansen, Iowa City, and John R. Mackaman, of Dickinson, Throckmorton, Parker, Mannheimer & Raife, Des Moines, for appellant.

Richard C. Turner, Atty. Gen., and Stephen J. Peetosa, Asst. Atty. Gen., for appellee.

STUART, Justice.

This is an action for a declaratory judgment. The only issue presented on this appeal is whether plaintiff is exempt from the payment of sales and use tax as a 'private nonprofit educational institution' under the provisions of section 422.45 subsection 8, 1966 Code as amended by chapter 349, Acts of the 62nd General Assembly. The trial court denied the exemption. We affirm.

American College Testing Program, Inc. (ACT) is a corporation not for pecuniary profit organized under chapter 504, 1966 Code. Since May 1965 it has held an exemption from federal income tax under section 501(c)(3) Internal Revenue Code. It is a membership corporation composed of one member from each of the 33 participating states. Each member is elected by the vote of all educational institutions and organizations within the state which participate in the ACT program. The members meet once a year and elect a 12 man board of trustees.

ACT's primary purpose is to assist college bound high school students and the educational institutions in achieving the best possible match between a student's potential, interests and ambitions on one hand and the available educational facilities on the other. It has prepared a battery of tests for the student covering English, mathematics, social studies and natural sciences. A personal profile questionnaire is also used to give the institution a better picture of the student by assisting him in presenting himself as fully and completely as possible in aspects that test scores would not be likely to reflect.

The answer sheets are sent to Iowa City where they are scored and analyzed. Copies are sent to the student through the guidance counselor of his high school and to three colleges of his choice. The test scores help the student decide which college to attend and what courses to take. It aids the college in determining the student's chances of succeeding in its program and in guiding his course of study. It is a useful tool for the high school guidance counselor and helps the high school evaluate its own programs in the tested areas.

The only similar organization is the College Entrance Examination Board, which is designed to furnish similar services to students seeking admission to highly selective colleges and universities. ACT is programmed for state supported universities and colleges and less selective private educational institutions. ACT is financed by the $6 fee each student pays to take the tests. During the 1968--1969 fiscal year 950,000 students were tested.

There are no students, teachers or classes in ACT. It maintains a small but adequate library in the area of educational measurement. It has an invitational summer program for post-doctoral fellows who are paid $3000 to pursue a research program using ACT's facilities, library and amassed data.

I. The only serious question before us is whether ACT is an 'educational institution' within the meaning of section 422.45(8), Code of Iowa.

Taxation is the rule and exemption from taxation the exception. Therefore exemption statutes must be strictly construed and any doubts must be resolved against the exemption and in favor of taxation. The burden is on the one claiming the exemption to clearly show his right thereto. South Iowa Methodist Homes, Inc. v. Board of Review (1965), 257 Iowa 1302, 1304, 136 N.W.2d 488, 489; Trinity Lutheran Church v. Browner (1963), 255 Iowa 197, 200, 121 N.W.2d 131, 133; Odle v. Iowa State Tax Commission (1955), 246 Iowa 1241, 1242--1243, 71 N.W.2d 584, 585; Readlyn Hospital v. Hoth (1937), 223 Iowa 341, 344, 272 N.W. 90, 91--92; Trustees of Griswold College v. State of Iowa (1877), 46 Iowa 275, 278; 84 C.J.S. Taxation § 225.

If we are to give this well recognized and often repeated rule anything more than lip service, we must hold ACT does not come within the exemption granted 'private nonprofit educational institutions'.

One ordinarily thinks of an educational institution as a school, college or university with students, faculty and an established curriculum. Lois Grunow Memorial Clinic v. Oglesby (1933), 42 Ariz. 98, 22 P.2d 1076, 1078, and citations; In Re Estate of Goetz (1966), 8 Ohio Misc. 143, 218 N.E.2d 483, 485. See: section 1.151--3(c) Federal Income Tax Regulations. We have broadened the concept to include libraries, Webster City v. Wright County (1909), 144 Iowa 502, 123 N.W. 193, and county school systems, McColl v. Dallas County (1935), 220 Iowa 434, 262 N.W. 824.

ACT does not fall within either of these extensions of the meaning of an educational institution. A library is a source of knowledge. It is used by the student for study and research to increase his knowledge. ACT does not offer the student such opportunity. It only tests the student to determine how much he already knows. The county school system as it existed in 1935 was an administrative adjunct to the county schools. It was directly involved in the educational process furnishing guidance to and supervision over the local school districts. No such...