Board of Assessment Appeals v. AM/FM Intern.

• Decision Date: 02 June 1997
• Docket Number: No. 95SC780,95SC780
• Citation: 940 P.2d 338
• Parties: 21 Colorado Journal 763 BOARD OF ASSESSMENT APPEALS, an agency of the State of Colorado; Mary E. Huddleston, Property Tax Administrator, Division of Property Taxation, an agency of the State of Colorado, Petitioners, v. AM/FM INTERNATIONAL, Respondent. . Banc
• Court: Colorado Supreme Court

Page 338

940 P.2d 338

21 Colorado Journal 763

BOARD OF ASSESSMENT APPEALS, an agency of the State of Colorado; Mary E. Huddleston, Property Tax Administrator, Division of Property Taxation, an agency of the State of Colorado, Petitioners, v. AM/FM INTERNATIONAL, Respondent.

No. 95SC780.

Supreme Court of Colorado En. Banc.

June 2, 1997.

As Modified on Denial of Rehearing July 28, 1997.

Gale A. Norton, Attorney General, Martha Phillips Allbright, Chief Deputy Attorney General, Richard A. Westfall, Solicitor General, Paul Farley, Deputy Attorney General, Larry A. Williams, First Assistant Attorney General, Mark W. Gerganoff, Assistant Attorney General, State Services Section, Denver, for Petitioners.

Davis, Graham & Stubbs, Laurence Nemirow, Randall Weeks, Denver, for Respondent.

Justice KOURLIS delivered the Opinion of the Court.

This case arises out of an application for an exemption from property taxation filed by AM/FM International (AM/FM). The Property Tax Administrator (PTA) denied the application and AM/FM appealed to the Board of Assessment Appeals (BAA). The BAA upheld the PTA's denial. AM/FM filed an appeal with the court of appeals which reversed the BAA's decision in AM/FM International v. Huddleston, 920 P.2d 815 (Colo.App.1995). We granted certiorari to determine whether the court of appeals erred in holding that AM/FM was a "charity" as defined by Colorado law and thereby entitled to an exemption from ad valorem property taxes. ¹ We hold that the BAA's decision was grounded in applicable law and supported by substantial evidence in the record. Therefore, we reverse the court of appeals and remand with instructions to reinstate the BAA's denial of AM/FM's application.

I.

AM/FM and the PTA submitted stipulated facts in lieu of a hearing before the BAA. The BAA and the court of appeals relied upon these facts, as do we for purposes of our review. AM/FM is a Colorado non-profit corporation engaged in various activities related to "automated mapping." Automated mapping involves the use of computers to manage spatially distributed facilities and assets through a "geographic information system." The stipulated facts define a "geographic information system" as:

(i) a system of computer hardware, software and procedures designed to support the capture, management, manipulation, analysis, modeling and display of spatially referenced data for solving complex planning and management problems, and (ii) a spatial abstraction of the real world, including infrastructure, cultural, social, physical, economic, and other spatially related information, which abstraction is used to solve problems associated with the data whose common attributes are related to space and geography.

For example, computers are used to map infrastructure such as utility lines, or geographical attributes such as mineral or water deposits. The use of automated mapping for such purposes is referred to in this opinion as either computer mapping information management, or, simply, computer mapping.

AM/FM consists of five classes of members: individual, student, user affiliate, sponsor, and contributor. Individual members are representatives of utilities, governmental agencies, for-profit and non-profit corporations, academic institutions, and other organizations. Student members are full-time students engaged in studies of computer mapping information management or related fields. User affiliates are organizations such as natural gas and electric utilities, governmental agencies, telecommunications utilities, water and waste water utilities and agencies, transportation utilities, and other organizations that use computer mapping information management products or services but do not sell them for profit. Sponsor and contributor members are organizations that provide computer hardware and software products, consulting firms, service companies, and other firms engaged in the for-profit sale of computer mapping information management products or services. User affiliate, contributor, and sponsor members are collectively referred to as corporate members.

In 1993, AM/FM had 1,697 individual members and 249 corporate members. ² Sixty percent of the individual members used computer mapping information management products and services for their own purposes; ³ the remaining forty percent of the individual members represented organizations engaged in the sale of computer mapping information management products and services. ⁴ Approximately ninety percent of the corporate members were for-profit corporations. The remaining ten percent were governmental public utilities.

Members of all five classes pay annual fees and receive various benefits in return. The annual fees range from fifty dollars for an individual member up to $3800 for sponsor members. According to the stipulated facts, the estimated value of services received annually by the individual, user affiliate, and sponsor members exceeds the amount of their annual fees.

AM/FM has been granted an exemption from federal income tax under section 501(c)(3) of the Internal Revenue Code (I.R.C.), and has been granted an exemption from sales and use tax by the Colorado Department of Revenue. ⁵ In addition, AM/FM has received a Special Bulk Rate Authorization as a qualified nonprofit corporation from the United States Postal Service.

AM/FM's Articles of Incorporation provide that (1) no part of AM/FM's net earnings shall inure to the benefit of or be distributable to its members, trustees, or other private person except as reasonable compensation for services rendered and distributions for AM/FM's purposes; (2) AM/FM is prohibited from carrying on activities not permitted to be carried on by a corporation exempt from Federal Income Tax under section 501(c)(3) of the I.R.C. or by a corporation, contributions to which are deductible under section 170(c)(2) of the I.R.C.; and (3) in the event of dissolution, assets remaining after payment of liabilities are to be disposed of exclusively for charitable, educational, religious, or scientific purposes to an organization exempt under section 501(c)(3) of the I.R.C. According to the Articles of Incorporation, AM/FM is "organized exclusively for charitable and educational purposes." AM/FM's purposes, as stated in its bylaws, are (1) to foster the exchange of information, educational opportunities, and research and development which will advance and promote the benefits of geographic and facilities management information systems; and (2) to provide these benefits to utilities; local, state, and federal governments and their agencies; other interested organizations; and the general public.

AM/FM's principal activity in furtherance of these purposes is the hosting of an annual conference. Those who attend the conference listen to technical seminars, exchange ideas with other individuals and organizations, and purchase products and services ⁶ related to computer mapping information systems. Reprints of the technical papers presented at the conferences are donated to libraries and educational institutions. AM/FM estimates the annual value of these donations to be about $4350. Through the organization of the conferences, AM/FM serves as a clearinghouse for information about computer mapping.

In addition to the annual conference, AM/FM engages in the following activities related to the development and use of computer mapping: (1) publishes a bi-monthly newsletter dedicated to computer mapping information management; (2) collects technical papers concerning the particular disciplines represented by its membership and publishes the best of these papers; (3) co-sponsors the technical GIS/LIS Conference and Exposition, reprints the proceedings, and donates them to user affiliate members, libraries, and educational institutions; (4) awards approximately $22,000 for scholarships and internships annually; and (5) conducts an annual forum for the senior management of its user affiliate members to educate them about computer mapping information management. In addition, AM/FM participated in the first National Geo-Data Policy Forum, a joint forum composed of representatives from the non-profit sector, the private sector, and federal governmental agencies concerning the development and use of the national spatial data infrastructure. AM/FM is also instrumental in facilitating the development of standards for computer mapping information management, although at the time the stipulated facts were submitted AM/FM had not developed any standards.

All of AM/FM's conferences and seminars are open to the members of the general public, and, on average, sixty-five percent of those in attendance are not members of AM/FM. Both members and non-members are required to pay registration fees for conferences and seminars, but the fees are higher for non-members. AM/FM also makes its publications available to the general public at roughly AM/FM's actual cost of production and administrative staff time, with discounts for its members.

During AM/FM's 1991 and 1992 fiscal years, it incurred operating losses as a result of expanded services to user organizations and extensions of AM/FM's educational programs. As a result of these losses, AM/FM was required to reduce its reserves; notwithstanding this reduction, at the conclusion of 1992, AM/FM had an accumulated unrestricted fund balance of $464,706.

The conferences and other activities are conducted by AM/FM's administrative staff and unpaid volunteers. In 1993, these volunteers provided 15,325 hours of service. The stipulated facts quantify these services at fifty dollars per hour for a total value of $766,250.

The events that ultimately led to the filing of this action began in December 1989, when AM/FM filed an Application for Exemption of Property (the Application) requesting an exemption from general taxation of property (the Property) it owns and uses as its administrative headquarters. ⁷ AM/FM requested the...