Fleet Credit Corp. v. Frazier

• Decision Date: 09 March 1999
• Docket Number: No. 97-328-Appeal.,97-328-Appeal.
• Citation: 726 A.2d 452
• Parties: FLEET CREDIT CORPORATION et al. v. Jack FRAZIER, in his capacity as Tax Assessor of the City of Warwick et al.
• Court: Rhode Island Supreme Court

726 A.2d 452

FLEET CREDIT CORPORATION et al. v. Jack FRAZIER, in his capacity as Tax Assessor of the City of Warwick et al.

No. 97-328-Appeal.

Supreme Court of Rhode Island.

March 9, 1999.

Joseph DeAngelis, Providence, for plaintiff.

Gina A. Vigliotti, Providence, Kerry I. Rafanelli, for defendant.

Present WEISBERGER, C.J., and LEDERBERG, BOURCIER, FLANDERS, and GOLDBERG, JJ.

OPINION

PER CURIAM.

This appeal questions whether the property tax exemption under G.L.1956 § 44-3-3(8) for personal property "owned by any corporation used for a school, academy, or seminary of learning" includes leased computer equipment that a nonprofit taxpayer has used exclusively for educational purposes. For the reasons set forth below, we hold that the tax exemption does not extend to such property, and thereby deny and dismiss the taxpayer's appeal and affirm the Superior Court judgment in favor of the tax assessor.

The plaintiffs, Fleet Credit Corporation (Fleet) and New England Institute of Technology (NEIT), appeal from a Superior Court judgment in favor of defendants, Jack Frazier, in his capacity as tax assessor for the city of Warwick, and David Tepin, in his capacity as collection supervisor for the city of Warwick (collectively, the city). The court ruled that the property in question was not exempt from the city's assessment of property taxes.¹ Following a prebriefing conference, a single justice of this Court referred this case to the full Court for a session in conference, pursuant to Rule 12A(3)(b) of the Supreme Court Rules of Appellate Procedure. We then ordered the parties to show cause why we should not decide the issues raised in this appeal summarily. None having been shown, we proceed to decide the appeal without further briefing and argument.

The parties submitted an agreed statement of facts to the Superior Court. In October 1990, NEIT acquired computer equipment to use for educational purposes. The parties do not dispute that NEIT is a fully accredited college and is exempt from taxation under § 501(c)(3) of the Internal Revenue Code. NEIT financed its acquisition of this equipment through a lease agreement with Fleet. In accordance with this agreement, Fleet paid the vendor for the equipment and acquired title to it. The city valued the equipment at $1,619,900 and assessed property taxes thereon of $50,216.90. Fleet paid these taxes to the city, and NEIT reimbursed Fleet under the terms of the lease agreement. Thereafter, in December 1991, Fleet conveyed its interest in the computer equipment to NEIT.

The plaintiffs contend that even when Fleet owned this equipment, it was not subject to taxation pursuant to § 44-3-3(8), which exempts the following property:

"The buildings and personal estate owned by any corporation used for a school, academy, or seminary of learning, and of any incorporated public charitable institution, and the land upon which the buildings stand and immediately surrounding them to an extent not exceeding one acre, so far as they are used exclusively for educational purposes, but no property or estate whatever shall hereafter be exempt from taxation in any case where any part of the income or profits thereof or of the business carried on thereon is divided among its owners or stockholders."

The plaintiffs argue that the statutory language "used for a school, academy, or seminary of learning," applies to the buildings and personal estates owned by any corporation that are used exclusively for educational purposes. Therefore, if a for-profit corporation, such as Fleet, owns property which is used for educational purposes, such as the computer equipment in question here, then that property, plaintiffs contend, is not taxable as long as its owners or stockholders do not divide the income generated by that property among themselves. The city's position is that the phrase "used for a school, academy, or seminary of learning," also refers to the words "any corporation" in the statute. Since Fleet is not a corporation used for a school or educational purpose, the city argues that the Fleet-owned computer equipment is not exempt from taxation.

The party claiming the tax exemption has the burden of showing that the language of the statute demonstrates "a clear legislative intent to grant such exemption." Cookson America, Inc. v. Clark, 610 A.2d 1095, 1098 (R.I.1992). The trial justice found that the different statutory interpretations advocated by plaintiffs and the city were both reasonable, and therefore he concluded that the exemption statute was ambiguous. The trial justice then applied the "time-honored rule" of statutory construction that requires a court to construe tax-exemption statutes strictly in favor of the taxing authority and against the party seeking the exemption. American Hoechst Corp. v. Norberg, 462 A.2d 369, 371 (R.I.1983); see also Roger Williams General Hospital v. Littler; 566 A.2d 948, 950 (R.I.1989)

. Based upon this reasoning, the trial justice determined that plaintiffs failed to prove that the computer equipment was clearly exempt from taxation under § 44-3-3(8).

On appeal, plaintiffs contend that we should `not strictly construe § 44-3-3(8) in favor of the taxing authority because it is not a true tax-exemption statute. The plaintiffs refer to the history of the educational-property exemption, which dates back to colonial times. They argue that its historical background indicates that the exemption for educational uses of property is, in reality, a rule of "nontaxability," rather than an exemption from taxation. However, plaintiffs overlook the fact that this Court consistently has applied a rule of strict construction to this exemption. In Society for the Preservation of New England Antiquities v. Tax Assessors of Newport, 62 R.I. 302, 5 A.2d 293 (1939), the Court considered whether the plaintiff, a Massachusetts corporation, was required to pay taxes on property it owned in Newport. In holding that the plaintiff was responsible for taxes, the Court noted that it must strictly construe the statute exempting property used for educational purposes from taxation: "Exemption from taxation cannot be read into the statute by implication." Id. at 307, 5 A.2d at 296. Similarly, in Powers v. Harvey, 81 R.I. 378, 103 A.2d 551 (1954), this Court determined that buildings located on state land and owned by college fraternities and sororities were also subject to taxation. In applying the educational-property exemption, the Court stated that "[i]t is settled in this state that exemptions of the above nature are strictly construed in favor of the taxing authority." Id. at 381, 103 A.2d at 552. Hence, we are of the opinion that the trial justice correctly applied the rule of strict statutory construction to the tax exemption in this case.

Furthermore, plaintiffs contend that § 44-3-3(8) is not ambiguous. They argue that the phrase "used for a school, academy, or seminary of learning" does not refer to a corporation because it is unnatural to describe a corporation as being "used for" something. Rather, they assert, it is appropriate to speak of a building or property as being "used for" something. In considering the tax-exempt status of property, however, this Court has reviewed the property owner's corporate charter to ascertain its charitable purpose. See Society for the Preservation of New England Antiquities v. Tax Assessors of Newport, 62 R.I. 302, 5 A.2d 293 (1939). Thus, it appears that the owner's corporate purpose can be a fact of some significance in determining the property's tax-exempt status. The city contends that, in order to be eligible for the exemption, an educational institution must both own the property and use it exclusively for educational purposes. It argues that if the General Assembly had intended the educational use of the property to be the only requirement for tax-exempt status, then the statute would have so stated. In that situation, the statute would not refer to the corporation's ownership of the property, but simply would have exempted all buildings and...