Greek Theatre Assn. v. County of Los Angeles

CourtCalifornia Court of Appeals
Citation76 Cal.App.3d 768,142 Cal.Rptr. 919
Decision Date12 January 1978
PartiesGREEK THEATRE ASSOCIATION, a nonprofit California Corporation, Plaintiff and Respondent, v. COUNTY OF LOS ANGELES, and State Board of Equalization, Defendants and Appellants. Civ. 50212.

John H. Larson, County Counsel, and Melissa A. Taubman, Deputy County Counsel, Los Angeles, for appellant County of Los Angeles.

Evelle J. Younger, Atty. Gen., Philip C. Griffin and Patti S. Kitching, Deputy Attys. Gen., for appellant State Bd. of Equalization.

Mitchell, Silberberg & Knupp, John L. Nourse, Thomas P. Lambert, and Judith N. Levy, Los Angeles, for respondent.

Heller, Ehrman, White & McAuliffe, Paul J. Mundie, Paul Alexander, Ronald T. Astin, San Francisco, Richard B. Isham, Visalia, Ehrlich, Allison, Rovens & Sparks, John R. Sparks, San Francisco, Musick, Peeler & Garrett, James E. Ludlam, Los Angeles, Dinkelspiel, Pelavin, Steefel & Levitt, Thomas B. Donovan, San Francisco, Lawrence E. Wayte, Fresno, Rutan & Tucker, and Roger A. Grable, Santa Ana, as amici curiae on behalf of respondent.

THOMPSON, Associate Justice.

This appeal primarily raises the applicability of the "welfare exemption" from property taxation to facilities used by a nonprofit corporation for theatrical and musical presentations by professional performers. Compelled by the broad rule of decision employed in Stockton Civic Theatre v. Board of Supervisors (1967) 66 Cal.2d 13, 56 Cal.Rptr. 658, 423 P.2d 810, we conclude that the exemption is applicable to property of plaintiff-respondent. We conclude, also, that operation of a small bar for the convenience of theatre patrons which is incidental to the theatrical use of the property does not prevent the welfare exemption from applying. Finally, we note, for what the comment may be worth to our Supreme Court on a petition for hearing, that changed conditions may have rendered the broad rule of Stockton Civic Theatre no longer suitable.


The trial court found that all of the requirements for the Revenue and Taxation Code section 214 welfare exemption are satisfied in the case at bench. We recite the record resolving all conflicts in the evidence and accepting all reasonable inferences in favor of those trial court findings. (Crawford v. Southern Pacific Co. (1935) 3 Cal.2d 427, 429, 45 P.2d 183; Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881, 92 Cal.Rptr. 162, 479 P.2d 362.)

Greek Theatre Association is a California nonprofit corporation. It was formed to fill an existing void in the presentation of opera and ballet in the Los Angeles area. The association's corporate purpose is "[t]o maintain, sponsor, promote, produce, present . . . or generally engage in the production or presentation of, any musical, cultural or educational activity . . . including but not limited to symphony orchestras, operas, concerts, recitals, dramas, comedies, ballet and pageants . . . ." From its inception, the association has qualified as an exempt organization for the purposes of the Internal Revenue Code and California Franchise Tax Law.

Beginning in 1953, the association leased from the City of Los Angeles "The Greek Theatre," an outdoor theatre in Griffith Park. For a number of years, the association presented ballet and opera plus an occasional "musical."

In 1964, the Huntington Hartford Theatre, a Los Angeles house presenting Broadway-type plays, was about to be closed. To preserve that center of theatre, the association purchased the Huntington Hartford, borrowing funds for the purpose. After the association's acquisition of the Huntington Hartford Theatre, Broadway-type productions continued to play there.

In the years subsequent to 1953 to the time of trial, Greek Theatre Association received financial support from the City and County of Los Angeles in an amount exceeding $600,000. Private contributions to the association also exceeded $600,000. The association could not have continued its operation without the benefit of the public and private subsidy.

In 1968, the State Board of Equalization ruled that Greek Theatre Association was entitled to the welfare exemption from property taxation as to its leasehold interest in the Greek Theatre in Griffith Park, its interest in the Huntington Hartford, and its personal property.

By the 1972 tax year, the mix of attractions at the Greek Theatre had changed from those presented in the first years of operation. Because of rising production cost of opera and ballet contrasted with the revenue generated by that form of entertainment, it had become necessary for the financial survival of the association that it produce, in addition to ballet and opera, other more popular forms of entertainment. In the calendar year 1972, productions at the Greek Theatre included two operas, concerts of modern classical music, four separate popular music concerts, concerts of folk music, and rock concerts by one group. In the 1973 calendar year, the attractions at the Greek Theatre included performances by the New York City Ballet, productions of the Peking Opera, performances by the Red Buddha Theatre of Japan, performances by popular singers, and performances by comedians. The mix of performances at the Greek Theatre has been substantially the same in other recent years.

Performers at the Greek Theatre and the Huntington Hartford are professionals. Generally, they are paid the customary performance fee although on occasion a popular performer appears for less but never for more. Performances, particularly at the Huntington Hartford, are publicized to increase attendance, and on most occasions the name of the star is included in the publicity. Substantial expenses for publicity were incurred in the tax years in issue. No person received excessive compensation for services to the association. "Attraction costs," i. e., the gross amount paid to the performing company, are the greatest single item of expense of the association.

A bar is maintained within the Huntington Hartford as a convenience to patrons of the theatre. Members of groups sponsoring and raising public donations for the association receive preference in seating on the purchase of tickets at the normal price. The members also are permitted to attend social events related to the productions. A small number of complimentary tickets are furnished to local office holders, the press, the performing companies, and employees of the association.

The association makes available a large number of tickets at no charge to children and economically disadvantaged persons and still more tickets at a reduced or service charge to groups of persons that might not otherwise attend performances.

The association maintains its accounts on a September fiscal year. Contributions aside, the Greek Theatre and Huntington Hartford operations for the fiscal periods 1970 through 1974 disclose the following results:

                Year   Greek Theatre   Huntington Hartford
                ----  ---------------  -------------------
                1970  ($148,864) loss       ($35,803) loss
                1971     $42,477 gain         $99,893 gain
                1972   ($54,618) loss      ($163,942) loss
                1973  ($399,997) loss        $149,958 gain
                1974  ($336,586) loss        ($7,377) loss

In 1971, the State Board of Equalization reversed its former position and determined that the association was no longer entitled to a welfare exemption of its property. Taxes assessed for the tax years 1972-1973 and 1973-1974 were paid by the association under protest. Having exhausted its administrative remedies, the association sued for a refund of taxes paid and for a declaration that it is entitled to the welfare exemption.

The trial court held in favor of the association. This appeal followed.


Revenue and Taxation Code section 214 states in pertinent part: "Property used exclusively for . . . charitable purposes owned and operated by . . . corporations organized and operated for . . . charitable purposes is exempt from taxation if:

"(1) The owner is not organized or operated for profit . . . ;

"(2) No part of the net earnings of the owner inures to the benefit of any private shareholder or individual;

"(3) The property is used for the actual operation of the exempt activity, and does not exceed an amount of property reasonably necessary to the accomplishment of the exempt purpose;

"(4) The property is not used or operated by the owner or by any other person so as to benefit any officer, trustee, director, shareholder, member, employee, contributor, or bondholder of the owner or operator, or any other person, through the distribution of profits, payment of excessive charges or compensations or the more advantageous pursuit of their business or profession;

"(5) The property is not used by the owner or members thereof for . . . social club purposes except where such use is clearly incidental to a primary . . . charitable purpose;

"(6) The property is irrevocably dedicated to . . . charitable purposes . . . ;

"(7) . . . . . . . . . . .

"The exemption provided for herein shall be known as the 'welfare exemption.' . . ."

The statutory scheme thus: (1) exempts from ad valorem taxation property owned by "charitable" organizations which is used "exclusively" for charitable purposes; and (2) restricts the availability of the exemption by a series of conditions that must be met by the one who claims it.

Controlling Precedent

Our application of the statutory scheme to the case at bench is governed by the approach adopted by our Supreme Court in analogous situations. (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 20 Cal.Rptr. 321, 369 P.2d 937.) The high court treats the term "charitable" as one to be broadly construed in favor of the welfare exemption (Stockton Civic Theatre v. Board of Supervisors, supra, 66 Cal.2d 13, 18, 56 Cal.Rptr. 658, 423 P.2d 810), and the word "exclusively" as not precluding activity which, while not...

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