In re Appalachian Student Housing Corp.
Citation | 598 S.E.2d 701,165 NC App. 379 |
Decision Date | 20 July 2004 |
Docket Number | No. COA03-908.,COA03-908. |
Parties | In the Matter The Appeal of APPALACHIAN STUDENT HOUSING CORPORATION from the decisions of the Watauga County Board of Equalization and Review concerning exemption of certain real and personal property for tax years 2001 and 2002. |
Court | Court of Appeal of North Carolina (US) |
Maupin Taylor, P.A., by Charles B. Neely, Jr., Nancy S. Rendleman and Kevin W. Benedict, Raleigh, and Di Santi, Watson & Capua, by Anthony S. di Santi, Boone, for taxpayer Appalachian Student Housing Corporation.
Hedrick & Eggers, by Jeffery M. Hedrick, and Eggers, Eggers, Eggers & Eggers, by
Rebecca Eggers-Gryder and Stacy C. Eggers, IV, Boone, for Watauga County.
Appalachian Student Housing Corporation (ASHC) appeals from a decision by the North Carolina Property Tax Commission holding that real property held in trust by ASHC for Appalachian State University (ASU) was not exempt from ad valorem taxation by Watauga County (County).
The subject property is known as the University Highlands apartment complex, which is situated on a 37.269 acre lot in Watauga County, located approximately two and one-half miles from the ASU campus. ASU Students began moving into the complex as tenants in August 2000. The property contains ten buildings that have 768 bedrooms in two and four-bedroom apartments. Each apartment at University Highlands is connected to the ASU computer network. A management and maintenance office, study carrels, group study and meeting space, a computer lab, and a clubhouse are located on the property, in addition to weightlifting equipment, aerobic exercise space, tennis courts, basketball goals, a walking trail and a swimming pool.
ASHC manages the daily operations of University Highlands apartments. ASHC limits rental availability to ASU students, though some students at community colleges that participated in the Appalachian Learning Alliance program were initially allowed to live in University Highlands. Each potential lessee must prove his or her current enrollment status at ASU before being granted a lease. The lease terms for the apartments mirror ASU's academic calendar. If a student has a complaint concerning the operation of University Highlands he or she must appeal that matter to the ASU Office of Student Development, which is the same process that is followed when a student has a complaint while living in a traditional ASU residence hall.
Plans to build University Highlands took shape in 1998, when ASU faced a student housing shortage due to aging residence halls and an increase in student enrollment. The Board of Governors of the University of North Carolina endorsed the use of privately funded student housing in order to meet this need. At least four other UNC-system member schools have developed plans to construct student housing managed by non-profit corporations for those institutions, including North Carolina Agricultural and Technical University, the University of North Carolina at Pembroke, Fayetteville State University and Winston-Salem State University.
ASHC was originally incorporated as ASU Housing Foundation, Inc. (Housing Foundation) on 19 August 1999 by ASU as a non-profit corporation to fund construction of the project and manage University Highlands once construction was complete. The Articles of Incorporation stated "the purpose of ASU Housing Foundation shall be to develop, finance, prepare, provide and supervise residential housing facilities for the students and faculty of [ASU]." In the event of dissolution of the corporation, all its corporate assets are to be transferred to ASU. The ASU Chancellor and two Vice Chancellors served as officers and directors of Housing Foundation. The ASU Board of Trustees approved the construction project and formation of the corporation.
After construction of the University Highlands complex was completed in September 2000, ASHC bought the real property and improvements from the developer for approximately $24 million. On 7 June 2001, ASHC and ASU executed a document entitled "Trust Agreement", which contained the following clause:
All funds and property received by ASHC shall be held in trust and used or expended for the benefit of ASU to the extent such expenditure is not inconsistent with lawful restrictions... ASHC may, from time to time, transfer any net revenue from its operations to ASU for support of student housing acquisition, development and operation. ASHC shall not transfer any funds or other assets to any person or entity other than ASU except in exchange for capital assets, goods or services at fair market value.
ASHC qualified for tax exempt status under the Internal Revenue Code as a section 501(c)(3) non-profit corporation and is not subject to State or Federal income taxes. On 27 June 2000, ASHC and the Town of Boone executed an agreement which prohibits ASHC from transferring legal title to the property to ASU until 2025.
On 9 February 2001, ASHC requested a property tax exemption from Watauga County for the 2001 tax year, which was denied by the Watauga County Board of Commissioners on 21 August 2001. ASHC timely filed an appeal to the North Carolina Property Tax Commission (Commission) on 13 September 2001. On 11 January 2002, ASHC filed an application for a property tax exemption for the 2002 tax year, which was denied on 10 October 2002. The Commission, sitting as a board of equalization and review, consolidated ASHC's appeals from the 2001 and 2002 tax exemption applications.
The Commission affirmed the County's denial of exemption after the presentation of ASHC's evidence. The Commission found: "The operation of a student housing facility is not a use that qualifies under the statutes of North Carolina as an educational purpose" and that "the subject student housing facility is not owned by Appalachian State University[.]" As a result, the Commission concluded, in pertinent part:
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The standard of review for decisions of the Property Tax Commission is contained within N.C. Gen.Stat. § 105-345.2(b):
N.C. Gen.Stat. § 105-345.2(b)(2003). "In making the foregoing determinations, the court shall review the whole record or such portions thereof as may be cited by any party...." N.C. Gen.Stat. § 105-345.2(c)(2003). In its review, "[t]he court may not consider the evidence which in and of itself justifies the [Commission's] decision without [also] taking into account the contradictory evidence or other evidence from which conflicting inferences could be drawn." In re Moses H. Cone Memorial Hospital, 113 N.C.App. 562, 571, 439 S.E.2d 778, 783 (1994) (citation omitted). "[T]he legal effect of evidence and the ultimate conclusions drawn by an administrative tribunal from the facts... are questions of law" that are decided under de novo review. Employment Security Com. v. Kermon, 232 N.C. 342, 345, 60 S.E.2d 580, 583 (1950); see In re Appeal of The Greens of Pine Glen Ltd. Part., 356 N.C. 642, 647, 576 S.E.2d 316, 319 (2003). However, "the `whole record' test is not a tool of judicial intrusion; `instead, it merely gives a reviewing court the capability to determine whether an administrative decision has a rational basis in the evidence.'" In re Appeal of Owens, 132 N.C.App. 281, 286, 511 S.E.2d 319, 323 (1999) (citation omitted).
The taxpayer, ASHC, bears the burden of proving that its property meets the requirements of an ad valorem taxation exemption. See In re Appeal of Atlantic Coast Conference, 112 N.C.App. 1, 4, 434 S.E.2d 865, 867 (1993), aff'd per curiam, 336 N.C. 69, 441 S.E.2d 550 (1994). Salisbury Hospital v. Rowan County, 205 N.C. 8, 10, 169 S.E. 805, 806 (1933)(quoting Latta v. Jenkins, 200 N.C. 255, 156 S.E. 857 (1931)). The taxation laws "should be construed...
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