Indiana State Bd. of Tax Com'rs v. International Business College, Inc.

• Decision Date: 29 September 1969
• Docket Number: No. 967,No. 1,967,1
• Parties: INDIANA STATE BOARD OF TAX COMMISSIONERS: Robert B. Stewart, Chairman; Larry Mohr, Herbert Holmes, and Fred C. Wissman, Secretary, who are Members of the Indiana State Board of Tax Commissioners; and Melvin A. Azar, Assessor of Allen County, Indiana; and Chester Graffis, Treasurer of Allen County, Indiana, Appellants, v. INTERNATIONAL BUSINESS COLLEGE, INC., a Corporation, Appellee. A 69
• Court: Indiana Appellate Court

Page 39

251 N.E.2d 39

145 Ind.App. 353

INDIANA STATE BOARD OF TAX COMMISSIONERS: Robert B. Stewart,

Chairman; Larry Mohr, Herbert Holmes, and Fred C. Wissman,

Secretary, who are Members of the Indiana State Board of Tax

Commissioners; and Melvin A. Azar, Assessor of Allen County, Indiana; and Chester Graffis, Treasurer of Allen County, Indiana, Appellants, v. INTERNATIONAL BUSINESS COLLEGE, INC., a Corporation, Appellee.

No. 967 A 69.

Appellate Court of Indiana, Division No. 1.

Sept. 29, 1969.

Rehearing Denied Nov. 20, 1969.

Theodore L. Sendak, Atty. Gen., Lloyd C. Hutchinson, James B. Droege, Deputy Attys. Gen., Indianapolis, for appellants, State Board of Tax Commissioners and its constituent members.

George P. Mallers, County Atty., Allen County, Fort Wayne, for County Officers of Allen County, Indiana.

Rothberg, Gallmeyer, Fruechtenicht & Logan, John H. Heiney, Fort Wayne, for appellee.

SULLIVAN, Judge.

This cause was brought by plaintiff-appellee, International Business College, Inc. (hereinafter referred to as International), in the Allen Superior Court to reverse a determination by the State Board of Tax Commissioners which denied appellee any exemption from real and personal property taxes for 1964. The trial court reversed and ordered the board to grant the exemption. Appellants assign as error the overruling of their motion for new trial, which motion, in substance, asserts that the findings and conclusions and the decision of the court are not sustained by sufficient evidence, and are contrary to law, and that the conclusions of law are not sustained by the findings of fact.

International is a corporation organized for-profit under the laws of the State of Indiana. It engages solely in providing education to students who have completed their high school training. The courses of instruction offered include mathematics, English, typing, shorthand, bookkeeping and data processing. Each course of instruction is taught by instructions utilizing standards of performance and text books generally accepted throughout the United States by colleges, universities and other business colleges.

International claims as exempt seventy-five percent of the real estate, together with the building located thereon which contains class room facilities and administrative offices. Twenty-five percent of such real estate and improvement was admittedly taxable because leased to commercial tenants. Separate real estate and the building located thereon used as a dormitory for students are claimed as one hundred percent exempt.

The first issue presented for decision is whether the fact that International was organized as a for-profit corporation should, in itself, constitute a disqualification from property tax exemption. Appellants do not argue that International is not entitled to an exemption in that it operates a business college as opposed to a general educational institution, ¹ and we do not, therefore, address ourselves to any possible disqualification except that of the profit status of appellee.

Article 10, Section 1 of the Indiana Constitution provides as follows:

'The General Assembly shall provide, by law, for a uniform and equal rate of assessment and taxation; and shall prescribe such regulations as shall secure a just valuation for taxation of all property, both real and personal, excepting such only for municipal, educational, literary, scientific, religious, or charitable purposes, as may be specially exempted by law.'

Pursuant to this authority the legislature enacted the Acts of 1919, ch. 59, § 5, as amended and as found in Burns' Indiana Statutes Anno. (1969 Supp.), § 64--201 (Fifth), which is an exemption statute for real and personal property, ² the applicable provisions of which read as follows:

'The following property shall be exempt from taxation:

'Fifth. Every building, or part thereof, used and set apart for educational (,) literary, scientific, religious or charitable purposes by any institution or by any individual or individuals, association or corporation, provided the same is owned and actually occupied by the institution, individual, association or corporation using it for such purpose or purposes, and every building owned and occupied, used and set apart for educational, literary, scientific, fraternal or charitable purposes by any town, township, city or county, and the tract of land on which such building is situate, including the campus and athletic grounds of any educational institution not exceeding fifty (50) acres; also the lands purchased with the bona fide intention of erecting buildings for such use thereon, not exceeding forty (40) acres; also the personal property, endowment funds, and interest thereon, belonging to any such institution or any town, township, city or county and connected with, used or set apart for any of the purposes aforesaid.'

However, the quoted exemption provision is limited by Acts of 1919, ch. 59, § 6, as found in Burns' Indiana Statutes Anno., (1961 Repl.), § 64--202, as follows:

'If all or any part, parcel or portion of any tract or lot of land or any buildings or personal property enumerated in the preceding sections as exempt from taxation shall be used or occupied for any other purpose or purposes than those recited in said section by reason whereof they are exempted from taxation, such property, part, parcel or portion shall be subject to taxation so long as the same shall not be set aside or used exclusively for some one of the purposes specified in said enumeration.'

Applying these provisions to the cause before us it is apparent that they exempt every building used for educational purposes by any institution or by any individual or individuals, association or incorporation, together with the land upon which such building is located, but that they impose a limitation by excluding from the exempt status any property used or occupied for any other purpose or purposes than those recited. Such language does not indicate a legislative intent that corporate property, otherwise exempt because exclusively used for educational purposes, should lose the exempt status solely because the corporation earns a profit.

The language of Burns' § 64--201 (Fifth), supra, is clear and umambiguous. It grants the exemption to any individual, individuals, association or incorporation which otherwise qualifies. It does not differentiate between associations and corporations which are not-for-profit or are charitable as opposed to those associations or corporations operating for profit.

In City of Indianapolis v. Sturdevant (1865), 24 Ind. 391, the tax exemption question concerning profit as related to an educational institution was judicially treated directly for the first time. ³ The exemption was upheld and the court there stated:

'* * * The evident intention of the clause of the constitution above quoted, was to leave the legislature at literty to encourage the establishment of institutions of learning, by exempting them the usual burden of taxation, whether the enterprise might be undertaken on public or private account * * *' (Emphasis supplied) 24 Ind. 391 at 393.

The court further stated that in its opinion the 1861 Geneal Assembly, by adding the words, 'by any individual or individuals, association or corporation,' to the 1852 exemption statute, made it clear that the fact that the institution was conducted on private account and that the earnings of it were applied to the personal benefit of the proprietor does not militate against the exemption. See also Pitcher v. Miss Wolcott School Assoc. (1917), 63 Colo. 294, 165 P. 608, L.R.A.1917B, 1095; Board of Sup'rs of Harrison County v. Gulf Coast Military Academy (1921), 126 Miss. 729, 89 So. 617; Rohrbough v. Douglas County (1906), 76 Neb. 679, 107 N.W. 1000; Englewood School for Boys v. Chamberlain (1893), 55 N.J.L. 292, 26 A. 913; State ex rel. Corporation Comm'n v. Oxford Seminary Construction Co. (1912), 160 N.C. 582, 76 S.E. 640; Board of Com'rs of Tulsa County v. Tulsa Business College (1931), 150 Okl. 197, 1 P.2d 351; and, Ward Seminary for Young Ladies v. Nashville (1913), 129 Tenn. 412, 167 S.W. 113.

The same question was later presented in Vink, County Treasurer v. Work (1902), 158 Ind. 638, 64 N.E. 83, wherein the court sustained an exemption for a private home and school for orphans and indigent children. The appellee there was the sole owner of the school and was paid by municipalities, charitable bodies and others for keeping and educating the children. The court there said at page 640, 64 N.E. at page 84:

'* * * Neither does the circumstance that the maintenance of the school or home is a private enterprise, and that compensation is made to the appellee for keeping, caring for, teaching, and maintaining the indigent and homeless orphans who are placed in her charge, deprive the appellee of the right to exemption from taxation * * *. It will be observed that the act applies to individuals as well as to private and public corporations, and that the only conditions are that the property shall be used and set apart for educational or charitable purposes.'

Notwithstanding the law as set forth in the two cases above-quoted, it is appellants' contention that 'by excusing the duty to pay taxes the state confers a financial benefit upon the exempt corporation, the effect of which is the same as if a direct grant were made. The costs of government not borne by that corporation must be made up by larger payments by other taxpayers.' The delicate task of balancing the considerations here involved was aptly acknowledged in Faculty-Student Assoc. of Harpur College v. Dawson (1967), 57 Misc.2d 112, 292 N.Y.S.2d 216 at 228, as follows:

'The court is mindful of the conflict between the policy of having all realty bear an equal share of the cost of public services and the policy of encouraging and fostering certain corporations and associations which are considered to bestow on the public a...