Kesselring, Tax Ass'R., v. Bonnycastle Club, Inc.
| Decision Date | 16 March 1945 |
| Citation | 299 Ky. 585 |
| Parties | Kesselring, Tax Assessor, et al., v. Bonnycastle Club, Inc. |
| Court | United States State Supreme Court — District of Kentucky |
2. Taxation. — Fact that property of non-stock corporation organized to promote educational, social, and athletic advantages reverts to members, and not to state, upon dissolution of corporation would not preclude corporation from exemption from taxation as an "institution of education" within Constitution, since it is present use of the property that is of controlling importance. KRS 273.020 et seq.; Const. sec. 170.
3. Taxation. — In determining whether non-stock corporation organized to promote educational, social, and athletic advantages was entitled to exemption from taxation as an institution of education within Constitution, it is primary use made of property which determined whether corporation was exempt, and not alone its declared objects. KRS 273.020 et seq.; Const. sec. 170.
4. Taxation. — The granting of tax exemption to charitable and educational institutions is a policy founded upon fundamental ground of benefit to the public by such organizations, and recognition of fact that they perform a service which state would or should otherwise have to perform, so there is consequent relief of tax burden of others. Const. sec. 170.
5. Taxation. — Property or functions of institution or organization which performs a public service or merely contributes to charity is not exempt from taxation, but it must come within classification of public property used for public purposes. Const. sec. 170.
6. Constitutional Law. — Words used in Constitution are to be taken in their ordinary acceptation.
7. Taxation. — The term "institution of education", as used in constitutional provision exempting institution of education from taxation, means a place where systematic instruction in any or all of useful branches of learning is given by methods common to schools and institutions of learning. Const. sec. 170.
8. Taxation. — A non-stock corporation organized to promote educational, social, and athletic advantages was not entitled to exemption from taxation as an "institution of education" within Constitution, notwithstanding that no one derived pecuniary profit from it. KRS 273.020 et seq.; Const. sec. 170.
Appeal from Jefferson Circuit Court.
Lewis C. Carroll and Lawrence S. Grauman for appellants.
Robert E. Hogan for appellee.
Before Churchill Humphrey, Judge.
Reversing.
The Bonnycastle Club of Louisville claims to be exempt from taxation under Section 170 of the Constitution of Kentucky as an institution of education, and the circuit court so adjudged.
The appellee is a non-stock corporation, organized in 1924 under the provisions of Section 879 et seq., Kentucky Statutes, now KRS 273.020 et seq. The charter is not in the record, but it is said to have been organized to promote educational, social and athletic advantages. No private or pecuniary profit is derived from its existence or operation, but it appears that when dissolved the property will be distributed among the members and not revert to the state. It is a community project. Membership is acquired by unanimous vote of the existing members and payment of $5 initiation fee. There are 40 members, who pay dues of $1.50 each month. The management is vested in a board of directors and four officers. The Club owns a parcel of ground in the eastern part of the city on which it maintains two tennis courts; a children's wading pool; a badminton court; and a small field on which various athletic games are played. Its club house is equipped with lockers and showers and facilities for indoor games. While maintained primarily and principally for the Club members and their families, the neighboring public is given access to the grounds. There is no city park within four miles. During the summer a municipal soft ball league, promoted and sponsored in part by the recreational division of the Welfare Department of the City, has games there for which nominal entrance fees are charged. These receipts are used in part for compensating referees or umpires. The dues paid by the members furnish the balance of the expense of maintenance. The members of the Club and perhaps others play this and other athletic games, and children of the neighborhood play there daily in good weather. Now and then an instructor in physical culture furnished by the city gives instruction on that subject and on the rules of athletics generally. At semi-monthly meetings of the members they discuss various topics of timely interest, and sometimes have a specialist to give a lecture. The chancellor commenting upon the need for physical development in this country expressed the opinion that the Club "is not only educational in character, but also educational along lines that are presently important and most neglected."
The question is whether the foregoing attributes and functions of this Club are sufficient to entitle it to the right of exemption from taxation under the constitution.
Equality under law is one of our cherished principles. Duties and rights are reciprocal. It is the duty of every citizen, corporate or natural, to bear his share of the cost of government for the protection and benefits which he receives from it. Every other citizen has the right to have him do so. Our Bill of Rights, Section 3, Constitution, declares that "All men, when they form a social compact, are equal; and no grant of exclusive, separate public emoluments or privileges shall be made to any man or set of men, except in consideration of public services," and there is added, "no property shall be exempt from taxation except as provided" in the Constitution.
Therefore, we start our thinking with the proposition that exemption from taxation has been strictly limited and defined. It is an exception to the rule or principle, for the exemption granted to one person places an additional burden upon others. Since such a situation is contrary to the spirit and genius of our system of government, exemption must always be found within the terms of the constitution, or statute, strictly construed. Lancaster v. Clayton, 86 Ky. 373, 5 S.W. 864; Layman Foundation v. City of Louisville, 232 Ky. 259, 22 S.W. 2d 622; Martin v. High Splint Coal Company, 268 Ky. 11, 103 S.W. 2d 711.
Among the exemptions are "public property used for public purposes" and "institutions of education not used or employed for gain by any person or corporation, and the income from which is devoted solely to the cause of education." Section 170. We have recently reconsidered the exemptions of "institutions of education" as well as "institutions of purely public charity," in City of Louisville v. Presbyterian Orphans Home Society of Louisville, 299 Ky. 566, 186 S.W. 2d 194. It was conceded that each of the institutions covered by that opinion was of the excepted class, the extent of their exemption only being challenged. The instant case presents the definition or the question of whether this organization and its activities is an institution of education within the meaning or contemplation of the exemption provisions of the Constitution. One of the attributes of tax immunity is present, viz., no one derives pecuniary profit from it. Commonwealth v. Trustees of Hamilton College, 125 Ky. 329, 101 S.W. 405. And the reversionary interest is not an obstacle for it is the present use of the property that is of controlling importance. Connecticut Junior Republic Ass'n v. Town of Litchfield, 119 Conn. 106, 174 A. 304, 95 A.L.R. 56. Likewise we may add, it is the primary use made of property which determines whether it is exempt and not alone its declared objects. Trustees of Widows' and Orphans' Fund, etc., v. Blount, 222 Ky. 717, 2 S.W. 2d 394; Hazen v. National Rifle Ass'n, 69 App. D.C. 339, 101 F. 2d 432, 433.
Basic of our consideration is the logical and settled conclusion, as pointed out in the recent case, that granting tax exemption to charitable and educational institutions is a policy founded upon the fundamental ground of benefit to the public by such organizations and recognition of the fact that they perform a service which the State would or should otherwise have to perform, so there is consequent relief of the tax burden of others. That condition or status sets the primary standard.
It does not follow, however, that property or functions of every institution or organization which performs a public service or merely contributes to charity is exempt from taxation. It...
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