New Habitat, Inc. v. Tax Collector of Cambridge

• Decision Date: 03 July 2008
• Docket Number: SJC-10033
• Citation: 451 Mass. 729,889 N.E.2d 414
• Parties: NEW HABITAT, INC. v. TAX COLLECTOR OF CAMBRIDGE (and two companion cases<SMALL><SUP>1</SUP></SMALL>).
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

889 N.E.2d 414

451 Mass. 729

NEW HABITAT, INC. v. TAX COLLECTOR OF CAMBRIDGE (and two companion cases¹).

SJC-10033

Supreme Judicial Court of Massachusetts, Middlesex.

Argued May 6, 2008.

Decided July 3, 2008.

Christine Vargas Colmey, Boston, for the plaintiff.

Elizabeth A. Lashway, for the defendant.

Anthony M. Ambriano, for Board of Assessors of Boston & others, amici curiae, submitted a brief.

Present: MARSHALL, C.J., GREANEY, IRELAND, SPINA, COWIN, CORDY, & BOTSFORD, JJ.

SPINA, J.

The plaintiff, New Habitat, Inc. (New Habitat), seeks to recover the taxes that it has paid on its real property. It claims that this property is exempt from taxes under G.L. c. 59, § 5, Third, as property of a "literary, benevolent, charitable or scientific institution." A judge in the Superior Court concluded that New Habitat was not entitled to a tax exemption under that statute and dismissed on summary judgment New Habitat's claims for recovery of taxes paid. New Habitat appealed. We granted its application for direct appellate review. We now vacate the order granting summary judgment in favor of the tax collector and order entry of summary judgment in favor of New Habitat.²

Background. New Habitat is a nonprofit organization whose stated mission is to provide long-term housing for persons with acquired brain injury and to promote the well-being of its residents by providing them with, among other things, educational programs, personal assistance programs, and programs to improve their physical and psychological health. New Habitat's staff provides its residents with care and support on its property at 225 Brattle Street in Cambridge, the property for which New Habitat paid the taxes that it now seeks to recover. At maximum capacity, this property can accommodate four residents. Since New Habitat began providing residential services, there have been three applicants for admission. New Habitat accepted them all. Currently, only two residents remain.³

To be qualified as a resident at New Habitat, an applicant must have an acquired brain injury, have a physical examination to determine whether he is in an acceptable state of health, maintain his own health insurance, and provide information on his financial ability to pay New Habitat's fees and expenses. Monthly fees currently range from about $17,000 to $18,000 per month. Until recently, residents were required to pay a $150,000 entrance fee, an amount that was refundable without interest at the termination of the contract or on the resident's death. All fees and revenue derived from the property are expended solely for the successful operation of the residence.

New Habitat received demands for payment of property taxes for the fiscal years 2004, 2005, and 2006 from the tax collector of Cambridge. New Habitat made timely payments of these taxes and timely commenced proceedings in the Superior Court to recover its real estate tax payments.⁴ The parties filed cross motions for summary judgment, and the judge granted the tax collector's motion. New Habitat appealed.

Discussion. "The standard of review of a grant of summary judgment is whether, viewing the evidence in the light most favorable to the nonmoving party, all material facts have been established and the moving party is entitled to a judgment as a matter of law." Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117, 120, 571 N.E.2d 357 (1991). See Mass. R. Civ. P. 56(c), as amended, 436 Mass. 1404 (2002). The taxpayer has the burden of establishing entitlement to a charitable exemption under G.L. c. 59, § 5, Third. Western Mass. Lifecare Corp. v. Assessors of Springfield, 434 Mass. 96, 101, 747 N.E.2d 97 (2001). "Exemption from taxation is to be strictly construed and must be made to appear clearly before it can be allowed." Springfield Young Men's Christian Ass'n v. Assessors of Springfield, 284 Mass. 1, 5, 187 N.E. 104 (1933).

New Habitat contends that it is a charitable organization within the scope of G.L. c. 59, § 5, Third, and that it therefore is entitled to a charitable exemption from its real estate taxes. The tax collector, on the other hand, contends that New Habitat's substantial fees so limit its class of potential beneficiaries that New Habitat does not qualify for a charitable exemption under G.L. c. 59, § 5, Third.

General Laws c. 59, § 5, Third, provides that real estate owned by a "charitable organization and occupied by it or its officers for the purposes for which it is organized" is exempt from taxation. A charitable organization is "a literary, benevolent, charitable or scientific institution or temperance society incorporated in the commonwealth." Id. "[T]he dominant purpose of its work is for the public good and the work done for its members is but the means adopted for this purpose." Massachusetts Med. Soc'y v. Assessors of Boston, 340 Mass. 327, 332, 164 N.E.2d 325 (1960). For purposes of the local property tax exemption, the term "charity" includes more than almsgiving and assistance to the needy. New England Legal Found. v. Boston, 423 Mass. 602, 609, 670 N.E.2d 152 (1996). "A charity, in the legal sense, may be more fully defined as a gift to be applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing their minds or hearts under the influence of education or religion, by relieving their bodies from disease, suffering or constraint, by assisting them to establish themselves in life, or by erecting or maintaining public buildings or works or otherwise lessening the burdens of government." Boston Symphony Orchestra, Inc. v. Assessors of Boston, 294 Mass. 248, 254-255, 1 N.E.2d 6 (1936), quoting Jackson v. Phillips, 96 Mass. 539, 14 Allen 539, 556 (1867). These activities characterize the traditional objects and methods of charity but do not encompass all the areas now considered to be charitable for the purposes of the real estate tax exemption. Boston Chamber of Commerce v. Assessors of Boston, 315 Mass. 712, 717, 54 N.E.2d 199 (1944).

To determine whether an organization is charitable, the court weighs a number of nondeterminative factors. These factors include, but are not limited to, whether the organization provides low-cost or free services to those unable to pay, see New England Legal Found. v. Boston, supra at 610, 670 N.E.2d 152; whether it charges fees for its services and how much those fees are, see Assessors of Boston v. Garland Sch. of Home Making, 296 Mass. 378, 390, 6 N.E.2d 374 (1937); whether it offers its services to a large or "fluid" group of beneficiaries and how large and fluid that group is, see New England Legal Found. v. Boston, supra at 612, 670 N.E.2d 152; Cummington Sch. of the Arts, Inc. v. Assessors of Cummington, 373 Mass. 597, 601, 369 N.E.2d 457 (1977); whether the organization provides its services to those from all segments of society and from all walks of life, see Harvard Community Health Plan, Inc. v. Assessors of Cambridge, 384 Mass. 536, 544, 427 N.E.2d 1159 (1981); and whether the organization limits its services to those who fulfil certain qualifications and how those limitations help advance the organization's charitable purposes, see Western Mass. Lifecare Corp. v. Assessors of Springfield, supra at 103-104, 747 N.E.2d 97; Boston Symphony Orchestra, Inc. v. Assessors of Boston, supra at 256, 1 N.E.2d 6.

The significance of these factors depends in no small part on the dominant purposes and methods of the organization. The closer an organization's dominant purposes and methods are to traditionally charitable purposes and methods, the less significant these factors will be in our determination of the organization's charitable status under G.L. c. 59, § 5, Third. See Boston Chamber of Commerce v. Assessors of Boston, supra at 718, 54 N.E.2d 199. The farther an organization's dominant purposes and methods are from traditionally charitable purposes and methods, the more significant these factors will be. See id. ("the more remote the objects and methods become from the traditionally recognized objects and methods the more care must be taken to preserve sound principles and to avoid unwarranted exemptions from the burdens of government"); Institute of Gas Tech. v. Department of Revenue, 289 Ill.App.3d 779, 787-788, 225 Ill.Dec. 316, 683 N.E.2d 484 (1997) (court considers "the remoteness of the nature of [organization's projects] from traditional notions of charities" in determining organization's tax exempt status).

Consistent with these principles, we consider the charging of fees to be more significant the farther the organization's dominant purposes and methods are from traditionally charitable ones. See Western Mass. Lifecare Corp. v. Assessors of Springfield, supra at 104-106, 747 N.E.2d 97 (organization was not charitable where it charged fees and did not have traditionally charitable purposes and methods); Boston Symphony Orchestra, Inc. v. Assessors of Boston, supra at 256, 1 N.E.2d 6 (same). On the other hand, we consider the charging of fees to be less significant the closer the organization's dominant purposes and methods are to traditionally charitable ones. See Assessors of Boston v. Garland Sch. of Home Making, supra at 389, 390, 6 N.E.2d 374 (organization was charitable where it charged fees and had traditionally charitable purposes and methods); Carpenter v. Young Men's Christian Ass'n, 324 Mass. 365, 368, 369, 86 N.E.2d 634 (1949) (same). See also Butterworth v. Keeler, 219 N.Y. 446, 449, 114 N.E. 803 (1916) ("What controls is not the receipt of income, but its purpose"). But see Under the Rainbow Child Care Ctr., Inc. v County of Goodhue, 741 N.W.2d 880, 887 (Minn.2007). In weighing this factor, we consider whether the organization's charging of fees helps to advance the organization's charitable purpose. See Boston Symphony Orchestra, Inc. v. Assessors of Boston, supra at 255-256, 1 N.E.2d 6. See also Butterworth v. Keeler, supra.

In the present case, New...