Preservation Soc. of Newport County v. Assessor of Taxes of City of Newport

• Decision Date: 06 November 1968
• Docket Number: No. 224-A,224-A
• Citation: 247 A.2d 430,104 R.I. 559
• Parties: The PRESERVATION SOCIETY OF NEWPORT COUNTY v. ASSESSOR OF TAXES OF the CITY OF NEWPORT. ppeal.
• Court: Rhode Island Supreme Court

Page 430

247 A.2d 430

104 R.I. 559

The PRESERVATION SOCIETY OF NEWPORT COUNTY v. ASSESSOR OF TAXES OF the CITY OF NEWPORT.

No. 224-Appeal.

Supreme Court of Rhode Island.

Nov. 6, 1968.

Corcoran, Peckham & Hayes, William W. Corcoran, Newport, for petitioner.

Joseph M. Hall, Asst. City Sol., Newport, for respondent.

OPINION

ROBERTS, Chief Justice.

This petition was filed in the superior court pursuant to the provisions of G.L.1956, 1956, § 44-5-26, seeking relief from an assessment of taxes against certain real and personal properties of the petitioner, The Preservation Society of Newport County, hereinafter referred to as the Society. The record discloses that the general assembly chartered the Society in 1946 for '* * * antiquarian, historical, literary, educational, artistic and monumental purposes, and for the purpose of preserving for posterity buildings, places and objects of historical, artistic, architectural and other interest * * *.' It further appears that in 1949 the general assembly enacted a statute purporting to exempt from taxation all the real and personal property of the Society '* * * as long as the same shall be used for the purposes of said corporation.'

The parties submitted the case to a justice of the superior court along with a stipulation as to the facts, and it was by that court certified to this court. The question certified by the superior court included seven separate inquiries as to whether certain specific properties owned by the Society were, under the facts as stipulated, being used '* * * for the purposes of said Society * * *.' In this court, however, the parties appear to agree that the controlling issue with respect to all inquiries is: 'Did the Petitioner, The Preservation Society of Newport County, in using its property in the manner set forth in the Stipulation as to Facts, use said property for the purposes of said Society under the exemption act of 1949?'

The taxes in dispute were assessed for the year 1964. It is conceded that the properties taxed were owned by the Society and comprise estates or buildings which are of historic, architectural, educational, and antiquarian interest. Two of these properties, the 'White Horse Tavern,' a tavern of colonial origin, and the 'Rogers House,' also of colonial origin, were leased by the Society, the first for operation by a restaurateur as a restaurant, and a portion of the second to the Newport chamber of commerce for office space. The rental income received from such leasing concededly was devoted to the purposes for which the Society was incorporated. Two other properties owned by the Society, namely, 'The Elms' and 'Marble House' were residences built by members of the Newport summer colony at the turn of the century and are presently kept open for public inspection at a nominal charge. However, it is conceded that each of these premises on occasion was made available to groups for the conduct of social functions of one kind or another therein and that income in the form of donations was received for such use, it being conceded again that the income was used for the purposes of the Society.

Another of the properties assessed is known as 'The Breakers' Parking Lot. This is a parcel of vacant land which is adjacent to an estate known as 'The Breakers.' This estate, which is leased by the Society, is open for tourist visitation at a nominal fee and has become one of the major tourist attractions in the city of Newport. 'The Breakers' Parking Lot was acquired in fee by the Society and is used exclusively for free parking for those tourists who visit 'The Breakers.'

Taxes were also assessed on certain personal property of the Society. One of these properties in an automobile used by the employees of the Society in the course of conducting its business, and the remaining such personal property is office equipment which is used by the Society in the conduct of its business and the furnishings of several of the estates and buildings which it owns and maintains.

The respondent, in seeking to establish that the exemption has been lost by reason of these uses, contends that this court in Preservation Society of Newport County v. Assessor of Taxes, 99 R.I. 592, 209 A.2d 701, held that the Society's real and personal property was exempt from taxation under the provisions of G.L.1956, § 44-3-3(8). ¹ ] That section provides, in pertinent part, that the buildings and personal estate of any corporation used for a school, academy, or seminary of learning and the land upon which said buildings stand and which immediately surrounds said buildings to an extent not exceeding one acre shall be exempt from taxation '* * * so far as the same is used exclusively for educational purposes * * *.' The respondent argues that, therefore, the exemption applies only so long as the property is used exclusively for the educational purpose.

In this, respondent relies on the rule laid down in Sisterhood of the Holy Nativity v. Tax Assessors, 73 R.I. 445, 57 A.2d 184. There we said that it is the policy of this court to construe tax exemption statutes strictly in favor of the taxing authority and the question of whether a use is within the purposes for which the Society was incorporated must be construed strictly against the Society and in favor of taxation. Where the grant of the exemption requires that the pertinent use be exclusive, it may be that the rule of strict construction would prevail, and that to put the property to commercial use might sacrifice the exemption even though the income from such use is used for the furtherance of the corporate purposes.

This argument might be pertinent if in fact the exemption here granted was that provided for in § 44-3-3(8). There is no doubt that the question of exclusive use and the application of the doctrine of strict construction has given rise to the formation of a considerable body of law supporting the proposition that if the use to which the property is put to produce income is not within the corporate purposes, the mere fact that such income is devoted to the corporate purposes will not save the exemption.

Basically, the rule appears to be that the use of property by an exempt corporation, and not the use of the proceeds from the rental of the property, determines whether the exemption may be granted or, if granted, will be lost by such a use. In Moon Township Appeal, 387 Pa. 144, 149, 127 A.2d 361, 364, the court stated the rule as follows: 'On the other hand, however, there is equally no doubt but that property, even though owned by a body ordinarily tax exempt, is taxable if used by it for commercial purposes, or if rented to a lessee for a purely business enterprise and not a public use; this is true even though the rentals or other proceeds from the property are devoted to the tax exempt activities of the lessor * * *.' This rule is followed in many jurisdictions, allowances being made only for the terms of the statute under consideration. People ex rel. Paschen v. Hendrickson-Pontiac, Inc., 9 Ill.2d 250, 137 N.E.2d 381; State Board of Tax Commissioners v. Indianapolis Lodge #17, Loyal Order of Moose, Inc., 245 Ind. 614, 200 N.E.2d 221; Gifford Memorial Hospital v. Town of Randolph, 119 Vt. 66, 118 A.2d 480; Princeton University Press v. Borough of Princeton, 35 N.J. 209, 172 A.2d 420.

However, it is true that in most of these jurisdictions and in others, there is also a tendency on the part of courts to make exception to this doctrine, particularly abandoning the strict construction view where the uses to which the property is put are reasonably necessary for the operation of the affairs of the exempt corporation, Moon Township Appeal, 425 Pa. 578, 229 A.2d 890, People ex rel. Paschen v. Hendrickson-Pontiac, Inc., supra, or where the use to which it is put, even though it provides no income to be used for the corporate purposes, is one that is reasonably necessary to make the operation of the exempt corporation effective and complete. In the Matter of Pace College v. Boyland 4 N.Y.2d 528, 176...