Failed Six-Factor Test for Exemption
In Boyne Area Gymnastics, Inc. v. City of Boyne City, Michigan Court of Appeals, No. 303590, May 15, 2012, a nonprofit Michigan corporation did not qualify for a local charitable institution property tax exemption because it did not meet the six-factor test in Wexford Med Group v. City of Cadillac, 713 N.W. 2d 734 (2006). The corporation existed for the purpose of educating children in all aspects of gymnastics, dance, and fitness. The corporation provided scholarship funds to families unable to pay tuition fees. The corporation determined eligibility for these scholarships based on the individual's participation in the public school lunch program. The corporation also existed to provide classes for adults and students for additional activities such as ballroom dancing, karate, yoga, and step aerobics.
The Michigan Court of Appeals noted that although the corporation's articles of incorporation stated that it was organized exclusively for charitable, religious, educational, and scientific purposes, the articles also stated that one of its purposes was to provide the opportunity for self-expression and recreation through gymnastics and dance. The corporation's articles did not state that the corporation was organized chiefly for a charitable purpose. The corporation provided classes to anyone who wished to participate in gymnastics, dance, and physical fitness and provided the use of its facilities either at a discount or no charge to some members of the public and was not organized primarily to provide charitable services. At most, the waiving of fees to some members of the public was incidental to the primary purpose for organizing.
Although the corporation claimed that its classes lessened the burdens of government by providing training outside of Michigan's strained public school system, the corporation failed to cite any evidence that it was the government's burden to provide physical fitness and gymnastics classes to children and young adults. Furthermore, the corporation's charitable endeavors appeared to be incidental to its recreational purposes, so that the corporation's overall nature was not charitable.