Property Tax Exemption Available Because Proceeds Were Donated to School
In Second Impressions Inc. v. City of Kalamazoo, Michigan Court of Appeals, No. 304608, July 24, 2012, a Michigan nonprofit corporation that operated a thrift shop was entitled to a charitable institution property tax exemption because it donated the net proceeds from the thrift shop to a Christian school association that used the proceeds to reduce the tuition of every student who attended a Christian school in grades kindergarten through 12. The corporation benefited any family that wanted to send their child to a local Christian school because a tuition reduction was available to every student.
The Michigan Tax Tribunal had found that the corporation offered its charity on a discriminatory basis and, therefore, was not a charitable institution. The reasoning was that the corporation offered its charity only to a select group and so it was properly denied a charitable exemption.
The corporation argued that the Tax Tribunal's conclusion was erroneous. The nonprofit corporation was unable to stipulate that the sole use of its donations was to reduce tuition.
The Michigan Court of Appeals recognized that even with a tuition reduction, the Christian school association still had to charge tuition and, therefore, not every student was financially able to attend an association school. The appellate court noted, however, that the Christian school association was legally distinct from the corporation. More importantly, a nonprofit corporation was not disqualified for a charitable exemption because it charged those who could afford to pay for its services as long as the charges approximated the cost of the services. Moreover, the corporation redonated items to various other charities. The corporation's redonating activity fit within one of its purposes as defined by its articles of incorporation. There was no evidence that any of the corporation's redonations were made on a discriminatory basis.