Friday, February 8, 2013
Earlier this week, the Maine Supreme Court addressed whether a private boarding school’s practice of renting some of its facilities for private use jeopardized the school’s tax-exempt status. The court held that it did not.
Maine law offers a property tax exemption for property "owned and occupied" or used by literary and scientific institutions "solely for their own purposes." The trial court believed the problem with the school in question was that, because the school rented the property out for private use, the property for which it was seeking tax exemption was not occupied solely for the school’s own purpose.
In upholding the school’s tax-exempt status, however, the court held that the school’s practice of renting the facilities for private use amounted to a "de minimis incidental use." Further, this use of the school’s facilities accounted only for about one percent of the school's operation budget and therefore did not interfere with its tax-exempt purpose.
This decision seems favorable to nonprofit organizations and educational instructions, but its opponents believe the court’s decision is at tension with the statute’s requirement that the property be used “solely” for the organizations own purpose.