Nonprofit unable to prove it is entitled to charitable tax exemption

The Indiana Tax Court Friday upheld the decision to deny a charitable purposes exemption for the 2006 tax year to a Bartholomew County nonprofit that provides housing for low-income residents. The court agreed the nonprofit failed to show that its rental properties qualified for the exemption under I.C. 6-1.1-10-16.

Housing Partnerships builds or rehabs housing units and rents or sells them to low- and moderate-income people who may not otherwise be able to obtain safe and decent housing. The organization receives income from donations, federal grants and the money it receives from the sale and rental of its units.

In 2006, Housing Partnerships sought an exemption on each of its rental properties and its administrative office, claiming they were entitled to the exemption outlined in I.C. 6-1.1-10-16 because they were used to provide housing to low-income residents. Its application was denied, and the Indiana Board of Tax Review ruled in 2010 that the organization failed to establish a prima facie case that the properties are entitled to the tax exemption.

Because the provision of low-income housing is not per se a charitable purpose, Housing Partnerships needed to demonstrate that it was taking on a task that would otherwise fall to the government, thus providing a benefit to the community as a whole because the government is able to direct its funds to other community needs.

In Housing Partnerships, Inc. v. Tom Owens, Bartholomew County Assessor, 49T10-1005-TA-23, Housing Partnerships argued that the final determination must be overturned because it is arbitrary, capricious and an abuse of discretion because the board ignored Housing Partnerships’ evidence. It also argued that the final determination is contrary to law.

The IBTR explained that the evidence showed that Housing Partnerships was “a good landlord” and did some “nice things for its tenants,” but it did not demonstrate that the subject properties were owned, occupied and predominately used for a charitable purpose as that term is used in I.C. 6-1.1-10-16. The board’s conclusion that a taxpayer must show more than just good deeds and a nonprofit status is supported by Tax Court caselaw, Judge Martha Wentworth wrote. Housing Partnerships also did not provide evidence that it has relieved the government of an expense that it would have otherwise borne.

Wentworth also found reasonable the board’s conclusion that Housing Partnerships did not provide facts showing that its provision of low-income housing met the legal requirements of a charitable purpose that would entitle it to an exemption from property taxes.