HEBRON, Maine — The Maine Supreme Judicial Court on Wednesday will hear arguments on whether Hebron Academy should pay property taxes on Robinson Arena and other facilities the school rents to outside groups.
The results of that decision could be expensive for this private college-preparatory school, and could result in the school being closed to outside use.
In 2009, the town of Hebron began taxing Hebron Academy for Robinson Arena, a hockey rink that had been an outdoor arena for decades before it was capped in 1993. The tax bill for the arena came to $19,240.
Hebron Selectman Daniel Eichorn said the town was in the process of a revaluation when the assessor, John E. O’Donnell & Associates of New Gloucester, pointed out that nonprofit organizations that rent out facilities can be taxed on those facilities.
“Essentially, we are obligated to tax properties that are, under the rules of the state of Maine, subject to taxation,” Eichorn said. “We don’t get to pick and choose which properties we tax and which properties we don’t.”
The school balked at the bill and requested an abatement, going before the Oxford County Commission in October 2010. Commissioners determined Hebron Academy’s request was not filed in time and denied the request. The school filed a lawsuit about six weeks later.
In a November 2011 hearing, town attorney Bryan Dench argued that the school didn’t qualify as a “literary and scientific institution,” a distinction necessary for tax-exemption.
Active Retired Justice Robert W. Clifford, who presided over the trial, ruled in the school’s favor that the arena should remain tax-exempt but rejected the school’s claim to the 2009 taxes it paid. He said the town was relieved of property taxes on the arena from 2010 forward. Clifford also ruled that the school did qualify as a “literary and scientific institution.”
The town appealed the court’s decision, and Maine’s highest court is set to hear the case on Dec. 12.
The stakes are higher this time. During the discovery process, the town found that the school rents out several facilities, including the Lepage Center for the Arts, where the Oxford County Chamber of Commerce holds its annual awards dinner, and school dormitories, which are used for summer sports camps.
According to court documents, the school has been rented out for Norway Savings Bank functions and for weddings, offering food service and alcohol sales to patrons.
If the high court rules in favor of the town, any building that has been rented out in the past three years would be taxed for the year or years in which it was used, Eichorn said.
On the other side, the school is asking the court to overturn Clifford’s decision on the 2009 taxes and have those refunded to the school. Since the decision, the town has been levying property taxes on the arena. Hebron Academy Head of School John King said the school paid taxes on the building in 2010 and 2011.
King said that if the high court upholds Clifford’s decision, the town will owe Hebron Academy about $40,000 in taxes paid those two years. If the court awards the school the money it paid in 2009, that increases to nearly $60,000.
Maine law grants tax-exempt status to institutions such as schools, colleges, churches, veterans’ groups and “benevolent and charitable institutions, including nonprofit nursing homes and hospitals. Hebron Academy is mostly exempt from property taxes as a “literary and scientific institution.”
Not all of the school’s property is tax-exempt, though. Hebron Academy pays taxes on faculty housing and a building that houses the Hebron post office, part of which is rented to the U.S. Postal Service. According to Maine law, schools can be exempted from property tax only for property “owned and occupied or used solely for their own purposes,” meaning property essential for the running of the school.
The town contends that the school’s renting the properties out, especially to private entities like sports camps and banks, violates the requirements the school must meet to be tax-exempt.
The school has argued that rented properties are part of the school, and that any rental use and subsequent income is “incidental and intermittent” and doesn’t detract from those properties’ primary use in serving the school’s educational mission.
In the past five years, the school has earned an average of $137,000 per year from facility rentals and services. That’s about 1 percent of the school’s $14 million annual budget. In court briefs, attorney John Conway, who represents Hebron Academy, said the actual profit from those rentals is much lower.
Robinson Arena costs more than $370,000 a year to run, according to court documents, including general and administrative expenses. The school makes about $36,000 in income from renting it out.
According to King, paying taxes on those properties could raise tuition and maybe even force the school to stop allowing outside groups to use the rink and other facilities. He said expenses related to keeping the rink open would cancel out the money made from rentals. “Paying the people, and so forth, certainly added up to more than we would make,” King said.
Dench said that argument doesn’t hold water.
“If that were true, then why do it?” Dench said. He pointed out that the school made $686,234 from facility rentals between June 30, 2006, and Feb. 18, 2011. “I would not describe rental income of $686,234 … as incidental,” he said.
Dench argues that the school’s tax-exemption lets it compete unfairly with businesses that rent facilities and pay taxes on those properties. In briefs submitted to the court, he points out that Hebron Academy employs a person to manage facility rentals.
“We don’t run it as a competitive venture,” King said. “We run it essentially to cover whatever we can of the costs. We don’t particularly pay attention to what other facilities are available.”
King argues that renting the ice rink and other properties is a service to the community, as well as a source of income. “It was something good to do for the area, and a little bit of an offset to the expenses that went to operating that facility.”
He added, “The town hasn’t really taken into consideration, we don’t think, the amount that we do for the town.”
Hebron Academy students volunteer at the local elementary school and Hebron Academy groundskeepers help maintain the town’s fields on their off time, King said. “The kinds of people who teach at a place like this are really community-oriented people.”
He added that Hebron Academy has students from local towns, including 28 from Oxford County, which decreases the burden on those schools.
He said losing the rink would be a loss to residents of Hebron and beyond. “You couldn’t make it available to youth hockey groups or youth sports groups or other things without running a risk of losing the tax-exemption,” he said.
Eichorn said King is overstating the school’s benefit to the town.
“To be perfectly frank, it’s not 1980 anymore,” Eichorn said. “There was a time when the academy was far more involved with the town. Town programs would use their ball field.” He said there was a time when losing access to the campus would have been difficult for the town, but not anymore.
He said that in his 10 years living in Hebron, he hasn’t seen much contact between the school and the town.
“At this stage, other than the open skating during a few months in the winter, I don’t know of any other circumstance in which the residents of the town of Hebron in general are welcome on the Hebron Academy campus,” Eichorn said.
He said the school might be able to allow free skating without being subject to property tax if it asked for, but didn’t require, donations rather than charging admission to use the ice.
Even the name recognition Hebron holds as the host of the school has been overshadowed, he said. “If you go outside of the state of Maine, people are more likely to have heard of the town because of the Redneck Olympics.”
Oral arguments on the case are scheduled for 11:30 a.m. Wednesday at the Cumberland County Courthouse in Portland.
Good Grief, tax exempt needs to end, the private property owners can no longer carry the load of these mandated town budgets, yes they, the Academy needs to pay taxes, in my opinion.
Trying to put the school of our business are you? How about churches, want to tax them too? And the Boy/Girl Scouts? Hospitals? Food banks?
they are ripping off tax payers in more ways then one .
In short, yes.
If your for profit, which you seem to be with your rentals, then you PAY !
As I learned awhile ago, non-profit organizations can indeed make a profit. It is all in the accounting semantics. Really the whole concept of “non-profit” as most Americans take it to mean is, well, it is an out an out lie. Incredibly many of us still believe the words “non-profit” to be accurate but they are not. Want proof? Just look the company officers’ salaries of some national non-profit organizations.
Are non-profits supposed to loose money in order to maintain their tax-exempt status? A non-profit entity still has to be run like a business.
and their CEO salaries ‘prove ‘ it.
The CEO salaries of most non-proifts are usually much much lower than the CEO salaries of non-profit companies. But there is no arguing with people who already have their mind made up.
The fact that officers salaries can be high for some of these organizations doesn’t mean they are for profit. I think most of the people posting here really have no idea what non-profit means. It does not mean that you cannot take in more than your expenses, it’s what you do with the income that you do receive. Are you paying it out to stockholders or doing the work of the non-profit organization, in this case using the income to support the school? I would find it hard to believe the SJC will say this property is taxable merely because it is rented out once in a while.
like the Maine Heritage Center or Freedomworks or Crossroads.. how did they get classified as “charities ” or “educational institutes”…Their purpose is purely partisan politics with the focus being promoting the freemarket and free entereprise to enrich their funders..
Odd how they say that the money they earn via rentals is “incidental and intermittent” yet they would be severely harmed if they even had to pay taxes on that income. You know folks aren’t being honest when they start talking out of both sides of their mouths.
You are misunderstanding – the tax is not on rental income; the town is saying that if they rent out a facility (even one day per year) they need to pay property tax on the facility for the entire year.
Sounds good to me. If they don’t want to pay the taxes, then don’t rent it out.
It’s not that they are paying taxes on that income, they would be forced to pay property taxes on the property rented. That could be far in excess of what they receive in income.
BUT they ARE making a profit from renting the buildings .
No they are not making a “profit”. The are making some money but it’s far from being a profit. All charitable organizations make money in some fashion, whether it’s rental, investment income or donations, it’s what they do with the money that determines whether they are a profit making organization.
well I guess this explains Lepage’s comment: :” if Maine students want a GOOD education they should go to Maine’s private ‘academies” They named a building after him and he soul his soul to the devil.!!! Geeze how obviously “transparent” can one GET. Does he get a kick back for being a “recruiter”, now?? Pathetic, truly pathetic.
Not sure if serious, as the young persons say nowadays.
Albert LePage, not the Governor.
Non profit should be non profit. If someone is making money, it is for profit. Does a preacher work for free? No. So the church is there for his profit. Do people get paid to work at the good shepherd food bank? Yes. Then it should be a for profit business. If a non profit organization can pay their top executives $100,000 or more per year, then they can afford to pay property taxes. Just think of Bangor alone. How many nonprofit organizations are not paying property taxes?
Right on!
That’s an interesting idea of what “profit” means you have there. It’s not actually correct, since profit means the money a company makes above its operating expenses, which naturally include the pay employees receive, but it’s interesting.
Non-profit applies to the organization, not any employee.
You have no idea what “profit” means. Profit is what you have after you pay your bills and workers.
and many non profits like Maine Hertitage Center and Freedom Works and Crossroads( and newt’s “non profit”) pay high salaries so there will be NO ‘profit”.
By your definition of non-profit, there are no non-profits, since almost every entity has employees.
I think you have to rethink things a bit.
ALL institutions that make a PROFIT and OWN property should pay property taxes. The Catholic Church makes millions in profit and own property. They SHOULD pay property tax. Same for all churches…..
Right on again!
yes
Whether “incidental” or not, how can an annual $137,000 income from facilities rental in the face of an annual budget of $14,000,000 be thought of as a profit? According to Hebron Academy, income from arena rental isa about 10% of annual operating costs, and no where in this article is it stated that the rental income is over and above what it costs to keep the school operating. Where is the profit?
As for property taxes on certain facilities as opposed to non-taxation of others owned by non-profits, that’s a matter of definitions, something both sides will pay plenty of money to attorneys in hopes the court agrees with their point of view. It’s certain that non-profits of all types have interest in these arguments. Because the values of non-profits to society run a wide range, it is a an important argument for sure, and far from a simple one.
“Whether “incidental” or not, how can an annual $137,000 income from
facilities rental in the face of an annual budget of $14,000,000 be
thought of as a profit?” They are only be taxed $13,000
If you want to change that, you would have to rewrite the First Amendment.
Where does it say in the First Amendment that churches are exempt from paying taxes? Using your logic, newspapers, television stations, magazines, publishers — all would be exempt from paying taxes.
The First Amendment says Congress (government), shall establish no religion or impede religions. Taxation could, depending on the level, be considered an impediment.
Also, note that the First Amendment contains instructions for Congress to control and contain their own actions. The First Amendment does NOT offer any language that controls individuals or churches. That is, the First Amendment is a one way street, blocking government from doing certain things, but not blocking individuals or churches.
You may not like it (not sure I like it), but that’s the way it’s currently written. Don’t like it? Change it/amend it.
You didn’t address taxation on media. Heck, using the logic you’re both using, it should be unconstitutional for the government to put a sales tax on paper, ink, computers, pens, pencils, telephones, CDs, DVDs, telephone service, etc. All of these items are directly involved in freedom of speech, which the First Amendment states cannot be abridged.
A tax on church property in no way prohibits the exercise of religion. The fact that churches have tax-exempt status, at the federal level, at least, has more to do with courtesy by Congress than any creative interpretation of the First Amendment.
In Walz v. Commission of City of New York , 397 U.S. 664 (1970), in which Walz argued the opposite of what you’re arguing — that tax exemption unconstitutionally favors churches — the U.S. Supreme Court said: “The legislative purpose of a property tax exemption is neither the advancement nor the INHIBITION of religion; it is neither sponsorship nor HOSTILITY (emphasis added).”
Put another way by the First Amendment Center in summarizing Walz: “The Supreme Court has made clear that a tax exemption is neither prohibited nor required under the First Amendment’s free-exercise and establishment clauses. The Walz Court said that the long history of tax exemption for religious organizations in no way creates an entitlement to any such exemption.”
Churches do not enjoy any more free speech rights than this very newspaper. The sole reason churches get tax exempt status is because the government considers them part of a “benevolent” network of organizations. such as certain nonprofits, that enhance the community.
is hebron academy a religious school??? Not that i know of ,making the connection to the first ammendment irrelevent.
When the price for ONE student to attend Hebron Academy (for one year) exceeds that of this tax bill, somehow I think they could afford it.
I don’t see where it says non profit. If they make money they pay.
You can make a lot of money with a non-profit…..Sesame Street is a non-profit; but has spawned many for-profit subsidiaries like that Ice show in Portland that make tons of money. Big Environmental trusts seem to have a lot of money for retreats and other facilities; I’ve noted the Crystal Springs Farm, a non-profit, competes with a lot of local farms but is spared tax liabilities. Not fair, time they pay up like every one else.
You going to throw Common Ground Fair into that list?
All entities INCLUDING non-profits, religious, and government, should pay property taxes. Does the town have to respond if there is a fire on this property? Does the town dump take the trash? Does the town pave any roads that the school uses to conduct business?
I have never understood why some entities feel entitled to ride on my dime.
The rationale has generally been that those organizations provide services to the community which offset the services the community provides to them, making the assessment and collection of property taxes upon them both discourteous and not worth the effort. Whether this is in fact the case is a matter of much, much debate, and I am taking no position on it here; but that’s the reasoning behind it.
(Also, taxing government buildings wouldn’t really make a ton of sense, would it? The government would be paying itself. Apart from complicating the state accountant’s life, what would that accomplish?)
The National Football League is a non-profit organization. Roger Goodell collects a salary.
So is Planned Parenthood, yet they can mount political campaigns that cost hundreds of thousands of dollars. If they have that much money, they should be paying taxes. ditto for the Unions.
and Maine Heritage center ( check out THEIR salaries) Freedom works check out DICK army’s salary), Cross roads ( Karl Rove is doing it for the SALARY)
Absolutely! These are profit-making enterprises and should pay taxes!
This is a drop in the bucket when compared to the holdings of Bowdoin, Bates, and Colby and their many ‘profit centers’ which are melding into the books. The court decision should affect their rentals; but does the town have the cojones to tax these wealthy colleges at the same rate the rest of us have to pay.
Other non-profits have valuable holdings, esp. environmental trusts and political action organizations.
every drop counts
” the school rents out several facilities, including the Lepage Center for the Arts” … the Lepage Center??? Anyone know the connection to this name??
It’s not spelled with a capital P on the school’s website or anywhere else I’ve seen it listed. I’m guessing it’s coincidental. LePage/Lepage/Le Page/etc. isn’t a particularly uncommon name.
Hebron Academy is a non-profit organization. The purpose of the Academy is to educate our youth, not to make money. The money made on the ice rink is used to offset the cost of operating the facility. How does the City of Portland offset the cost of operating the pool at Reiche School? It rents it to the public.
If you looked at the 2011 tax return, you might all realize the simple fact that – HEBRON ACADEMY ISN’T MAKING MONEY.
Revenue
Total Revenue
$13,628,241
Expenses
Total Expenses
$13,575,377
What I sense from the town is a general sentiment of classism rather than concern for fair taxation.
Many times I have spent more than I have made, does that make my household non profit?? Figures can be rigged many ways to sail a sloop.