On March 18, 2014, the Indiana Tax Court clipped the wings of the Fraternal Order of Eagles #3988, affirming the denial of a property tax exemption for its lodge in Mooresville as of the March 1, 2006 assessment date. In Fraternal Order of Eagles #3988, Inc. v. Morgan County Property Tax Assessment Board of Appeals, the Court considered whether the lodge (which included social and entertainment rooms, a kitchen, offices and storage areas) qualified for the fraternal beneficiary association or charitable purposes exemptions. The Eagles used the lodge for a variety of events – to raise funds for charity and needy families and to host private events for members such as dances, pool tournaments, and bingo. On occasion, other charitable organizations could use the facility without charge. At the administrative hearing, the Eagles introduced a charitable donations record, monthly profit/loss statements, several affidavits regarding the property’s exempt use, and a usage report.
The fraternal beneficiary association exemption did not apply. Property owned by a “fraternal beneficiary association” incorporated, organized or licensed under Indiana law and occupied and exclusively used by the association to further its purpose is exempt from property tax under Ind. Code § 6-1.1-10-23. The Eagles never got off the ground with this argument, failing to show that it was a qualified association. The Eagles squawked at the definition of “fraternal beneficiary association” applied by the Indiana Board, which relied upon a 1970 opinion by the Court of Appeals. Instead, the Eagles cited a 1944 Attorney General Opinion to support its claim. The Tax Court explained, “Official opinions of the Attorney General have no precedential value and they are not judicially binding.” Slip op. at 5 (citations omitted). Nevertheless, the opinion and the court decision were not contradictory; therefore, the Board’s final determination wasn’t contrary to law on this basis. Slip op. at 6. And the Board didn’t ignore evidence showing the property was used for fraternal and charitable purposes. The Eagles’ evidence was often conclusory and therefore could not “independently demonstrate” that it met the elements of an association under Ind. Code § 27-11-1-1, such as the requirement that it have a representative form of government. Slip op. at 8.
The charitable purpose exemption did not apply. Property owned, occupied, and exclusively or predominantly used for charitable purposes qualifies for exemption under Ind. Code § 6-1.1-10-16. The Eagles took this argument to the limit, but one more time the Court rejected its claim. It asked the Court to find that using property for fraternal purposes was “synonymous with using property for charitable purposes because fraternal organizations collectively seek to promote the general welfare of their members and society in general.” Slip op. at 9. The Court, however, declined to reach this conclusion where there was no evidence of a legislative intent to equate use for fraternal purposes with use for charitable purposes. Slip op. at 9. Finally, while the lodge was used for social, recreational and charitable purposes, the usage report submitted by the Eagles did not compare the relative amounts of time the property was used for exempt and non-exempt purposes – a fatal flaw that grounded any hopes of a full or partial exemption. Slip op. at 10. The Indiana Board’s denial of an exemption for the lodge was affirmed. Id.