A Hoosier Homeowners’ Association was denied a property tax exemption because it failed to show that it was established for the purpose of retaining and preserving its land and water for their natural characteristics.  The Association in Marineland Gardens Community Association v. Kosciusko County Assessor (Feb. 19, 2015) was an Indiana non-profit corporation that owned ten non-contiguous parcels of land within a subdivision located on a lake.  For the 2009 and 2010 tax years, the Association claimed a property tax exemption for each parcel, asserting that it “maintains these parcels for the purpose of retaining and preserving land and water for their natural characteristics.”  Slip op. at 2 (record citation and internal brackets omitted).

Evidence of the property’s use was provided.  At the administrative hearing, the Association’s witnesses explained that:

• nine of the ten parcels were unimproved;
• some parcels had narrow walking paths allowing access to the water and the piers from the road;
• one of the parcels was a long and narrow strip that separated homes from the water’s edge;
• this same parcel has a seawall running along its length, interrupted by a boat ramp;
• several parcels contained utility poles with lighting and possibly utility service;
• the Association permits access to all ten parcels, the piers, and the lake for recreational purposes such as fishing, walking, and picnicking;
• no business activity or outside vendors are allowed on the land;
• one of the parcels was acquired to prevent commercial buildings from being built upon it, and this parcel was improved with gravel so that it could be used as a parking lot for the boat ramp.

The Indiana Code exempts a tract of land not exceeding 500 acres from property tax if it “is owned by a nonprofit entity established for the purpose of retaining and preserving land and water for their natural characteristics,” if the land is not used to make a profit  Slip op. at 4 (quoting Ind. Code § 6-1.1-10-16(c)(3).)  Here, there was no dispute that the property was not used to generate a profit for the Association.  The issue was whether the Association was established for the purpose of retaining and preserving the natural characteristics of its property.

Evidence of organizational intent was lacking.  The evidence presented showed how the Association used the land but not why it was formed.  The Association did not submit its organizational documents.  Even if the property’s current use could show why the Association was established, the evidence was contradictory.  Some evidence – such as the public’s access to the land and lake and the prohibition of business activity on the property – might have supported granting the exemption.   Other evidence did not.  For example, several parcels contained improvements – a gravel parking lot, a long cement seawall, a boat ramp, boat docks and utility poles with lighting.  In addition, much of the demonstrated use of the property was for recreational activities, e.g. walking, fishing, and boating, and the Association failed to explain how these uses furthered the exempt purpose.  The Tax Court held that “a reasonable person viewing the record would find enough relevant evidence to support denying the exemption because [the Association] did not explain how its evidence indicates that it was established for the purpose of retaining and preserving the land and water for its natural characteristics under Indiana Code § 6-1.1-10-16(c)(3).”  Slip op. at 7.