Indiana Tax Court Upholds Property Tax Exemption For Early Learning Center

by Faegre Baker Daniels
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Indiana Tax Court upholds property tax exemption for early learning center

On April 1, 2015, the Indiana Tax Court in Johnson County PTABOA and Assessor v. KC Propco LLC d/b/a Kindercare Learning Center affirmed the grant of a 100% real property tax educational purpose exemption for property used as an early learning center as of the March 1, 2009 assessment date.  KC Propco was the real estate acquisition and development arm for KinderCare Learning Centers.  In 2005, KC Propco bought the property and KinderCare Learning Centers renovated it.  Subsequently, KinderCare Learning Centers was acquired by Knowledge Learning Corporation.  In its final determination, the Indiana Board of Tax Review concluded that KC Propco and KinderCare Learning Centers each had its own exempt purpose.

Educational goals emphasizedDiscussing the educational programs conducted at the center, the Indiana Board noted that “[g]enerally, the pre-kindergarten curriculum was designed to develop and refine children’s cognitive, motor, language, and computer skills” and that the basic curriculum was adjusted to meet each child’s specific needs.  Educational goals and objectives were emphasized during before and after school programs.  The Board concluded that the property’s use as an “early learning center” was a qualified educational purpose because the programs offered were “a complement to and prepare children for enrollment in school by providing the foundational elements children need to thrive in more advanced programs.”

Court would not reweigh the evidenceThe Court explained the purpose of the educational purpose exemption “is to encourage non-governmental entities to provide educational services for the public welfare.”  Slip op. at 8 (citation, internal quotation omitted).   To qualify, the party seeking exemption must show that the property is owned, occupied and predominantly used to further the exempt purpose.  The PTABOA and Assessor argued that the administrative record lacked evidence showing who owned, occupied and used the property; they claimed that KC Propco (through the testimony of two witnesses) merely showed a “confusing corporate structure.”  But the Court could not reweigh the evidence or judge the credibility of witnesses on appeal.  Slip op. at 10 (citation omitted).  Because the Board “understood their testimony and determined it had probative value, the Court will not overturn that determination absent an abuse of discretion.”  Id.  To prove their case, the PTABOA and Assessor should have pointed to evidence showing that KC Propco did not own the property and that KinderCare Learning Centers did not occupy and use it.  In this case, no such evidence was in the record.  Moreover, the Court found that the record contained other evidence, including the property record card, showing the property’s ownership, occupation and use.  Slip op. at 11.

The PTABOA and Assessor also asserted that the evidence supported an “alternative conclusion” regarding the property’s use for educational purposes.  For example, the evidence indicated certain non-educational activities occurred on site and that only 25% of the teaching staff had college degrees.  Once again, the Court held that it could not reweigh the evidence. Slip op. at 12-13.  The Board’s ruling recognized that both educational and childcare activities took place at the center, but the focus was on the educational activities.  The Court explained:  “Here, it is clear that the Assessor simply disagrees with how the Indiana Board distributed the weight of the evidence.  Nonetheless, the Court will not now redistribute the weight in order to tip the scales in the Assessor’s favor.”  Slip op. at 13.

Entire parcel exempt. The Assessor further argued that if the improvements are exempt, then the entire 2.607 acre parcel should not be exempt – only the one acre supporting the building and parking lot.  But the exemption applied to the entire parcel, not just the land attributable to the building’s footprint.  Slip op. at 13-14.

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