Faegre Baker Daniels

Indiana Tax Court applied a partial real property tax exemption to a military museum.

Name: McClain Museum, Inc. v. Madison County Assessor

Date Issued: November 7, 2019

Property Type: Museum

Assessment Year: 2014

Point of Interest: Tax Court affirms denial of educational exemption for military history museum, but it reversed the Indiana Board of Tax Review and applied a 75% exemption to the museum’s real property. The museum “enhance[s] the public’s knowledge and understanding of a part of the American experience.”

Synopsis: The Museum, an Indiana non-profit corporation, exhibited military equipment used by the United States armed forces in a variety of conflicts. Located in Anderson, it is recognized by the Army as a historical preservation site for military equipment. The property is comprised of 18 acres of land with two buildings, the largest of which was 88,600 square feet and included exhibition areas with tanks and other vehicles and equipment, as well as uniforms, photographs and books. The building also had areas for the restoration of military vehicles, storage and a reception / meeting hall known as the “Officer’s Club.”

The Museum was open to the public free-of-charge for limited hours and upon request, though it accepted donations. Part of the storage area was rented out for boat storage. And the Officer’s Club was rented out for social occasions such as wedding receptions. Local historical societies were permitted to store exhibits without charge. The Museum had a bookkeeper and one paid staff member, and it was assisted by unpaid volunteers.

Educational purposes exemption rejected. The Museum requested both the educational and charitable purposes exemptions. The Tax Court affirmed the denial of the educational purpose exemption, explaining: “While there is no doubt that the public is educated and its knowledge enhanced about military history through the Museum’s displays, the Museum has nonetheless made no showing – as is required by the aforementioned case law – that it conducts educational services, training, or coursework related to that topic.”

Charitable purposes exemption applied.  However, the Court reversed the denial of exemption for charitable purposes. The term “charitable purpose,” the Court noted, “is defined and understood in its broadest constitutional sense.” The Indiana Board of Tax Review viewed the museum as the founder’s hobby. The Court disagreed, holding that the Museum “conveys a gift for the benefit of the general public that is charitable in nature.” The Court’s conclusion was based on several factors:

1. The “Museum provides a place where members of the general public can learn about our country’s military history and heritage as well as pay homage to its veterans and their families for the sacrifices they made in defending our freedoms.”
2. “[V]isitors can view actual helicopters, tanks, and artillery equipment and understand how they were operated.”
3. “[V]isitors can learn how members of our military were trained, uniformed and learn how important battles were fought.”
4. “The Museum provides the public with access to its library of books and manuals for use in their own military research or restoration work.”

The Court held: “All of these activities enhance the public’s knowledge and understanding of a part of the American experience.”

The Court approved a 75% exemption for the real property. The Museum’s exhibition area, restoration area, and most of its storage area were deemed exempt as being exclusively used for charitable purposes. The Court found that the Officer’s Club and areas used for non-museum storage were taxable, as the Museum did not prove they were predominantly used for a charitable purpose. The Court reversed the Indiana Board and awarded a partial exemption.

Photos by Kenn W. Kiser