Maine Supreme Court preserves private school’s tax-exempt status and rental activity

Earlier thisweek, the Maine Supreme Court addressed whether a private boarding school’spractice of renting some of its facilities for private use jeopardized theschool’s tax-exempt status. The court held that it did not.

Maine law offersa property tax exemption for property “owned and occupied” or used byliterary and scientific institutions “solely for their own purposes.”The trial court believed the problem with the school in question was that,because the school rented the property out for private use, the property forwhich it was seeking tax exemption was not occupied solely for the school’s ownpurpose.

In upholding theschool’s tax-exempt status, however, the court held that the school’s practiceof renting the facilities for private use amounted to a “de minimisincidental use.” Further, this use of the school’s facilities accountedonly for about one percent of the school’s operation budget and therefore didnot interfere with its tax-exempt purpose.

This decisionseems favorable to nonprofit organizations and educational instructions, butits opponents believe the court’s decision is at tension with the statute’srequirement that the property be used “solely” for the organizations ownpurpose.

http://www.mpbn.net/Home/tabid/36/ctl/ViewItem/mid/5347/ItemId/26068/Default.aspx

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