SYLLABUS 1. A taxpayer seeking a property tax exemption as an institution of purely public charity must show that the proposed use of the property is in furtherance of the tax-exempt charitable purpose of the organization, and that it has made reasonably diligent progress toward implementing the proposed tax-exempt use of the property. 2. The tax court erred in failing to consider whether relator's conduct demonstrated reasonable diligence toward implementing its proposed tax-exempt use of its property. 3. The tax court erred in declining to consider whether relator's current activities, including activities conducted on nonadjacent leased property, demonstrate that the proposed future use of the property supports a continued exemption.
The opinion of the court was delivered by: Dietzen, Justice.
Tax Court Dietzen, J. Concurring, Page, Anderson, G. Barry, and Wright, JJ.
Office of Appellate Courts
Relator Living Word Bible Camp (Living Word), a tax-exempt organization, owns property located on Deer Lake in Itasca County (Deer Lake property), for which it seeks to obtain the necessary governmental approvals for use as a summer bible camp and retreat center. At the request of Living Word, the County classified the property as tax-exempt from 2001 to 2007. The County then reclassified the property as taxable as of January 2, 2008. Living Word challenged the reclassification for both the 2008 (payable in 2009) and 2009 (payable in 2010) assessments. The Minnesota Tax Court affirmed the County's reclassification because Living Word had failed to make sufficient progress in obtaining the necessary governmental approvals for its proposed use of the property. Subsequently, Living Word sought certiorari review by this court. We reverse and remand to the tax court for further proceedings.
Living Word is a tax-exempt organization under IRC § 501(c)(3) (2006), which for the past 20 years has operated summer bible camps on leased property in Aitkin County (Aitkin property). In 2000, Living Word acquired the Deer Lake property with the hope of transferring the summer bible camp and retreat center activities from the Aitkin property to the Deer Lake property. From 2001 through 2007, the Deer Lake property was exempt from tax, first as a church and later as an institution of purely public charity under Minn. Stat. § 272.02, subds. 6-7 (2012). Living Word has made efforts to obtain the necessary governmental approvals to use the Deer Lake property as a summer bible camp and retreat center and to obtain a property tax exemption.*fn1 We turn to those facts.
In May 2001, Living Word applied to the County to rezone the Deer Lake property consistent with its proposed use. The Itasca County Board denied the application, and Living Word brought a declaratory judgment action challenging that denial. The district court concluded that the County Board's findings denying the application were insufficient, and remanded the matter to the County Board for further findings. On appeal, the court of appeals affirmed. Living Word Bible Camp v. Cnty. of Itasca, No. A03-0385, 2003 WL 22890070 (Minn. App. Dec. 9, 2003).
On remand, the County Board granted Living Word's application to rezone the Deer Lake property. Thereafter, local residents appealed to the district court, which reversed the County Board's decision. In 2006, the court of appeals reversed the district court and reinstated the County Board's decision to rezone the Deer Lake property.
Newton v. Cnty. of Itasca, Nos. A05-0879, A05-0893, 2006 WL 771719 (Minn. App. Mar. 28, 2006), rev. denied (Minn. June 20, 2006).
In April 2006, Living Word applied to the County for a conditional-use permit (CUP) and planned-unit-development permit (PUD) to use the Deer Lake property as a summer bible camp and retreat center. Shortly thereafter, local residents filed with the County a petition requesting that an environmental assessment worksheet (EAW) be prepared to evaluate the environmental impacts of the proposed project. The County Board denied the petition, and the residents appealed to the district court. While that appeal was pending, the County Board approved Living Word's CUP and PUD applications, and local residents challenged those decisions in district court. In April 2007, the district court reversed the County Board and ordered that the EAW be prepared, but affirmed the decisions of the County Board to grant the CUP and PUD applications. Both sides appealed.
In July 2008, the court of appeals affirmed the district court's order requiring the preparation of an EAW, vacated the order approving the CUP and PUD applications, and remanded for redetermination once the EAW was completed. In re the Conditional Use Permits and Preliminary Planned Unit Dev. Applications of Living Word Bible Camp, Nos. A06-1850, A07-1231, 2008 WL 2245708, at *1 (Minn. App. June 3, 2008). The County prepared the EAW and made it available for public comment in December 2009.
In February 2010, the County Board voted to have an environmental impact statement (EIS) prepared for the project.*fn2
Since acquiring the Deer Lake property, Living Word has made improvements permitted by existing zoning to facilitate the proposed use of that property as a summer bible camp and retreat center. Specifically, the land has been cleared and surveyed; location of the buildings, driveways, and parking lot have been staked; and an outbuilding was constructed to repair camp equipment. Also, an architect has drafted plans for the camp buildings. Currently, Living Word uses the Deer Lake property for training of its camp counselors and for other administrative work for the summer bible camp and retreat center activities conducted on the Aitkin property.
As noted earlier, Living Word applied for and obtained an exemption from the County for the Deer Lake property for 2001 through 2007, first as a church and later as an institution of purely public charity. See Minn. Stat. § 272.02, subds. 6-7. In 2007, the County reclassified the Deer Lake property from tax-exempt to taxable as seasonal-use property effective as of January 2, 2008 (taxes payable in 2009). Living Word filed a timely petition challenging the reclassification on two grounds: (1) that the Deer Lake property was exempt from taxation, and (2) that the Deer Lake property was misclassified. The matter proceeded to trial before the tax court in June 2010. At the time of trial, Living Word's zoning applications and the pending environmental review of the project were incomplete and not administratively final.
Following trial, the tax court issued findings of fact, conclusions of law, and an order affirming the County's classification of the Deer Lake property as taxable in both 2008 and 2009. Living Word Bible Camp v. Cnty. of Itasca, Nos. 31-CV-09-1514, 31-CV-10-884, 2011 WL 1303396 (Minn. T.C. Mar. 28, 2011), aff'd as amended, 2012 WL 653844 (Minn. T.C. Feb. 24, 2012). The court found, among other things, that Living Word "has had a reasonable amount of time to develop and use the Subject Property- eight years-while receiving a property tax exemption," but is "no closer to commencing its plans to develop the Subject Property than it was at the time of the purchase due to the legal bar to its progress." 2011 WL 1303396, at *5. The court therefore concluded that the Deer Lake property was properly classified as taxable for the 2008 and 2009 assessment years because Living Word "has not demonstrated progress towards developing the Subject Property and it is uncertain whether the Subject Property can legally be developed for [Living Word's] intended use" as a summer bible camp and retreat center. Id. at *6.
Living Word argues on appeal that the tax court erred in (1) failing to determine whether it is an institution of purely public charity (IPPC); (2) determining that it did not make sufficient progress in obtaining the necessary approvals for the proposed use of the Deer Lake property as a summer bible camp and retreat center; and (3) determining that its current use of the Deer Lake property, in ...