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HomeMy WebLinkAboutAgenda - 06-17-2003-8fORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: June 17, 2003 Action Agenda Item No. SUBJECT: Application for Property Tax Exemption DEPARTMENT: Assessor PUBLIC HEARING: (Y/N) No ATTACHMENT(S): Brief Description of Chapel Hill Training Outreach Project Property Vicinity Map for Property Exempt Status Resolution INFORMATION CONTACT: John Smith, ext. 2101 TELEPHONE NUMBERS: Hillsborough Chapel Hill Durham Mebane 732-8181 968-4501 688-7331 336-227-2031 PURPOSE: To consider an untimely application for granting exempt status from ad valorem taxation for the 2002 tax year. BACKGROUND: Chapel Hill Training-Outreach Project, Inc. submitted an application for property tax exemption on tract number 402705 in late 2002. North Carolina General Statutes state that an application for exemption must be filed during the normal listing period, which is during the month of January. NCGS 105-282.1(a)(5) does allow some discretion. Upon a showing of good cause by the applicant for failure to make a timely application, an application for exemption or exclusion filed after the close of the listing period may be approved by the Department of Revenue, the board of equalization and review, the board of county commissioners, or the governing body of a municipality, as appropriate. An untimely application for exemption or exclusion approved under this subdivision applies only to property taxes levied by the county or municipality in the calendar year in which the untimely application is filed. Chapel Hill Training-Outreach Project, Inc. (CHTOP) has applied under NCGS 105-278.7 claiming the property is being used wholly and exclusively for a charitable and educational purpose. The opinion of the Assessor is that the Chapel Hill Training-Outreach Project, Inc. property is not wholly and exclusively used for a charitable and educational purpose and does not qualify for exemption. 1. CHTOP claims in its Application for Property Tax Exemption that its land, improvements, and personal property are used for the purpose of a "Head Start Child Development Day Care Center." 2. CHTOP receives some funds from Head Start, but its funding is not exclusively from Head Start. (CHTOP supplies a custodial care service for which it is paid by Head Start.) 3. CHTOP is anon-profit corporation and is tax exempt under 501(c) (3) of the Internal Revenue Code, from federal Income taxes. 4. CHTOP's Application for Property Tax Exemption states that the taxpayer claims that, as an educational organization, its property is exempted for ad valorem taxes under N.C. Gen Stat. 105-278.7. Under N.C. Gen. Stat. 105-278.7, buildings, the land they actually occupy, and additional adjacent land necessary for the convenient use of any such building shall be exempted from taxation if wholly owned by a charitable, historical, veterans, scientific, literary, benevolent, or nonprofit community or neighborhood organization, if the land is "wholly and exclusively used" by its owner for educational purpose as "one that has as its objective the education or instruction of human beings, [which] comprehends the transmission of information and the training and development of the knowledge or skills of individual persons." Charitable is defined in the statute as "one that has humane and philanthropic objectives [and] is an activity that benefits humanity or a significant rather then limited segment of the community without expectation of pecuniary benefit or reward." According to its Articles of Incorporation, CHTOP is "organized exclusively for charitable, religious, educational, and scientific purposes" to qualify it under Section 501 (c) (3) of the Internal Revenue Code. An organization is not deemed to be a charitable organization for purposes of determining its eligibility for an exemption from property taxes merely because it enjoys non-profit status for income tax purposes. See appeal of Chapel Hill Residential Retirement Center, Inc., 60 N.C. App. 294, 299 S.E.2d 782 (1983). The Internet website of CHTOP (www.chtop.com) indicates that, besides its Head Start Programs, the organization operates or supports a number of other projects, offers a number of services, and develops and sells a number of products, such as the following: 1. Programs and services related to day care and respite care services for children, the disabled and the elderly; 2. Family support programs; 3. "Outreach" services under contract on a national and international scale including training, media development, demonstration, technical assistance, and public awareness; and 4. Products for sale related to learning and infant preschool play assessments, early childhood, curriculum planning, disability, head start, respite and family support, volunteer support; and related media products. The website suggests that, although CHTOP is partially funded by Head Start funds, and other funding sources that are possibly public in nature, it is substantially supported by the above- described product sales at retail prices. For example, certain 15-minute video transfers are being sold for sixty-five dollars and there are assessment kits that are sold for nearly a thousand dollars each. The products may be ordered from CHTOP directly and are, according to the ordering instructions, to include North Carolina sales tax for State residents. These facts are suggestive of an enterprise which, although operating anon-profit, is, arguably, not charitable in character for property tax exemption purposes. See Matter of Barham, 70 N.C. App. 236, 319 S.E.2d 657 (1984) (nonprofit corporation which required that residents pay large sums of money for the services rendered and which reserved the right to terminate any resident for nonpayment of fees, was not entitled to a charitable purpose exemption from ad valorem taxes.) The Application for Property Tax Exemption states that the property is being used as a Head Start child development day care center. However, it is not exclusively used for that purpose and not exclusively funded by Head Start. The Assessor's understanding is that the property is being used for custodial care to community children. Day care is a custodial service, which, even with an educational component, is not wholly and exclusively related to education. See In re Appeal of Chapel Hill Day Care Ctr., Inc. 144 N.C.App. 649, 552 S.E.2d 172 (2001) dsc. Rev. denied, 355 N.C. 492, 563 S.E. 2d 564 (2002) (day care center at issue had a custodial purpose and was not wholly and exclusively educational in nature). The information provided by the applicant in support of its requested exemption does not demonstrate or provide an alternative basis for property tax exemption. Based on what the Assessor knows, it is Assessor's opinion that the CHTOP property is not exempt from property taxes because either or both: (1) CHTOP is not a charitable organization for property tax purposes, and (2) the property in question is not wholly and exclusively used to provide education. Reviews have also been made by the Orange County Attorney and the Ad Valorem Tax Division of the N.C. Department of Revenue. It is the opinion of both entities that this property does not qualify for exemption. FINANCIAL IMPACT: Denial will have no financial impact. Approval will result in a reduction of 2002 taxes due to the County, municipalities, and special districts in the amount of $2,498.27. RECOMMENDATION(S): The County Manager recommends that the application for 2002 exemption be denied. 4 Brief Description of Chapel Hill Training Outreach Project (4.9.C.18) The Chapel Hill Training Outreach Project (CHTOP) is situated on approximately 1.58 acres located at 125 Lawndale Avenue off Hwy 70, west of Hillsborough. The majority of the property is fenced in creating safe play areas for the children. The facility is one story construction of brick veneer consisting of 2880 square feet of heated area. The dimensions are 36 by 80. There is a covered area above the front entrance allowing parents to drive through when dropping off children. This covered area is 28 by 24 covering 672 square feet. In addition there are four small open shelter areas and two storage buildings. The property has a tax value of $172,000. SR 1397 TULIPTREERO v m ~ CLEO CT 0 SR~1409 r= • n 2 ~ ~0 V RIDDLEgVE 2 ~ ~ v ~ HOMEMONTAVE ~m ~ ~aRPER RD -v ~ SR 1557 DALTONST ~ ~ _ RENCHER ST ~~ N TORAIN ST ~O ~wN pqC HOLMgN pR tis~ ~ ~' m SR 1558 ~( .p 'Yi Chapel Hill Training Outreach P P ~ S'T ,L t~ roject roperty 125 Lawndale Avenue ~ N 9~ V ~~ J 4~ 5 Intersection of Hwy 70 and Churton Street (Hwy 86 North) V S 70 S --. G~ '~ OAK ST >' v=i ~RF` ~, O ~+ ~ ~~ OHO CEDAR ST 90~ ~ G~ ~ ~~O O~ AVE ~Q W CORBIN ST E CORBIN ST ~tv~ W CORBIN ST aP~ W ORANGE ST W UNION ST h w W QUEEN ST z ~~ W UNION ST E UNION ST _ _- z W QUEEN ST E QUEEN ST 6 NORTH CAROLINA ORANGE COUNTY EXEMPT STATUS RESOLUTION (Denial) Whereas, North Carolina General Statutes 105-282.1 empowers the Board of County Commissioners to approve applications for exemption after the close of the listing period, and Whereas, good cause has been shown as evidenced by the information packet provided,and Whereas, the Assessor has determined that the applicant could not have been approved for 2002 had applications been timely. NOW, THEREFORE, IT IS RESOLVED BY THE BOARD OF COUNTY COMMISSIONERS OF ORANGE COUNTY THAT the property applying for exemption for 2002 is not approved as exempt. Upon motion duly made and seconded, the foregoing resolution was passed by the following votes: Ayes: Commissioners Noes: I, Donna Baker, Clerk to the Board of Commissioners for the County of Orange, North Carolina, DO HEREBY CERTIFY that the foregoing has been carefully copied from the recorded minutes of the Board of Commissioners for said County at a regular meeting of said Board held on said record having been made in the Minute Book of the minutes of said Board, and is a true copy of so much of said proceedings of said Board as relates in any way to the passage of the resolution described in said proceedings. WITNESS my hand and the corporate seal of said County, this day of , 2003. Clerk to the Board of Commissioners