Evergreen Aviation & Space Museum v. Yamhill County Assessor
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IN THE OREGON TAX COURT MAGISTRATE DIVISION Property Tax EVERGREEN AVIATION & SPACE MUSEUM and THE CAPTAIN MICHAEL KING SMITH EDUCATION INSTITUTE, Plaintiffs, v. YAMHILL COUNTY ASSESSOR, Defendant. ) ) ) ) ) ) ) ) ) ) ) TC-MD 111240D DECISION Plaintiffs appeal Defendant s determination that personal property identified as Account 546418 is not exempt from taxation for tax year 2011-12. A trial for the above-entitled matter and four other related cases (TC-MD 111230D, 111231D, 111241D and 120587D) was held on June 18, 2012. Kevin L. Mannix, Attorney at Law, appeared on behalf of Plaintiffs. Delford M. Smith (Smith), Plaintiffs founder, Blythe Berselli (Berselli), President of Evergreen Aviation and Space Museum and board member, Larry Wood (Wood), Evergreen Aviation and Space Museum Executive Director, Philip D. Jaeger (Jaeger), Evergreen Aviation and Space Museum Director of Operations, Mary Alice Russell (Russell), McMinnville School District Superintendant, and Janeanne Upp (Upp), High Desert Museum President, Bend, Oregon, testified on behalf of Plaintiffs. Brian A. Linke (Linke), Yamhill County Registered Appraiser III, appeared and testified on behalf of Defendant. Plaintiffs Exhibits 1 through 33 and Defendant s Exhibits A through E were admitted without objection. /// /// DECISION TC-MD 111240D 1 I. STATEMENT OF FACTS Smith testified that he founded the Evergreen Aviation & Space Museum, stating Plaintiffs mission is: (1) To inspire and educate; (2) To promote and preserve aviation and space history; and (3) To honor the patriotic service of our veterans. Smith testified that the continuing goal of Plaintiffs is to expand their educational program. He described and Russell concurred that a strong business partnership exists between Plaintiffs and the McMinnville School District (District). A. Programs Russell, who has 32 years of teaching and administrative experience, testified about the numerous programs jointly sponsored by Plaintiffs and the District, including STEM (Science, Technology, Engineering and Math) and ESA (Engineering Space Academy) and their relationship with Chemekata College that gives college credit to high school students who satisfactorily complete the ESA course requirements. Russell testified that Evergreen Truck Stop is a program that teaches students how to fix a vehicle; Saturday Academy operates in conjunction with Chemekata College; Science of Skateboarding offered 500 fifth graders the opportunity to measure time and distance while skateboarding in the museum; and the robotics team is a spin off from the ESA program for 30 students. Russell testified that the museum complex offers educational programs that are a direct supplement to the District s educational offerings. Russell and Wood testified that Plaintiffs six classrooms located in the Aviation Museum are used for the ESA program in addition to another three classrooms located in the Space Museum. Linke testified that it is his understanding that the three Space Museum classrooms were also available for rent or use as meeting or conference rooms. Wood, a retired DECISION TC-MD 111240D 2 military officer (1997) and teacher (2006), testified that he would describe those classrooms as multi-purpose, estimating that less than 25 percent of their use is by outside groups, and they are principally used as classrooms. Russell testified that the District hires certified teachers for the ESA program and Wood testified that Plaintiffs employ five certified teachers. Wood testified that Plaintiffs employ a young man in a van, who travels around the state delivering educational material to classrooms. Wood testified that Plaintiffs offer scholarships to bring more children into the buildings. He testified that discounts are offered to school groups and fees are waived for those who cannot pay to participate. Wood testified that Plaintiffs work with Boy Scouts and Girl Scouts to offer programs that allow a scout to earn merit badges and one day a month is home school day for those children who are home schooled, offering more toys than a home school parent could offer. Wood testified that there is an aviation maintenance program and camping is allowed on the grounds. He testified that Discovery Ambassadors are trained on Saturdays and Sundays to learn how the museum works and some individuals are involved in restoring a Cessna 206 with the goal of getting it to fly again. Wood testified that restoration work is performed by a group of volunteers who are supervised by a licensed mechanic. B. Campus Wood testified about the subject property s campus and how the subject property is allocated to different uses. He testified that in the Aviation Museum and the Space Museum there are café/cafeterias with commercial grade kitchens that serve lunch to students, volunteers (no cost), and Plaintiffs employees and the facilities are open to the public without DECISION TC-MD 111240D 3 paying admission to the museums. (Def s Ex L-R4423-00601, TC-MD 111230D.) Wood described various catered events held on the subject property and the use of the kitchen by Chemekata College s culinary program. Jaeger testified that it is a known fact that if food is available it keeps visitors there and revenue is generated to support the educational mission of the subject property. Russell testified that the District is dependent upon the cafeterias to serve a healthy hot lunch to the students. Wood testified that the Aviation and Museum Stores sell items that match the theme of the museum (e.g. Spruce Goose t-shirts) and other items that include educational models and little airplanes, posters, science kits, puzzles, books, CDs, and DVDs. Linke testified that the stores sell the for profit corporation logo items. (Def s Ex L-R4423-00600, TC-MD 111231D.) Wood testified that individuals can access the stores without paying an admission fee. (Def s Exs J-R4423-00600, TC-MD 111231D; M-R4423-00601, TC-MD 111230D.) Wood testified that the IMAX Theatre shows 45 to 50 minute educational films and Jaeger testified that each of the movies that are shown has an educational message and teacher s guides are available for many of the movies. (Ptfs Ex 29.) Wood and Jaeger testified that the admission ticket booth is also a concession stand, selling popcorn and soft drinks. (Def s Ex O-R4423-00601, TC-MD 111230D.) Wood testified that having popcorn available results in a more complete experience for someone attending a movie. In response to questions about ownership and lease arrangements, Berselli and Jaeger testified that Evergreen Vintage Aircraft (the for profit corporation ) purchased the IMAX equipment in 2007. They testified that there is no written lease agreement between Plaintiffs and Evergreen Vintage Aircraft and zero rent is paid by Plaintiffs for the use of the theatre and equipment. Jaeger testified that the museum covers annual operating expenses. Linke testified that there is a document titled DECISION TC-MD 111240D 4 Agreement for Sublease of IMAX 3D SR Projection System, dated December 29, 2010, stating the fees that Plaintiffs will pay to Evergreen Vintage Aircraft for Plaintiffs to operate the IMAX 3D SR Projection System. (Def s Ex H, TC-MD 111241D.) Linke testified that the theater is exempt but the lease does not allow the county to grant an exemption because the rent is not set below market. He testified that IMAX should not get tax benefit due to tax exempt status of the theater. Plaintiffs allege that the personal property should be taxed if the real property is taxed and noted that this is the first year ever that Defendant is taxing personal property. Wood testified that the child s play area in the Space Museum provides a place for children to relax and learn by playing. He testified that there is jungle gym equipment that simulates helicopter controls. (Def s Ex I-R4423-00600, TC-MD 111231D.) Jaeger described that the equipment as an aircraft ride, like a carousel, with arms that move up and down when a child pulls back on the yoke. The parties agree that the subject property s area allocated to the wine bar that is operated by Evergreen Vintage Aircraft, Inc. is taxable. The parties dispute the square footage allocated to the wine bar. (Def s Ex N-R4423-00601, TC-MD 111230D.) Jaeger testified that the 5,000 square feet reserved for Evergreen Vintage Aircraft, Inc s uses as stated in the Lease Agreement, dated January 1, 2000, was space allocated to the wine bar. (Def s Ex P-5, Sec 2.1, TC-MD 111230D.) Jaeger testified that Plaintiffs allocated no more than 1,120 square feet in the Space Museum and 1,200 square feet in the Aviation Museum for the wine bar. (Ptfs Ex 33.) /// /// /// DECISION TC-MD 111240D 5 Jaeger testified that two weeks prior to trial he measured the subject property s space allocated to different uses. (Ptfs Ex 33.) On redirect, Jaeger testified that the area allocated to the Museum café was 300 square feet larger as of the assessment date, January 1, 2011. Linke testified that he measured the outside of the subject property in 2010, measured the interiors of the Space Museum when it was newly built and relied on the subject property s blue prints. (Def s Exs D, TC-MD 111230D; C, TC-MD 111231D.) Linke testified that he was not aware that some offices were used by the museum. Jaeger testified that the subject property is available for rent and the venue makes the events, especially for weddings and receptions. He testified that there is outreach to others to use the facility. Linke questioned whether special events further Plaintiffs educational and charitable work. (Def s Ex M-R4423-00600, TC-MD 111231D.) He testified that Defendant does not agree with Plaintiffs totality concept that just because it is associated with education it should be exempt. Linke testified that each individual component s use should be considered when determining exemption from property taxation. C. Displays Wood testified that the subject property is a living museum with moveable displays that change on a regular basis. He testified that there needs to be open spaces to change displays, especially given the size of the aircraft that are moved from one location to another, inside or outside the buildings. Jaeger testified that the subject property was designed to grow. D. High Desert Museum, Bend, Oregon Upp, who for the last four and one-half years has been the president of the High Desert Museum, testified that the High Desert Museum offers an education based program within its 110,000 square foot building and 135 acres. She testified that there are three changing DECISION TC-MD 111240D 6 galleries. Upp testified that the Silver Sage Trading Store sells sketches and is known for its books. She testified that the museum which is located six miles from Bend has a café that is for the benefit of the visitor, offering a place to rest and eat and allows guests, who she describes as multi-generational (e.g., grandparents, parents and children), to extend their stay. Upp testified that all the money received from the store and café support the museum and the museum is 100 percent property tax exempt. II. ANALYSIS Generally, all property located within Oregon is taxable. Living Enrichment Center v. Dept. of Rev., 19 OTR 324, 328 (2007) (citing ORS 307.030 (2003)). It has long been the rule in Oregon that property is subject to taxation unless specifically exempted. Id. (quoting Christian Life Fellowship, Inc. v. Dept. of Rev., 12 OTR 94, 96 (1991)). Exemption provisions should be strictly construed in favor of the state and against the taxpayer. North Harbour Corp. v. Dept. of Rev., 16 OTR 91, 94 (2002) (citing Mult. School of the Bible v. Mult. Co. (Mult. School of the Bible), 218 Or 19, 27, 343 P.2d 893 (1959)). That rule of construction means strict but reasonable[,] which requires an exemption statute be construed reasonably, giving due consideration to the ordinary meaning of the words of the statute and the legislative intent. Id. at 95 (citing Mult. School of the Bible, 218 Or at 27-28). Plaintiffs assert that the subject property with limited exceptions qualifies for exemption from property taxation, because it meets the statutory requirements of ORS 307.130(2)1 which provides, in pertinent part, that: Upon compliance with ORS 307.162, the following property owned or being purchased by art museums, volunteer fire departments, or incorporated literary, benevolent, charitable and scientific institutions shall be exempt from taxation: 1 All references to the Oregon Revised Statutes (ORS) are to the 2009 edition unless otherwise stated. DECISION TC-MD 111240D 7 (a) Except as provided in ORS 748.414, only such real or personal property, or proportion thereof, as is actually and exclusively occupied or used in the literary, benevolent, charitable or scientific work carried on by such institutions. ORS 307.130(2). A. Benevolent, Charitable or Scientific Institution Plaintiffs allege that they are charitable and scientific organizations engaged in charitable and scientific work. The Oregon Supreme Court described scientific organizations in the context of ORS 307.130. The Supreme Court stated: Scientific societies are usually and ordinarily understood to embrace organizations for the promotion of science or the pursuit of scientific studies for the purpose of developing science, rather than as a student in a college or university for his own edification. Kappa Gamma Rho v. Marion County, 130 Or 165, 176, 279 P 555 (1929). Plaintiffs allege that they qualify as a scientific organization because [a]eronautics is defined in the Merriam-Webster dictionary as a science dealing with the operation of aircraft and Plaintiffs mission is to inspire and educate the public, and promote and preserve aviation and space history, as evidenced by the activities which take place at the subject property. (Ptfs Trial Mem at 2-3.) Defendant reviewed Plaintiffs application on the basis that it was a charitable organization and gave no consideration to whether it was a scientific organization. The court finds that Plaintiffs mission and its activities are consistent with the concept of a scientific organization. Through its partnership with the McMinnville School District and Chemekata College, Plaintiffs offer educational opportunities for scientific inquiries into the operation of aircraft and create interactive learning opportunities to uncover the wonders of space. Plaintiffs create numerous programs staffed by certified educators and licensed professionals, offering scholarships and funding educational events for those who cannot pay the fee. Plaintiffs programs are designed to promote an interest in aeronautics, to preserve vintage DECISION TC-MD 111240D 8 aircraft and to offer a historical perspective that encourages future development and exploration. The court finds that Plaintiffs are a scientific institution within the meaning of ORS 307.130. Although a scientific organization must be in the nature of a public charity, it is distinguishable from a charity organization. Math Learning Center v. Dept. of Rev. (Math Learning Center), 14 OTR 62, 65 (1996). The Oregon Supreme Court has held that, for purposes of ORS 307.130, the words benevolent used in connection with the word charitable are synonymous. Methodist Homes, Inc. v. Tax Com., 226 Or 298, 308-309, 360 P.2d 293 (1961) (citing Behnke-Walker v. Multnomah County, 173 Or 510, 519, 146 P.2d 614 (1944)). There are, however, some significant differences between charitable and scientific institutions. Although a scientific organization must be in the nature of a public charity, it is distinguishable from a charitable organization. A charitable organization must have charity as its primary, if not its sole, object. A literary or scientific organization has a different primary purpose. Math Learning Center 14 OTR at 65 (1996) (citing Dove Lewis Mem. Emer. Vet. Clinic v. Dept. of Rev., 301 Or 423, 427, 723 P.2d 320 (1986)). Notwithstanding the primary purpose of literary or scientific organizations, those types of organizations must be charitable in nature. Theatre West of Lincoln City, Ltd. v. Dept. of Rev., 12 OTR 479, 482 (1993) rev d on other grounds 319 Or 114, 873 P.2d 1083 (1994). This means that a literary or scientific organization cannot qualify for the exemption unless a significant portion of its activities have a charitable objective. Theatre West of Lincoln City, Ltd. v. Dept. of Rev., 319 Or 114, 117, 873 P2d 1083 (1994). The underlying rationale for this is that tax exemption is given in return for the performance of functions that benefit the public. Math Learning Center, 14 OTR at 65. /// /// DECISION TC-MD 111240D 9 B. Exclusive Use The parties agree that Plaintiffs are organized under Oregon law as a public benefit corporation. The issue before the court is whether the use made of the subject property qualifies for exemption under the statute. Property or a portion of a property shall be exempt from taxation if it is actually and exclusively occupied or used in the * * * charitable or scientific work carried on by such institutions. ORS 307.130(2)(a). [T]he words exclusively occupied or used, * * * refer to the primary purpose for which the institution was organized and includes any property of the institution used exclusively for any facility which is incidental to and reasonably necessary for the accomplishment and fulfillment of the generally recognized functions of such a charitable institution. Mult. School of Bible, 218 Or at 36-37. It is the actual occupancy of the property which determines its right to exemption[.] Id. at 40 (citing Hibernian Benevolent Society v. Kelly, 28 Or 173, 42 P 3 (1895)). However, this court has determined that Plaintiffs are scientific organizations and, therefore, Plaintiffs do not have to establish charity as their primary purpose. It is not necessary for Plaintiffs to meet the tests set forth in Methodist Homes, Inc. v. Tax Com., 226 Or 298, 309-10, 360 P2d 293 (1961), because those tests are designed to determine whether the organization operates with charity as its primary object. Both parties agree that Plaintiffs do engage in some truly donative activities. Math Learning Center 14 OTR at 67. Plaintiffs are nonprofit entities that provide no benefit for the founder, officers or employees and rely on volunteers and admission revenue to support their scientific activities. Plaintiffs partnership with the District supplements or relieves a government burden. The court concludes that Plaintiffs activities are charitable in nature. With respect to the exclusive use of the property, ORS 307.130(2)(a) requires that the property be actually and exclusively occupied or used in the * * * charitable or scientific work DECISION TC-MD 111240D 10 carried on by such institutions. The parties agree that the majority of the subject property s square footage is exclusively used for Plaintiffs charitable and scientific work. The court has determined that some portions of the subject property are not used for Plaintiffs charitable and scientific work. At issue is the subject property s personal property other than the IMAX projection equipment. C. Personal Property Plaintiffs assert that [i]f this court finds that Evergreen Museum qualifies for exemption on its real property, a finding that the Assessor s office has already conceded, it logically follows that Evergreen Museum s personal property would be covered under the same exemption. (Ptfs Trial Memo at 5.) As previously stated, this court has determined that some portions of the subject property are not exclusively used for Plaintiffs charitable and scientific work. See TC-MD 111230D and 111231D. At trial, Plaintiffs agreed that if the court concluded that some portions of the subject property were not exclusively used for Plaintiffs charitable and scientific work it would identify that personal property, providing cost and other relevant information. III. CONCLUSION After careful consideration of the testimony and evidence, the court concludes that some of Plaintiffs personal property is not exclusively used for its charitable and scientific work. Now, therefore, IT IS THE DECISION OF THIS COURT that Plaintiffs appeal is denied for its personal property identified as Account 546418 that is not exclusively used for Plaintiffs charitable and scientific work. /// /// DECISION TC-MD 111240D 11 IT IS FURTHER DECIDED that Plaintiffs will identify the personal property in accordance with the court s determination that portions of the subject property are not exclusively used for Plaintiffs charitable and scientific work. Dated this day of August 2012. JILL A. TANNER PRESIDING MAGISTRATE If you want to appeal this Decision, file a Complaint in the Regular Division of the Oregon Tax Court, by mailing to: 1163 State Street, Salem, OR 97301-2563; or by hand delivery to: Fourth Floor, 1241 State Street, Salem, OR. Your Complaint must be submitted within 60 days after the date of the Decision or this Decision becomes final and cannot be changed. This document was signed by Presiding Magistrate Jill A. Tanner on August 27, 2012. The Court filed and entered this document on August 27, 2012. DECISION TC-MD 111240D 12
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