‍FSHT Wins in Superior Court, But Town Will Appeal

In the May 2013 E-Bulletin, I wrote about Francis Small Heritage Trust’s (FSHT) court action against the Town of Limington to obtain property tax exemption.  Later in May, the Superior Court ruled soundly in favor of FSHT.  See the decision here.  The Town of Limington has since signaled its intention to appeal to the Maine Supreme Court.  The moment that Maine land trusts have been anticipating for 20 years will soon be at hand: Will the Maine Supreme Court clearly declare land conservation a charitable purpose for property tax exemption?

First, let’s review the basic facts in the FSHT case.  FSHT is a land trust that owns several contiguous parcels of land comprising the Sawyer Mountain Highlands Preserve in the Town of Limington.  All of the parcels were open to the general public for a variety of recreational uses, and FSHT held occasional educational events on the parcels.  FSHT acquired the parcels at different times, and enrolled some of the parcels in the current use Tree Growth program, while others were enrolled in the current use Open Space program, both of which allowed for reduced property tax assessments.  Nevertheless, in 2009 FSHT’s annual property tax assessment for these parcels was doubled to $6,000, and FSHT applied for and was denied property tax exemption by the Town.  After applying for an abatement and then petitioning the Maine Board of Property Tax Review, FSHT filed a court appeal.  One of the reasons cited by the Town in denying FSHT’s application was a lengthy purpose statement in its Articles of Incorporation that included “protecting appropriate uses such as logging, farming and other compatible commercial activities.”  The Town and subsequent local and state administrative bodies ruled that this language meant that FSHT was not organized for exclusively charitable purposes because it could engage in commercial activities on its properties.  The Town also argued that the Open Space property tax program was intended by the Legislature to pre-empt outright exemption for land trust conservation properties.  Also at issue was whether land conservation in and of itself is a charitable use within the meaning of Maine’s property tax exemption statute.  Finally, FSHT claimed federal civil rights violations based on evidence that the Town had denied the exemption application because FSHT had successfully brought a lawsuit against the Town relating to an abutter’s subdivision application.

The Superior Court (Justice Fritzsche) held for FSHT on the exemption issue, finding in very forceful language that land conservation is charitable.  In its key paragraph, the Court wrote:

It is time to directly declare that a legitimate land trust, such as this one, which meets the statutory and case law requirements, is a benevolent and charitable institution exempt from local property taxes.  The direct and indirect value of open space preservation particularly when, in appropriate cases, it is coupled with access for a wide variety of recreational activity is within any modern definition of a charitable institution.  In addition to the ecological and environmental benefit of land preservation there are numerous physical, psychological and, for some, even spiritual benefits to having access to undeveloped land.

Furthermore, the court rejected the Town’s interpretation of the purpose language in the Articles, noting that this provision permits the “protection” of logging, farming and other compatible commercial activities, but does not directly authorize or require such activities be conducted by FSHT.  The court noted that no such commercial activities had taken place on the disputed parcels, and even if it had, limited commercial activities would likely be incidental and therefore not disqualifying of exemption.  Finally, the court found that the Open Space statute did not pre-empt the property tax exemption statute.

FSHT’s federal civil rights claims remain outstanding before the Superior Court, and the appeal to the Maine Supreme Court will not go forward until these are resolved.  Maine Coast Heritage Trust filed an amicus curiae brief in support of FSHT, which brief was credited by the court as helpful in clarifying the issues.  We can expect MCHT to once again participate at the appeal level.  It will likely take at least a year or two before the Supreme Court will rule on the case.  Meanwhile, Maine land trusts can point to the Superior Court decision in fending off a town’s exemption challenge, but its impact will be muted by the fact of the appeal to the Supreme Court.

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Portland Council Votes to Sell Park, Opponents Bring Citizens’ Initiative

(Note:  I represent the nonprofit organization Friends of Congress Square Park, which is featured in this E-Bulletin item.)

On September 16, the Portland City Council voted 6-3 to sell approximately two-thirds of Congress Square Park, located at the corners of High and Congress Streets in the heart of the Arts District.  The lost park land would be used to build an event center by the adjacent hotel, formerly the Eastland, about to reopen as the Westin Hotel).  The decision on the sale has been very controversial, with the Council hearing over three hours of testimony during a Public Comment period the previous week.  Opponents of the sale outnumbered supporters by more than 2-1, according to news reports.  This sale of parkland to a private developer is thought to be an unprecedented move by the City of Portland.

Meanwhile, a group known as Friends of Congress Square Park incorporated and decided to prepare a submit a Citizens’ Initiative that would afford better protection to 60 of Portland’s park properties by strengthening the already existing Land Bank Ordinance.  The Initiative papers were filed with the City on September 6, and included a retroactive provision that could effectively nullify the City Council’s decision with respect to Congress Square Park.  However, the City Corporation Counsel has rejected the Initiative, claiming that it is an appropriations measure and an administrative (as opposed to legislative) measure, both of which are prohibited under the City’s initiative and referendum ordinance (and both of which limitations are not in the statewide initiative and referenda efforts).  As this E-Bulletin went to press, the Friends were preparing litigation papers to challenge this decision, and a memo outlining its legal position can be found on the Friends’ website (click on Letter to Corporation Counsel).

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Upcoming Event:  Nonprofit and Tax-Exempt Organization Seminar

Date: October 17, 2013, 8:30am – 4:40 pm
Location: Fireside Inn & Suites, Portland

Sponsor:  National Business Institute

The IRS has intensified its enforcement efforts and continues to revoke tax-exempt status for a growing number of organizations. Are your legal, accounting and business practices in compliance with the complex regulations governing nonprofits? This practical course offers essential strategies for creating and operating a successful tax-exempt organization that complies with laws and disclosure requirements.

Presented by attorneys Robert H. Levin, Leonard M. Cole, and Nathaniel S. Putnam, but designed for both attorneys and non-attorneys, this workshop will be valuable to the eager novice as well as the skilled nonprofit veteran, and will include:

Common actions that endanger nonprofits.

• Recent court cases and legislation affecting Maine nonprofits
• Insurance issues for nonprofits
• Accounting issues for nonprofits
• Unrelated Business Income Tax

For more information and to register, click here.

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CIRCULAR 230 DISCLOSURE: Any federal tax advice contained in this communication or attachment is not to be used for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing or recommending any transaction or matter addressed in this communication.