Thursday, November 11, 2010

Art Center Fails to Pick a (Tax-Exempt) Winner

Vermont Studio Center, Inc. v. Town of Johnson, 2010 VT 59
The Vermont Studio Center, Inc. (VSC) is a non-profit organization that runs an artists’ residency program at it facilities in Johnson, Vermont.  The main users are artists, writers, photographers, and printmakers.  Because of limited funding and space, the Center can only accept 612 residencies each year from out of 2000 applicants.  The general public is free to apply, but the applications, which include a portfolio, resume, and reference components are reviewed by a jury that selects the best and offers positions to individuals who must then pay to enroll.  VSC claimed exemption from property taxes under 32 V.S.A. § 3802(4), which exempts real estate put to public use.  To be entitled to an exemption under this provision, an owner must show, in part, that the primary use of its property directly benefited “an indefinite class of persons who are part of the public,” and also conferred “a benefit on society as a result of the benefit conferred on the persons directly served.”  Am. Museum of Fly Fishing, Inc. v. Town of Manchester, 151 Vt. 103, 110, 557 A.2d 900, 904 (1989).
The SCOV majority in this case found that the direct beneficiaries of VSC were “identified, determined, and defined” each year by the judging and selection process that separated the public from the “artists” who became the direct beneficiaries.  To reach this conclusion, the SCOV used its prior decisions in Sigler Foundation v. Town of Norwich, 174 Vt. 129 (2002) (state of the art dairy barn used to demonstrate modern farming techniques and open to the general public benefited an indefinite class and was exempt) and Trs. of Vt. Wild Land Found. v. Town of Pittsford, 137 Vt. 439, 443 (1979) (land owner who arbitrarily chose who could and could not come on to his refuge to study wildlife for scientific purposes benefited a definite and defined class of people and was not exempt).  The SCOV reaffirmed the language in Sigler that the broader an organization’s beneficiaries and less restrictive its criteria, then the more likely it serves an indefinite class of people.  For the SCOV, VSC’s juried acceptance program was too great a barrier that necessarily limited beneficiaries to the most-talented artists of any given application group and effectively blocked the general public.  For the Court this made VSC’s program too restrictive and too close to Vt. Wild Lands and its selective criteria.
In a particularly strong dissent, Judge Crawford, sitting on special assignment, pokes holes in the majority’s opinion by pointing out that the Court’s reasoning effectively disallows any kind of merit-based selection process for a public use.  Judge Crawford points out that both Am. Fly Fishing Museum and Sigler  involved public uses that appealed to only a small sub-group of the general population (fly fishing enthusiasts and individuals interested in dairy farming, respectively) and that a benefit to this small sub-group benefited society as a whole.  He also reminds us that Vt. Wild Lands was a unique case where the owner’s criteria were blatantly arbitrary and suspect as to their actual purpose.  This is all a wind-up to Judge Crawford’s main points, which are:
A reasonable definition of “indefinite class of persons” should not exclude groups whose activities require training, practice, and technical accomplishment.  “Public use” does not have to be limited to activities such as museum-going which anyone can do without preparation.  Nothing in 32 V.S.A. § 3802 suggests that the term is so limited.
The phrase “indefinite class of persons” should include classes of people selected through an open, competitive admissions process.  These would include artists selected through a juried process, musicians and actors who audition, and writers and poets who submit manuscripts to a competition.  The activities of these groups provide obvious public benefit.  The open nature of the competitions invites a class which is broad, numerous, and indefinite in its membership.  That winning a place through a fair competition depends upon individual skill makes it no less “open to all.”
Indeed, the majority’s decision requires open enrollment, non-merit based selection, or a similarly broad scope of admission policy that will always prohibit a nonprofit entity seeking to enroll participants with some background or interest in a particular field. 

In a bid to revive their tax exempt status, rumor has it that next year’s Studio Center applications will be picked from a glass jar by Mr. Chuckles, a rare, African albino Chimpanzee who was specially trained at Harvard to perform completely random selections.  Long-time applicant Mildred Smith of West Charlotte, whose portfolio consists entirely of costume sketches for an all-cat remake of Slumdog Millionaire, expects this to be her year.  

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