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Charity's commercial use of property to fund charitable activities does not render it ineligible for an exemption.

The Supreme Court of Minnesota ruled that a nonprofit book publisher that engaged in contract publishing to cover its operating costs was entitled to a property tax exemption when its primary purpose was charitable and its commercial activity was in furtherance of its charitable purpose.

The Afton Historical Society Press (Afton) is a nonprofit corporation that publishes books about Minnesota history and culture, donates books to schools and libraries, and promotes its publications through various events such as museum exhibitions. Afton sells its books at less than half the cost of publication; it covers its remaining operating costs through donations and through publishing books on a contract basis. Some donations Alton receives are designated by donors for specific publishing projects or for its Books-for-Schools program.

For the years 2003-2005, Afton sought a property tax exemption as a charitable institution. The tax court denied the exemption, finding that Afton's retail sales, contract publishing, and earmarked donations were not characteristic of a purely public charity. Afton appealed.

On appeal, the state supreme court held that Afton qualified as a public charity, noting that an institution is a charity when it provides a substantial proportion of its goods free of charge or at prices far below market value or cost. Here, the court found that the proportion of Alton's books sold at a loss or donated to schools free of charge was substantial. The fact that some donations were earmarked for specific purposes did not affect whether the beneficiaries received the books free or at reduced cost, according to the court. In addition, the court found that Alton necessarily engaged in contract publishing to cover its overhead costs, had never made a profit, and published fewer books per year on a contract basis than it published otherwise.

The court thus ruled that Alton's commercial use of its property was incidental and reasonably necessary to further its charitable purpose and so did not affect its charitable status. The court concluded that Alton was a purely public charity entitled to a property tax exemption. The trial court decision was reversed.

Afton Historical Society Press v. County of Washington

Supreme Court of Minnesota

December 13, 2007

742 N.W.2d 434 (Minn. 2007)

Alan M. Weinberger, JD, is the Associate Dean for Faculty at Saint Louis University School of Law where he has been a law professor since 1987. Previously he practiced for twelve years with law firms in Detroit and Washington, DC, specializing in real estate transfer, finance, and development. Weinberger graduated magna cum laude from the University of Michigan Law School. He has published articles and chapters in the fields of real estate finance, partnership, and property law. He is coauthor of Property Law Cases, Materials and Problems, 3rd ed., published by West Group. Contact:
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Title Annotation:Recent Court Decisions; Afton Historical Society Press
Author:Weinberger, Alan M.
Publication:Appraisal Journal
Geographic Code:1USA
Date:Mar 22, 2008
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