The Idaho Supreme Court on Thursday unanimously ruled that the Simplot Foundation must pay property taxes on the 2015 value of Jack’s Urban Meeting Place while it was under construction.
The high court rejected the foundation’s contention that construction was a “use” of the building that qualified it for a charitable exemption.
“Here, the plain language of the statute unambiguously indicates that to receive the charitable tax exemption the property must be used exclusively for the charitable purposes for which the charitable company is organized,” Chief Justice Roger Burdick wrote in the nine-page decision. “An active construction site is not property that is being used exclusively for an organization’s charitable purposes.”
The foundation claimed that site tours, community presentations and other activities carried out during construction were evidence of charitable work being performed at JUMP during construction.
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“The limited tours, interviews and meetings at the JUMP construction site did not provide a gift or service of public benefit to the community, nor is a tour or meeting at a construction site a charitable purposes for which the foundation is organized, as required by law,” Burdick wrote.
It’s unclear how much the foundation will owe the county based on the value of the building on Jan. 1, 2015, when construction was 70 percent complete.
In a separate court action, the foundation is challenging Ada County’s assessment of $40 million. If the assessed value is lowered, the foundation would pay less than the $675,000 it was originally billed.
The story below was published Dec. 12, 2017, under the headline, “Ada County taxed Simplot charity’s JUMP project in 2015. Now they’re fighting over it.”
Ada County says the J.R. Simplot Foundation owes $675,000 in 2015 property taxes on Jack’s Urban Meeting Place. The foundation says it does not, because it is a tax-exempt charity.
Their dispute has landed at the Idaho Supreme Court.
At issue is whether a nonprofit must pay property taxes on a building under construction before the charity begins offering services there.
The J.R. Simplot Foundation, which has operated since 1951, is challenging a decision by Ada County District Judge Richard Greenwood that says the foundation is liable for paying property taxes on JUMP for 2015, shortly before it opened to the public.
JUMP, a project of the family of Idaho agricultural tycoon J.R. Simplot, houses interactive studios, event spaces and a collection of antique tractors in its six stories at 1000 W. Myrtle St. in Downtown Boise. It is next to the Simplot Co.’s newly opened headquarters on the same block.
Construction began in 2012 but was halted two years later after the project expanded to include the nine-story headquarters. Plans were redrawn to enlarge an underground parking garage. JUMP opened to the public in December 2015 but refinements continued to be added.
Earlier assessments and tax payments were made just on the land. The property tax bill did not become an issue until the building value was added to the 2015 assessment. Beginning in 2016, Ada County granted the foundation an exemption, and it has not had to pay property taxes for that year or for 2017.
The foundation is a nonprofit that listed assets of more than $200 million in 2014. JUMP is its primary beneficiary. The foundation is separate from the smaller J.R. Simplot Co. Foundation, which contributes to several community causes.
Foundations, churches, charitable organizations and other nonprofits are generally exempt from federal and state income taxes and local property taxes in Idaho. That’s because the law considers these organizations to benefit the public and relieve the government’s burden. (Most do pay Idaho sales tax on most purchases and collect sales taxes on sales.)
In seeking the $675,000 , Ada County relied on a state law that says a property must be used “exclusively” for charitable purposes to qualify for an exemption. The Simplot Foundation paid the bill but appealed to the Idaho Board of Tax Appeals, which ruled in April 2016 that construction does not constitute a “use” of a building and that the exemption applied. The county paid the money back but went to court to appeal the ruling.
Greenwood disagreed. “Construction is, in fact, a use,” the judge wrote in a Feb. 13 opinion. “It was the primary use to which the property was being put [in 2015].”
Greenwood cited a 1998 decision by then-Ada County District Judge Daniel Eismann, who ruled that St. Luke’s Regional Medical Center was not entitled to an exemption from $155,000 in property taxes for its Meridian hospital while it was under construction. Then, as now, the Board of Tax Appeals ruled that the institution should get the exemption and was overruled.
“This statute clearly shows that the Legislature intended that a claim for exemption must be based on the status of the property as of the first day of January,” wrote Eismann, who retired earlier this year from the Idaho Supreme Court.
The hospital opened in April 1996, four months after the qualifying date.
In response, the 1999 Idaho Legislature passed a bill providing hospitals with a property tax exemption during construction. But the law did nothing for other charitable groups.
Previous cases have held nonprofits liable
In 2014, the Board of Tax Appeals upheld a decision by the Ada County Board of Equalization regarding an expansion of Grace Bible Church at 4262 N. Eagle Road. The church sought a full exemption for a new church sanctuary and adjoining rooms under construction. The county provided a 20 percent exemption based upon use of existing space that wasn’t part of the expansion.
In a handful of cases over more than 60 years, courts around the state have shared Ada County’s interpretation. This is the first time the question has been brought before the Idaho Supreme Court.
Boise attorney Terry Copple, who represents the Simplot Foundation, said it does not make sense to penalize a charity one year for constructing a new building and then issuing an exemption as soon as the structure is completed. “The activity and everything that was being done on that property was geared toward and was accomplishing the charitable goal,” Copple told the justices in oral arguments last week.
Copple said Oregon, Utah, California, Colorado and 10 other states exempt charities from property taxes during construction.
Sherry Morgan, a deputy Ada County prosecuting attorney, said a series of public tours and other activities that took place before JUMP officially opened do not meet the requirements of the law. “Those were not exclusive uses for charitable purposes on that property,” Morgan said.
At least one justice seemed to side with Ada County. Justice Warren Jones said the statute seemed straightforward. It’s up to the Legislature to decide if charities should get the same exemption hospitals get, he said.
“This is a policy argument, and it isn’t our job to make public policy,” Jones said.
The court’s ruling could take weeks or months.
Last year, the Idaho Statesman found that more than 325 hospitals, churches, nonprofit organizations and private schools or educational organizations were exempt from paying property taxes. The value of their properties totaled $1.6 billion.