Decision Frees More than $1 Million in Property and Fire Taxes
In a one-sentence ruling, the North Carolina Supreme Court last Friday reversed a decision by the NC Court of Appeals and gave Watauga County the right to keep approximately $1 million dollars in property taxes paid by the Maharishi Spiritual Center of America. The court concurred with the dissenting opinion of appellate Judge John M. Tyson, who argued that the campus — a center devoted to the teaching and practice of Transcendental Meditation — did not meet the legal standard for an exempt educational institution.
Over the past four years, the question of whether the Spiritual Center qualifies as a property-tax-exempt educational institution has wound its way from the Watauga County Tax Administrator’s office all the way to the state Supreme Court. From the beginning, the Spiritual Center has claimed educational use as the basis for its exemption and did not petition for an exemption under other allowed categories such as religious or charitable use.
– Is TM a religion?
Although the Spiritual Center is a 501(c )(3) nonprofit and exempt from a number of taxes, its nonprofit status does not automatically confer exemption from property tax. Watauga County tax administrator Kelvin Byrd explains that while nonprofit ownership is a criterion in determining if a property is exempt from property tax, additional standards must be met as well, and usage is one of the big ones, with the key words being “wholly and exclusively.” The county’s argument, validated last Friday at the Supreme Court level, was that the Spiritual Center property was not wholly and exclusively used for educational purposes.
The contest began in April 1999 when the Board of Equalization & Review denied the Spiritual Center’s exemption request for 61 parcels of real estate encompassing approximately 550 acres located within the 7,000-acre Heavenly Mountain Resort. The NC Property Tax Commission upheld that denial in December 2000. However, in August 2002, two judges on a three-member panel of the NC Court of Appeals reversed the Tax Commission’s finding and ruled that the campus did qualify as an educational institution and was therefore exempt from property tax.
Judge Tyson disagreed with the majority opinion and pointed out in his dissent that “merely providing some short and long-term meditation courses, as well as Vedic Science and Sanskrit courses, does not qualify the Spiritual Center for exemption.”
The Supreme Court agreed with Judge Tyson. The justices’ one-sentence decision stated simply, “For the reasons stated in the dissenting opinion, we reverse the Court of Appeals.”
Former county attorney Jeff Hedrick who has worked on the case for a number of years, prepared the brief for the Supreme Court and was present during the arguments acknowledged that court’s brevity was “a bit unusual,” but added, “Short decisions don’t bother me too much. It’s hard to criticize a one-line decision.” Hedrick pointed out that the decision affirmed two key points of the county’s case: meditation is not education within the meaning of the tax law and the corporation that ran the girls’ school at the Spiritual Center (Maharishi Global Administration Through Natural Law) is not an educational institution.
Both Hedrick and Byrd said that they do not anticipate any further litigation on the issue for the contested tax years.
Not only does the decision free approximately $1 in property taxes for the county, but it also frees approximately $44,000 in fire taxes for the Boone Fire Department.