News Articles

5/27/97 High court protects charities serving out-of-state residents

WASHINGTON (BP)–The U.S. Supreme Court has struck down a portion of a Maine property tax law that excludes from full exemptions charities that serve mostly out-of-state residents.
Had the high court not rejected the measure, its opinion might have adversely affected international relief agencies, religious universities and camps, and homeless shelters throughout the country, the Christian Legal Society said. The 900 member camps of Christian Camping International would have an annual tax bill of nearly $22 million if they lost their property tax exemption, CLS said.
“By striking Maine’s law, the court slammed the door against state assaults on the skimpy coffers of charities nationwide,” said Steve McFarland, director of CLS’ Center for Law and Religious Freedom, in a written statement. “Otherwise, we could have expected revenue-hungry states and cities to tax all but the smallest of charities.”
In a 5-4 opinion, the justices ruled the state’s exclusion of a Christian Science camp from property-tax exemption violated the U.S. Constitution’s commerce clause. The clause, in the Constitution’s Article I, gives Congress the authority to regulate commerce among the states and with foreign countries.
The case began its path to the high court when the camp, in Harrison, Maine, sought a refund of more than $20,000 in real estate and personal property taxes it had paid from 1989 to 1991, contending the tax-exemption measure violated the commerce clause.
The law allows charities operated “principally for the benefit” of nonresidents of Maine only a limited exemption if their weekly charge is no more than $30 a person. If it is more than this amount, no exemption is permitted. About 95 percent of the participants at the camp are nonresidents. The weekly tuition is about $400.
After the town rejected the request for a refund, the Superior Court ruled in the camp’s favor. The Maine Supreme Judicial Court reversed the lower court, however.
In the majority opinion released May 19, Associate Justice John Paul Stevens wrote, “Protectionism, whether targeted at for-profit entities or serving, as here, to encourage nonprofits to keep their efforts close to home, is forbidden under the dormant Commerce Clause. If there is need for a special exception for nonprofits, Congress not only has the power to create it, but also is in a far better position than we to determine its dimension.”
Rather than requesting such an exception, however, the town argued the state law “should be viewed as an expenditure of government money designed to lessen its social service burden and to foster the societal benefits provided by charitable organizations,” Stevens wrote. “So characterized, the town submits that its tax exemption scheme is either a legitimate discriminatory subsidy of only those charities that choose to focus their activities on local concerns, or alternatively a governmental ‘purchase’ of charitable services falling within the narrow exception to the dormant Commerce Clause for states in their role as ‘market participants.’ We find these arguments unpersuasive.”
CLS filed a friend-of-the-court brief in support of the camp. The Southern Baptist Christian Life Commission, National Association of Evangelicals, Coalition of Christian Colleges and Universities and World Relief were among organizations joining in the brief.
Associate Justices Sandra Day O’Connor, Anthony Kennedy, David Souter and Stephen Breyer joined Stevens in the majority opinion. Dissenting were Associate Justices Antonin Scalia, Clarence Thomas and Ruth Bader Ginsburg, as well as Chief Justice William Rehnquist.
In his dissent, Scalia said the court’s rejection of Maine’s limited exemption would have the effect of declaring a state “that provides a tax exemption for real property used exclusively for the purpose of feeding the poor must provide an exemption for the facilities of an organization devoted exclusively to feeding the poor in another country. These results may well be in accord with the parable of the Good Samaritan, but they have nothing to do with the Commerce Clause.”
The case is Camps Newfound/Owatonna v. Town of Harrison.