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Hebron Academy Tax Dispute Comes Before Maine High Court
12/12/2012   Reported By: Jay Field

The state's highest court heard oral arguments today in a case that could determine whether private schools and universities keep renting out their sports facilities and other buildings. A lower court ruled last winter that Hebron Academy could lease its hockey rink and other facilites for private use and still hold on to the property tax exemption enjoyed by scientific and educational institutions. But the Town of Hebron says it has every right to tax the school for using the rink this way and wants the Maine Supreme Judicial Court to overturn the earlier decision.

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Hebron Academy Tax Dispute Comes Before Maine High Listen
 Duration:
2:56

 

Attorney Bryan Dench argued the town's case, citing Maine statute. "All real estate within the state is subject to taxation on the first day of each April," he said.

Hebron's selectmen are the property tax assessors for the town. And in 2009, Dench told the seven justices, a firm the selectmen had hired to help calculate assesments told them that Hebron Academy was getting a free pass on the rental of its hockey rink.

"The academy was allowing that rink to be used by outside individuals who were not, as far as we can tell from the record, benevolent or charitable organizations that would be exempt from tax," Dench said.

The selectmen taxed the hockey rink. Hebron Academy filed a lawsuit after its appeal to the town for relief was denied.

The lower court, Chief Justice Leigh Saufley reminded Dench, looked hard at whether exemptions should apply to the rink and other facilities that the school rents out for a profit, "and determined, essentially, that because the revenues, in the aggregate, are so small that they are incidental uses that do not affect the exemption. Should we require the court to return to this question and look at the real estate, parcel by parcel?" she asked.

"Yes," Dench told Justice Saufley.

But Justice Jon Levy stepped in, suggesting that the lower court had showed that the rentals were minor and had limited economic benefit.

"And it's not surprising that a private institution would rent out their facilities that to generate some income. That would seen to be part of a wise business decision, I would imagine, that a private institution like Hebron might make," Justice Levy said. "So why isn't that the end of this case?

Other private schools, and small colleges such as Colby, Bates and Bowdoin, also rent out their facilites in many of the same ways that Hebron does. A ruling in the town's favor might make it economically unfeasible for these institutions to continue to open their doors to youth hockey or basketball clubs.

The justices appeared concerned about setting this sort of precedent. But their questions for John W. Conway, Hebron Academy's lawyer, were equally tough. Justice Saufley grilled Conway on why the rentals should not be considered profitable.

Conway: Trying to avoid taxes, trying to use this as a profit motive, trying to...and I think the court, on the facts of this case, can see clearly that there's no profit motive.

Justice Saufley, interrupting: Isn't there really a - from a business perspective - is there not a profit motive here? The faciltiies are rented out for weddings, for bank receptions, for things that are entirely unrelated to education."

Conway says the income generated from all the rentals accounts for just 1 percent of Hebron Academy's $14 million budget. He says the school uses the money to defray operating costs and extend financial aid to students, among other things. The justices of the Maine Supreme Judicial Court are expected to issue a ruling on the case sometime early next year.



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