High Court Frees Charities from Property-Tax Pinch Justices Say Maine Law Impedes Interstate Commerce, in Lawsuit Won by Christian Science Camp

Article excerpt

In a decision that will benefit nonprofit organizations around the United States, a Maine summer camp operated for the children of Christian Scientists won a Supreme Court decision.

Yesterday's 5-to-4 ruling gives legal footing for nonprofit organizations to benefit from state tax breaks - even if most of the nonprofit's business comes from out of state.

The ruling opened a new patch of ground in American law, since the high court has never taken up the question of the residence of people contributing to or doing business with nonprofits. In so doing, the high court said that nonprofits are protected from discriminatory state law by the commerce clause of the US Constitution, which governs free and fair economic trade among the states. The case stems from a 1992 challenge by Camps Newfound/Owatonna. The group objected to a 40-year-old Maine law that exempts nonprofit summer camps from taxes - but only if a majority of the campers live in Maine. Some 95 percent of Owatonna's campers are from out of state. Lawyers for Owatonna asked for a return of some $20,000 a year in real-estate and personal-property taxes the camp paid between 1989 and 1991, saying the state law violated the commerce clause. Writing for the court, Justice John Paul Stevens stated, "There is no question that if this statute targeted profit-making entities, it would violate the dormant Commerce Clause. The statute discriminates on its face against interstate commerce...." He added, "The rule applicable to profit-making enterprises also applies to a discriminatory tax exemption for charitable and benevolent institutions.... Even though petitioner's camp does not make a profit, it is ... engaged in commerce, not only as a purchaser, but also as a provider of goods and services." Nonprofits keep a close eye The case was being closely watched for a number of reasons. If Owatonna had lost, hundreds of nonprofit groups worth billions of dollars could find themselves taxable. About two dozen nonprofits filed "friend of the court" briefs with the camp. Constitutional scholars also see the case as another test of how much power the Supreme Court will allow state courts and legislatures at a time of devolution of power. …


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