Blog Posts > Sean O’Leary and Ted Boettner: We Are Split on the Boy Scout Amendment
October 5, 2014

Sean O’Leary and Ted Boettner: We Are Split on the Boy Scout Amendment

Charleston Gazette – On Nov. 4, voters will decide on a constitutional amendment that would allow the Boy Scouts of America to rent out its Summit Bechtel Reserve in Fayette County to for-profit businesses without jeopardizing its tax-exempt status. While a vote either way won’t have a large impact on the state, it is not a cut-and-dried decision. Read

The Boy Scouts wish to allow for-profit business to use the facility, and use the profits from those events to maintain the property and offset expenses. However, the Boy Scouts are concerned that by leasing the facility to a for-profit business, they could lose their property-tax exempt status, leading them to seek the constitutional amendment.

There is a great deal of ambiguity in West Virginia law when it comes to the issue of charities leasing their exempt property to other organizations. West Virginia’s Constitution allows the legislature to exempt property used for charitable purposes, and the Legislature has done so. In 1944, the Supreme Court ruled that a charity cannot lease its property to an organization operating for private profit without losing its property tax exemption. After that case, the Legislature amended the code to say that charitable property is not exempt, unless the property or income derived from the property is used for the purposes of the charity.

Since then, the amended code has not been challenged or ruled upon by the Supreme Court, leaving the issue unclear. A recent survey of county assessors by economist Cal Kent showed disagreement over how charitable property leased out for private use would be treated, with some saying it would remain exempt, and other responding it would lose its exemption. If this is true, that some county assessors are granting exemptions in some cases and not in others, that could be a violation of the state’s constitution which states that taxation shall be equal and uniform throughout the state.

While there is ambiguity in state law and disagreement among county assessors, the Boy Scouts are right to be concerned with losing their property tax exemption, and West Virginia’s laws do need clarifying. But the proposed amendment is worded in such a way that it would apply to only the Boy Scout’s Summit Bechtel Reserve facility and the ambiguity in law would remain for everyone else.

The language in the proposed amendment also does not compel the Boy Scouts to use their lease income from the property for charitable purposes. While required enabling legislation could compel them to do so, it is left at the whim of the Legislature.

It is also important to put the issue in a larger context. Some states do not allow the use of tax-exempt property by for-profit organizations. In Massachusetts, for example, if a charitable organization leases property to a for-profit it is completely taxable. In California, they use a more incremental approach, where exemptions are pro-rated according to the portion of the property used for non-exempt purposes. This seems like a more sensible approach.

The question of whether charitable organizations be able to lease their property to for-profit businesses as a source of revenue without losing their property tax exemption is one that the state should address. And while the Boy Scout’s facility in Fayette County is a positive asset for the state, and allowing it to be used for other events will bring people and revenue to the state, the proposed amendment does not answer that question. Instead, it carves out a special exemption for one facility, leaving the rest of the state in limbo.

With this all being said, should you vote against the amendment? It really depends. If the enabling legislation requires the rental income from the reserve to be used for charitable purposes and a portion of the income goes to Fayette County for public services(e.g. a payment in-lieu of taxes or PILOT), it could be a win-win for the state. If this doesn’t happen, it could create a bad precedent for the future and a more uneven playing field. You decide. We are split.

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