The Morning News - Bentonville, Arkansas
Charitable Or Fraternal?
By Joseph Askins
BENTONVILLE -- Members of the Bentonville Masonic Temple Association raise money for Arkansas schools, hospitals, shelters and sports leagues. But members of the 153-year-old organization aren't so keen about giving money to one public entity: the Benton County government.
Through their attorneys, the Bentonville and Pea Ridge lodges filed a lawsuit against County Assessor Shirley Sandlin and Tax Collector Greg Hoggatt, claiming the elected officials unlawfully are imposing ad valorem property taxes on lodge buildings.
Sandlin removed both lodges from her exemption rolls in 2005 during a countywide reassessment of real and personal properties. She also mailed property exemption applications to the owners of 2,600 other tax-exempt parcels, asking nonprofit organizations to explain how they used their buildings, lands and other properties.
Appraisers valued the Bentonville Masonic Temple Association's fraternal building at 805 N.W. Eighth St. at $351,450, requiring the association to pay $3,851.89 in property taxes for 2005. The Pea Ridge Lodge, 13133 N. Old Wire Road near Avoca, was valued at $99,770, and was assessed $957.12 in property taxes for 2005.
Roughly half of the state's 293 Masonic lodges pay ad valorem property taxes, said James Weatherall, the grand secretary for the Grand Lodge of Arkansas. Weatherall predicted most or all lodges would pay taxes within the next few years if the state's 75 county assessors continue to review their exemption rolls.
"The state's looking to bring in more money, not less," Weatherall said.
The review of exempt properties wasn't exclusive to Benton County. The state's Assessment Coordination Department last year issued a nine-page set of guidelines to help the state's assessors determine what should and shouldn't be taxed. Generally, Washington County already taxes most buildings owned by fraternal organizations.
The only properties exempt from ad valorem taxes under Article 16 of the Arkansas Constitution are publicly owned parcels and buildings used for public purposes, churches used solely for religious purposes, cemeteries, schools, libraries used only for educational purposes, and properties devoted exclusively for public charities.
A local Masonic lodge might raise money for the Arkansas Children's Hospital or the American Cancer Society, but it's probably using its fraternal building for private meetings and social functions. Therefore, that building needs to be taxed, according to the exemption guide.
The attorneys for the Masonic lodges claim Arkansas Code Annotated 26-3-301 protects their clients from having to pay taxes. The statute exempts all properties owned by charitable organizations so long as they are not leased or used to turn a profit.
The attorneys in the lawsuit ask Benton County Circuit Judge Jay Finch to declare both lodges exempt from taxation under A.C.A. 26-3-301. They also want the judge to enjoin Hoggatt from collecting $7,830.08 in delinquent taxes, penalties and interest from the Bentonville lodge.
The state's exemption guide suggests the state law is probably invalid, however, because the constitution does not give legislators the power to hand out exemptions.
The guide also reminds assessors an organization is not exempt from property taxes simply because it holds a 501(c)3 designation from the Internal Revenue Service or a nonprofit charter from the Arkansas secretary of state.
The Bentonville lodge has raised its annual dues from $25 to $150 this year to cover the new taxes, said association secretary Theodore Solarz.
Solarz agreed the lodge "wasn't built strictly for charity," but neither were tax-exempt organizations like the Veterans of Foreign Wars or the American Legion.
Most American Legion posts in Washington County pay property taxes because assessors determined the posts existed primarily for the benefit of their own members. No veterans organizations were removed from Benton County's exemption rolls during Sandlin's review, according to a report from assessor's office manager Valerie Brewer.
"Why would you exempt one but not another?" Solarz asked. "It's definitely for political reasons because you don't want to seem like you're taxing veterans while there's a war on terrorism and everything else going on."
Sandlin did not respond to multiple messages and requests for an interview.
Some county assessors shy away from reviewing their exemption rolls because they don't want to seem "like the bad guy" by taxing a popular local organization, said state Assessment Coordination Director Debra Asbury.
"If they need us to do that, to take the heat and explain to people why they have to pay taxes, I'm perfectly fine with that, because that's what we're here for," Asbury said.
The assessor's office in 2005 identified 58 parcels on its exemption rolls that were subject to ad valorem property taxes, according Brewer's report. Those properties had a combined market value of almost $9.6 million and will generate $99,925.02 in annual property tax revenue for the county, cities and public schools.
Most of that new revenue goes to public schools.
Millage rates, used to figure property taxes, vary in Benton County from 40.15 to 55.1 mills, depending on location. An area's millage rate is multiplied by a property's assessed value, which is 20 percent of a property's appraised value, to determine the tax rate. A mill represents one-tenth of 1 percent and generates $1 of tax revenue for every $1,000 of assessed property.
The county gets 6 mills to pay for its government operations -- 4.8 mills go to the general fund and 1.2 mills to the Road Department. At those rates, the county will receive $11,519.46 in revenue from the newly nonexempt properties.
That's a small increase within Benton County's total property tax collections for the county government of $11.6 million in 2005.
Eight more parcels were not assessed until this year, meaning their owners will not have to pay taxes until 2007. Those properties have a total appraised value of $831,700 and would be assessed $8,741.80 in taxes at current property tax rates. Of that amount, $998.04 would go into the Benton County government's coffers.
Rogers-Lowell Area Chamber of Commerce President Raymond Burns doesn't necessarily agree with the results of the exemption reviews but won't challenge his organization's change in tax status. The chamber must pay $42,317.12 on seven properties, including three parcels owned by the Rogers Industrial Development Corp. and two owned by the Rogers Development Foundation, according to 2005 tax statements.
"The taxes will definitely impact our program and our ability to better our community, but if the assessor says we need to be paying them, then we'll defer to that decision," he said.
First Baptist Church of Rogers owes $1,304.16 in taxes on a complex with five apartments at the corner of Olive and Sixth streets in Rogers. The church leases the apartments to missionaries and senior church members, said associate pastor Rocky Parsons.
"Sometimes we charge rent, and sometimes we don't -- if they can afford it and help make an investment, then we usually ask them to contribute a little, but in some cases we're just offering a courtesy of our ministry," Parsons said.
The church will have no problem paying the taxes and will continue to offer the apartments to people in need, he said.
Despite the removal of some parcels from the exemption rolls, the number of exempt properties in Benton County actually grew during the re-evaluation period. The assessor's office recognized 2,644 exempt parcels at the end of 2004, Brewer said. But by the end of 2005, the office recognized almost 2,900.
Brewer attributed that rise to Benton County's population growth. As more people and businesses move into the county, more churches and nonprofit organizations move in as well, she said.
Property owners will have to justify their tax exemptions on a yearly basis starting this year, Brewer said. The assessor's office will continue to investigate the 2,900 tax-free parcels still on its rolls to make sure that every property meets the legal criteria for exemption, Brewer said.
THE MORNING NEWS' JEFF NIESE CONTRIBUTED TO THIS REPORT.