by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
TAXATION; EXEMPT PROPERTY; PUBLIC PURPOSES: When a facility is rented to private parties and "preferred" private memberships are sold, such facility is not entitled to a public facility exemption from state ad valorem taxation. City of Fayetteville v. Phillips, 899 S.W.2d 57 (Ark. 1995).
The Arkansas Constitution provided for an exemption for "public property used exclusively for public purposes." Ark. Const. art 16, 5(b). While the facility in question, an arts center, may have been used largely for public purposes, it was not used exclusively for public purposes; moreover, the indicia of private use were too numerous for the facility to qualify for an "incidental use" exception to the general rule. The court also frowned upon the idea of the facility receiving a tax advantage over its area competitors for entertainment dollars. Query: Does the benefit derived from taxing quasi-public facilities outweigh the cost of potentially discouraging future privately-sponsored, community-benefitting?
DIRT readers: How would this case have been resolved in your state? The activities at the art center in this case are quite common. Are state constitutions in other states more generous as to what qualifies for tax exempt treatment?
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