October 1, 2014

Lions Club Not a Purely Public Charity Exempt from Property Tax

Written By

by Erica Horn & Jordan Green

In Pleasure Valley Lions Club, Inc. v. Jefferson County Property Valuation Administrator, Ky. Bd. Tax App. File No. K13-S-125 (Oct. 9, 2014), the Kentucky Board of Tax Appeals (the “Board”) held that the Pleasure Valley Lions Club was not a “purely public charity,” and therefore, its building was not exempt from property taxation pursuant to Section 170 of the Kentucky Constitution.

The Lions Clubs owns a large multipurpose building where its members hold monthly meetings, have an annual Super Bowl party, and host other parties and gatherings. Most of the money raised by the club comes from renting its building for various events to both members and nonmembers. The members of the club can rent out the building for a reduced rate. Other club income comes from membership dues, gaming and fundraising events, and through beer and wine sales conducted through its hosted events and private party rentals. On some occasions, the club allows seniors and other nonmember groups to use the building for free. Also, after spending its revenues to take care of its building and purchase supplies, the club annually donates its extra revenue to charity.

At issue in this case was whether the Lions Club is a “purely public charity” and whether, as a purely public charity, the club’s building should be exempt from property taxation. The Board concluded that since the primary use of the building was as a gathering place for club members and their families, and the charity provided by the club and the building itself was merely incidental to its primary use, the Lions Club is not a purely public charity. Therefore, its building was subject to property taxation.

The Board reached its conclusion based on certain key facts regarding the operation of the Lions Club and the use of the building. First, the Board found that the primary reason for raising funds and revenues was to maintain the building. Also, the tax returns of the Lions Club for the three prior years showed that the amount of donations given to charity was not significant in proportion to the amount of receipts the club generated (annual charitable donations were approximately 10% or less of annual gross revenues). Further, donations were only given from what was left after expenses for the club had been paid. The Board also noted that although the club permitted others to use the building at no charge on occasion, the building was primarily rented out for a fee.