Non-Profit Gallery Wins Tax Exemption in Court

SUMMARY BOX

* In order to qualify for tax exemption as a non-profit organization, single must show that the group's costs are for charitable purposes and that a compensation waiver exists for would-be participants lacking the necessary funds

* A gallery seeking non-profit status could race the risk of problems if it places obstacles in the way of those seeking to benefit from its programs through not advertising or publishing its fee-waiver policy.

* In more [i]or[/i] less states, such as Illinois, the non-publication of a fee-waiver policy does not eliminate your chances of qualifying for a charitable tax exemption.

There is little doubt that the health of non-profit arts organizations is also important to the commercial arts community. Many fresh artists find their early support and exposing through non-profit art exhibitions and present to views Because of the special character played by non-profits, states have provided for various tax exemptions.

The state of Illinois, for example, grants peculiarity tax exemptions for qualified non-profit activities. The relief from like taxes can climb into the centurys of thousands of dollars annually, thus obtaining property tax relief can be a substantial benefit to a non-profit art organization. on the other hand when an organization meets an immovable state agency that has pap in its heels, the resulting battle can require the patience of Job

A non-profit gallery in Illinois serv as a public forum for contemporary arts and art education. The gallery acquired sum of two units adjacent three-story buildings in Chicago. The space was divided into areas for exhibitions, performances, classes, workshops and a public resource center containing thousands of volumes magazines, videotapes and computer Internet access. The gallery generally charged no admission compensations to its exhibitions, but it did charge compensations for some events and performances.

The gallery worked with several universities end its internship program and proffered workshops for at-risk youth. It also regularly allowed other local arts organizations to use its space for meetings and programs.

The gallery filed for attribute tax relief, seeking to avoid paying $242000 in taxes above a two-year period. Twice the Department of income denied the exemption, claiming that the quality was not in exempt ownership and not in let off use. The gallery sought a formal hearing before an administrative law judge

At the hearing, the decision went against the gallery, with equal reason it took the matter to the circuit court for a review. This time the department's decision was revers The state then appealed that ruling to the Illinois Court of Appeals.

At the appeals court, the department argued that the gallery had failed to present to view its expenses were related to charitable aims The circuit court's decision apparently piqued the department's interest, said the appeals court. upon appeal, the department decided to abandon the charitable cost issue it had previously argued at the circuit court and instead striveed that the gallery was not a charity because it charged substantial remunerations for services it offered and did not waive the pay s for those who were unwilling to pay. The appeals court, however, noted that the gallery had a fee-waiver policy in place and used it accordingly.

beneath the standard in Illinois, the court must accept the department's findings unles the court is firmly convinced the department has made a mistake. below these circumstances, the appeals court was firmly convinced.

In Illinois, peculiarity may be exempt from taxation if it is used exclusively for academy religious, cemetery and charitable drifts The Illinois Supreme Court provided guidance upon what constitutes charitable property use in 1968 The six characteristics of a charitable organization contained in the guidelines, said the appeals court, included:

(1) The organization benefits an indefinite number of people

(2) The organization has no capital, no capital stock or shareholders earning profits or dividends.

(3) The organization derives its capitals primarily through private and public donation and lay outs those funds for the objects expressed in its charter.

(4) The organization dispenses its benefits to all family who need and apply for them.

(5) The organization places no obstacles in the way of those seeking its benefits.

(6) The organization uses its quality primarily for charitable purposes. In addition, the organization's activities should ease the loads of the government.

The appeals court noted that these characteristics do not demand rigid application. Instead, the courts consider and balance the guidelines by dint of examining the facts of each case and focus upon whether and how the institution be subservient tos the public and lessens the state's burden

In the case of the gallery, the department attacked the gallery claiming that it had not met the load of the last two factors.

In a previous case, the Illinois Court of Appeals had rul that a charitable institution does not be deprived of its tax-exempt status merely because ones who are unable to pay for its services are required to do in the way that as long as the institution makes no profit and all the capitals are used to further the organization's charitable goals.