Tax Court reversal: Low-income apartments qualify for charitable exemption

The Indiana Tax Court on Monday reversed an Indiana Board of Tax Review’s final determination that concluded a low-income apartment complex owner failed to prove it qualified for a charitable purposes exemption.

In 2007, Hebron-Vision, LLC purchased Misty Glen Apartments, a U.S. Department of Housing and Urban Development affordable housing apartment complex for low-income renters in Porter County. Hebron-Vision didn’t receive tax credits when it bought the property but kept operating it as a USC § 42 apartment complex. The company was managed by its sole member Vision Communities, Inc.

Hebron-Vision applied for and later received a charitable purposes exemption for Misty Glen for 2008, but the property was determined by the Porter County Property Tax Assessment Board of Appeals as ineligible for the exemption during the 2012, 2014 and 2015 tax years. In a consolidated appeal of the PTABOA’s decisions, Hebron-Vision argued the property was used solely for charitable purposes during the years at issue. The Porter County Assessor contended that the evidence was inadmissible because Hebron-Vision failed to comply with the disclosure requirements of 52 Ind. Admin. Code 2-7-1.

The state board ultimately ruled against Hebron-Vision, concluding it had failed to prove that its property was predominantly owned, occupied and used for charitable purposes during the years at issue. Specifically, it determined that evidence regarding the management fees, rental rates, Misty Glen residents’ income levels and screening process, and provision of additional services to residents failed to show that the property qualified for a charitable purposes exemption.

In Hebron-Vision, LLC v. Porter County Assessor, 18T-TA-19,  the Indiana Tax Court reversed the state board’s final decision. Tax Court Senior Judge Thomas Fisher first wrote that the statutory provisions on which Hebron-Vision relied and related record evidence established that the federal government and state assumed the burden of providing affordable housing to certain individuals and families during the years at issue.

The senior judge further noted that the state board’s determination regarding the management fees, rental rates, Misty Glen resident’s income levels and screening process, and provision of additional services was unsupported by substantial evidence. Among its findings, the Tax Court concluded the rent Misty Glen tenants paid was below market and that its residents were indeed proper subjects of charity.

Additionally, the Tax Court found that the evidence indisputably showed that Hebron-Vision, Vision Communities, and offsite property manager Flaherty & Collins Properties did not receive any federal tax credits, and that Hebron-Vision voluntarily charged its tenants below market rates and kept evictions to a minimum.

“Hebron-Vision also provides its tenants with access to, and facilitates the provision of, a variety of social services and activities. In addition, there is absolutely no evidence that Hebron-Vision uses Misty Glen to generate profits for Flaherty & Collins or any other private organization/individual,” Fisher wrote. “Given the totality of the record evidence, therefore, the Indiana Board erred when it concluded that Hebron-Vision failed to establish that it owned, occupied, and used its property for charitable purposes, and thus, qualified for a charitable purposes exemption during the years at issue.”

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