Millsaps College v. City of Jackson

Background

Millsaps College is a nonprofit educational institution incorporated by a Mississippi law approved February 21, 1890. That law allowed the college to accept donations and to hold up to 100 acres as a campus and to exempt certain property and the endowment fund from state, county, and municipal taxation. Two improved lots on Capitol Street in Jackson were donated “in aid of the endowment,” are not part of the campus, and produce rental income used to pay the college’s operating expenses. The City assessed those lots and buildings, and the college sued to vacate the assessment, arguing the 1890 statute exempted the property and that taxing it would impair the contract embodied in the incorporation law.

Reasoning

The Mississippi Supreme Court interpreted the 1890 law as creating two limited exemptions: (1) campus land and buildings up to 100 acres, and (2) the endowment fund in a restricted sense. Because the donated Capitol Street lots were not campus property, the state court held they were not exempt. The U.S. Supreme Court reviewed the case because the college raised a federal contract-clause claim, gave respectful weight to the state court’s statutory interpretation, applied the rule that tax exemptions should be construed narrowly, and concluded the state court’s reading was correct. The U.S. Supreme Court therefore affirmed the judgment allowing taxation.

Real world impact

The decision lets the city tax off-campus donated property held to produce income for the college. It narrows nonprofit tax exemptions to campus land and buildings as described in the 1890 act, limiting attempts to shield income-producing property simply by calling it part of the endowment.