Camps Newfound/Owatonna, Inc. v. Town of Harrison

1997-05-19

Headline: Court strikes down state property tax exemption that excludes charities serving mainly nonresidents, blocking states from taxing nonprofits more harshly because their clients come from other states.

Holding: The Court ruled that Maine's property tax exemption unlawfully discriminated against interstate commerce by denying full tax relief to charities that serve mainly nonresidents, and therefore violated the Commerce Clause.

Real World Impact:

Stops states from denying charity property tax exemptions based on clients' residency.
Protects out-of-state users from indirect taxation through discriminatory exemptions.
Prevents taxing nonprofits more because they serve mostly nonresidents.

Topics: charitable tax exemptions, interstate commerce, property taxes, nonprofit taxation

Summary

Background

A Maine nonprofit runs a summer camp for Christian Science children and charges about $400 per camper each week. About 95% of the campers come from other states. Maine law exempts property used by charities, but limits or denies the exemption when the charity operates chiefly for nonresidents or charges more than $30 per week; the camp therefore paid substantial property taxes and sued for a refund and exemption.

Reasoning

The Court asked whether a generally applicable property tax violates the Constitution when the tax exemption treats charities differently based on whether they serve mostly out-of-state people. The majority held that the camp’s services and the cross-state travel they create are commerce, and that the statute facially discriminates by penalizing charities for serving nonresidents. The Court explained that a tax scheme that functionally targets out-of-state consumers acts like an export tariff and is barred by the Commerce Clause. The opinion rejected arguments that nonprofits are categorically exempt from the Commerce Clause, and rejected viewing the exemption as a permissible subsidy or as the State simply acting as a market participant.

Real world impact

The decision prevents States from designing charitable property-tax exemptions that favor in-state beneficiaries over out-of-state beneficiaries. Nonprofit service providers that draw clients from other States cannot be denied generally available tax relief simply because most users live elsewhere. The ruling rests on national Commerce Clause principles and thus applies beyond this single camp.

Dissents or concurrances

Separate dissents argued the exemption served a traditional state interest in encouraging charities to relieve local social burdens and that limiting benefits to residents should survive Commerce Clause review; they would have upheld the Maine rule.