HEBRON — The Maine Supreme Judicial Court's decision in Hebron Academy v. Town of Hebron could have far-reaching effects on other schools and nonprofit organizations in the state, possibly forcing them to stop renting their facilities for outside use.
In February, active retired Justice Robert W. Clifford ruled that Hebron Academy's renting out of its facilities — the ice rink, dorms and other buildings — when they weren't being used by the school didn't negate the property tax exemption on those buildings. The town appealed the court's decision and, on Dec. 12, the Maine Supreme Judicial Court is set to hear the case.
If the court rules in the town's favor, it could cost the school tens of thousands of dollars. Attorneys representing private schools, colleges and hospitals have weighed in, arguing that those institutions should be permitted to rent their property to offset costs of operation.
In cases like this, parties not involved in the proceedings but who have an interest in the outcome can file briefs in support of either party. The Maine Independent Colleges Association, the Maine Association of Independent Schools and the Maine Hospital Association have filed briefs supporting the academy. Hebron Academy is a member of the Maine Association of Independent Schools.
Hebron Academy Head of School John King said the academy is grateful for the support from other schools, colleges and hospitals.
“These institutions do good things for their communities and the state,” King said. “That tax-exemption is deserved.” If that exemption ended, “That would be a significant change in public policy,” he said.
King said any money made is returned to the school's operating budget to offset costs. In the past five years, the school has made an average of $137,000 per year on facility rentals. King said the management of rentals cuts into that, and that the money made is “minimal.”
Attorney Janet Mills, who will take office as attorney general on Jan. 7, filed a brief on behalf of the Maine Independent Colleges Association, outlining their case.
“No MICA members use tax-exempt facilities primarily for rental income,” Mills said in an email. “When facilities are occasionally rented, these rentals are intermittent and are incidental to the institution's primary use as a scientific or literary institution.”
Attorney Bryan Dench, who represents the town of Hebron, said the argument is self-contradictory, calling the money incidental while saying it relies on that money. “They all describe the income they could realize as 'incidental' or 'de minimis' and then also argue without it they would be severely harmed,” he said in an email. “Does that make any sense?”
In one brief, Dench calls the argument that Hebron Academy still occupies its facilities while they're being rented out “a painful mental fiction this Court should not indulge.”
Mills said Maine colleges are confident that the high court will uphold the Superior Court decision.
“We think it unlikely that the court will permit towns to fully tax any and all facilities that are ever rented out for any purpose,” Mills said. “If the court were to rule against Hebron Academy, any calculation of potential losses to other schools would depend entirely on the scope of the decision.”
She said a decision in the town's favor could potentially hurt financial aid to students and economic benefits to the towns that host private colleges.
Bates College echoed that sentiment Friday in a written statement: "The community benefits that colleges provide to local towns are significant. The tax-exemption is fundamental to the ability of nonprofit colleges and universities to provide affordable access to higher education and community benefits in the form of jobs, cultural activities, recreation and other contributions."
Dench said the town appealed the case out of a legal obligation to the state and to the taxpayers of Hebron "to assess and tax all properties that are lawfully subject to tax,” he said. “They cannot shirk that duty if the facts show the properties should be taxed. That would be wrong.”