Tax Exemption Law and Camp Predominantly Used by Muslims

An interesting case in Michigan, in which a Tax Tribunal decision was reversed by Camp Retreats Foundation, Inc. v. Township of Marathon (Mich. Ct. App. May 15, 2012). The question is whether a camp was exempt from property taxes; the camp was rentable by the general public (and sometimes rented by the public), but it was mostly used by Muslim groups, “because (i) the facilities were constructed so that separate ‘villages’ are available to boys and girls such that a ‘conducive environment’ is created to ‘manage the two genders,’ and (ii) word of mouth of the availability of the subject facilities was generated through Muslim lines of communication.” The main user was a summer camp that had a pretty clearly Muslim focus, with a good deal of time devoted to prayer and study of the Koran, and with the rules providing that:

All participants must observe Islamic laws, which includes but is not limited to, good moral standards, maintaining proper hijab, keeping away from backbiting and gossiping, presenting oneself with respect and dignity, maintaining decency with appropriate clothing and more. Brothers and sisters must show respect for each other. Any misconduct may lead to expulsion from the camp if deemed necessary.

Under Michigan law, a property-owning organization is treated as a charitable organization and can therefore claim tax-exempt status for its property when it is organized “for the benefit of an indefinite number of persons, either by bringing their minds or hearts under the influence of education or religion, by relieving their bodies from disease, suffering or constraint, by assisting them to establish themselves for life, or by erecting or maintaining public buildings or works or otherwise lessening the burdens of government” and at the same time “does not offer its charity on a discriminatory basis by choosing who, among the group it purports to serve, deserves the services.” The Township argued that Camp Retreats didn’t qualify, because, in relevant part,

1) it discriminates in determining who can use the subject property, 2) participation in the Tawheed Summer Camp, sponsored by Petitioner’s parent organization, and the primary user of the subject facilities, is conditioned specifically on observance of Islamic laws and management, [and] 3) Petitioner has not established by testimony or exhibits that Petitioner’s purpose is to “bring people’s minds or hearts under the influence of education or religion,” nor do they “relieve people’s bodies from disease, suffering or constraint[.]“

The Tax Tribunal concluded that Camp Retreats was indeed not a charity, because it was “is chiefly organized for recreational purposes rather than for charitable purposes.” The Tribunal’s opinion didn’t discuss the “bringing … minds or hearts under the influence of … religion” part of the test, and relied on the fact that the articles of incorporation for the camp focused on recreation rather than religion.

The Michigan Court of Appeals reversed, reasoning that the tax tribunal should have looked at how the property was actually used rather than focusing on what the articles of incorporation said, and that the actual use of the property was indeed charitable under Michigan law:

In reaching [its] conclusions, the Tribunal disregarded its own factual determination that the facility was chiefly used as camp for children and families of the Muslim faith, and in so doing misapplied the law. We find that the property fulfills the requirements of a charity because its primary use focuses on “bring[ing] people’s minds or hearts under the influence of … religion,” and it offers this charity on a nondiscriminatory basis.

As the Tax Tribunal recognized in its findings of fact, various groups sharing an identity with Islam constitute the principal users of the camp facility: “Most groups renting the subject facilities were of the Islamic faith because the facilities are constructed to separate and ‘manage’ the two genders and because the availability of the facilities was generated through word of mouth communications among Muslims.” Indeed, unrebutted evidence established that Camp Retreats bought the land specifically intending to create a camp for use by people of the Islamic faith, and has created a facility particularly suitable for that use….

The relevant inquiry is whether the property “benefit[s] … an indefinite number of persons, either by bringing their minds or hearts under the influence of … religion.” This requires a searching examination of the actual nature of the activities conducted on the land, with an eye toward evaluating “the overall nature of the institution, as opposed to its specific activities.” … Camp Retreats’ central focus is on providing the Islamic community with religious experience in a camp environment. Marathon Township admits as much; its brief in this Court asserts: “Apart from a few exceptions, all uses share the common thread of being Islamic in nature. Participants either have a personal connection to the two directors, who are both Muslim, or are tied to Muslim groups or activities.”

Given that the evidence overwhelmingly supports the religious nature of Tawheed’s activities on the property, we are hard-pressed to distinguish this case from Gull Lake Bible Conference Ass’n v. Ross Twp, 351 Mich. 269; 88 NW2d 264 (1958). In that case, the nonprofit plaintiff’s stated purpose was “[t]o promote and conduct gatherings at all seasons of the year for the study of the Bible and for inspirational and evangelistic addresses.” The plaintiff owned a “tabernacle and youth chapel” located on land exempt from ad valorem taxation. In addition, the plaintiff owned land “in close proximity” to the tabernacle and youth chapel that included a lake, “a fellowship center building, picnic area, boat docks, bath house, bathing beach, playground, and horseshoe and badminton courts.” The Supreme Court held that the additional land qualified for a charitable property tax exemption because its use “promote[d]” gathering for the study of the Bible. The Supreme Court adopted the following elaboration of the plaintiff’s charitable function:

Looking at the situation in the light of this latter purpose, it may be logically concluded that in order to obtain satisfactory attendance to its conference, plaintiff found it advisable and necessary to provide those attending with living accommodations, recreational facilities and all of the other services offered by plaintiff and made possible through the use and occupancy of the land in question by plaintiff in the manner in which they do use and occupy such land.

As in Gull Lake, the Tawheed camp’s recreational opportunities further religious purposes. Islamic worship and observance are inextricably interwoven into the camp’s daily programs. An internet description of the property introduced by Marathon Township portrayed Tawheed camps as providing “a full residence summer and winter camp experience in a beautiful setting within an Islamic environment.” Thus, the camp’s overall structure operates as a “gift” for the benefit of an indefinite number of persons, by bringing their minds or hearts under the influence of religion.

I’m not an expert on the law of charitable tax exemptions, but the Michigan Court of Appeals decision seems quite right to me.