The Missouri Supreme Court has reversed a ruling by the state’s Administrative Hearing Commission (AHC), finding instead that a state bowling association is “entitled to a tax exemption as a not-for-profit civic organization within the meaning of Mo. Rev. Stat. § 144.030.2(20) (Supp. 2007) because its activities benefit the community.”
Central to the court’s ruling was the finding that “although the association’s activities were enjoyed largely by its current members, it was not restrictive in its membership, and its purposes included fostering increased opportunities for all people to participate in recreational bowling activities. The association’s activities, which were recreational and available to the public at large, brought it under the definition of ‘civic’ in case law.”
By way of background, in 2006, the Missouri State Bowling Association, the Missouri State Women’s Bowling Association and the Missouri State Young American Bowling Alliance were merged, becoming the Missouri State USBC Association.
According to the new organization’s bylaws, its purposes include: (1) to provide equal opportunity for all in the sport of bowling; (2) to promote the game of American Tenpins; (3) to conduct and support bowling competitions; and (4) to engage in other activities permitted by its federal tax-exempt status. It further contends that its efforts to promote the sport of bowling increase physical activity and recreational opportunities for Missourians.
The organization encourages all age groups to be active bowlers and annually hosts a number of bowling tournaments. Tournament bowlers pay a fee to participate and cover their bowling costs. The association pays a per-game, per-player “lineage” fee for use of the bowling lanes used in its tournaments. The organization, which already has federal tax exempt status, seeks sales tax exempt status, in part, to avoid paying tax on its use of bowling lanes at its tournaments.
The high court went on to note that the organization annually hosts a bowlers showcase and annual meeting, during which time it hosts a banquet and honors distinguished members with awards. It also awards $4,000 annually in scholarships to youth. The scholarships are awarded based on scholastic and bowling ability, community service, and recommendations of teachers and coaches. The bowlers showcase also includes workshops and assistance for bowlers and their local associations, updates on the association’s activities, and an opportunity to elect board members.
The organization and its local affiliates make various charitable contributions, according to the court. Thousands of dollars have been raised by the organization’s predecessor organizations and its local affiliates, but its own budget in 2006-2007 included only $1,000 for “donations.” The organization, however, states that it has not begun all of its intended activities because it is newly formed. It reports plans to increase educational ventures to help local bowling organizations enhance operations and improve public outreach. It also has plans to donate kits to elementary schools that will promote the sport of bowling in physical education classes.
The organization contends that its actions better the state and local communities and serve the public interest. It maintains that it is the kind of organization entitled to tax exempt status under sections 144.030.2(19) and (20), RSMo Supp. 2007.
The state’s director of revenue, however, has countered that the organization is not a charitable, civic, or service organization entitled to tax exempt status under Missouri law.
In its review, the court noted that taxpayers “carry the burden of showing they are entitled to an exemption under the statutes. Branson Props. USA, L.P. v. Dir. of Revenue, 110 S.W.3d 824, 825 (Mo. banc 2003). Exemptions from taxation are to be strictly construed against the taxpayer, and any doubt is resolved in favor of application of the tax.” Id.
Quoting from See Indian Lake Prop. Owners Ass’n, Inc. v. Dir. of Revenue, 813 S.W.2d 305, 308 (Mo. banc 1991), the high court noted that “for an organization to be civic in nature, its purposes and functions must be concerned with and relate to the citizenry at large. The organization must benefit the community it serves on an unrestricted basis.” Id.
“In Indian Lake, this court rejected a claim by a homeowners’ association that it was a civic organization entitled to tax exempt status because the association had ‘done everything within its power to create a private environment and to exclude nonmembers from any benefits. . . . [and the benefits it accrued] to the general public [were] at best incidental and peripheral to the members’ private interests.’ Id.
The bowling association, “unlike the homeowners’ association in Indian Lake, is not restrictive in its membership, as its membership is available to any person. Additionally, while Bowling Association’s activities are enjoyed largely by its current members, its purposes include fostering increased opportunities for all people to participate in recreational bowling activities. Bowling Association’s activities, which are recreational and available to the public at large, bring it under the definition of ‘civic’ outlined in Indian Lake. As such, Bowling Association qualifies for tax exempt status as a civic organization under section 144.030.2(20).
“Because the Bowling Association is a not-for-profit civic organization within the meaning of section 144.030.2(20), the AHC’s decision is reversed, and the cause is remanded.”
Missouri State USBC Association v. Director of Revenue; S.Ct. Mo.; No. SC88630, 2008 Mo. LEXIS 41; 4/29/08
Attorneys of Record: (for appellant) Mr. Carole L. Iles, Mr. Edward F. Downey, Jefferson City, MO. (for respondent) Honorable Jeremiah W. (Jay) Nixon, Attorney General, Mr. Gary L. Gardner, Assistant Attorney General, Jefferson City, MO; Mr. James L. Spradlin, Ms. Amy T. Bartolomucci, Department of Revenue, Jefferson City, MO.
