Lodge 817, Trustees Benevolent & Protective Order v. Supervisor of Assessments

Murphy, C. J., delivered the opinion of the Court. The question in this case is whether a fifty-seven acre golf course owned by a nonprofit fraternal organization and used exclusively by its members and authorized guests is exempt from real property taxation under Maryland Code (1957, 1980 Repl. Vol.), Article 81, § 9 (e). That section, in pertinent part, exempts from taxation specified charitable, benevolent and educational property as follows: "Property owned by...

(2) any nonprofit charitable, fraternal or sororal, benevolent, educational, or literary institutions or organizations, including public libraries subject to the provisions of Title 23 of the Education Article and nonpolitical, nonstock men’s or women’s clubs (but not exceeding 100 acres of land outside any city appurtenant to any institution or organization); when any of such property ⁵³⁵ described above is actually used exclusively for and necessary for charitable, benevolent, or educational purposes (including athletic programs and activities of an educational institution) in the promotion of the general public welfare of the people of the State. In the case of fraternal or sororal organizations, the exemption shall extend only to those existing solely for the mutual benefit of their members and beneficiaries, which have a lodge system with ritualistic form of work and a representative form of government, and this term shall not mean any college or high school fraternities or sororities or other fraternal or sororal organizations with membership which is restricted wholly or largely to students or graduates of educational institutions or professional schools.. ..” (1) Lodge #817, Trustees Benevolent and Protective Order of Elks (the Lodge) is a fraternal organization within the ambit of § 9 (e), which owns approximately sixty-six acres of land in Wicomico County. Situated on nine acres of this property are the Lodge Building, a picnic area, a swimming pool, a softball field, a parking area, and a parcel of woodland, which are used, in part, for various charitable activities of the Lodge, including assembling and delivering Christmas baskets to needy families; answering emergency calls for fuel and food; participation in various student scholarship programs; and the sponsorship of a Little League baseball team and a Boy Scout troop. The average annual contribution of the Lodge to charity is less than seven percent of the Lodge’s annual budget.

The Elks Lodge Golf Course is exclusively used for the recreational benefit of Lodge members and their authorized guests. 1 The general public is not permitted to use the ⁵³⁶ course, nor is it used for any of the Lodge’s charitable activities. No funds are generated from the operation of the golf course, which are donated to charity. On the contrary, the Lodge’s financial statement for the year ending March 31, 1978, showed a deficit in the operation of the golf course of $2,276.40, requiring a subsidy from the general funds of the Lodge. 2 (2) The Lodge was afforded a property tax exemption under § 9 (e) for its golf course by the county Property Tax Assessment Appeal Board. The Supervisor of Assessments of Wicomico County appealed to the Maryland Tax Court which upheld the exemption. 3 The tax court found that the Lodge was a nonprofit fraternal organization, with a ritualistic form of work and a representative form of government as required for an exemption under § 9 (e).

In concluding that the exemption was properly granted under § 9. (e), the tax court said: "Our reading of this Section indicates that fraternal organizations such as the Respondent enjoy a unique status among the other organizations which the Legislature sought to provide an exemption from real property taxes. We think it is significant to note that by Subsection 2 of 9 (e), the Legislature has distinguished between non-profit charitable, benevolent, educational, literary, and fraternal organizations. This distinction is carried further when the statute defines those fraternal organizations to which the exemption shall extend.

As it applies to fraternal organizations, we think ⁵³⁷ that Section 9 (e) evidences the legislative intent or policy, to promote such organizations recognizing that the purpose of such organizations, is as much for the mutual benefit of their members as well as to have some charitable or benevolent purpose.” The Circuit Court for Wicomico County affirmed the tax court’s order, holding that it was not "clearly erroneous.” The Court of Special Appeals reversed. Supervisor v. Lodge #817, Order of Elks, 48 Md. App. 319 , 427 A.2d 1022 (1981). It held that the § 9 (e) exemption "is based not only on the type of organization that owns the property but also upon the use made of the property”; and that it was therefore incumbent upon the Lodge to show, as required by § 9 (e), that the golf course "is actually used exclusively for and necessary for charitable, benevolent, or educational purposes ... in the promotion of the general public welfare of the people of the State.” Id. at 322. The court said that even if the main purpose of the Lodge, as an organization, was charitable or benevolent in nature for the promotion of the general public welfare, nevertheless, the golf course was used for the sole benefit of the Lodge’s members and guests, and was not therefore necessary for, or fairly incidental to the Lodge’s charitable or benevolent purposes.

The court found no merit in the Lodge’s argument that because the golf course serves a "benevolent” purpose for its members and guests, it is per se exempt under the statute. This argument, the court said, ignores the plain language of § 9 (e) which requires that the property, to be exempt, must be used "in the promotion of the general public welfare of the people of the State.” Id. at 323. We granted certiorari to consider the important issues of statutory construction raised in the case. We shall affirm the Court of Special Appeals.

(3) Under the express provisions of § 9 (a) of Art. 81, exemptions from real property taxation "shall be strictly construed.” We have said many times that to doubt an ⁵³⁸ exemption is to deny it. See Ballard v. Supervisor of Assess., 269 Md. 397, 403 , 306 A.2d 506 (1973); Suburban etc. Gas Corp. v. Tawes, 205 Md. 83, 87 , 106 A.2d 119, 121 (1954). This rule of strict construction in favor of the State is not relaxed in favor of charitable or benevolent corporations.' See Clarke v. Union Trust Co. of D.C., 192 Md. 127, 134 , 63 A.2d 635, 638 (1949). Eligibility of a nonprofit fraternal organization for a § 9 (e) tax exemption is governed by a two-prong test.

First, the fraternal organization must exist "solely for the mutual benefit of [its] members and beneficiaries ... [and] have a lodge system with ritualistic form of work and a representative form of government .. ..” The Lodge clearly meets this test. The second prong of the § 9 (e) test requires that the property be "actually used exclusively for and necessary for charitable, benevolent, or educational purposes ... in the promotion of the general public welfare of the people of the State.” The Lodge maintains that its golf course facility satisfies the second prong of the statutory test for a number of reasons. It argues, as it did below, that the golf course qualifies for a § 9 (e) tax exemption because it is owned and used primarily for "benevolent” purposes. It claims that the term "benevolent” has a meaning less encompassing in scope than "charitable” in that it need not embrace almsgiving but only the well-being of others, i.e., in this instance to fulfill the recreational and leisure time interests of the members of the fraternal organization.

The Lodge also suggests that the availability of the golf course to its members acts as an inducement to their sponsorship of charitable events which, in turn, promotes the general public welfare of the people of Maryland. Moreover, the Lodge contends that the mere existence of a qualified fraternal organization promotes the public welfare by providing the people of the State with an opportunity to join such organizations, and therefore supports a tax exemption for all property used in the organization’s operation. Finally, the Lodge argues that even though the public is excluded from using its