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SG-W:/ Re: Land Protection

Dear ListServe Folks:
Just in case some people would be interested, I'm sending out the following 
which I e-mailed in response to the questions posed by Jon Kazmierski.
-Jack Smiley


Here's some response to your questions.  I'm not an attorney, but I have had 
some experience in appearing before MTT hearings and in securing property tax 
exemptions for Southeast Michigan Land Conservancy property.

1. Do conservation easements in Michigan ever have the potential to
relieve local/municipal property taxes?
        Yes.  Conservation easements have the potential to reduce property 
taxes on a given parcel of land.  The extent of the reduction depends on the 
terms of the easement (how restrictive it is) and the unrestricted 
development potential of the property (easement restricted land in high 
development areas will receive a greater degree of property tax relief).  
Conservation easements, in general, WILL NOT render a property exempt from 
property taxes.

If a property has a conservation easement recorded against it, local 
assessors in Michigan are REQUIRED to take into account the impact that the 
easement has upon the market value.  (See Michigan Tax Tribunal Docket No. 
157543,205036--a precendent case before the MTT--Indian Garden Group v Resort 
Township.  Judgement entered 2/17/95).

2. I know someone who is interested in establishing an organic farm that
would provide food to the local community, provide community education,
and provide learning opportunities for those interested in organic farming
practices.  Would this group be able to obtain non-profit status
(non-profit is their objective)? Would non-profit status help relieve
property taxes?

        Non-profit status is relatively easy to obtain (both from 
Incorporation and from the I.R.S), but a "non-profit" status would not 
guarantee that they would become exempt from ad valorem (general) property 
taxes.  (Note:  there is no blanket exemption from Special Assessments, much 
to the chagrin of conservancies which have had to pay for roads, drains and 
other "improvements" from which they don't benefit).

In the Michigan Compiled Laws, MCL 211.7o states that  "real estate or 
personal property owned and occupied by nonprofit charitable institutions 
incorporated under the laws of this state with the buildings and other 
property thereon while occupied by them solely for the purposes for which 
they were incorporated...(are) exempt from taxation under this act."

The operative word in the above is "charitable".  It is easy to set up a 
nonprofit corporation, but the more challenging task will be to define and 
operate the corporation so that it will be truly charitable in nature.  The 
definition of charity set forth in Retirement Homes of the Detroit Annual 
Conference of the United Methodist Church, Inc.  v  Sylvan Twp, 416 Mich 340, 
348-349; 330 NW2d 682 (1982) is recognized as applicable in Michigan cases.  
In this decision, the Supreme Court stated:
        "Charity...{is} a gift, to be applied consistently with existing 
laws, 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 of 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. "  

There is a wealth of case law on property tax exemptions (both those granted 
and denied).  An afternoon at any law library would be much advised for 
anyone who is considering setting up a nonprofit charitable group.

Although I don't have sufficient time to thoroughly discuss the pitfalls and 
possibilities of attaining exempt status on an organic farm property, let me 
simply highlight the two purposes which you raised:

      One of the stated purposes was to "provide food to the local 
community".  Although important, this economic purpose would be a stretch to 
claim as "charitable".  In addition, there would be a strong likelihood that 
certain individuals would receive benefits (economic, use, etc.) greater than 
those accorded to the general public.  With a charitable group, benefits 
cannot inure to particular individuals.

      The other purpose, to "provide community education, and provide 
learning opportunities for those interested in organic farming practices" 
could possibly qualify as a charitable purpose, but it may be difficult.  In 
general, claiming a charitable purpose which is "educational" is much more 
difficult to substantiate.  The Michigan United Conservation Clubs lost their 
appeal for a property tax exemption, and they were claiming to be 
"educational".  This is not to say that it couldn't be done.  I'm sure that 
there are demonstration farming operations that own exempt properties, but I 
can't cite any offhand with certainty.  The ones I know of have broader 
purposes than simply farm operations, and expanding the scope of the purpose 
is something that should be considered if property tax exemption is sought.

So, in summary, the answer to Question #1 is "Yes"; the answer to Question #2 
is "Possibly".  But do they really wish to start a non-profit charity?  Or 
could they accomplish their goals by maintaining the farm in private 
ownership, with a conservation easement helping to reduce the tax burden.  A 
fuller evaluation of their  desires, expectations and long-term vision for 
the future of the organic farm operation is in order.

Please feel free to e-mail me if you have additional questions.

- Jack Smiley, President
Southeast Michigan Land Conservancy
E-mail:  SmileySMLC@aol.com

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