On November 4, 2014 West Virginia voters will be asked to vote, by statewide majority, on an amendment to the West Virginia Constitution which will have fundamental effects on the future of West Virginia. House Resolution 108, the so-called “Boy Scout Amendment,” will be worded on the ballot as follows:
“To amend the State Constitution to exempt from property tax certain properties in this state owned by nonprofit youth organizations and built at [a] cost of at least $100 million whether or not the property is used for the nonprofit youth organization’s charitable or nonprofit purpose to help raise funds for the benefit of the nonprofit youth organization. If approved, the Legislature would be required to enact laws that would protect local and regional businesses from unfair competition and unreasonable loss of revenue caused by the nonprofit organization use of the tax exemption.” (1)
Although officially termed the “Nonprofit Youth Organization Tax Exemption Support Amendment,” (1) the only organization that would benefit is the Boy Scouts of America, who recently built the multimillion dollar Summit Bechtel Reserve in Fayette County, West Virginia. The Boy Scouts claim that they need the amendment so as to not endanger their 501( c )( 3 ) nonprofit status should they engage in for-profit events on the property. (2)
In essence, HR 108 will allow the Boy Scouts of America to operate for-profit ventures at the reserve while still maintaining its 501( c )( 3 ) tax exempt status, “whether or not the property is used for the nonprofit youth organization’s . . . purpose.” (1) This will allow the Boy Scouts to compete with the local rafting, climbing, zip lining, restaurant, and hospitality industries: businesses that pay taxes just as everyone else does. Of course, any entity that is exempt from taxes has a significant advantage over those that do not enjoy such special treatment from the legislature.
The Privatization of the Constitution.
Equality is at the core of West Virginia’s Constitution. To require any monetary amount to qualify for Constitutional protection, much less the proposed $100 million requirement, goes sharply against this notion. No organization should have the people’s Constitution rewritten for their private needs, regardless of who they are, or what benefits they promise. To do so is to privatize our Constitution for the benefit of a select group. Once this door is open, it will be very hard, if not not impossible, to close. The last sentence of the amendment attempts to alleviate these concerns by providing that, “If approved, the Legislature would be required to enact laws that would protect local and regional businesses from unfair competition and unreasonable loss of revenue caused by the nonprofit organization use of the tax exemption.” (1)
At first glance, these words may provide some sense of security. Upon consideration, however, these words are void of any real meaning. What would these laws be? Where is the conversation on how they should be drafted? Should the legislature limit the activities of nonprofits? To what extent? How will “unreasonable loss” or “unfair competition” be measured? Asking the legislature to fully comprehend the dynamics of Fayette County’s unique position in West Virginia’s tourism industry is neither a realistic, nor an efficient use of our state’s time or money. The legislature is woefully inadequate, ill-positioned, and unqualified to monitor the industries and economics of the Raleigh-Fayette region.
The legislature already has the power to do what the Boy Scouts are asking. No new amendment is needed.
According to Steve McGowan, legal representative of the Scouts, the state Constitution, and a 1944 state Supreme Court opinion, prohibit tax-exempt groups from leasing facilities to for-profit organizations. (2) However, this is simply not the case.
Not only does the Constitution already have enabling language (9) granting the legislature power to define the scope of nonprofit tax exemption, but the 1944 case (7) Mr. McGowan refers to was clarified in a 1945 statute, §11-3-9, specifically adopted to address the ambiguity of that case. (6) This statute specifically allows property to remain tax exempt in a nonprofit’s hands if “the property or the dividends, interest, rents or royalties derived therefrom, is used primarily and immediately for the purposes of the corporations or organizations.” (8) Thus, it would seem the Boy Scouts are exempt if they used income from the reserve to “support the facility”as Boy Scout Director Dan McCarthy told the Charleston Daily Mail last March. (2)
In 2010 the West Virginia Association of Counties distributed a statewide survey to county assessors to determine how assessors treated property tax exemptions for nonprofit organizations. In one of the scenarios, a building owned by a nonprofit had a restaurant/bar, dance floor, bingo parlor, and gaming parlor. When asked if the entire building would be exempt from property taxes, 75% of county assessors said yes. The other 25% answered that only some of the activities would be tax exempt. Thus, it would seem the issue before us is one of inconsistency between counties, and not a Constitutional issue, as the Boy Scouts claim. It then follows that this issue can be settled by means other than a Constitutional Amendment. Perhaps even as simple as the Fayette County Assessor agreeing that the Boy Scouts may remain tax exempt if they use proceeds from events in the upkeep of the facility. At the most extreme, it would require the legislature to specifically exempt the Bechtel Reserve.
The Boy Scouts, the legislature, and many voters are under the impression that the Scouts absolutely have to have an amendment to the Constitution to get the most out of the reserve. The truth is, this is a county-wide issue, and a legislative issue at most, not a Constitutional one. Further, there is no evidence to support the Scouts assertion that they would lose their entire 501( c )( 3 ) status. In a worst case scenario for the Boy Scouts, they would lose their tax exemption status as it pertained to property taxes. Thus the Boy Scouts would pay property taxes, which they would be able to offset with the income they received from renting out the reserve. It is not a matter of all or nothing, as the Scouts have framed the issue. Concessions may have to be made on both sides, but if the Boy Scouts want guaranteed exemption, they only need a bill from the legislature: not a Constitutional Amendment.
Too far, too fast.
A Constitutional Amendment should be a thoroughly debated and highly scrutinized process for the betterment of all people, not just a single entity. West Virginians need to have an open, honest, and statewide dialogue about the direction this amendment could take us. Further, an amendment would be unnecessary if the income would be used for what the Scouts claim. It is very disappointing that our legislature would ask us to vote on such a proposition without first doing their own homework. We need to take a good hard look at any amendment before ratifying it, especially an amendment with such significant and far-reaching consequences to all West Virginians. We are simply moving too far, too fast.
2. http://www.charlestondailymail.com/Business/201403020058
3. http://www.wvgazette.com/News/201208140245
4. http://www.charlestondailymail.com/article/20140903/DM0104/140909710
5. http://www.wvpolicy.org/constitutional-amendment-clarifies-property-tax-law-but-just-for-boy-scouts
7. Central Realty v. Martin, 30 S.E.2d 720 (1944)
8. West Virginia Statute §11-3-9(29)(d)
9. West Virginia Constitution, Article 10
