Taxation; Charitable, Benevolent or Civic Organization

October 22, 1980 Taxation; Ad Valorem Taxes; Classification; Exemptions; Labor Unions; Fraternal or Civic Order or Organization; Charitable, Benevolent or Civic Organization; Constitution, Article V, § 2(2) and (3); G.S. 105-275(19); G.S. 105-278.7.

Subject:

Requested By: J. Bourke Bilisoly Wake County Tax Attorney

Questions: Is property of a labor union classified out of the ad valorem tax base by G.S. 105-275(19)?

Is property of a labor union exempt from ad valorem taxation pursuant to G.S. 105-278.7?

Conclusions: No.

Enquiry has been made as to whether property of the "Chauffeurs, Teamsters and Helpers Local Union No. 391, affiliated with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America" is subject to ad valorem taxation, in view of the provisions of G.S. 105-275(19) and G.S. 105-278.7.

No specific details of the actual operation of the Union are provided, but a copy of the By-laws of the Local Union states, among other things, the following purposes:

To unite into one labor organization all workers eligible for membership;
To organize unorganized employees, and to provide services to those who are organized;
To secure improved wages, hours, working conditions and other economic advantages;
To provide eduction advancement and training pertaining to "Local Union, Shop Stewards and Agents;"
To advance the principle of free collective bargaining;
To engage in cultural, civic, legislative, political, fraternal, educational, charitable, welfare, social and other activities which further the interests of the organization and its members;
To provide assistance to other labor organizations;
To engage in community activities which advance the interests of the organization and its members;
To preserve the Union as an institution;
To carry out the objectives of the International Union of which the Local Union is an affiliate.

The objects of the International Union include:

To organize workers and educate them to cooperate in every movement which tends to benefit the organization;
To secure improved wages, hours, working conditions and other economic advantages through organization, negotiations and collective bargaining;
To do generally those other things enumerated in the Local Union’s By-laws, above.

In order to escape taxation, property must either be classified out of the tax base pursuant to the Constitution, Article V, § 2(2), or be exempted pursuant to Article V, § 2(3). Regarding the former, the General Assembly has exercised its classification power in G.S. 105-275, including the following:

"(19) Real and personal property belonging to the Loyal Order of Moose, the Benevolent and Protective Order of Elks, the Knights of Pythias, the Odd Fellows and similar fraternal or civic organizations operated for nonprofit benevolent, patriotic, historical, charitable or civic purposes, when used exclusively for meeting or lodge purposes by said organization. . ." It is apparent that two tests must be met: (1) ownership, and (2) use. If either fails, the exemption fails.

The threshold question is whether the Union is a "fraternal or civic organization" which is similar to Moose, Elks, Knights of Phthias or Odd Fellows Lodges, and it seems an inescapable conclusion that it is not.

The organization is, first and foremost, a labor union dedicated to the worthwhile objective of promoting the economic well-being of its members through higher wages, improved working conditions and the like. 48 Am. Jur. 2d Labor and Labor Relations, § 46. It is a "labor organization," which is an organization "in which employees participate and which exists for the purpose, in whole or in part, of dealing with employees concerning grievances, labor disputes, wages, rates of pay, hours or other terms or conditions of employment. . . ." 29 U.S.C. § 402(i).

Local No. 1 (ACA), Broadcast Employees of International Brotherhood of Teamsters, Warehousemen and Helpers of America v. International Brotherhood of Teamsters, Warehousemen and Helpers of America, (D.C.Pa.), 419 F. Supp. 263.

In that sense, there is a great dissimilarity between a union, on one hand, and Moose, Elks, Odd Fellows and other conventional fraternal orders on the other.

There seems to be a dearth of cases on the question, presumably because such property is so clearly taxable, or so clearly nontaxable. We suspect that the former is the case. Of the few there are, none seems to have much difficulty in concluding that a union is not a "fraternal organization" as the term is used in property tax statutes. See: Local Union No. 845, United Rubber, Cork, Linoleum and Plastic Workers of America, Home Association, Inc. v. Lee County Board of Supervisors, (1979) Miss., 369 So. 2d 497;

La Manna v. Electrical Workers Local Union No. 474 of the International Brotherhood of Electrical Workers, AFL-CIO (1974), Tenn., 518 S.W.2d 348;

Nor is a labor union a "civic organization" in the conventional sense. A "civic organization" is one that embodies the idea of citizens of a community cooperating to promote the common good and general welfare of the people of the community. U.S. v. Pickwick Electric Membership Corp., (C.C.A. Tenn.), 158 F.2d 272. A labor union has objectives substantially more directed toward the economic goals of its own members. We conclude that the Local Union here does not meet the "ownership" test, making it unnecessary to examine the remaining requirements of the statute.

Pursuant to Article V, § 2(3), the General Assembly has enacted exemption statutes. They too establish the same two tests which have to be met, in order for an exemption to apply. G.S. 105-278.7, for example, exempts buildings, land, and personal property wholly and exclusively used for nonprofit educational, scientific, literary or charitable purposes, if the owner is one of the following:

a charitable institution;
an historical institution;
a veterans organization;
a scientific institution;
a literary institution;
a benevolent institution;
a nonprofit community or neighborhood organization.

It has been suggest that property of a union falls within the provisions of that statute. As before, we look to see first if a union meets the ownership test.

As we understand it, the union does not contend that it is a veterans, historical, scientific, literary or neighborhood organization. We gather that the question is whether it is a "charitable" or "benevolent" organization.

Again, the few cases in point suggest the contrary.

Observing that there are of course elements of charity and benevolence in a union’s work, the Oklahoma court nevertheless said:

"That the union is not entitled to exemption of the property on the basis of its being a charitable institution we deem too obvious to require discussion. In the first place the property is not devoted solely to charitable use. And, in the second place, since the use is for the benefit of members only, that fact precludes the idea of use for charity, even though it were wholly benevolent in such respect. . . ."

Noting that the main purpose of the union was to serve the economic interests of members who paid dues and were entitled to the benefits they received, the Court said:

"The main purpose of the Union being commercial precludes the idea that it is a benevolent institution. . . ."

County Assessor v. United Brotherhood of Carpenters and Joiners of America, Local No. 329, (1949), Okla., 211 P.2d 790.