Maine Nonprofit Law E-Bulletin – April 2013

In this Issue:

  • Introduction
  • Hebron Academy Case
  • Workplace Protection for Nursing Mothers


Welcome to the latest issue of the Maine Nonprofit Law E-Bulletin.  I send E-Bulletins 3 or 4 times per year to provide updates and analysis on legal and policy matters respecting Maine nonprofit organizations.  I do my best to keep the messages brief, timely, and useful to nonprofit staff, board members, volunteers, advisors, and donors.  At the same time, no one may rely on these E-Bulletins as legal advice, and I encourage you to consult a qualified attorney for advice on any particular situation.

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Hebron Academy Case

In December, the Maine Supreme Court decided an important property tax exemption case.  In Hebron Academy v. Town of Hebron, 2013 ME 15, the Court held that the school’s property does indeed qualify for exemption.

The Academy is a private nonprofit middle school and high school offering a full curriculum of courses in English, literature, science, and other subjects.  In addition to its regular sources of revenue, the Academy receives about $130,000 per year (about 1% of its budget) by renting some of its facilities on a short-term basis to outside individuals and organizations.  For many years, the Town had granted the Academy property tax exemption as a “literary and scientific institution” under 36 M.R.S. § 652(1)(B).  However, beginning around 2008 the Town sought to tax those properties that the Academy rented.  Two key issues emerged in the Superior Court and reached the Supreme Court on appeal:  (1) Does the Academy’s rental of its properties mean that those properties are not “occupied or used solely for [its] own purposes”; and (2) Is the Academy a “literary and scientific institution.

The “occupied or used solely for its own purposes” issue is of widespread importance to the Maine nonprofit community, because this requirement exists for all exemptions for charitable organizations under § 652(1)(A), literary and scientific institutions under § 652(1)(B), and other less common categories of exemption such as veterans organizations and chambers of commerce.

The Court held that the Academy’s rental of properties amounting to one percent of its total revenues and not interfering with its scientific and literary purposes was a de minimis incidental use and therefore did not violate the “occupied or used” requirement.  The Court followed an earlier line of cases finding the same de minimis exception.

Although the ultimate result is comforting for Maine nonprofits, the Court did not elaborate on how to distinguish between de minimis use and a more substantial use that would jeopardize exemption.  In any event, Hebron Academy should not be misread to establish a rule that only revenues below one percent of the organization’s total are de minimis.  Other Court-sanctioned examples of de minimis use in previous cases are the rental of an organization’s summer camp facilities to its directors for a nominal fee and the off-season rental of summer camp facilities.  These rental activities could very well have yielded revenues far in excess of one percent.  Furthermore, the Court also recognizes an entirely distinct category of incidental use for “institutional necessity,” such as a parking garage for a hospital or a thrift store providing rehabilitation opportunities.

Meanwhile, the main part of the Court’s opinion held that the Academy is indeed a “literary and scientific institution,” based on some complicated legislative history suggesting that the Maine Legislature understood that term to include “academy and college buildings.”  However, the Court defined an academy as primarily a high school, and limited its holding to organizations offering an accredited course of high school education.  The Court was silent on whether other types of private schools that are not high schools would qualify under the statute.  In my opinion, schools that offer a diverse curriculum that includes science and literary subjects would and should qualify under both § 652(1)(B) as a “literary and scientific institution” and under § 652(1)(A) as an educational charitable institution.


Workplace Protection for Nursing Mothers

Fortunately, both the federal government (as part of the Affordable Care Act, which amended the Fair Labor Standards Act) and the Maine Legislature have enacted workplace protections for nursing mothers in recent years.  Unfortunately, these relatively new laws have been overlooked by many employers and employees alike, and many employers are likely not in full compliance.  The Fair Labor Standards Act applies to only certain nonprofits such as hospitals, nursing homes, schools, and commercial operations such as gift shops.  However, the Maine law applies to all employers, nonprofit or otherwise, and regardless of the number of employees.

Maine law (see 26 M.R.S. § 604, passed in 2009) requires employers to allow adequate unpaid break time or permit an employee to use paid break time or meal time to express breast milk for her nursing child for up to three years following childbirth.  Furthermore, the employer must make reasonable efforts to provide a clean room or other location, other than a bathroom, where an employee may express breast milk in privacy.  Finally, the employer may not discriminate in any way against an employee who chooses to express breast milk in the workplace.  Maine nonprofits should make sure their personnel policies and practices are in compliance with this law, and welcome these new laws as progress for social and health policy.

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              CIRCULAR 230 DISCLOSURE: Any federal tax advice contained in this communication or attachment is not to be used for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing or recommending any transaction or matter addressed in this communication.