Request By:
Mr. Geoffrey P. Morris, President
Louisville Bar Association
200 South Fifth Street
Louisville, Kentucky 40202
Opinion
Opinion By: Steven L. Beshear, Attorney General; By Alex W. Rose, Assistant Attorney General
You have requested an opinion from the Attorney General as to whether the Louisville Bar Association is exempt from the payment of sales tax. It is our opinion that the Louisville Bar Association is not exempt.
KRS 139.470(1) exempts from sales tax those gross receipts that the state is prohibited from taxing under the State Constitution. Section 170 of the State Constitution exempts from taxation ". . . institutions of purely public charity, and institutions of education not used or employed for gain by any person or corporation, and the income of which is devoted solely to the cause of education . . ." and several other categories that are not applicable to the LBA. The only two categories in which the LBA could conceivable be placed are "institutions of purely public charity" and "institutions of education." It is our opinion that the LBA does not qualify under either category.
In Iroquois Post No. 229, Etc., v. City of Louisville, Ky., 309 S.W.2d 353, 355 (1958) the Court stated that in the phrase "institutions of purely public charity" , "purely" modifies "charity. " In the cases Commonwealth v. Isaac Bernheim Foundation, Ky., 505 S.W.2d 762 (1974) and Department of Revenue v. Louisville Children's Theater, Ky. App., 565 S.W.2d 643 (1978), "charity" was defined as that which reasonably betters the condition of mankind. Nothing in your letter or in our experience would qualify the LBA under this definition as a Section 170 charity.
The other OAGs pertaining to charities that you cite are not similar to this situation. Those opinions involved the Louisville Orchestra, Big Brothers and Big Sisters, and Actors Theater of Louisville. Under the Bernheim definition these organizations do qualify for the exemption.
In Kesselring v. Bonnycastle Club, 299 Ky. 585, 186 S.W.2d 402 (1945), the Court defined "institutions of education." It stated as follows:
"Basci of our consideration is the logical and settled conclusion . . . that granting tax exemption to . . . educational institutions is a policy founded upon the fundamental ground of benefit to the public by such organizations and recognition of the fact that they perform a service which the state would or should otherwise have to perform . . ."
"To be exempt from the payment of taxes, this organization must reasonably come under the classification of an 'institution of education.' Words used in the Constitution are to be taken in their ordinary acceptation. While in its broadest and best sense education embraces all forms and phases of instruction, improvement and development of mind and body, and as well of religious and moral sentiments, yet in the common understanding and application it means a place where systematic instruction in any or all of the useful branches of learning is given by methods common to schools and institutions of learning. That we conceive to be the true intent and scope of the term 'institutions of education', as used in the Constitution." 186 S.W.2d at 404.
Under this definition, it is our opinion that the LBA does not qualify as an "institution of education."
The foreign cases that you cite are not persuasive. Minnesota State Bar Association v. Commissioner of Taxation, 240 N.W. 2d 321 (Minn., 1976), Association of the Bar of the City of New York v. Lewisohn, 313 N.E. 2d 30 (N.Y., 1974) and Smith v. Brooklyn Bar Association, 44 N.Y.S. 2d 620 (1943) all held that the subject bar associations were not exempt from sales tax, property tax or unemployment insurance as charities or educational institutions. Stearns v. Association of the Bar of the City of New York, 276 N.Y.S. 390 (1934) held that the subject bar association was a charity for the purposes of a tort action. A different definition of charity is involved. Both St. Louis Union Trust Co. v. U.S., 374 F.2d 427 (8th Circ., 1967) and Dulles v. Johnson, 273 F.2d 362 (2nd Circ., 1959) held that the subject bar associations were charities within the meaning of the federal estate tax statute. Again, a different definition of charity is involved.