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District of Columbia v. Cato Institute

July 24, 2003

DISTRICT OF COLUMBIA, APPELLANT,
v.
CATO INSTITUTE, APPELLEE.



Appeal from the Superior Court of the District of Columbia (TX-7792-98) (Hon. Cheryl M. Long, Trial Judge)

Before Reid and Washington, Associate Judges, and Kern, Senior Judge.

The opinion of the court was delivered by: Washington, Associate Judge

Argued June 11, 2003

The District of Columbia appeals a ruling from the trial court, which concluded that property located at 1000 Massachusetts Avenue, N.W., Washington, D.C., owned and used by the Cato Institute ("Cato"), should be exempt from real property tax under D.C. Code §§ 47-1002 (8) and (18) (2001). The question before us is one purely of statutory interpretation. After reviewing the legislative history, statutory scheme, and case law, we conclude that the building owned by Cato is not entitled to exemption from real property tax under D.C. Code §§ 47-1002 (8) and (18).

I.

The facts of this case are largely not in dispute and will only briefly be reviewed in order to assist in our statutory interpretation. The Cato Institute, originally called The Charles Koch Foundation, Inc., is named for the Cato letters, which were libertarian pamphlets that helped lay the philosophical foundation for the American Revolution. Cato's Articles of Incorporation state that it "is organized NOT for profit, but rather said corporation is organized exclusively for charitable, religious, educational and scientific purposes." The articles further state that "no part of the net earnings of the corporation shall inure to the benefit of, or be distributable to, its members, trustees, officers, or other private persons" and that "no substantial part of the activities of the corporation shall be carrying on of propaganda, or otherwise attempting to influence legislation, and the corporation shall not participate in, or intervene in (including the publishing or distribution of statements) any political campaign on behalf of any candidate for public office." Cato's activities include publication on a variety of public policy issues, holding conferences, and publishing a quarterly magazine. Cato's activities "focus primarily on the impact of the federal government's policies on the economy, education, and society."

As a nonprofit corporation devoted to public policy research and education, Cato is exempt from federal taxes under I.R.C. § 501 (c)(3) and recognized as a "public charity" under I.R.C. § 509 (a). Cato is also exempt from D.C. personal property tax, income and franchise tax, and sales and use tax. D.C. Code §§ 47-1508 (1), -1802.01 (4), -2005 (3), -2206 (2) (2001). In 1996, Cato filed an application for exemption of real property taxes in the District of Columbia under D.C. Code §§ 47-1002 (8) and (18) (2001) for a property located at 1000 Massachusetts Avenue, N.W., Washington, D.C. (denominated as Lot 58, Square 342). This property is Cato's headquarters and contains staff offices, meeting rooms, the F.A. Hayek auditorium, conference facilities, and a library. The District denied the application in a letter dated May 27, 1998, and Cato filed an appeal from this decision in the District of Columbia Superior Court. After hearing argument on cross-motions for summary judgment, Judge Cheryl M. Long granted summary judgment in favor of Cato, concluding that it should receive property tax exemption under the statute. The District now appeals the ruling of the trial court.

II.

D.C. Code § 47-1002 states: "Only the following real property shall be exempt from taxation in the District of Columbia: . . . (8) Buildings belonging to and operated by institutions which are not organized or operated for private gain, which are used for purposes of public charity principally in the District of Columbia. . ." On appeal, the District contends that Cato does not qualify for tax exemption of its real property taxes under this provision because (1) it is not a "public charity" and (2) its activities are not "principally in the District of Columbia." These questions present issues of statutory interpretation, which we review de novo. See, e.g., District of Columbia v. Gallagher, 734 A.2d 1087, 1090 (D.C. 1999); Ashton Gen. P'ship, Inc. v. Federal Data Corp., 682 A.2d 629, 632 (D.C. 1996).

"As a threshold matter, we acknowledge the often stated axiom that 'the words of [a] statute should be construed according to their ordinary sense and with the meaning commonly attributed to them.'" E.R.B. v. J.H.F., 496 A.2d 607, 609 (D.C. 1985) (quoting Davis v. United States, 397 A.2d 951, 956 (D.C. 1979)); see also United States v. Goldenberg, 168 U.S. 95, 102-03 (1897); accord Gallagher, 734 A.2d at 1090. "When the plain meaning of the statutory language is unambiguous, the intent of the legislature is clear, and judicial inquiry need go no further." Id. at 1091. While we first employ the plain meaning rule to our task of statutory interpretation, we have acknowledged that in certain circumstances it is appropriate to look beyond even the plain and unambiguous language of a statute to understand the legislative intent. See generally, Peoples Drug Stores, Inc. v. District of Columbia, 470 A.2d 751, 754 (D.C. 1983) (citations omitted). "These exceptions to the plain meaning rule should not, however, be understood to swallow the rule completely." Id. at 755. This court has noted that "[t]here are strong policy reasons for maintaining the certainty, fairness, and respect for the legal system that the plain meaning rule engenders in most instances." Id. Therefore, this court will "look beyond the ordinary meaning of the words of a statute only where there are 'persuasive reasons' for doing so." Id. (quoting Tuten v. United States, 440 A.2d 1008, 1013 (D.C. 1982)).

When interpreting statutes relating to tax-exemption, we must keep in mind that "[i]t is firmly established in the jurisprudence relating to the District's real property tax that exemptions from taxation are to be construed strictly against the party claiming an exemption." National Med. Ass'n, Inc. v. District of Columbia, 611 A.2d 53, 55 (D.C. 1992). Furthermore, "each type of tax has its own 'independent and distinct criteria for exemption.' It is therefore a separate question whether [Cato's] property is exempt from taxation under the District's property tax scheme." District of Columbia v. Helen Dwight Reid Educ. Found., 766 A.2d 28, 32 (D.C. 2001). Finally, it is well to remember the underlying principle of laws which exempt certain taxes; they are "based upon the theory that the Government is compensated for the loss of revenue by its relief from financial burdens which would otherwise have to be met by appropriations from other public funds, and by the benefits resulting from the promotion of the general welfare." Bob Jones Univ. v. United States, 461 U.S. 574, 590 (1983) (quoting H. R. Rep. No. 1860, 75th Cong., 3d Sess., 19 (1938)).

A. D.C. Code § 47-1002 (2001).

We now turn to the history and language of D.C. Code section 47-1002. In or around 1940, the then commissioners of the District of Columbia began a review of every property on which no taxes were paid. The review was sparked by the District's need for additional operating funds due to the large presence of the Federal Government, which does not pay tax on the property it owns. See Senate Report No. 1634, 77th Cong., to Accompany S. 2804 -- Defining the Real Property Exempt from Taxation in the District of Columbia; House Report No. 2635, 77th Cong., to Accompany H.R. 7781 -- Defining the Real Property Exempt from Taxation, District of Columbia (hereinafter House Report). Following this review, two bills were introduced in Congress to deal comprehensivelywith the issue of property tax exemption in the District. See H.R. 7406, 77th Cong. (1942); S. 2673, 77th Cong (1942). The resulting Act, as amended and codified today, contains twenty-five different provisions exempting real property from taxation in the District of Columbia.

D.C. Code § 47-1002. The statute is much more detailed than most statutes that provide a tax exemption. For example, I.R.C. § 501 (c)(3) exempts organizations from federal tax if they are "organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals . . . ." However, § 47-1002, rather than simply listing the types of organizations in a "laundry list," takes great care in defining and limiting the exemption to buildings which ...


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