Challenge

 

7/27/2017
TAX IMPLICATIONS IF THE RELIGIOUS TEST FOR BAY VIEW MEMBERS AND TRUSTEES IS SUCCESSFUL
Currently Bay View members are entitled to tax deductions for charitable gifts to the Chautauqua program. Most of us also deduct what we pay for taxes to Bear Creek Township. We do not get deductions for the homeowner fees that we pay to the for-profit Bay View Real Estate Management Corp. Nor are we able to deduct the Chautauqua fees paid to the Bay View Association.**
The question often asked is:  “What effect, if any, will a court ruling striking down a religious test have on the tax deductions for the Bay View Chautauqua.”  
SHORT ANSWER: A deduction for gifts to the Chautauqua can be retained in various ways.          
                                                                                                                                                1.  We are currently under the group tax exemption of the United Methodist Church. If the Bay View religious test were eliminated, the UMC may well extend our group tax exemption with no change. There are numerous precedents for this.  Many persons in Bay View, including those in the Chautauqua Inclusiveness Group, favor redefining and continuing our long relationship with the United Methodist Church.                                                       2.  Persons close to the UMC also expect that even if the church does not continue the current group tax exemption in perpetuity, they would be willing to work with us and cover us for a number of years until we quality for our own 501(c)3 non-profit tax status.            3.  Bay View’s programming of religious, education, recreation and the arts are all activities eligible for tax exemption.  Bay View could qualify for its own independent tax exempt status for the Chautauqua programs.  This is what Lakeside in Ohio did after its membership criteria were challenged as religiously discriminatory.

Donald N. Duquette                                                                                                         Clinical Professor Emeritus of Law                                                                                       Founding Director, Child Advocacy Law Clinic                                                           University of Michigan Law School

 **Of course individuals should always consult their tax accountant regarding their tax liability.

ARCHIVED:

4-29-2013…MEMBERSHIP BALLOT PROPOSAL NOW AVAILABLE FOR COMMENT
The membership by-law amendment proposed by the Trustees can be found under this “Challenge”  tab. Scroll down to the “Legal Updates” link.  You are invited to share your opinion regarding the proposed amendment by posting a comment.  If you are a Bay View member and have forgotten or not obtained the password needed to access this page, please send a request for password using the  Contact page on this site.  (Scroll down to “Leave a Reply”.)

Challenge: Preserving the Chautauqua Tradition
The Chautauqua ideal recognizes personal fulfillment and successful living as lifelong pursuits, a journey best taken as part of a community that combines quality life experiences with real opportunity for Intellectual and spiritual growth. In Bay View, this vision has survived war, political unrest, global economic crisis—not to mention periodic cultural backlash– for over 130 years.

Certain provisions in Bay View’s Current by laws, which impose a religious test for membership, represent a significant threat to Bay View’s Chautauqua identity. In 2011, a group was formed to work toward elimination of these provisions and the discriminatory practices they support.

Mission Statement for the Inclusiveness Group
The Bay View Inclusiveness Group is working for the time when Bay View welcomes as members all who accept its religious and Chautauqua traditions and who desire to serve and sustain them with their talents, their time, and their treasures.

Progress on Inclusive Campaign—Summary
The questions raised last summer regarding returning Bay View to its inclusive roots have largely been answered:
(1.) Bay View’s current restrictive membership practices are illegal.
(2.) Modifying our membership requirements does not jeopardize our relationship with the United Methodist Church and the tax exempt status tied to that relationship.

Lawyers engaged by the Bay View Board have stated that Bay View’s religious-based membership requirements are contrary to Federal Fair Housing and Michigan Civil Rights Laws. Failure to remove the requirement that member be involved in a Christian Church, may also endanger our Methodist Church relationship and benefits.

The entire report on the Inclusiveness campaign, including summaries of the legal opinions, is found on the “Legal Update” page, which is available to Bay View members only. Use the “Contact” page to request the password.

3 thoughts on “Challenge

  1. John, Charlie & Dick – you’ve done a terrific job on the website! Thanks for your hard work on this – it will help expand members’ knowledge about our Chautauqua origins.

  2. THE RELIGIOUS EXEMPTION

    Question: Can Bay View Association reject a transfer of leasehold interest if the transferee does not meet the requirements of By-Law 1.D.5?
    It first depends on whether it can claim exemption under the Fair Housing Act of 1968 (Title VIII of the Civil Rights Act of 1968), either as a “religious organization” or “a nonprofit organization operated, supervised, or controlled by or in conjunction with a religious organization.”
    Secondly, it depends on whether the transfer of leasehold interests is a protected activity under the exemption. Keep in mind that a transfer of leasehold interests can also include adding someone’s name on the lease.

    It should be kept in mind that what is being discussed here is a very narrowly focused issue: whether a “religious organization” or a “nonprofit organization, etc.” can refuse membership to someone on the basis of religious beliefs — not on any other grounds — and religious beliefs cannot include discrimination on the basis of race, gender or ethnicity. The assertion that First Amendment rights trump any restriction on discrimination is wrong.

    No one disagrees that Bay View should have membership requirements. It is appropriate that only people be admitted to membership or to own a cottage who will be contributing and supportive of Bay View’s culture and traditions.

    Bay View Association is not a private club, not a commercial enterprise, not a year-round resort. It is a singular, Michigan-specific type of community, which has a blend of purposes, not just one, and each are equally important. It is the sum total of these which constitute a “summer resort and assembly association.”

    The present membership requirements can lead to paradoxical results. For instance, if either the owner of the Bay View Inn or the owner of the Terrace Inn wanted to sell to, or bring in as a partner, someone who did not meet the By-Law 1.D.5 requirements, they would not be able to do, even though under the Fair Housing Act their establishments could not refuse to admit anyone who wanted to stay at their inns.

    It is believed that there is no case interpreting the exemption which has arisen from within the jurisdiction of the federal 6th Circuit Court of Appeals, which covers Michigan. Nor has there been any U.S. Supreme Court case interpreting the exemption. There have been Title VIII cases in other federal Circuit Courts of Appeal, however, but those decisions, while persuasive, are not binding within the 6th Circuit. There is, therefore, no precedent either way on the issue within the jurisdiction of the 6th Circuit Court of Appeals.

    There have been cases in all jurisdictions, including the U.S. Supreme Court, involving similar (but not identical) exemption language in Title VII of the Civil Rights Act of 1964, pertaining to employment. Those cases looked for guidance in interpretation of the Title VIII (Fair Housing Act) exemption.

    The general rule of interpretation evolved by the federal courts is that acts which carry out a broad public policy (such as ending discrimination) are broadly defined, while exceptions (or exemptions) to such policy are narrowly defined.

    The courts have also stated that whether an organization can claim the exemption depends on the facts of the case. There is no one single factor that will enable an organization to claim the exemption. Likewise, the absence of a particular factor would not necessarily prevent an organization from successfully claiming the exemption.

    Thus Bay View Association, to operate under the Fair Housing Act exemption, must therefore do so within circumscribed and narrow limitations.

    Synthesizing the holding of relevant cases under the Civil Rights Act of 1964 and 1968 and the pertinent commentaries leads to the following conclusions:

    The factors for determining a “religious organization” are:
    —a principal organizing purpose is to conduct religious activities;
    —it is owned by a religious organization; was established by a religious organization;
    —it is a unit or division of a religious organization;
    —receives more than nominal funding from a religious organization;
    —it has a regular body of communicants;
    —is not organized or operated for profit;
    —its members gather in common membership for regular worship and religious observances.

    The factors for determining a “nonprofit organization operating . . . in conjunction with a religious organization” are”
    —a formal, mutual relationship between a church and the entity more than mere affiliation; close and substantial relationship in the areas of day-to-day administration and financial management;
    —whether there are specific policies that forbid deviation from the tenets of the religion;
    —requirements that religious leaders sit on the governing body of the entity;
    —whether the entity has reserved the right to discriminate in employment on the basis of religion;
    —whether prior approval of the religious organization is required for any changes in the entity’s articles or by-laws.

    Without going through an extensive analysis of which factors are present or absent in Bay View, Members can apply their own knowledge of Bay View to the factors above and draw their own conclusions. Also, the legal opinions on the Bay View Association website discuss these factors.

    The real estate aspect of Bay View Association is, of course, what causes the problems in this discussion. Paradoxically once again, if Bay View still had it old two-entity structure, one entity holding the real estate and the other containing all the other Bay View activities, the non-real estate entity could probably restrict its membership as at present; the real estate entity, on the other hand, clearly could not.

    There is one condition in the Fair Housing Act exemption section which is difficult to resolve: “ . . . dwellings which it owns or operates for other than a commercial purpose . . ..” A number of cases involved a Bay View-type real estate structure: the association owning the real estate, the members owning and cottages and a leasehold interest. However, that split was not determinative of whether there was allowable discrimination; common sense compels a reading that “dwellings” includes the underlying real estate. The real issue is “commercial purpose.”

    One website opinion states that the real estate activity is a commercial activity and generates revenues over and above the expenses attributable to the real estate alone; hence, the opinion concludes, there is a commercial purpose and the exemption is not available.

    That seems too narrow a view of the situation: Bay View Association levies fees to the leasehold, part of which goes to cover the real estate activity (property upkeep of the common grounds, etc.), but the other goes to cover the other activities of the Association. Further, donations and endowed funds to the Association go to support the non-real estate activity.

    It is thought that, overall, the real estate activity of Bay Association is incidental to the collective purposes of the community and is not a “commercial purpose.”

    This brings us back to whether Bay View Association is either a “religious organization” or “a nonprofit organization operated . . . in conjunction with a religious organization.”

    Although there is language in some of the cases declaring that a purpose of furthering religion is of weight in characterizing a “religious organization,” those cases, as stated previously, are not binding within the 6th Circuit; even so, the same language could be applied to say that Bay View is a music conservatory, a summer educational institution or a summer resort. So, it seems a stretch to call Bay View a “religious organization.”

    One ordinarily thinks of the category as including such entities as the United Methodist Church, the Epworth League, a particular congregation or various Methodist outreach organizations.

    A much better argument can be made for the category of “nonprofit organization operated, etc.” Although Bay View Association is not incorporated under the Michigan Nonprofit Corporation Act, but under the Summer Resort and Assemblies Association Act, it does operate as a nonprofit entity; its financial statements are compiled in accordance with GAAP rules pertaining to nonprofit entities; any surplus which is generated goes for operating purposes and none is distributed to Members. It also qualifies for IRS 501 (c)(3) nonprofit exemption under the umbrella exemption of the United Methodist Church.

    Nonetheless, the statute requires that the “ . . . nonprofit institution or organization [be] operated, supervised, or controlled by or in conjunction with a religious organization . . ..”

    Bay View Association operates independently of the United Methodist Church, despite formal, nominal links. In practice, no officer of the Church exercises any authority over Bay View. Bay View was founded by individuals who happened to be Methodists, but that has never been a requirement for membership; the only requirement actually put upon Bay View by the Methodist denomination is that a majority of the Trustees be Methodists and that was only because such a requirement was critical for allowing Bay View Association to avail itself of the umbrella or group tax exemption of the United Methodist Church.

    Further, being part of a group tax exemption in itself is not enough, it is believed, to bring into play the phrase ” . . . in conjunction with a religious organization.”

    For these reasons and the factors outlined above, the conclusion is that Bay View Association is neither a “religious organization” nor a “nonprofit organization operated . . . in conjunction with a religious organization . . ..”

    Consequently, it is not likely that the Association will be able to carry the burden of proving it falls within the exemption in the Fair Housing Act of 1968.

    Bay View Association also has several classes of membership, some of which do not involve leasehold interests. As to those non-leaseholding categories, it is believed that By-Law 1.D.5 would not apply, since the Fair Housing Act applies only to leaseholding memberships, not non-leaseholding memberships. Thus, though it seems non-sensical, Bay View theoretically could discriminate against applicants for Associate and Non-Leaseholding Memberships, but would still be able to do so regarding leaseholding memberships (assuming no other civil rights laws are applicable). Also, it should be recognized that until there has been an application rejected on religious grounds (non-Christian applicant), there is no violation of the Fair Housing Act. If there is such a rejection, then the applicant’s remedy is to file a claim with the U.S. Department of Housing and Urban Development (HUD). Interestingly, on the one U.S. Supreme Court case bearing on the Fair Housing Act (Trafficante v. Metropolitan Life), there is a strong indication that not only the applicant, but also the leaseholder, who attempted to transfer the leaseholding interest to the applicant could file a claim with HUD.

  3. The Board proposal continues the unchristian exclusionary practices of Bay View. I cannot accept this proposal as an acceptable alternative. The Adhoc committee on membership submitted a suitable inclusion proposal, which, while putting many checks in place for a potential membership application, did correct much of the unchristian membership practices of the Association. The Board reversal of that proposal is unfortunate and speaks strongly of the underlying unchristian behaviors of the Bay View community. We fail miserably at the test “to be known as Christians by our Love”. It is clear that our Bay View brethren, who claim to be knowledgeable of the Bible, yet continue to block opening our doors to people who are on a different faith journey, are woefully missing a full understanding of God’s purpose and our role in achieving that purpose.

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