PORTLAND — The Maine Supreme Judicial Court on Tuesday affirmed a 2012 judgment that certain properties at Hebron Academy are exempt from property taxes, despite being rented for outside use.

An attorney for the school said the town will have to repay Hebron Academy more than $40,000 in property taxes paid by the school in recent years.

The decision also affirmed that the school cannot be refunded the taxes it paid in 2009 on those properties, which include the Robinson Arena and several other buildings, because it filed an appeal too late.

The court agreed with Active Retired Justice Robert W. Clifford, who ruled last year in Oxford County Superior Court that Hebron Academy is a literary and scientific institution, and that the properties at issue are owned and occupied or used solely for its own purposes, a necessary qualification for tax-exemption.

The Maine Supreme Judicial Court agreed with Clifford that the income the school received from property rentals, about 1 percent of its operating budget, was incidental and does not detract from the school’s overall mission.

The town of Hebron had appealed Clifford’s decision, saying he ruled in error that the income was “incidental” and claimed that the school’s rental income disqualified it as a literary and scientific institution. The school had filed a counter-appeal on the court’s refusal to grant a refund on the 2009 taxes the school paid on those properties.

The school also has paid, and will continue to pay, taxes on faculty housing and a building that houses the Hebron post office, part of which is rented to the U.S. Postal Service.

Hebron Academy Head of School John King said he was relieved by the thoroughness of the decision and how it clarified the school’s status as a literary and scientific institution, something the town had disputed.

“Hebron Academy is a literary and scientific institution,” the decision read, “because it has a primary purpose of engaging its students in the academic pursuit of both literary and scientific knowledge through the provision of an accredited course of high school education.”

The court’s decision clarified that literary and scientific institutions included high schools like Hebron Academy, and not only colleges.

“They further clarified that none of this was done with the intent of making a profit but to help cover the expenses of running a literary and scientific institution,” King said.

Hebron Selectman Daniel Eichorn said the ruling changes Maine law.

“The court has decided to create some new law,” Eichorn said. “It does not appear, based on their decision, that ‘solely’ means ‘solely.’” He was referring to the qualification that a tax-exempt property must be “occupied or used solely for (its) own purposes” under Maine law.

“They are a law court,” Eichorn said. “They can certainly do that.”

Attorney Bryan Dench, who represents the town of Hebron, said in an email that he was looking over the decision. “We are still reviewing the court’s decision and will evaluate the appropriate actions for the town with the selectmen in the next few days,” Dench said.

On Dec. 12, attorneys for the town and Hebron Academy argued their cases before the high court. The Maine Independent Colleges Association, the Maine Association of Independent Schools and the Maine Hospital Association all filed briefs supporting the academy, stating concerns that ruling with the town could be detrimental to other nonprofits that sometimes rent out facilities while being exempt from property taxes.

Attorney John W. Conway, who represents Hebron Academy, said it was a victory for nonprofits and municipalities because it makes clear the court’s decision and continues to give Maine residents access to schools’ facilities.

“Most towns can’t afford to have the type of facilities that most of these colleges can have,” Conway said. “I think it’s a win-win for everybody.”

Eichorn disagreed, and said the decision makes the question of when to collect property taxes less clear.

He said the court calls the school’s rental revenue incidental but doesn’t set a line for what qualifies as incidental and what percentage of the operating budget would qualify as substantial revenue.

“Is 5 percent OK?” Eichorn asked. “The towns’ tax assessors are all going to have to make their own decisions as to where that line is.” He called the decision “disappointing on several different levels.”

King said Tuesday that all that’s left is for the town to reimburse back taxes the academy paid on the Robinson Arena, about $20,000 per year for 2010 and 2011.

Conway said the town will have to return the taxes paid for the arena, plus interest, as well as some taxes paid in 2008 for several Hebron Academy properties. Conway said the school is identifying the taxes it overpaid, and he will discuss with the town how the money will be repaid.

treaves@sunjournal.com

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