An admittedly “counterintuitive” Court of Appeals ruling on the tax-exempt status of properties in use by Bridgewater State University may prove a boon to cash-strapped communities – and the bain of Massachusetts’ 30 other state colleges and universities.

The case is in response to the actions of Bridgewater’s local assessors, who believed Bridgewater State’s charitable foundation – which owns several buildings and land parcels currently in use by the university – might owe taxes on those properties.

The ruling turns on the specific language of the Massachusetts statute which exempts charities from paying property tax. Both charities and state universities are exempt from property tax. A charity can also lease or lend space to other charities and remain exempt.

But while the state universities are themselves exempt from property tax, they’re state institutions, and not charities, the judges said. So even though Bridgewater State’s charitable foundation is organized and operated “exclusively for the benefit of the university,” because the foundation allowed the university use space owned by the charity, that space becomes subject to tax.

“We recognize that our conclusion has the effect of subjecting to taxation properties that would be exempt if occupied by the charitable organization that owns them, or if owned by the state university that occupies them,” the ruling states. And if that result seems “counterintuitive,” then it’s up to the Legislature solve the problem by means of a statutory amendment, the court said.

Uncommon Arrangement

Given the close ties between the institutions, the ruling was a surprise, said Bryan Baldwin, a university spokesman.

“To the average student, faculty, alum, whatever, you cannot sense a difference when you’re using these facilities,” said Baldwin. “[From their perspective] it is the university.”

The properties at issue include the building housing the college’s political science department, an alumni center, the university president’s residence and three parcels of land on Plymouth Street.

According to assessor’s records, at 2011 tax rates the total bill for all the properties would be $24,439. But because the dispute stretches back several years, said Baldwin, Bridgewater State is looking at a back tax bill of more than $100,000.

“It’s not an insignificant amount of money” for the college, said Baldwin.

Nor for the town, countered Bridgewater town manager Troy Clarkson.

Clarkson said he takes pride in the close relationship between the town and the university, and said they will continue to work together on several projects. But he was pleased with the court’s decision.

“We are in exceedingly difficult financial times,” he said. Though the town has been working to improve its finances, “any infusion of cash of this magnitude is certainly a huge help.”

The decision may also have implications for Massachusetts’ 30 other state colleges and universities, suggested Henry Kara, founder of H.G. Kara P.C. and a specialist in tax abatement law.

“If it was a regular school like Suffolk or Northeastern, it would be exempt,” he said in a statement.

“This is a common arrangement with the state colleges; they all have foundations like this because the Legislature told them to form these foundations and try and raise private money to create endowments, the way private colleges have,” said Michael Coppock, an attorney for Boston-based Rubin and Rudman, who represented Bridgewater State. “It’s a common arrangement for a university to have a foundation which has bought property and allows the university to use it. So I think a number of universities are going to find that this decision is surprising to them, too.”

Far-Reaching Effects

The case comes at a time when universities are being pressured to contribute more to public coffers.

“There are some institutions, particularly private institutions, which will make payments in lieu of taxes to their local municipalities,” said Karin George, a senior consultant at Washburn & McGoldrick, a New York-based consultancy firm which advises colleges on fundraising and philanthropy. Amherst College, for example, donates in excess of $100,000 every year to the town of Amherst, George said.

But when colleges aren’t so generous, some cities and towns have become more aggressive in going after new revenue through other means. Locally, a bill sponsored by Rep. Anne Gobi (D-Spencer) would put a 2.5 percent tax on private university endowments of more than $1 billion. In Rhode Island, the mayor of Providence has proposed a $300-per-year tax on all private university students.

Not only can these kinds of efforts cause town/gown friction, they can also throw a monkey wrench in the school’s fundraising efforts, George said.

“As a private donor, I don’t want the city where my alma mater resides to take a percentage off the top of my gift,” she explained.

The fight’s not over for Bridgewater State, said Coppock, saying the college plans to petition for a rehearing before the Appellate Tax Board, “because we think that they overlooked some of the evidence.” The university also plans to ask for further appellate review by the Supreme Judicial Court, he said.

“I think it’s a case that could certainly have implications well beyond the borders of Bridgewater,” said Clarkson.