Open Space Tax Benefits Threatened For Golf Course Owners
Many golf course owners have significantly decreased their tax burden by entering into special state sponsored "open space covenants" with the county in which the course is located. However, at least one county in Pennsylvania is threatening golf course owners' access to this special tax treatment.
The special tax treatment stems from Pennsylvania's "Act 515," which authorizes counties to enter into covenants with owners of land designated as "farm, forest, water supply, or open space land." In such covenants, the landowner agrees that the land will remain open space for a period of ten years or more and the county, in turn, covenants that it will assess the property at its fair market value "as restricted." These covenants renew automatically for periods of one year unless either party notifies the other of its intent not to continue to the covenant.
Historically, to take advantage of this special tax treatment, course owners had only to meet the statutory definition of "Open Space Land," which simply is "any land, . . . in common ownership, of at least ten acres in area, in which site coverage by structures, roads and paved areas does not exceed three percent." However, at their October 7 meeting, the Board of Commissioners of Montgomery County, Pennsylvania added a new element to the mix: the Board voted to prohibit private courses that discriminate against women and/or minorities from participating under Act 515.
Prior to adopting its resolution, the Board discussed instituting a requirement that each golf or country club applicant sign a certificate that it does not discriminate against women and/or minorities. Ultimately, the Board concluded that an anti-discrimination provision could be incorporated into the standard language of future Act 515 covenants. While the language for such a provision has yet to be determined, it is likely that difficulties will arise for both course owners and the County in determining the standards that will be used to measure whether a particular course does or does not discriminate. This uncertainty leaves room for discussion and debate about how far a county can go in applying anti-discrimination principles to private clubs. While the Act allows each county to establish its own procedures for entering into Act 515 covenants, it does not expressly allow a county to instill additional requirements for an applicant to enter into a covenant. For an update on anti-discrimination laws' applicability to private clubs, see "Anti-Discrimination Laws Applicable to Private Clubs or Not?".
This approach to anti-discrimination is not new to the Mid-Atlantic region. Maryland has long prohibited any country club that "allows or practices discrimination based on race, color, creed, sex, or national origin in granting membership or guest privileges" from benefiting from the state's open-space tax exemption. 1
In one significant case, the Maryland State Supreme Court found unconstitutional the portion of the statute which allowed clubs to exclude "certain sexes on specific days or at specific times" and still take advantage of the tax exemption. However, to date, no case has been brought challenging the standards which the state applies in determining whether a particular club does or does not discriminate.
The Saul Ewing LLP Golf Practice Group can assist clubs in tax planning matters, including determining whether an Act 515 covenant is an appropriate vehicle, as well as provide a full range of services targeted to meet the specific needs of golf courses. For assistance or more information, contact the Chair of the Golf Practice Group, Michael A. Finio at 717-238-7671, or one of its Vice-Chairs, John C. Snyder at 610-251-5079 or Wendie C. Stabler at 302-421-6865.
1 State v. Burning Tree Club, Inc., 315 Md. 254, 554 A.2d 366 (1989), cert. denied, 493 U.S. 816, 110 S.Ct. 66, 107 L.Ed.2d 33 (1989).