In Duke v. Hamilton County Assessor, Pet. Nos. 29-014-08-2-8-00003 et al (August 9, 2013) (March 1, 2009 to 2011 assessment dates), Charles Duke requested an 84% exemption for his 5,298 square foot daycare facility and supporting land.  The property was used by and exclusively for the operations of Little Lamb Daycare, Inc. (Little Lamb), a for-profit company.  Little Lamb offers programs for children six weeks of age through kindergarten, including before and after programs and a summer program for children up to ten years old.  (Duke didn’t request an exemption for rooms dedicated to caring for infants through one-year-olds – 16% of the building’s square footage.)

Daycare founded on religious principles and applied recognized educational standards.  Charles and Mrs. Duke established Little Lamb; they promoted the facility as a Christian, “faith-based school” and “learning center.”  Religious training was “intended to mirror and supplement religious instruction typically offered during weekend church services and Sunday school classes.”  (Page 7, ¶ 17.)  And Little Lamb used the A-Beka curriculum, which according to Mrs. Duke “is widely applied among Christian schools . . . located in Indianapolis.”  (Page 8, ¶ 19.)  Duke claimed that Little Lamb’s academic standards were “substantially similar to the academic standards at public schools” and that most of the school’s teachers had degrees in elementary education or childhood development.  (Page 8, ¶ ¶  19, 20.)  Little Lamb participated in Paths to Quality, a program accredited by the Indiana Department of Education that “acknowledges the public benefits of early childhood education.”  (Page 9, ¶ 22.)

Daycare simply provided daycare for a fee and offered no public benefit.  According to the Assessor, “Daycare is equivalent to custodial care” and that was the “primary and predominant component of Little Lamb.” (Page 9, ¶ 23.)  Moreover, the facility was used less than half the time – only 3.5 of the 11.5 hours (or approximately 30%) each day that it was in use – for religious and / or educational purposes, the Assessor contended.  Children attended Little Lamb sporadically, and they received educational and religious training no different than what occurs in homes throughout the county on a daily basis.  Granting the exemption would hurt, not benefit, the public; with 116 other exemption appeals of daycare facilities pending, the county could potentially lose more than $179 million in assessed value.

Neither owner’s nor user’s status defeats exemption.  Duke was an individual.  Little Lamb was a for-profit corporation.  The “involvement of a for-profit entity does not necessarily preclude” an exemption.  (Page 14, ¶ 39) (citing College Corner v. DLGF, 840 N.E.2d 905, 908 (Ind. Tax Ct. 2006)).  Duke charged no rent.  The facility was built pursuant to plans approved by Mrs. Duke, Little Lamb’s President, “specifically for the purpose of facilitating Little Lamb’s early learning programs.”  (Page 14, ¶ 41.)  The Board reasoned that, “[u]nder these circumstances, the use by Mr. Duke and Little Lamb is indistinguishable for purposes of Ind. Code § 6-1.1-10-16,” the educational / religious purposes exemption statute.  Id.

Predominant use of property was not religious – but it was educational.  Because only about 30% of the day involved religious programs and materials, the facility was not predominantly used for religious purposes. (Page 15, ¶ 42.)  The Board explained, “Even though religious themes are present and the subjects taught at the facility have religious connotations, the use of the facility is not elevated to one that should be granted a religious exemption.”  (Page 16, ¶ 45.)  However, use of the property was “substantially related to the programs and courses public schools provide.”  (Page 19, ¶ 54.)  The Board’s conclusion was based on the following:

  • Little Lamb provides “scheduled educational learning.”
  • Teachers prepared detailed lesson plans.
  • Lead teachers have post-secondary education.
  • The A-Beka curriculum is widely applied among Christian schools and is similar to public school standards.
  • Subjects taught at Little Lamb “mirror those that are taught at public schools.”
  • Teachers evaluate students based on academic progress and report that progress to parents.
  • “The atmosphere at Little Lamb is one of education, where children are learning throughout the day” and programs “prepare children for enrollment in school by providing the foundational elements children need to thrive in more advanced programs.”

(Page 19, ¶ 53.)  Duke was able to show that the “curriculum, goals, and educational activities” provided by Little Lamb relieved the burden on the government to prepare children for public school at least to “some limited extent.”  (Page 20, ¶ 55.)

The Board rejected the Assessor’s arguments.  The Assessor’s submission of attendance records for students failed to show why the property shouldn’t be exempt; the exemption statute doesn’t “state how many days individuals must attend in order for a facility to be found educationally exempt.”  (Pages 20-21, ¶ 57.)   Moreover, the fact that Little Lamb charged a fee didn’t disqualify the facility from exemption.  (Page 21, ¶ 58.)   Finally, the Assessor’s “argument that the Board should decide this appeal based on other pending appeals does not hold any weight. . . .  The Board has not, and will not, decide a case based on how many other appeals are pending.”  (Page 21, ¶ 59.)  While assessed values may be decreasing as student enrollment is increasing, “this does not prove whether Little Lamb is entitled to an exemption or not.”  (Page 21, ¶ 59 n.5.)

The Board approved the 84% exemption.  (Page 22,  ¶ 63.)