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In a decision that substantially protects property tax bases for local governments in North Carolina, the North Carolina Supreme Court has declined to review a Court of Appeals decision holding that one of North Carolina’s most recognizable tourist attractions, Grandfather Mountain, is subject to property taxes in Avery County. The Court of Appeals’ decision can be found here and is summarized below. Poyner Spruill attorneys, Chad Essick and Drew Erteschik, successfully represented Avery County in the case.

In 2008, the undeveloped portion of Grandfather Mountain – now known as Grandfather Mountain State Park – was sold to the State of North Carolina. In connection with that sale, Grandfather Mountain Stewardship Foundation (GMSF), a non-profit entity, was established to oversee operations on the remaining, developed portion of Grandfather Mountain that was not sold to the state. This remaining portion includes, among other things, the Mile High Swinging Bridge, retail shops, a restaurant, administrative offices, a nature museum, animal habitats, visitor guest cabins, and a fudge shop. Also, in connection with the sale of the undeveloped portion to the state, a conservation easement was placed on the developed portion that limited future development but allowed all of the existing uses on the developed portion to continue.

In December 2010, GMSF filed an application for exemption from property taxes with Avery County based on two statutes exempting property that is “wholly and exclusively” held and used by a “non-profit, charitable association” for “scientific and educational purposes.” Avery County denied GMSF’s request and GMSF appealed to the North Carolina Property Tax Commission. The Commission granted GMSF’s request for exemption and Avery County appealed to the North Carolina Court of Appeals. | © Poyner Spruill LLP. All rights reserved.

On appeal, Avery County argued that the Commission erred by exempting the property from taxation because Grandfather Mountain is a self-described tourist attraction that is not “wholly and exclusively” held and used for “educational or scientific purposes.” The County further argued that the Commission erred by focusing on what GMSF did with the income from Grandfather Mountain rather than on how the property was actually used. In a unanimous, published decision, the Court of Appeals agreed with Avery County and reversed the Commission’s decision.

The Court of Appeals based its decision on several undisputed facts in the record, including admissions from GMSF’s former Executive Director that: (1) the conservation easement did not limit any of the activities that had been occurring on Grandfather Mountain for the past 50 years; (2) Grandfather Mountain is used for numerous purposes, not just science and education; and (3) Grandfather Mountain generates millions of dollars in revenue from commercial operations.

GMSF appealed the Court of Appeals’ decision to the North Carolina Supreme Court. On December 15, 2014, the Supreme Court dismissed GMSF’s appeal and declined to review the Court of Appeals’ decision. As a result, Grandfather Mountain has paid its unpaid property taxes and will be required to pay its fair share of property taxes to Avery County moving forward.

In light of the Court of Appeals’ published decision, counties across North Carolina should carefully review their tax rolls and any pending exemption applications to determine whether the property at issue satisfies the criteria under various statutes requiring property be “wholly and exclusively” used for an exempt purpose. Identifying properties that fail to satisfy this statutory criteria, as recently interpreted by the Court of Appeals, can go far in preserving a local government’s property tax base. Conversely, non-profits should be careful to ensure that exempt property, and the structures located thereon, are exclusively held and used for an exempt purpose, as opposed to commercial, recreational, retail, or other non-exempt purposes.

For additional information about the Grandfather Mountain decision or for questions about property tax issues, please contact attorneys Chad Essick at cessick@poynerspruill.com and Drew Erteschik at derteschik@poynerspruill.com.

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