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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Fairbanks North Star Borough v. Dena' Nena' Henash (04/02/2004) sp-5792

Fairbanks North Star Borough v. Dena' Nena' Henash (04/02/2004) sp-5792

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
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            THE SUPREME COURT OF THE STATE OF ALASKA
                                

FAIRBANKS NORTH STAR          )
BOROUGH,                                            )     Supreme
                              Court Nos. S-9849/10029
                              )
     Appellant/Cross-Appellee,     )    Superior Court No. 4FA-99-
1858 CI
                              )
     v.                       )    O P I N I O N
                              )
DENA' NENA' HENASH a/k/a      )    [No. 5792 - April 2, 2004]
TANANA CHIEFS CONFERENCE,     )
INC.,                              )
                              )
     Appellee/Cross-Appellant.     )
________________________________)


          Appeal  from the Superior Court of the  State
          of    Alaska,   Fourth   Judicial   District,
          Fairbanks, Richard D. Savell, Judge.

          Appearances:   A.  Rene'  Broker,   Assistant
          Borough    Attorney,   for   Appellant/Cross-
          Appellee.  Michael J. Walleri, Law Offices of
          Michael    J.    Walleri,   Fairbanks,    for
          Appellee/Cross-Appellant.

          Before:    Fabe,  Chief  Justice,   Matthews,
          Eastaugh, Bryner, and Carpeneti, Justices.

          EASTAUGH, Justice.
          MATTHEWS, Justice, dissenting.
I.   INTRODUCTION

           Tanana  Chiefs Conference, Inc. (TCC), also  known  as

Dena'  Nena'  Henash, is a regional Native nonprofit  corporation

that  uses its properties in the Fairbanks North Star Borough  to

provide   health,  social,  community  development,  and  similar

services throughout Interior Alaska.  When TCC sought charitable-

purposes  tax exemptions for some of its properties, the  borough

assessor  denied TCC's applications, finding that TCC's  programs

were  largely funded by government contributions and  that  TCC's

receipts  usually  exceeded the cost of operating  its  programs.

TCC appealed and the superior court reversed, ruling that six  of

TCC's  parcels were wholly or partially exempt. The  borough  and

TCC  both  appeal.   We conclude that TCC's properties  were  not

altogether ineligible for charitable-purpose exemptions, and that

the   assessor  should  have  granted  most  of  TCC's  exemption

applications.  We therefore affirm the decision of  the  superior

court.

II.  FACTS AND PROCEEDINGS

          Tanana Chiefs Conference is a regional Native nonprofit

corporation  organized under the Alaska Native Claims  Settlement

Act.1    It   represents  forty-three  Interior  Alaskan   Native

communities and qualifies for exemption from federal income tax.2

TCC  owns several properties in the Fairbanks North Star Borough,

including  the six-story TCC building, the TCC Annex  (the  BESCO

building), and the Paul Williams House.  Among other things,  TCC

offers  medical  services and conducts lands  management,  tribal

government  assistance, and natural resources programs  at  these

properties.

          Village councils select forty-three representatives for

TCC's  board  of directors, which elects a nine-member  executive

board.   The corporation has five major divisions: Administration

and  Finance,  Planning and Development, Health Services,  Native

Services,  and Subregional/Village Programs.  TCC's programs  are

funded  largely through its contracts with the federal and  state

governments.   These  contracts  support  TCC's  dental  and  eye

services,  mental health services, community services  for  women

and  children, economic and business support for members  of  the

community,  and  sanitation  maintenance  training.   TCC's  base

funding  comes  from contracts with the Bureau of Indian  Affairs

and   the   Indian  Health  Services  under  the   Indian   Self-

Determination Act, 25 U.S.C.  450 et seq.

           In  1996,  1997, and 1998 federal and state government

sources  provided  about ninety percent of TCC's  program  funds.

The  remainder of TCC's funding came from what TCC  calls  "self-

generated  money,"  including  interest  and  investment  income,

rental  income,  and  program income from  third-party  insurers,

Medicare, and Medicaid.

           Real property exclusively used for "non-profit .  .  .

charitable  purposes" is exempt from municipal  property  tax  in

Alaska.3

           In  March 1997 TCC filed ten appeals with the  borough

assessor seeking exemptions from real property taxation  for  the

BESCO  building, the Paul Williams House, and five floors of  the

TCC  building.  TCC sought these tax exemptions on the ground  it

used   these  properties  to  provide  services  for  "charitable

purposes."   TCC  acknowledged  that  some  of  its  property  is

taxable,  and only sought exemption for the tax lots  in  dispute

here.   The assessor denied tax-exempt status for each parcel  in

July  1997  and declined to apportion the space for  any  of  the

parcels between exempt and non-exempt uses.

           TCC  appealed  the assessor's denial to  the  superior

court,  which  remanded to the assessor for  further  proceedings

because  the  court held that the assessor had not made  specific

findings  of fact.  On remand, the assessor conducted  a  hearing

and  entered  findings  of  fact and  conclusions  of  law.   The

assessor  again denied TCC's exemption requests for each parcel.4

TCC again appealed the assessor's decision to the superior court.

          In a thoughtful memorandum decision issued November 17,

2000,  Superior Court Judge Richard D. Savell thoroughly reviewed

the  record,  the  assessor's findings and conclusions,  and  the

pertinent  constitutional and statutory provisions and case  law.

The  superior court first rejected the borough's argument and the

assessor's   conclusion  that  receipt  of   government   funding

precluded any exemption.  The court then examined the use of each

contested  parcel to determine its eligibility for tax exemption.

Concluding that the assessor's denials as to six of the  disputed

parcels  lacked  a  reasonable legal basis,  the  superior  court

reversed  in whole or in part the assessor's rulings as to  those

parcels.  The superior court then awarded TCC about forty percent

of its attorney's fees.

           The  borough  argues on appeal that no part  of  TCC's

properties should be exempt from taxation.  It therefore asks  us

to  reverse those parts of the superior court decision that found

some  of TCC's parcels to be tax-exempt.  TCC's cross-appeal asks

us  to  reverse  the superior court decision  to  the  extent  it

affirmed  the  assessor's denial of TCC's exemption  applications

for  two of the parcels.  TCC's cross-appeal also argues that the

superior  court  erred by failing to award  TCC  full  reasonable

attorney's fees; it argues alternatively that TCC should  receive

seven-eighths of its attorney's fees.

III. DISCUSSION

     A.   Fairbanks North Star Borough's Appeal: Was TCC Entitled to
          Any Exemption for a Charitable Purpose?
          
          1.   Standard of review
               
            Because  the  superior  court,  as  the  intermediate

appellate  court, did not conduct a trial de novo on appeal,  and

made no findings of fact of its own,5 we independently review the

decision of the borough assessor.6  The borough asserts that  its

"argument  ultimately rests on an interpretation  of  `charitable

purposes.' "  It asks us to interpret the charitable-purposes tax

exemption to be inapplicable if the property owner receives "full

compensation for its services through a combination of government

contracts, third-party insurers, and participant fees, and . .  .

consistently earns more income than it expends .  .  .  ."   This

argument  requires  us to interpret the Alaska Constitution,  the

Alaska  Statutes,  and  case  law.   As  to  this  argument,   we

consequently   review   the   assessor's   decision   under   the

"substitution  of  judgment  test"  and  do  not  defer  to   the

assessor's   administrative  expertise.7   To  the   extent   the

borough's  arguments  require review of  the  assessor's  factual

findings, we apply the "substantial evidence" standard of review.8

           The main question involved in this case is one of  law

to which "we apply our independent judgment and adopt the rule of

law  that  is most persuasive in light of precedent, reason,  and

policy."9

           Taxpayer exemptions are strictly construed against the

taxpayer  and in favor of the taxing authority.10  The burden  of

proving  eligibility for an exemption is on the taxpayer.11   The

policy  underlying the rule of strict construction and the burden

of proof is:

          All property is benefited by the security and
          protection furnished by the State, and it  is
          only   just   and  equitable  that   expenses
          incurred in the operation and maintenance  of
          government should be fairly apportioned  upon
          the property of all.[12]
          
           Boards of equalization may spatially apportion  exempt

from  nonexempt  uses of a building and tax the nonexempt  space.

In  all  contested cases boards of equalization are  required  to

make  findings of fact sufficient to explain the reason for their

decisions.13  Such findings are reviewed deferentially and will be

affirmed if they are supported by substantial evidence.14

          2.   Charitable-purpose exemption analysis

           Per  article IX, section 4 of the Alaska Constitution,

property  is  exempt  from taxation in  Alaska  if  it  is  "used

exclusively for non-profit . . . charitable purposes, as  defined

by law . . . ."  Section 4 provides in relevant part:

          The  real and personal property of the  State
          or its political subdivisions shall be exempt
          from taxation under conditions and exceptions
          which  may be provided by law.  All,  or  any
          portion of, property used exclusively for non-
          profit  religious, charitable,  cemetery,  or
          educational  purposes,  as  defined  by  law,
          shall   be   exempt  from  taxation.    Other
          exemptions of like or different kind  may  be
          granted  by general law.  All valid  existing
          exemptions shall be retained until  otherwise
          provided by law.[15]
          
           Alaska  Statute 29.45.030(a)(3)16 and Fairbanks  North

Star Borough (FNSB) Ordinance 3.08.02017 are substantially similar

to  article IX, section 4, but do not include the "as defined  by

law" clause.

           "A taxpayer claiming a tax exemption has the burden of

showing   that  the  property  is  eligible  for  the  exemption.

Furthermore, the courts must narrowly construe statutes  granting

such exemptions."18  But, as the superior court observed, "[t]his

canon of strict construction `is an aid to, not a substitute for,

statutory  interpretation; the interpretation  must  still  be  a

reasonable one.' "19

           The  borough asserts that none of TCC's properties  is

eligible  for  a  charitable-purposes exemption.   It  ultimately

founds this assertion on the assessor's factual finding that  TCC

is  fully,  or more than fully, remunerated for its  services  by

federal and state government funding, medical insurance payments,

and  its  investment and rental income.  It asks us to  read  the

charitable-purposes  exemption  in  light   of   three   proposed

eligibility  requirements, and thus argues that TCC's  activities

are  not  for charitable purposes because they (1) do not provide

the  public with a gift or significant benefit, (2) do not lessen

a governmental burden, and (3) do not subsidize a socially worthy

activity.20   The borough's opening brief attributes considerable

importance  to  the  fact that government payments  fund  a  very

substantial part of TCC's services: "TCC's use of its property to

fulfill government contracts and perform service for which it  is

fully  paid  .  .  .   by  government . . . does  not  constitute

charitable  use  of its property."  Its reply brief  refines  its

argument  in  the following terms: "It is not the source  of  the

support  but  the amount of the support (i.e., full  remuneration

for  services)  that disqualifies TCC from charitable  tax-exempt

status."   A heading in its reply brief states that "Charity  Can

and Does Exist with Government Support."

          TCC responds that the controlling factor in determining

eligibility  for  Alaska's charitable-purposes exemption  is  the

property's actual use.  It argues that Alaska precedent does  not

support the three requirements the borough proposes, and that the

programs   TCC  conducts  at  its  properties  satisfy   Alaska's

charitable-purposes exemption.  TCC concedes on  appeal  that  it

received  about  ninety percent of its funding from  the  federal

government  during the relevant tax years, but  argues  that  the

source   of   funding   does  not  determine  charitable-purposes

eligibility in Alaska.

               a.   How we analyze exemption claims

           The  relevant constitutional and statutory  provisions

specify  that to be exempt from local taxation, property must  be

used exclusively for "non-profit religious, charitable, cemetery,

hospital, or educational purposes."21  Our cases have interpreted

these  provisions to require a two-part inquiry:  first,  whether

there is a nonprofit, charitable purpose, and second, whether the

property is being exclusively used for an exempt purpose.22

           As  to  the  first of these, we read  "non-profit"  to

impose  a substantive qualification that is not identical to  the

"charitable    purposes"   requirement,    both    because    the

constitutional delegates included the "non-profit"  qualifier  in

article  IX,  section 4 despite the absence of that qualifier  in

the  existing  territorial exemption statute,23  and  because  we

interpret  the  words of the constitution to avoid rendering  any

words superfluous.24

          The "non-profit" qualifier modifies "purposes," and the

constitution  does  not expressly refer to the organization  that

owns  or  uses  the  property.   In discussing  eligibility,  the

primary  exemption  provisions do not  refer  to  owner  or  user

organizations.25  This suggests that the focus under the  primary

exemption  provisions is on the purpose of the use,  not  on  the

organization.

          We note that AS 29.45.030(c) requires that if property,

otherwise eligible for exemption under subsections .030(a)(3) and

(4), generates "income," the organization using the property must

be a "nonprofit . . . charitable . . . group[]."26  We applied the

predecessor  of  subsection  .030(c) in  Greater  Anchorage  Area

Borough  v.  Sisters of Charity of the House of  Providence,  and

affirmed  the  denial of an exemption for three income-generating

floors  of the owner's medical building.27  The medical  center's

owner arguably had the purpose of operating a nonprofit hospital.

But  it  received rental income from physicians who  used  office

space on those floors to conduct their private medical practices.

Because  the  actual users of these income-generating  properties

were  not  nonprofit charitable groups, AS 29.45.030(c)  deprived

the  properties  of  any  exemption  they  otherwise  would  have

received   under  AS  29.45.030(a)(3)  or  (4).    Thus,   unlike

subsections .030(a)(3) and (4) - which look to the nature of  the

owner's purpose - subsection .030(c) looks to the nature  of  the

user.

           It is not clear whether subsection .030(c) would apply

here.   The borough does not rely on it and the assessor did  not

base  the exemption denial on that subsection,  possibly  because

it  is  not clear that subsection .030(c) applies if the  "group"

using  the property is also the owner seeking the exemption,  and

possibly because it is not obvious that the governmental  support

TCC  received can be considered "income."  Certainly there is  no

dispute before us about TCC's status as a nonprofit organization.

The  assessor  found that TCC was a nonprofit organization.   The

borough  does  not  take issue with this finding,  and  does  not

assert  on  appeal  that TCC was operating in  violation  of  the

Internal  Revenue  Code or its own articles  and  bylaws.   TCC's

501(c)(3)  nonprofit status for purposes of the Internal  Revenue

Code28 is not necessarily determinative, although its status  and

corporate purposes are consistent with finding the purposes to be

nonprofit.

           The  borough does argue that TCC was not acting  as  a

charity,  but  makes that argument only in context of  its  claim

that  TCC  used its property for "contractual," not "charitable,"

purposes.   The  borough does not assert that subsection  .030(c)

applies   here.    As  the  borough  recognizes,  its   "argument

ultimately rests on an interpretation of `charitable purposes.' "

           Consequently,  the question raised by the  borough  in

this   appeal   is  whether  TCC  was  motivated  by  "charitable

purposes," not whether TCC itself was a "charity."

           We  therefore next look to the purposes for which  the

parcels were used.  The record confirms that the assessor did not

err  in  finding that the programs TCC conducted on those parcels

generated a surplus in most years.  And as to one of the parcels,

the  assessor  found that TCC had engaged in lease activity  that

"results  in  a  profit"  to TCC with respect  to  the  Fairbanks

Community Mental Health Clinic.  But we think it significant that

the  assessor  did not find that the other disputed parcels  were

not  used for nonprofit purposes.  The fact that use of  a  given

parcel  created  an  operational  surplus  does  not  necessarily

preclude  a conclusion that the activity had a nonprofit purpose.

That a given charity manages, through effective fund-raising  and

careful management, to generate a surplus while carrying out  its

charitable purposes does not necessarily deprive the charity of a

property tax exemption.

           Our decisions have previously discussed this nonprofit

qualifier  only briefly, and have translated it to  mean  that  a

property generating income will not lose its exemption if payment

is "not sought as a result of a dominant profit motive."29

           We  conclude  that  the nonprofit qualifier  does  not

require us to affirm the assessor's decision denying all of TCC's

exemption  applications.   (We will return  to  the  question  of

profit  motive  in  Part III.B.2, when we consider  TCC's  cross-

appeal concerning exemptions for two specific parcels.)

           Most  of  our charitable-purposes tax exemption  cases

revolve  around  the  second part of the analysis:   whether  the

property is being used exclusively for a charitable purpose.   We

have interpreted "exclusive use" to require that all uses of  the

property  be  for  the  "direct and  primary"  exempt  purpose.30

Although   the   exclusive-use  requirement  precludes   temporal

apportionment  if property is used for both exempt and  nonexempt

purposes,  we recognized in Catholic Bishop that the constitution

allows  spatial  apportionment.31  Accordingly we have  concluded

that  operation  of a church radio station that  sold  commercial

radio  time was not an exclusive use of property for a  religious

or  charitable  purpose.32  In so holding, we did  not  think  it

relevant  that  the  radio  station's income  was  used  to  fund

missionary activities.  We have also held that a hospital did not

use  its  property exclusively for hospital purposes  because  it

leased  the  property to doctors for private office space.33   We

recognized an exception to the exclusive-use requirement in  City

of  Nome v. Catholic Bishop of Northern Alaska, in which we  held

that de minimis use of property for a non-exempt purpose did  not

preclude  an  exemption.34   The exclusive-use  requirement  also

requires analysis of how the property is actually used.

           The eligibility analysis in this case ultimately turns

on  the meaning of "charitable purposes" in Alaska.  Noting  that

neither  the  constitution nor AS 29.45.030 defined "charity"  or

"charitable,"  in Matanuska-Susitna Borough v. King's  Lake  Camp

we  approvingly  quoted this statement as  typifying  the  "broad

scope" given to these terms:

          It  is  quite clear that what is done out  of
          good  will  and  a  desire  to  add  to   the
          improvement   of  the  moral,   mental,   and
          physical  welfare  of  the  public  generally
          comes   within  this  meaning  of  the   word
          "charity."  To crowd out coarseness, cruelty,
          brutality from social man undoubtedly results
          in this betterment.[35]
          
We  later  characterized this statement as "the broad common  law

definition  of  `charity' " and observed   that  this  definition

reflects the "humanitarian rationale" of property tax exemptions:

they  are  granted  "as an aid or encouragement  to  individuals,

corporations, or businesses, to do something supposedly  for  the

good  of  the  community at large, although such an  act  is  not

itself a proper or even permissible function of the government."36

This  definition provides some guidance, but it does not  purport

to  specify  prerequisites for eligibility.  It provides  only  a

general  framework  for determining eligibility.   Applying  this

framework,  we have concluded that properties used  for  a  youth

summer recreational camp,37 a youth hostel,38 and a church  radio

station39 were being  used for charitable purposes.

            Our  "charitable  purposes"  doctrine  also  requires

analyzing whether the property sustains activities motivated by a

"dominant  profit motive."40  This factor parallels the nonprofit

requirement discussed above.  Exemption is foreclosed if there is

a "real profit motive" in the undertaking.41

           We  considered  the  effect of  deriving  income  from

property in  King's Lake Camp and Catholic Bishop.  We held  that

property  will not lose an exemption even if payment is  received

for  the  use  of  the  property if  (1)  the  property  is  used

exclusively for exempt purposes; (2) the payment is not sought as

a result of a dominant profit motive; and (3) the payment is both

incidental to and reasonably necessary for the accomplishment  of

the  exempt  activity and does not exceed operating costs.42   We

have  applied  this test in cases involving user  fees,43  rental

income,44 and donations.45

               b.   Source of funding and "government contractor"

status

            Neither  the  constitution,  the  statute,  nor   the

borough's  ordinance  mentions source  of  funding  as  a  factor

controlling  or  bearing on the exemption right.   Nor  have  our

decisions  addressed what effect receipt of government funds  may

have  on exemption eligibility.  Our property tax exemption cases

have  primarily turned on whether the property was actually  used

exclusively for an exempt purpose.46

          The superior court understood the borough to be arguing

below  that  none  of the TCC properties was exempt  because  the

government  was  the  source of most of  the  funding  for  TCC's

programs.   The superior court treated this "source  of  funding"

argument as a threshold issue and held that receipt of government

funding did not preclude exemption.

           The  borough  does not squarely advance  a  government

"source of funding" argument here.  It asserts, especially in its

reply  brief, that it is not arguing that substantial  government

funding  is  a  complete  disqualifier.   It  is  therefore   not

necessary for us to consider whether the superior court erred  as

a matter of law in holding that it is not.

          The borough nonetheless argues that TCC was acting as a

government  contractor, and was therefore acting not  to  fulfill

charitable  purposes, but to satisfy its contractual undertakings

to  the  government.   And it argues that substantial  government

funding  remains relevant to the charitable-purposes analysis  it

proposes.

           Courts  elsewhere  are  split on  whether  substantial

government  funding  affects eligibility  for  charitable-purpose

exemptions.   Some  hold  that  substantial  government   funding

precludes an exemption, and some do not.  These results may  turn

on  considerations that do not apply in Alaska.  For example,  in

many  of  the  jurisdictions  that  have  held  that  receipt  of

government funding precludes a charitable-purpose exemption,  the

courts were bound by a statutory or constitutional framework that

required  the  organization  to be a public  charity,47  or  they

applied multi-factor tests valuing support provided by donations.48

It  may  also be significant that some cases in which receipt  of

government  funding rendered property ineligible,  federal  grant

money  was  used  to construct low-income housing  and  subsidize

rent.49

           In  contrast,  many of the cases upholding  exemptions

despite  government funding involved corporations  that  provided

services  to  their beneficiaries.50  In some jurisdictions  that

have  adopted multi-factor tests that consider source of funding,

courts  have  not  distinguished between government  funding  and

donations.51   We  find this latter group of  cases  to  be  more

persuasive.

          Rather than argue that government funding is a complete

disqualifier,  the  borough argues that  TCC  was  a  "government

contractor,"  and therefore did not act for charitable  purposes.

Assuming that TCC was a government contractor, we decline to hold

that  its  government contractor status necessarily  renders  its

property altogether ineligible for any exemption.  Such a  status

would  not  necessarily  be inconsistent with  finding  that  the

property  was used exclusively for  "non-profit . . .  charitable

. . . purposes."52

           In  any event, the government's financial support  for

TCC is largely provided through the Indian Self-Determination and

Education  Assistance  Act (the Self-Determination  Act).53   The

unique  relationship  between the federal government  and  Indian

tribes  has long led the government to provide support to  tribes

for  health,  education, employment, irrigation,  administration,

and  real  estate  services.54  These services encompass  a  wide

variety   of   activities,  some  of  which   are   traditionally

governmental  and  some  of  which resemble  those  conducted  by

private business.  The federal government's purpose of satisfying

its  trusteeship responsibility is essentially charitable,  i.e.,

is motivated by "good will and a desire to add to the improvement

of  the  moral,  mental,  and  physical  welfare  of  the  public

generally."55   The Self-Determination Act confirms  the  federal

government's trust responsibility.56  The act has the purposes of

improving  the provision of federal services by making them  more

responsive to tribal needs, and improving the functioning of  the

tribes   through   increased  self-government.57    Thus,   Self-

Determination Act contracts are not merely conduits  for  federal

funding that would be provided in any event.  By reorganizing the

services  and  their provision, the contracts  permit  tribes  to

"improve[]  .  .  . the moral, mental, and physical  welfare"  of

individuals and the group.58  We also note that TCC contends that

it  acts  on  behalf of several native villages that may  be  too

small  to administer Self-Determination Act contracts themselves.

We  conclude  that  TCC's  activities  in  satisfying  its  Self-

Determination Act contracts with the government are motivated  by

purposes  that  are properly characterized as  charitable.   This

satisfies  the  charitable-purposes criterion  for  exemption  in

Alaska.

               c.   Other possible factors

           The  borough  contends that because TCC receives  full

compensation   for   its  services  through  a   combination   of

"government  contracts,  third-party  insurers,  and  participant

fees"  and  operates  with  a surplus, TCC's  property  does  not

qualify  for  a charitable exemption.  Thus, it asks  us  to  add

additional  factors to our charitable-purpose  analysis:  whether

the  property's  use  provides  a gift  or  significant  benefit,

lessens  a governmental burden, and subsidizes a socially  worthy

activity.    TCC  responds  that  Alaska's  charitable  exemption

analysis  focuses  only on whether the property  is  used  for  a

nonprofit and charitable purpose.  Thus, TCC concludes  that  the

borough's proposed factors are contrary to Alaska law.

            Our constitutional and statutory exemption provisions

do  not  catalogue all factors that might define eligibility  for

charitable-purpose exemptions.59  It is not desirable, assuming it

were  possible, for us to attempt to identify in context of  this

case  all factors that should determine exemption eligibility  in

future  disputes.   We therefore decline to adopt  the  borough's

proposed  factors  as comprising a comprehensive  or  dispositive

test that would control charitable-purpose analysis.  Rather,  we

think it is appropriate to consider any circumstance relevant  to

whether   a   particular  property  owner   has   satisfied   the

constitutional  and  statutory standard.  The  circumstances  the

borough  discusses  are relevant, but they  are  not  necessarily

exhaustive or controlling.

            The  borough  first  argues  that  we  should  define

"charitable purpose" to require "a gift to the general public  or

a  significant  public  benefit."  We separately  consider  these

alternatives.

           Significant  public benefit.  The Alaska Constitution,

the   Alaska  Statutes,  and  the  borough's  ordinance  do   not

precondition  charitable-purpose  exemption  eligibility  on  use

providing a "significant public benefit."  Nonetheless, our broad

common   law  definition  of  charity  contemplates  some  public

benefit. That definition states, "It is quite clear that what  is

done  out of good will and a desire to add to the improvement  of

the  moral, mental, and physical welfare of the public  generally

comes within the meaning of the word `charity.' "60  This concept

of  charity  -  as  an activity that improves  public  welfare  -

reflects  the  public  policy behind tax  exemptions.   We  noted

generally  in  Sisters  of  Providence  in  Washington,  Inc.  v.

Municipality  of Anchorage that "exemptions are  granted  as  the

quid pro quo for non-profit contributions of services and aid  to

society in general."61

           Charitable activities provide a public benefit whether

or not the beneficiaries are indigent.62  Programs that serve only

a  portion  of the community can also "add to the improvement  of

the . . . welfare of the public generally."63  Thus, in McKee  v.

Evans,  we  upheld an educational-purpose exemption for  property

used  for  a vocational training program for union apprentices.64

We  held there that educational-purpose tax exemptions require  a

"substantial  public benefit."65  We observed that  "the  general

public is clearly benefited both by the increased opportunity for

Alaskans  to obtain vocational training not otherwise  available,

and by the increased quality of service from a skilled trade."66

           We  therefore conclude that a use providing  a  public

benefit  indicates  that  the  property  is  being  used  for   a

charitable purpose.

           Gift  to the general public.  The borough also  argues

that  charity requires a "gift to the general public."  (Emphasis

added.)   In  support of its argument, the borough  cites  King's

Lake  Camp,  which  quoted  Lord  Camden,  an  eighteenth-century

chancellor  of  England, who defined charity as "[a]  gift  to  a

general public use, which extends to the poor as well as  to  the

rich."67   The  borough  defines "gift"  as  something  "bestowed

voluntarily and without compensation."  It argues that "a gift to

the community simply requires that . . . some material gap exists

between  what TCC receives and what it gives."  It also  contends

that "[i]t is not the source of the support but the amount of the

support  (i.e., full remuneration for services) that disqualifies

TCC from charitable tax-exempt status."  Thus, the borough argues

that  because  TCC  receives full compensation for  its  services

through  government  funds  and other  receipts,  it  should  not

qualify for an exemption.

          The exemption provisions in the constitution, statutes,

and  ordinances  do  not  precondition exemption  eligibility  on

whether the property supports programs that are fully funded from

such   outside  sources  as  the  government.   We   have   never

interpreted  charitable  purpose  to  require,  as  the   borough

proposes,  a  "material gap" between what the charity  gives  and

what the charity receives.

            Rather,  our  decisions  have  recognized  that   the

existence  of  a gap between what the beneficiary  pays  and  the

value  of the services the beneficiary receives could be evidence

of  a  charitable purpose.  We held that operating a youth hostel

that provided temporary lodging for travelers for a low daily fee

was  a  "gift  to the general public," because we concluded  that

"although some who stay at the Hostel are not needy and could pay

more, no one is turned away if the fees are not paid."68

           Although providing services free of charge is evidence

of  a  charitable  purpose,  we have not  explicitly  conditioned

charitable  purpose eligibility on whether the property  supports

programs  that are free to those who cannot pay.  Thus,  we  have

held  that properties supporting programs that charge a user  fee

were  exempt,  as  long as the user fee is  "not  inspired  by  a

dominant profit motive" or does not exceed operating costs.69

            Our  charitable-purpose  exemption  cases  have   not

required that there be a "material gap" between what TCC receives

and  what it gives.  The borough argues that TCC does not provide

a  gift  to the community because even if the beneficiary is  not

paying  TCC for its services, the government is compensating  TCC

for  the services it provides.  Thus, the borough concludes  that

TCC's  service is not gratuitous and not a gift to the community.

The  borough's argument implies that only entities whose receipts

do  not  cover  all  of their operating costs  are  eligible  for

charitable-purpose exemptions.

           We hold that whether a nonprofit organization receives

outside  funding allowing it to provide services at reduced  cost

or no charge to the community does not determine whether property

is being used for a charitable purpose.  Our cases establish that

receipt of payments or compensation for using the property is not

fatal  to a charitable-purpose exemption.70  An otherwise  exempt

property  that generates revenue will not lose its  exemption  if

(1)  payment  is  not  sought as a result of  a  dominant  profit

motive;   (2)  payment  is  both  incidental  to  and  reasonably

necessary for the accomplishment of the exempt activity; and  (3)

payment does not exceed operating costs.71

           Lessening  a governmental burden.  The borough  argues

next  that  charitable-purpose  eligibility  should  require  the

lessening  of  a  governmental  burden.   It  contends  that   by

receiving  substantial  government  funding  for  activities  the

government  is  obligated  to perform,  TCC  does  not  lessen  a

governmental  burden.72  The borough argues that  charitable  tax

exemptions  are  justified  because charitable  entities  perform

functions  that  governmental  institutions  would  otherwise  be

obligated to perform.

           Our constitution and statutes do not mention lessening

of  a  governmental  burden  as  a factor  in  charitable-purpose

analysis,  nor  do our cases.  Although we generally  acknowledge

that  tax  exemptions are granted to compensate  those  who  give

"nonprofit contributions" to the general public,73 we have  never

conditioned  tax exemption eligibility on whether an organization

reduces  a  governmental burden by either providing services  the

government  would  otherwise have to perform  or  supporting  its

services  without  government funding.  In  McKee  v.  Evans,  we

granted  an educational-purpose exemption for property  used  for

electrician  apprenticeship  training.74   We  considered   there

whether   relieving  a  governmental  burden  was   relevant   to

educational-purpose analysis under article IX, section 4  of  the

Alaska Constitution and former AS 29.10.336(a).75  We rejected an

argument  that school properties qualifying for the  educational-

purpose  exemption must provide programs similar to those offered

at state institutions.

          The  rationale for this [proposed] limitation
          is   that  only  such  school  properties  as
          relieve  some substantial educational  burden
          from  the state should receive rights of  tax
          exemption.   Although  this  quid   pro   quo
          reasoning has superficial appeal in a  period
          of  financial crisis for local government, we
          find it unconvincing.[76]
          
We  also  concluded that it was within the legislature's province

to   decide   whether   eligibility  for  an  educational-purpose

exemption should require a lessening of governmental burden:

          In Alaska the power of deciding what types of
          education are to be publicly supported . .  .
          by   tax   exemption,  is  vested  with   the
          legislature. AS 29.10.336 in no way  delimits
          the term "educational purposes" and we see no
          justification for this court to give to  that
          term   anything  other  than   its   ordinary
          meaning.[77]
          
            The   borough  reasons  that  because  TCC   receives

substantial  and direct government funding, its programs  do  not

lessen  a  governmental burden.  The borough argues that  because

TCC  receives  most  of  its  funding from  the  government,  the

government is already assuming a large burden.  Thus, it  claims,

TCC  need  not  receive further subsidy in  the  form  of  a  tax

exemption.

           But as the borough elsewhere concedes, receipt of some

government  funding  is  not  necessarily  inconsistent  with   a

charitable purpose.  We decided above that government funding  is

not necessarily determinative.  And precluding tax exemptions  if

government   funding  is  "substantial"  potentially   encourages

trivial  and arbitrary attempts to determine what precise  amount

or  percentage  of  support  renders property  ineligible  for  a

charitable exemption.

           The  borough  acknowledges that the mere existence  of

some  governmental  subsidy or other direct governmental  support

does  not automatically destroy eligibility. But it contends that

because TCC receives most of its funding from government, TCC  is

merely  a  government  contractor, not  a  charity.   Whether  an

organization  is  a "government contractor" may  be  relevant  to

whether  it has a dominant profit motive or a nonprofit  purpose,

but  it does not conclusively establish that the property is  not

being  used  for a charitable purpose.  The borough's  contention

seems  ultimately  to stand on an argument it claims  it  is  not

making - that government funding is a complete disqualifier.

            In  a  related  argument,  the  borough  argues  that

charitable  exemptions  should   "indirectly  subsidize  socially

worthy activities."  It asserts that the practical effect of  tax

exemptions is to "make all taxpayers indirect subsidizers of  the

institution"  receiving the exemption.  Thus, the borough  argues

that there is no need for local taxpayers to indirectly subsidize

an  organization  that already receives government  funding.   It

claims  that  granting an exemption to programs that are  already

funded  by  the government shifts "part of the cost of  providing

the service from one government to another."

          The borough's "shifting-the-tax-burden" argument raises

policy  questions that are of little help to courts applying  the

constitutional  and  statutory exemption  provisions.   Moreover,

government property is not subject to borough taxation  anyway,78

so  whether  the government directly operates a local program  or

"subsidizes" it would seem to have little effect on the local tax

base.   And  because  programs like TCC's  broadly  benefit  many

borough  residents,  it  is not obvious that  there  is  anything

inappropriate about transferring to local residents some  of  the

cost  (the  loss  of some property tax revenues)   of  conducting

these  programs.   But  to the extent granting  these  exemptions

shifts  some  federal tax burden to local property  owners,  that

effect  does not convince us that we should interpret Alaska  law

to  deny  TCC  the  disputed exemptions.   To  the  extent  state

statutes  control  municipal  taxation  of  TCC's  property,  the

legislature  can  address  any perceived  imbalance  in  taxpayer

burdens.79

           Operating surplus.  We next consider whether,  as  the

borough  asserts,  TCC's operating surplus renders TCC ineligible

for  a  charitable-purpose exemption.  Our  cases  hold  that  an

otherwise  exempt property that generates revenue will  not  lose

its  exemption  if (1) payment is not sought as  a  result  of  a

dominant  profit  motive; (2) payment is both incidental  to  and

reasonably  necessary  for  the  accomplishment  of  the   exempt

activity; and (3) payment does not exceed operating costs.80

           We  have  never  decided whether an operating  surplus

precludes  an  exemption. Although we require  that  payment  not

exceed  operating costs, that requirement should  not  disqualify

property  owned  by  successful  fundraisers.  We  hold  that  an

operating  surplus  will  not preclude  an  otherwise  valid  tax

exemption  so long as revenue is not generated out of a  dominant

profit  motive  and revenue is allocated only to  support  exempt

purposes.    Our  Part  III.A.2.a  discussion  of  the  nonprofit

qualifier  also pertains here.  That TCC conducted its charitable

programs  while achieving an operating surplus in the  applicable

tax  years  does  not make TCC ineligible for any  exemption  for

those  years.  It makes little sense to endorse a rule that would

encourage  charities to operate at a deficit just to  ensure  tax

exemption eligibility.

           Although  we  decline  to  treat  as  dispositive  the

circumstances  the borough finds controlling, we have  considered

them to the extent they are relevant to the "charitable-purposes"

inquiry  that determines this appeal.  We conclude that  they  do

not render TCC's properties altogether ineligible for exemption.

     B.   TCC's Cross-Appeal: Did the Superior Court Err in Denying
          Exemptions for the Fifth Floor (Used for Community Service
          Programs) and Sixth Floor (Used for Administration) and
          Apportioning TCC's Attorney's Fees?
          
          1.   Standard of review
               
          TCC's cross-appeal argues that the superior court erred

by  denying exemptions for portions of the fifth and sixth floors

of  the  TCC building.  In denying exemptions for those  parcels,

the  superior court relied on the assessor's findings of fact and

conclusions  of  law.  As to the fifth floor, the superior  court

implicitly  invoked the reasonable basis standard of  review  and

held  that  it  could  not conclude that the assessor's  decision

lacked  a  legal and factual basis.  As to the sixth  floor,  the

court  apparently drew its independent conclusions about  whether

TCC's  administrative  activities  supporting  both  exempt   and

nonexempt programs satisfied the requirement that the property be

used "exclusively" for charitable purposes.

           We  conclude  that  the substantial evidence  standard

controls  review of the assessor's rulings with respect  to  both

the  fifth  and  sixth floors to the extent the  rulings  involve

findings of fact.  We apply the substitution of judgment standard

in reviewing the assessor's legal conclusions.81

          2.   Fifth floor

           The  fifth floor of TCC's main building housed various

community  programs  providing  family  services,  Indian   child

welfare, self-governance, planning, village government credit and

finance,  and  employment  services.   The  assessor  denied   an

exemption  for the family services programs because the  programs

"appear  to be fully funded by the state and federal government."

The  assessor also found that the village government services and

credit  and  finance  activities did not  qualify  as  activities

"adding to the moral, mental, and physical welfare of the  public

generally."   The  assessor  found  that  these  latter  programs

involved "attempts to economically benefit certain businesses . .

.  ."   The  assessor  consequently denied an exemption  for  the

entire fifth floor.

           Having  determined that receipt of government  funding

was not a valid factor in analyzing eligibility for a charitable-

purpose  exemption, the superior court held that only  the  fifth

floor  family services and employment programs, which were funded

by  state  and federal government, qualified for exemption.   The

superior court determined that thirty percent of the fifth  floor

was  used  for  these  programs.  The remainder  was  subject  to

taxation.  (The superior court calculated this spatial allocation

after reviewing an exhibit and finding that 3,500 square feet  of

the 11,570 square-foot fifth floor were used for exempt purposes.

Neither  TCC  nor the borough asserts on appeal  that  the  court

erred  by  making this calculation rather than remanding  to  the

assessor.)

          As to the remaining seventy percent of the fifth floor,

the  superior court upheld  the assessor's conclusion  that  this

portion  of the property was used for business loan programs  and

village  government services and therefore did  not  qualify  for

exemption.   In  the words of the superior court, those  programs

are  "geared more toward providing assistance to governmental and

tribal  entities  in  the  performance of  what  are  traditional

government services."

           TCC argues that the superior court erred by denying an

exemption  for  the  portions of the fifth floor used  for  these

services.   It  asserts that the fifth floor programs  that  were

denied  an  exemption by the superior court "add  to  the  moral,

mental  and  physical  welfare  of  the  public  generally."   It

contends  that  other courts have identified  community  programs

promoting  environmental health, agriculture,  housing,  economic

and  community  development,  and self-governance  as  charitable

activities.  It further argues that community services  are  just

as charitable as "individual-based" services.

            TCC   also   contends  that  programs  that   perform

"traditional  government  services"  are  not  ineligible  for  a

charitable-purpose  exemption, and that government  services  may

promote  charitable purposes.  In support, it cites  Southwestern

Oregon  Public Defender Services, Inc. v. Department of  Revenue,

in  which   the  Oregon  Supreme  Court  held  that  a  nonprofit

organization  providing  legal  services  to  indigent   criminal

defendants,  a  typical  government  service,  was   engaged   in

charitable  activity.82  TCC further notes that  in  states  that

require a charity to lessen a governmental burden, charities must

provide  a  traditional governmental service  to  qualify  for  a

charitable exemption.

           The borough responds that the disputed programs do not

"add  to  the moral, mental, and physical welfare of  the  public

generally."   It contends that these programs provide  distinctly

government and political services and are therefore not conducted

for  charitable  purposes.   It argues  that  the  functions  TCC

performs, such as constitution and ordinance drafting, licensing,

and   other   legislative  duties,  are  political   governmental

activities, not charitable activities.

           The  borough  also  states  that  not  all  government

functions   qualify  as  charitable,  and  that   expanding   the

definition  of  charitable  purposes to  include  all  government

functions   would   render  the  separate  government   exemption

superfluous.   The  borough concludes that the  term  "charitable

purpose" must be construed narrowly.

           We do not disagree with TCC's contention that property

used   to  provide  "traditional  government  services"  is   not

necessarily ineligible for exemption.  But that was not the  only

basis  for  the assessor's ruling.  Rather, he ruled  that  these

services "do not involve activities adding to the moral,  mental,

and  physical  welfare  of the public generally.   Instead,  they

involve  attempts  to  economically  benefit  certain  businesses

(Credit and Finance), provide for economic development of certain

areas  (Planning),  and technical assistance to  tribal  entities

like drafting ordinances and constitutions (VGS)."  We cannot say

that  these  findings and conclusions lack a  legal  and  factual

basis.   And  whether  or  not these are  traditional  government

services,   it   is  not  evident  that  they  necessarily   have

"charitable  purposes."   In the words  of  the  superior  court,

"narrowly  construing the exemption and holding TCC to  its  high

burden,"  we  cannot say that the assessor erred  by  failing  to

exempt the parcels used for these purposes.

          3.

               Sixth floor

           In  granting an exemption for only thirty-four percent

of   the   sixth  floor,  the  superior  court  held   that   the

administrative  offices  supported  both  exempt  and   nonexempt

activities  and  that  "[n]onexempt activities  include[d]  fund-

raising,  lobbying, and political activity, as well  as  economic

development and commercial loan programs."

          TCC first argues that fund-raising should not deprive a

charity  of  a  tax exemption.  It reasons that  fund-raising  is

necessary for a charity's survival and is directly incidental  to

and vitally necessary to a charity's activities.  TCC also argues

that a nonprofit entity which receives rent or income should  not

be disqualified from receiving an exemption.

            The  borough  argues  that  fund-raising  is  not   a

charitable-purpose  activity.  In support, it  cites  Evangelical

Covenant Church of America v. City of Nome, in which we held that

a  church radio station that sold commercial radio time to  raise

money  for  church  activities  was  not  exclusively  using  the

property for charitable purposes.83  We there noted:  "It matters

not  that  only a part of the radio time was sold  and  used  for

commercial purposes and that the profits derived from the sale of

commercial radio time were used to further the missionary work of

Covenant Church."84

           TCC  responds  that  operating the  radio  station  in

Evangelical  Covenant  Church differed  from  TCC's  fund-raising

efforts  because  it claims the radio station was  a  "charitable

feeder" activity.  TCC defines a "charitable feeder" activity  as

"commercial  activity conducted by a non-profit entity  in  which

the  profit from the enterprise is used to support and  fund  the

charitable  activity."  TCC argues that there  is  a  distinction

between  commercial  feeder  activity  and  its  solicitation  of

donations  and  grants, which it characterizes as "passive  fund-

raising."   It  argues that the appropriate test is  whether  the

activity is necessary and incidental to carrying out a charitable

purpose.

           Although  we recognize that fund-raising  can  be  for

charitable purposes, it loses its eligibility for exemption if it

is  used to support both exempt and nonexempt  services, i.e., if

it  is not conducted exclusively for a charitable purpose.85  The

assessor found that the administrative services supporting exempt

and  nonexempt programs were not used exclusively for  charitable

purposes.    The  superior  court  relied  on  that  finding   in

classifying  the  fund-raising  as  nonexempt  when   the   court

spatially  apportioned  the sixth floor  to  determine  the  part

entitled  to exemption.  It did not commit legal error  in  doing

so.   TCC  has  not demonstrated on appeal that the facts  compel

application  of  either  of  the  recognized  exceptions  to  the

"exclusive use" rule.86  We consequently discern no error in  the

superior court's spatial apportionment on the basis of the  fund-

raising activity.

          TCC next argues that the superior court should not have

classified  TCC's lobbying activities as nonexempt.   It  reasons

that a nonprofit agency should not be denied a charitable purpose

exemption  because  it "conducts activity that  is  unpopular  or

perceived as political . . . ."  It also contends that seeking to

effectuate a change in the law or in government is no  basis  for

denying a charitable-purpose exemption.

            The   borough  applied  the  rule,  extant  in   some

jurisdictions,  that  denies charitable exemptions  for  property

used for lobbying.87

          Given the findings and conclusions of the assessor that

TCC's  administrative functions serve both exempt  and  nonexempt

purposes,   we   conclude,  for  the  reasons  we  discussed   in

considering  TCC's  fund-raising activities,  that  the  superior

court  committed  no  error in spatially apportioning  the  sixth

floor  on this basis and in rejecting TCC's contention that  more

of the sixth floor should have been exempt.

           Finally, TCC argues that economic development programs

satisfy  a  charitable  purpose because they  contribute  to  the

welfare of the public generally.  TCC further argues that private

economic  development programs, including those lending money  to

private businesses, achieve charitable purposes.  It focuses  its

discussion on its credit and finance program, which TCC  contends

"receives funding from the federal and state governments and  re-

lends  the  funds to aid business development."  TCC argues  that

the  lending program promotes the physical welfare of individuals

and  rural communities by making financing available "which would

otherwise not be available."  TCC also notes that because it does

not  charge for these lending services, the program does not have

a dominant profit motive.

           The borough responds that because economic development

encourages   the  "production,  development  and  management   of

material wealth," it does not fulfill a charitable purpose.   The

borough argues that lending money to for-profit  businesses  that

compete  in  the  marketplace is not charity.  The  borough  also

argues that Alaska law does not recognize exemptions for property

used for commercial activity of any sort.

           We  cannot  conclude that the assessor's findings  and

conclusions  on this point lack a legal and factual  basis.   The

superior  court  did  not err by failing to find  that  the  area

devoted to community economic development was also exempt.   That

TCC did not charge for its re-lending activity may well mean that

it  had  no  dominant profit motive, but it  does  not  compel  a

conclusion that the activity itself was for charitable purposes.88

     C.   Attorney's Fees

           The superior court found that TCC was entitled to  tax

refunds  for  1997, 1998, and 1999 and consequently  awarded  TCC

attorney's fees of $11,384.50 under authority of AS 29.45.500(a).89

This  was  about  forty percent of TCC's actual attorney's  fees.

The  parties  on  appeal  agree that this  percentage  apparently

corresponded  to the percentage of area of the TCC  property  the

superior court held to be exempt.

          TCC invokes AS 29.45.500(a) and argues that because the

court  held that TCC was entitled to tax refunds, the court erred

by  failing  to  award TCC the fees it actually incurred  and  by

failing to make fact findings supporting the limited award.   TCC

observes  that  the court rejected the borough's contention  that

all of TCC's properties were ineligible for an exemption.

           We agree with the borough's responsive contention that

AS 29.45.500(a) only entitled TCC to an award of those attorney's

fees  it  incurred with respect to its successful refund efforts.

This  is  consistent with our case authority concluding that  the

statute  permits an apportionment of fees based on the taxpayer's

success.90

           TCC alternatively argues that it was error to base the

fee  reduction  on  the  court's  spatial  apportionment  of  the

disputed  properties; TCC asserts that it prevailed on  seven  of

the  eight  tax parcels in dispute, and that it therefore  should

have  recovered  seven-eighths, or 87.5%, of its actual  attorney

fees.

           But  we conclude that the superior court did not abuse

its  discretion  in this case by choosing to apportion  the  fees

based  on  the area it held to be exempt.  That method  seems  at

least  as  fair as apportioning by parcel, a method that arguably

might be unfair if parcels significantly differ in size.  And TCC

does  not argue that there is any significant difference  in  the

per-square-foot  tax  valuations of the parcels,  a  circumstance

that  might  bear  in  a  given  case  on  the  fairness  of  the

apportionment method the court applied here.

           We  finally  observe  that no  findings  of  fact  are

required  for an award of attorney's fees in this situation.   It

is  evident how the court calculated the fees, and TCC  does  not

argue  that  the  method  the superior court  applied  cannot  be

discerned and therefore cannot be reviewed on appeal.

IV.  CONCLUSION

           For  these  reasons,  we AFFIRM the  superior  court's

memorandum decision of November 17, 2000.

MATTHEWS, Justice, dissenting.

           I dissent from today's opinion for reasons that can be

summarized  as  follows.   One  necessary  element  of  the  term

"charitable"  as used in our tax-exemption statute  is  that  the

activity  in  question must entail a gift to  the  public.   This

implies  two requirements:  first, that the services in  question

must  be given, rather than paid for; and second, that the "gift"

have its source in the private sector.  Since TCC's services  are

paid  for rather than given, and since they are paid for  by  the

government,  they  are not charitable.  In  the  paragraphs  that

follow I will explain these points in more detail.

           At  the  outset I will briefly describe  TCC  and  its

activities.91   TCC is a large and apparently well run  nonprofit

corporation  incorporated under the Alaska Nonprofit  Corporation

Act.   Its members consist of most of the Athabascan villages  in

the  Yukon  and  Kuskokwim  River drainages.   Among  its  stated

purposes  is  "to promote the common welfare of  the  Natives  of

Alaska and their physical, economic and social well being."92  TCC

provides health, social, and economic services to Alaska  Natives

and villages in its region.  These services are funded by federal

and  state  government contracts and grants.  TCC  also  receives

revenue  from  interest  on contract and  grant  funds  and  from

billing private and public insurers.

           For  its fiscal year ending September 30, 1998,  TCC's

total  revenues were $51,791,385.  Of that $46,178,114 came  from

federal  grants  and contracts, and $5,091,073  came  from  state

grants  and contracts.  TCC is able to charge the government  for

the  costs  of operating the buildings used in carrying  out  its

activities.  These costs include property taxes.  In  some  cases

TCC  is  allowed  to collect twice for health  services  that  it

provides  -  once under its contracts with the federal government

and  again from public or private health insurers.  TCC  provides

some  health services, such as glasses and orthodontia, that  are

not  directly paid for by the government.  The surplus  generated

from  collecting  twice must be used to provide health  services.

It  covers  the  cost,  and then some, of  these  services.   TCC

currently  has  an accumulated surplus of over $27,000,000.   TCC

does not rely on donated funds or services.

            The   statute   that  governs   this   case   is   AS

29.45.030(a)(3) and (c).  In relevant part it provides:

                (a)   The following property is  exempt
          from general taxation:
          
               . . . .
          
                 (3)   property  used  exclusively  for
          nonprofit  religious,  charitable,  cemetery,
          hospital, or educational purposes;
          
               . . . .
          
                (c)  Property described in (a)(3) . . .
          of  this section from which income is derived
          is  exempt only if that income is solely from
          the   use   of  the  property  by   nonprofit
          religious,    charitable,    hospital,     or
          educational groups. . . .
          
           Since  TCC derives incomes from the property  that  it

claims  as exempt, both subsections (a)(3) and (c) apply.   Thus,

the property must be used for charitable purposes and TCC must be

a charitable group for an exemption to be granted.

           Under  Alaska  law, exemptions from property  taxation

must  be  construed narrowly so that to the extent  possible  all

taxpayers  will share equally in the cost of local  government.93

For the same reason the burden is placed on the taxpayer to prove

that it is eligible for an exemption.94

           What  then  is  the  meaning of the terms  "charitable

purpose" as used in AS 29.45.030(a)(3) and "charitable group"  as

used  in  AS 29.45.030(c)?  Clearly, more than merely a nonprofit

purpose or a nonprofit group is required, because "nonprofit"  is

a requirement separate from "charitable" under these subsections.95

Our  case  law  establishes  that  the  term  has  two  essential

elements.   First, charity is "that [which] is done out  of  good

will and a desire to add to the improvement of the moral, mental,

and physical welfare of the public generally."96  Second, charity

must entail "a gift to the general public."97

           In  Sisters  of  Providence  in  Washington,  Inc.  v.

Municipality  of  Anchorage,  we  approved  of  a  quid  pro  quo

rationale  as the justification for charitable and other  related

exemptions:   "exemptions are granted as the  quid  pro  quo  for

nonprofit  contributions  of  services  and  aid  to  society  in

general."98

           The gift to the public requirement means that services

provided  by an organization claiming charitable status  must  be

based at least in part on donations of funds, property, or labor.

To  be charitable, services must be given, rather than paid  for.

This,  in  turn, means that they must be based, in a  substantial

way,  on  donations.99  Further, the donations must be  from  the

private sector.  Under the quid pro quo model that justifies  tax

exemptions   for  contributions  of  services  to   the   public,

government partially pays for charitable services in the form  of

a  tax exemption.  But this model breaks down when government has

already  fully  paid  for the services  in  question.   When  the

government  through contracts and grants supplies the "quid"  for

services, the additional consideration that would be supplied  by

a tax exemption is not required.100  There are many cases decided

in  other  jurisdictions  that  reflect  these  points.   I  will

summarize  some of them here, quoting language that is applicable

to the present case.

          One instructive case is County Board of Equalization of

Utah  County v. InterMountain Health Care, Inc.101  Here the Utah

Supreme Court recognized, as we have, that "the element of  gift"

is  "crucial to the meaning of charity."102  The Utah court  also

recognized  that  exemptions  are  founded  on  a  quid  pro  quo

rationale:  "These exemptions confer an indirect subsidy and  are

usually  justified  as the quid pro quo for  charitable  entities

undertaking functions and services that the state would otherwise

be  required to perform."103  In applying the gift to the  public

test  to a nonprofit hospital, the court found that there was  no

gift  because the value of services provided to the patients  was

equal  to the income received from government programs, insurance

companies,  and  patients receiving care.   "Collection  of  such

remuneration does not constitute giving, but is a mere reciprocal

exchange of services for money."104  The hospitals at issue donated

only  a  few services, valued at less than one percent  of  their

revenues,   and   they  received  little  or  no   support   from

nongovernmental  gifts, donations, or endowments.105   The  court

concluded  that  it could not find on the record  presented  "the

essential  element of gift to the community, either  through  the

nonreciprocal provision of services or through the alleviation of

a government burden . . . ."106

             Another   case   that   illustrates   the   required

characteristics  of a charitable organization is Waterbury  First

Church  Housing,  Inc.  v. Brown.107  Here  a  nonprofit  housing

corporation  rented apartments to elderly tenants at below-market

rates  with assistance from the federal government.  The  Supreme

Court  of  Connecticut  ruled that  the  corporation  was  not  a

charitable   organization  because  it  did  not  rely   in   any

substantial way on gifts or gratuities from private sources.  The

court  stated  "that an essential characteristic of a  charitable

organization,  besides a charitable purpose, is that  it  achieve

its  purpose  `through  the  means  of  funds  derived  from  the

gratuities  of the benevolent.' "108  Observing that  an  "exempt

organization's  income [must] be based to some measurable  extent

on  `sums  coming from private sources which are  spent  for  the

public  weal,' " the court concluded that this test was  not  met

since the organization was not "the beneficiary of any gifts from

private  sources, and the only funds which it has  to  distribute

consist  of  rental  income  from its  tenants  and  the  federal

subsidies  which it receives."109  The court found error  in  the

approach  of the trial court that had looked only to the  purpose

of  the organization's activities "without considering whether it

achieves  its  charitable purposes through the use of  charitable

funds."110

          Parker v. St. Stephen's Urban Development Corp., Inc.111

is   another   case   involving  a  nonprofit  corporation   that

participated  in  federally  subsidized  housing  programs.   The

corporation  rented apartments to low-income  tenants  at  below-

market rates.  It was supported by a combination of federal money

and  tenant  rental payments and operated on a break-even  basis.

The  New  Jersey court held that the corporation was not engaging

in "charitable purposes" under the New Jersey charitable immunity

statute.    The  court  reached  this  conclusion   because   the

corporation  did not rely on charitable contributions:   "Equally

important  is  the  absence from defendant's operation  of  fund-

raising  activities and charitable contributions."112  The  court

made it clear that government funding is not charitable funding:

          Indeed,  by the very nature of its operation,
          defendant contravenes one of the footings  of
          charitable status - undertaking acts by which
          the  government is relieved pro tanto from  a
          burden  it  would otherwise have to  perform.
          It  is  the government which pays defendant's
          mortgage    interest,    supplies    mortgage
          insurance,   and   subsidizes   the   tenants
          sufficient  to  meet its operating  expenses,
          including  the  remaining mortgage  payments.
          Defendant  was  not  created  to  lessen  the
          burden  on government but to obtain  as  much
          funding  from the government as possible  and
          to  operate the project exclusively with that
          funding.[113]
          
The  court went on to state that government funding per se is not

a  disqualifying factor.  What is required though is  significant

support through charitable contributions:

                This is not to suggest that defendant's
          activities  are  not  salutary  or  that  its
          operation  with  federal funds  deserves  our
          disapprobation.  Nor is it to suggest that an
          actual  charity which receives a  measure  of
          support   from   the  government   would   be
          prohibited   from  claiming  immunity.    The
          inquiry  in  each case should  focus  on  the
          essence of the entity itself.  If a nonprofit
          corporation   is  performing   a   charitable
          service  and is essentially supported through
          charitable  contributions, the fact  that  it
          happens  to  receive some government  support
          would  not alter its nature as a charity  for
          immunity purposes.[114]
          
           In  Housing Southwest, Inc. v. Washington County,  the

Supreme  Court of Idaho addressed the question whether a  private

nonprofit  corporation that owned federally subsidized low-income

housing  facilities  for  senior  citizens  was  entitled  to   a

charitable tax exemption.115  The trial court had held  that  the

federal rent subsidy revenue received by the corporation could be

considered  "a  donation."116  The supreme court disagreed.   The

court  explained  the importance of the donation  factor  to  the

rationale underlying exemptions:

          [T]he   requirement  of   donations   is   an
          important    factor,    because    charitable
          donations  reduce  the cost  of  the  service
          provided,  either to the public generally  as
          direct  beneficiaries of the  service  or  to
          taxpayers  who  would  otherwise   bear   the
          burden.[117]
          
The  Idaho  court observed that federal subsidies do not  satisfy

the donations requirement because they do not reduce the cost  of

the services to taxpayers who would otherwise bear the burden  of

providing them.  Instead, they are the cost to the taxpayers:

          Housing  Southwest argues  that,  because  it
          provides   housing   to   low-income   senior
          citizens and disabled persons based  on  need
          it  is meeting a need that might otherwise be
          met by government.  This argument is circular
          in  that the need Housing Southwest meets  is
          in  fact being met by government through tax-
          supported FHA subsidies.[118]
          
The  court  explained  that  if federal  subsidies  qualified  as

donations  and  thus qualified the corporation  distributing  the

subsidies  for tax exemption "the burden is merely  shifted  from

one group of taxpayers to another, and government is not relieved

from an obligation it would otherwise have."119

           In  my judgment TCC fails the gift to the public test.

The  services that it provides are fully paid for.  They are  not

gifts  or  contributions  because  TCC  does  not  rely  in   any

substantial  way  on  donations of  funds,  property,  or  labor.

Further,  since TCC's services are funded by the government,  the

quid  pro  quo relationship that justifies charitable  exemptions

does  not apply.  If TCC's services were considered a gift,  they

would  have  to be considered a gift from the public because  the

public  pays for them.  Granting a tax exemption to  TCC  is  not

justified under the quid pro quo model because the government has

already  paid for the services TCC provides.  As in  the  Housing

Southwest case,120 the main effect of an exemption will be to shift

part of the burden of supporting TCC's programs from one group of

taxpayers  to another - here, primarily, from all those  who  pay

taxes  to the federal government to Fairbanks North Star  Borough

taxpayers.

          In reaching these conclusions I do not suggest that the

receipt  of  government  funds means  that  a  nonprofit  service

provider  is  necessarily ineligible for a charitable  exemption.

Nor  do I believe that such an organization is disqualified  from

charitable status because it receives income from those  to  whom

it provides services.  What is required by the gift to the public

test  is that in a substantial way the services provided be based

on  private  donations.  Because this essential  element  of  the

concept  of charity was not shown by TCC to be present,  I  would

reverse the decision of the superior court.

_______________________________
1    43 U.S.C.  1601-1629 (1971).
2     26  U.S.C.  501(c)(3) (2002) (exempting from federal income
taxation  "[c]orporations,  and any  community  chest,  fund,  or
foundation,  organized  and  operated  exclusively  for  .  .   .
charitable . . . purposes").
3     See  Alaska  Const.  art. IX,  4; AS 29.45.030(a)(3).   See
also Fairbanks North Star Borough Ordinance (FNSB) 3.08.020(F).
4     On  remand, the borough assessor made these findings, among
others:

                4.    TCC  does  not generally  receive
          donations   or  use  volunteers.   Generally,
          except  for  some minor local grant  funding,
          all  of  TCC's revenues used to  operate  its
          programs  come  from  federal  and  State  of
          Alaska  contracts and grants.   TCC  operates
          some programs under non-refundable compacting
          agreements   with  the  federal   government.
          TCC's other programs are funded through cost-
          reimbursable contracts with both the  federal
          government and the state of Alaska.  Indirect
          administrative  and other costs  not  charged
          directly  to  a particular program  are  paid
          through an indirect cost allocation system at
          previously   negotiated   rates.    If    the
          negotiated  rate  results  in  either   over-
          funding  or  under-funding  of  the  indirect
          costs  in one year, those costs are recovered
          or  refunded to the grantor by adjusting  the
          next year's indirect rate.
               5.   By the end of the 1998 fiscal year,
          TCC  accumulated a total fund balance of over
          27  million  dollars.  With the exception  of
          its    lease    activities,   TCC   primarily
          accumulates  this  money  by  depositing  the
          difference between what TCC receives from the
          government and its actual expenditures.  This
          fund  balance  in leaner years  covers  funds
          that  a  program overspent or costs that  the
          government disallows.
                6.    In  addition  to  money  received
          directly  from  governmental  entities,   TCC
          generates  program income  by  billing  third
          party insurance companies, including Medicaid
          and  Medicare for services originally  funded
          by   the  government.   This  program  income
          generally may be spent by TCC only  for  that
          program  and  for that type of service.   TCC
          uses  this income to supplement its  services
          largely  in  the  health area.   This  income
          provides the largest source of what TCC calls
          "self-generated" money.
                 7.    TCC  also  generates  income  by
          investing  annually approximately 30  million
          dollars  in  federal  program  sums  paid  in
          advance.  TCC is permitted by federal law  to
          earn interest on federal money.  In addition,
          TCC  receives  interest income  by  investing
          payroll, leave, and other accounts originally
          funded  by  program funds (federal  or  state
          dollars).   All of this income is  designated
          on TCC's financial statements as interest and
          investment income.
5     Cf.  Alaska R. App. P. 609; City of Nome v. Catholic Bishop
of N. Alaska, 707 P.2d 870, 875 (Alaska 1985).
6     CH  Kelly  Trust  v.  Municipality  of  Anchorage,  Bd.  of
Equalization, 909 P.2d 1381, 1382 (Alaska 1996).
7     Catholic  Bishop,  707 P.2d at 876 (citing  Earth  Res.  v.
State, Dep't of Revenue, 665 P.2d 960, 965 (Alaska 1983)).
8    Id.
9    Ketchikan Gateway Borough v. Ketchikan Indian Corp., 75 P.3d
1042, 1045 (Alaska 2003) (quoting State, Dep't of Transp. &  Pub.
Facilities v. Sanders, 944 P.2d 453, 456 (Alaska 1997)).
10    Sisters of Providence in Washington, Inc. v. Municipality of
Anchorage, 672 P.2d 446, 447 (Alaska 1983).
11    Catholic Bishop, 707 P.2d at 877.
12     Id.  at  879  (quoting Animal Rescue  League  v.  Bourne's
Assessors, 37 N.E.2d 1019, 1021 (Mass. 1941)).
13    City of Nome, 707 P.2d at 875.
14     Balough  v. Fairbanks N. Star Borough, 995 P.2d  245,  254
(Alaska 2000).
15     (Emphasis added.)  After 1923 Alaska municipalities  could
assess property taxes subject to this statutory exemption: "[A]ll
property  used exclusively for religious, educational, charitable
purpose  . . . shall be exempt from taxation."  Ch. 97,  12,  SLA
1923.   Identical language in the territory's codified  statutes,
16-1-35,  Alaska  Compiled Laws Annotated (ACLA) 1949,  described
Alaska's charitable-purposes exemption as it stood in 1956,  when
Alaska's constitutional delegates approved the language contained
in article IX, section 4 of the Alaska Constitution.  Among other
changes  they made to the language of the pre-statehood statutory
exemption, the delegates added the "non-profit" qualification and
the "as defined by law" clause.  Alaska Const. art. IX,  4.
16    AS 29.45.030 provides in pertinent part:

          (a)   The  following property is exempt  from
          general taxation:
          
               . . . .

                 (3)   property  used  exclusively  for
          nonprofit  religious,  charitable,  cemetery,
          hospital, or educational purposes.
          
(Emphasis added.)

17    FNSB Ordinance 3.08.020(F) exempts property from taxation if
it  is  "used  exclusively for nonprofit  religious,  charitable,
cemetery, hospital, or educational purposes."
18     Greater  Anchorage Area Borough v. Sisters of  Charity  of
House  of  Providence, 553 P.2d 467, 469 (Alaska 1976); McKee  v.
Evans, 490 P.2d 1226, 1230 (Alaska 1971).
19     In  support of that proposition the superior  court  cited
Sisters of Providence v. Municipality of Anchorage, 672 P.2d 446,
447 (Alaska 1983) (quoting McKee, 490 P.2d at 1230 n.18).
20    The borough's appellate briefs often refer to the exemption
as one for "charitable use."  We assume that the borough is using
that  phrase as shorthand for the charitable-purposes  exemption,
and  is  not attempting to recast the constitutional test,  which
requires  that  the property be exclusively used for  "charitable
purposes."   For consistency, we will use the phrase  "charitable
purposes," per article IX, section 4 of the Alaska Constitution.
21    Alaska Const. art. IX,  4; AS 29.45.030(a)(3).
22    McKee, 490 P.2d at 1231.
23    See supra note 15.
24     We  interpret  statutory language  to  avoid  superfluity.
Municipality  of  Anchorage v. Repasky, 34  P.3d  302,  312  n.80
(Alaska  2001).   This principle also applies  to  constitutional
interpretation.  Cf. Hootch v. Alaska State-Operated  Sch.  Sys.,
536   P.2d  793,  801  (Alaska  1975)  ("The  general   rule   in
constitutional construction is to give import to every  word  and
make none nugatory.").
25    Alaska Const. art. IX,  4; AS 29.45.030(a)(3).
26    AS 29.45.030(c) provides:

          Property described in (a)(3) or (4)  of  this
          section  from  which  income  is  derived  is
          exempt only if that income is solely from use
          of   the  property  by  nonprofit  religious,
          charitable, hospital, or educational  groups.
          If  used by nonprofit educational groups, the
          property  is  exempt only if used exclusively
          for classroom space.
          
27    Greater Anchorage Area Borough v. Sisters of Charity of the
House of Providence, 553 P.2d at 472.
28    See supra note 2.
29    Catholic Bishop, 707 P.2d at 889.
30    Id. at 879; Evangelical Covenant Church v. City of Nome, 394
P.2d 882, 883 (Alaska  1964).
31    Catholic Bishop, 707 P.2d at 881.
32    Evangelical Covenant Church, 394 P.2d at 885.
33     Greater Anchorage Area Borough v. Sisters of Charity,  553
P.2d  at  472 (holding three floors rented to doctors in  private
practice of medicine not exempt, because floors' use by owner  to
support  nonprofit hospital was not exclusive and floors'  actual
use was not charitable).
34    707 P.2d 870, 880 (Alaska 1985).
35     439 P.2d 441, 445 (Alaska 1968) (quoting Old Colony  Trust
Co. v. Welch,  25 F. Supp. 45, 48 (D. Mass. 1938)).
36     Catholic Bishop, 707 P.2d at 888 n.37 (quoting Holbrook  &
O'Neill, California Property Tax Trends: 1850-1950, 24 S. Cal. L.
Rev. 252, 272 (1951)).
37    King's Lake Camp, 439 P.2d at 445-46.
38    Catholic Bishop, 707 P.2d at 891.
39    Id. at 890-91.
40    See id. at 888-89; King's Lake Camp, 439 P.2d at 444.
41     King's  Lake Camp, 439 P.2d at 444 (holding that  charging
user  fees to defray operational expenses did not establish  that
there was "any real profit motive").
42    Catholic Bishop, 707 P.2d at 889; see also King's Lake Camp,
439 P.2d at  444-45.
43    King's Lake Camp, 439 P.2d at 444-45.
44    Catholic Bishop, 707 P.2d at 892.
45    Id. at 890-91.
46    See id. at 881 (holding in part that Alaska Constitution and
AS 29.53.020 require spatial apportionment between exempt and non-
exempt  purposes); Sisters of Charity, 553 P.2d at  472  (holding
that nonprofit hospital that rented out part of its property  for
private  office  space did not exclusively use its  property  for
hospital  purposes); King's Lake Camp, 439 P.2d at  445  (holding
that  property  used to operate recreational camp  was  used  for
charitable  purpose and that charging nominal user fees  did  not
divest  property of tax exemption); Evangelical Covenant  Church,
394  P.2d  at 883 (holding that church radio station, which  sold
commercial radio time, did not qualify for religious purpose  tax
exemption because property was not used exclusively for religious
purposes  -  regardless of whether income derived  from  station-
funded church activities).
47     See, e.g., G.D.L. Plaza Corp. v. Council Rock Sch.  Dist.,
526 A.2d 1173, 1177-78 (Pa. 1986) (holding that nonprofit housing
corporation that received substantial federal government  funding
was not "maintained by public or private charity" as required  by
Pennsylvania  statute and did not qualify for exemption);  Parker
v.  St. Stephens Urban Dev. Corp., 579 A.2d 360, 364 (N.J. Super.
App.  Div. 1990) (holding that nonprofit housing corporation that
received  all of its funding from government did not  qualify  as
charity in tort action under Charitable Immunity Act).
48     See, e.g., Hous. Southwest, Inc. v. Washington County, 913
P.2d  68,  72  (Idaho  1996) (holding that nonprofit  low  income
housing  corporation  that  received federal  subsidies  did  not
qualify  for exemption in part because it did not receive support
from  donations); Supervisor of Assessments of Baltimore City  v.
Har  Sinai  W. Corp., 622 A.2d 786, 791-92 (Md. Spec. App.  1993)
(holding that nonprofit housing corporation that received federal
government  subsidies  but  no  donations  did  not  qualify  for
exemption).
49    See supra note 48.
50     See,  e.g., S. Jersey Family Med. Ctrs., Inc. v.  City  of
Pleasantville,  798 A.2d 120, 131 (N.J. Super.  App.  Div.  2002)
(upholding  exemption  for community health  care  facility  that
received  majority  of its federal funding for services  rendered
and not through grants); State Dep't of Assessments & Taxation v.
N.  Baltimore  Ctr.,  743 A.2d 759, 772  (Md.  Spec.  App.  2000)
(holding that facility used for providing indigent mental  health
services and that received most of its funding through government
funds and minimal donations qualified for tax exemption).
51     See, e.g., Yorgason v. County Bd. of Equalization of  Salt
Lake  County, 714 P.2d 653, 660 (Utah 1986) (holding that whether
low  income housing was subsidized through government or  private
donor  did not dictate different result as long as there  is  gap
between  what  beneficiary  pays and value  of  what  beneficiary
receives); Franciscan Tertiary Province of Missouri v. State  Tax
Comm'n, 566 S.W.2d 213, 226 (Mo. 1978) (holding that purpose  for
which  property  is used is determinative, that factors  such  as
donations  are  only  relevant  if  they  indicate  institution's
purpose,   and  that  federal  subsidies  have  same  effect   as
charitable contributions from private sector).
52    Alaska Const. art. IX,  4.
53    25 U.S.C.  450.
54    See, e.g., Snyder Act of Nov. 2, 1921, 25 U.S.C.  13.
55     King's Lake Camp, 439 P.2d at 445 (quoting from Old Colony
Trust Co. v. Welch, 25 F. Supp. 45, 48 (D. Mass. 1938)).
56    25 U.S.C.  450(a) ("the Federal government's historical and
special  legal relationship"); 25 U.S.C.  450n ("Nothing in  this
subchapter  shall  be  construed as  . .  .  (2)  authorizing  or
requiring the termination of any existing trust responsibility of
the  United States with respect to the Indian people."); see also
25  U.S.C.   451 (authorizing  Secretary of Interior  to  "accept
donations of funds and other property for the advancement of  the
Indian race" and to "use the donated property in accordance  with
the   terms  of  the  donation  in  furtherance  of  any  program
authorized  by  other  provision  of  law  for  the  benefit   of
Indians").
57    25 U.S.C.  450(a)(1); 25 U.S.C.  450a(a).
58    Old Colony, 25 F. Supp. at 48.
59     For  a comprehensive list of states employing multi-factor
tests for charitable exemptions, see North Baltimore Center,  743
A.2d at 768 n.3.
60     King's Lake Camp, 439 P.2d at 445 (quoting Old Colony,  25
F. Supp. at 48).
61    672 P.2d 446, 451 (Alaska 1983).
62    King's Lake Camp, 439 P.2d at 446 (holding that recreational
camp constituted use for charitable purpose).
63    City of Nome v. Catholic Bishop of N. Alaska, 707 P.2d 870,
890  (Alaska  1985) (holding that radio station whose programming
focused on Native issues benefited general public).
64    490 P.2d 1226 (Alaska 1971).
65    Id. at 1230.
66    Id. at 1231.
67    See King's Lake Camp, 439 P.2d at 446 (emphasis added).
68    Catholic Bishop, 707 P.2d at 891.
69     See, e.g., King's Lake Camp, 439 P.2d at 443 (holding that
camp that charged nominal user fees still qualified for exemption
even  though  camp  did not absorb cost of those  who  could  not
afford it, and instead passed this cost to the user groups).
70    Id.
71    Catholic Bishop, 707 P.2d at 889; see also King's Lake Camp,
439 P.2d at 444-45.
72     TCC  indicates that federal funds constitute approximately
ninety  percent of its funding.  It argues that the rest  of  its
expenses   are  covered  by  "self-generated"  funds,   including
investment, interest, and rental income.
73      See   Sisters  of  Providence  in  Washington,  Inc.   v.
Municipality of Anchorage, 672 P.2d 446, 451 (Alaska 1983).
74    490 P.2d 1226, 1229-30 (Alaska 1977).
75    Former AS 29.10.336(a), recodified as AS 29.45.030(a).
76    McKee, 490 P.2d at 1229-30.
77    Id. at 1230.
78    Irwin v. Wright, 258 U.S. 219, 288 (1922).

          The rule established by the decisions of this
          court  is  that, by virtue of its sovereignty
          and  the constitutional power of Congress  to
          dispose  of  and make all needful  rules  and
          regulations respecting the territory or other
          property  belonging to the United States,  no
          state  can  tax  the property of  the  United
          States within its limits.
          
Id.

79      The   Alaska   Constitution  also  addresses   charitable
exemptions.   Alaska Const. art. IX,  4.  Federal  law  may  also
limit taxation of tribal property.  See Ketchikan Gateway Borough
v.  Ketchikan  Indian  Corp., 75 P.3d 1042 (Alaska  2003),  which
concerned a federal preemption question not raised by the parties
in the present case.
80    City of Nome v. Catholic Bishop of N. Alaska, 707 P.2d 870,
889  (Alaska 1985); see also Matanuska-Susitna Borough v.  King's
Lake Camp, 439 P.2d 441, 444-45 (Alaska 1968).
81    Catholic Bishop, 707 P.2d at 876.
82    817 P.2d 1292, 1296 (Or. 1991).
83    394 P.2d 882 (Alaska 1964).
84    Id. at 885.
85    City of Nome v. Catholic Bishop of N. Alaska, 707 P.2d 870,
875 (Alaska 1985).
86     Exceptions  have  been  recognized  to  the  exclusive-use
requirement:

          [W]e  acknowledge two very narrow  exceptions
          to  the  "exclusive  use"  rule.   The  first
          excepts de minimis uses.  We foresee, as have
          other   courts,  that  application   of   the
          "exclusive use" rule could be "so literal and
          narrow   that   it  defeats  the  exemption's
          settled   purpose.  .   .   .    Second,   we
          acknowledge    an    exception    under    AS
          29.53.020(a)(3)   for   property   used   for
          purposes  directly incidental to and  vitally
          necessary  for  the  exempt  use   of   other
          property.
          
Catholic Bishop, 707 P.2d at 879-80.

87     The borough cites these cases as examples: Michigan United
Conservation  Clubs  v. Lansing Township,  342  N.W.2d  290,  296
(Mich.  App. 1983); Minnesota State Bar Ass'n v. Commissioner  of
Taxation, 240 N.W.2d 321 (Minn. 1976).
88     TCC has raised no contention in this case that federal law
preempts state law and consequently precludes taxation of any  of
the  properties at issue here.  Cf. Ketchikan Gateway Borough  v.
Ketchikan Indian Corp., 75 P.3d 1042 (Alaska 2003).
89    AS 29.45.500(a) provides:

          If  a taxpayer pays taxes under protest,  the
          taxpayer may bring suit in the superior court
          against the municipality for recovery of  the
          taxes.   If  judgment for recovery  is  given
          against  the  municipality,  or,  if  in  the
          absence  of suit, it becomes obvious  to  the
          governing body that judgment for recovery  of
          the   taxes  would  be  obtained   if   legal
          proceedings  were  brought, the  municipality
          shall  refund the amount of the taxes to  the
          taxpayer with interest at eight percent  from
          the date of payment plus costs.
          
90    Kenai Peninsula Borough v. Port Graham Corp., 871 P.2d 1135,
1140-41 (Alaska 1994) ("In light of today's decision, this  award
must  be vacated and the court must make such further adjustments
as  will  be  necessary to reflect the fact that Port  Graham  is
entitled to a refund of taxes only for 1988.").
91     Ordinarily  appeals  from the  placement  of  property  on
municipal  assessment  rolls are heard  administratively  by  the
municipal  board of equalization.  AS 29.45.190,  .210.   In  the
present   case  the  parties  agreed  to  bypass  the  board   of
equalization.   Instead, formal hearings  were  held  before  the
borough  tax assessor, who entered written findings of  fact  and
conclusions  of law.  TCC agreed that the assessor's findings  of
fact  should be reviewed deferentially, just as those of a  board
of  equalization  would  be.   Unless  otherwise  indicated,  the
factual  summary  in this and the following paragraph  are  taken
from findings of fact of the assessor.
92    Article III(e), Articles of Incorporation.
93     Greater  Anchorage Area Borough v. Sisters of  Charity  of
House of Providence, 553 P.2d 467, 469 (Alaska 1976).
94    Ketchikan Gateway Borough v. Ketchikan Indian Corp., 75 P.3d
1042,  1045  (Alaska 2003).  "All property is benefitted  by  the
security  and protection furnished by the State, and it  is  only
just  and  equitable that expenses incurred in the operation  and
maintenance of government should be fairly apportioned  upon  the
property  of  all."   Id.  (quoting Nome v.  Catholic  Bishop  of
Northern Alaska, 707 P.2d 870, 877 (Alaska 1985)).
95     Our constitutional framers recognized that self-sustaining
nonprofit groups would not necessarily come within the  ambit  of
the word "charitable."  In debating the need to include nonprofit
cemeteries within the list of uses that are exempt from taxation,
one   delegate  stated:   "If  you  strike  this  [inclusion   of
cemeteries]  I  presume  that  you  will  make  them  subject  to
taxation, if and when the local government unit or the state ever
imposed   a  tax,  unless  they  were  covered  under  the   word
`charitable,'  and  I'm  pretty  sure  most  of  them   are   not
charitable,  they  are just self-sustaining,  nonprofit  groups."
Constitutional Minutes, page 2329, statement of V.  Rivers.   The
amendment  that  sought to delete cemeteries was  defeated.   The
main  opponent  of  the amendment, Delegate McLaughlin,  observed
that  nonprofit  cemeteries, though not run "under  religious  or
charitable  auspices"  nonetheless  provide  "a  definite  public
service."  Minutes 2329.
96    Catholic Bishop, 707 P.2d at 890 (quoting Matanuska-Susitna
Borough v. King's Lake Camp, 439 P.2d 441, 445 (Alaska 1968)).
97    Id. at 891 (quoting King's Lake Camp, 439 P.2d at 446).  We
first  approved  of  the  dual definition  of  charitable  status
including the element of "a gift to a general public use" in  the
1968  King's Lake Camp decision.  Our only subsequent  case  that
concerned  properties  claimed  to  be  exempt  under  the   term
"charitable" as used in AS 29.45.030 was the 1985 Catholic Bishop
decision.   We found that the radio station and the youth  hostel
involved  in  that case satisfied the gift to the general  public
test.  707 P.2d at 890-91.
98     672  P.2d  446, 451 (Alaska 1983).  This is the  generally
accepted rationale for granting charitable tax exemptions.  Erika
King, Tax Exemptions and the Establishment Clause, 49 Syracuse L.
Rev.  971, 981 (1999) ("The most common explanation for religious
and  charitable tax exemptions in the modern world is the `social
benefit' theory, sometimes labeled the `public benefit theory' or
the `quid pro quo theory.' ").
99     Legal  commentators have referred to this as "the donative
theory" of charitable tax exemption.  See Mark A. Hall & John  D.
Columbo, The Charitable Status of Nonprofit Hospitals:  Toward  a
Donative  Theory of Tax Exemption, 66 Wash. L. Rev. 307,  389-405
(1991).   The  authors  of  this  article  list  numerous   cases
demonstrating that donations are essential to charitable  status.
Id. at 400-01, especially notes 331 & 332.
100     In speaking of the "aid or encouragement" that exemptions
supply  for those who would act for the good of the community  we
have only referred to actors in the private sector as the targets
of  such  incentives:   "Exemptions are granted  `as  an  aid  or
encouragement to individuals, corporations, or businesses, to  do
something  supposedly  for the good of  the  community  at  large
.  .  .  .'  "   Catholic Bishop, 707 P.2d at 888  n.37  (quoting
Holbrook  &  O'Neill, California Property Tax Trends:  1850-1950,
24 S. Cal. L. Rev. 252, 272 (1951)).
101    709 P.2d 265, 269 (Utah 1985).
102    Id. at 272.
103    Id. at 268.
104    Id. at 274.
105    Id.
106    Id. at 278.
107    367 A.2d 1386 (Conn. 1976).
108    Id. at 1389.
109    Id. at 1390.
110    Id. at 1391.
111    579 A.2d 360 (N.J. App. 1990).
112    Id. at 365.
113    Id. (citation omitted).
114    Id. at 366 (citation omitted).
115    913 P.2d 68 (Idaho 1996).
116    Id. at 70.
117    Id. at 71-72.
118    Id. at 72.
119     Id. at 72-73.  A number of other cases have taken similar
positions  declining  to treat the administration  of  government
funded  programs as charitable.  Clark v. Marian Park, Inc.,  400
N.E.2d   661 (Ill. 1980) (rent payments and federal subsidies  do
not  constitute  public  or  private charity);  Dow  City  Senior
Citizens Housing, Inc. v. Board of Review of Crawford County, 230
N.W.2d  497  (Iowa  1975) (government has already  assumed  large
share  of burden through loan subsidies, exemption statute should
not  be  applied  to  put  additional burden  on  local  property
taxpayers);  Supervisor of Assessment of Baltimore  City  v.  Har
Sinai   West  Corp.,  622  A.2d  786  (Md.  App.  1993)  (federal
government subsidies are not considered donations); G.D.L.  Plaza
Corp.  v.  Council  Rock Sch. Dist., 526  A.2d  1173  (Pa.  1987)
(organization was not charitable for purposes of exemption  where
all  income  came  from  federal  government  and  rent  paid  by
tenants); Yakima First Baptist Homes, Inc. v. Gray, 510 P.2d  243
(Wash. 1973) (rent subsidies are not public donations).  There is
also  contrary  authority  represented  by  the  cases  cited  in
footnotes 50 and 51 of the opinion of the court.  But of the four
jurisdictions represented there, only Utah is like Alaska in that
it requires that charitable purposes include an element of a gift
to  the  public, and the Utah court found that this  element  was
present.   Yorgason v. County Bd. of Equalization  of  Salt  Lake
County, 714 P.2d 653, 659 (Utah 1986) ("the Tower provides a gift
to  the community . . . Episcopal Management Corporation has made
and  continues  to make substantial contributions of  both  money
.  .  .  and services . . . .").  In any event, in light  of  the
numerous  authorities rejecting the view that government  funding
is equivalent to private charitable donations, our rule of narrow
construction (as well as logic) counsels against adoption of this
view.
120    See supra at page 47-48.