IN RE: THE PROTEST OF VALUATION AND ASSESSMENT OF IMPROVEMENTS FOR TAXATION AS REAL PROPERTY OF NON-EXEMPT ENTITY (2025)

OPINION

{1} American Campus Communities (ACC) and the University of New Mexico (UNM) protested the assessment of property tax by the Bernalillo County Assessor (the Assessor), claiming an exemption for certain shared properties under Article VIII, Section 3 of the New Mexico Constitution. The County Valuation Protests Board (the Board) denied the protests and upheld the assessment on the grounds that there was never an application for the tax exemption, nor are the Properties eligible for the exemption, as the primary use of the Properties is residential, not educational use. The district court agreed, from which order ACC and UNM appeal. We affirm.

BACKGROUND

{2} In 2008, UNM partnered with ACC to remodel and build on-campus housing facilities for UNM students. ACC is a for-profit, real estate investment trust that contracts with universities around the United States to fund student housing. ACC and UNM entered into an agreement that stated ACC was to “design, develop, manage, and operate large scale and complex student housing projects[,]” which would later be established as “Casas del Rio” on UNM's main campus and “Lobo Village” on UNM's south campus (collectively, the Properties). Separate agreements were entered into for each property and provided that UNM would have the fee simple interest in the land and improvements and that ACC would hold a leasehold interest.

{3} Both agreements required that the Properties be used “only for UNM [s]tudent residential housing, parking[,] and ancillary supporting uses, such as (without limitation) a management office, a leasing office, common areas and amenities, recreational rooms, meeting rooms, workout rooms, utility rooms, lobbies, and parking areas, swimming pools[,] and other outdoor amenities.”

{4} In 2010, a representative from the Assessor's office contacted UNM's Director of Real Estate, Kim Murphy, inquiring about the tax status of the Properties. Mr. Murphy relayed to the Assessor that under the terms of the lease for the Properties, the improvements were owned by UNM. In 2020, after the completion of the Properties, the Assessor sent a letter to ACC stating that although the Properties had been considered tax-exempt due to partial ownership by UNM, after further review and an investigation the Properties were taxable to ACC. During those eight years, neither UNM nor ACC applied for property tax exemptions. A letter was written from the Assessor alerting ACC that not only were the Properties not tax exempt but also it would be receiving amended tax bills for the years 2012-2020, amounting to more than $6,000,000.

{5} ACC filed a protest with the Board, challenging the denial by the Assessor for the educational use exemption, and UNM intervened as an interested party. The Board denied ACC's protest, stating that ACC never applied for an exemption and therefore was never entitled to the exemption for the tax years of 2012-2020. ACC filed another protest for the tax years of 2021-2022, presenting additional evidence on the use of the Properties and arguing for the educational use exemption. The Board again denied ACC's protest, stating that ACC failed to show that the Properties’ use qualified as tax exempt. ACC filed a third protest with the Board for the tax year of 2023, again arguing for an exemption based on educational use, which the Board denied. ACC then appealed the three decisions to the district court.

{6} The district court consolidated the three appeals into a single opinion and affirmed the decision of the Board. It concluded that the Board's decision was supported by substantial evidence that the Properties were not used for educational purposes and therefore not exempt from taxation. ACC now petitions for our review of the district court's decision. We granted the petition for writ of certiorari because this case involves a significant question of constitutional law and an issue of substantial public interest. See Rule 12-505(D)(2)(d) NMRA (listing the four grounds upon which this Court has discretion to grant a writ of certiorari).

DISCUSSION

{7} ACC first argues that the ruling by the Board and the district court is contrary to law as stated in Albuquerque Alumnae Ass'n of Kappa Kappa Gamma Fraternity v. Tierney, 1933-NMSC-011, 37 N.M. 156, 20 P.2d 267, as well as Article VIII, Section 3 of the New Mexico Constitution. ACC also contends that the Assessor is equitably estopped from taxing the Properties for 2012-2020. Finally, ACC argues that the Board and the district court erred by concluding that the Properties are not used for educational purposes, arguing that the use of the Properties for student housing serves an educational purpose, therefore qualifying them for the tax exemption for the tax years 2022 and 2023. We disagree.

I. Standard of Review

{8} “We review a district court's decision in an administrative appeal under an administrative standard of review.” CAVU Co. v. Martinez, 2013-NMCA-050, ¶ 11, 302 P.3d 126 (internal quotation marks and citation omitted). “[W]e conduct the same review of an administrative order as the district court sitting in its appellate capacity, while at the same time determining whether the district court erred in the first appeal.” Id. (internal quotation marks and citation omitted). “The district court may reverse the [p]rotest [b]oard if it acted outside the scope of authority of the agency, or if the district court determines that the administrative entity acted fraudulently, arbitrarily, or capriciously; if the decision was not supported by substantial evidence in the whole record; or if the [p]rotest [b]oard did not act in accordance with the law.” Id. (alterations, omission, internal quotation marks, and citations omitted). “Interpretation of a statute is a question of law which an appellate court reviews de novo.” Id.

{9} “Property is presumed to be subject to taxation.” Georgia O'Keeffe Museum v. Cnty. of Santa Fe, 2003-NMCA-003, ¶ 32, 133 N.M. 297, 62 P.3d 754. Article VIII, Section 3 of the New Mexico Constitution provides that “all property used for educational or charitable purposes ․ shall be exempt from taxation.” See CAVU Co., 2013-NMCA-050, ¶ 9. This exemption deals with real property and therefore it is “the use of the property, not the ownership, that is the determinative factor in property taxation.” Georgia O'Keeffe Museum, 2003-NMCA-003, ¶ 40; see also Albuquerque Lodge, No. 461, B. P. O. E. v. Tierney, 1935-NMSC-022, ¶ 29, 39 N.M. 135, 42 P.2d 206 (holding that “[i]t is the use of the property, not the declared objects and purposes of its owner, which determines the right to exemption”). This Court has held that the phrase “used for educational purposes” means “the direct, immediate, primary and substantial use of property that embraces systematic instruction in any and all branches of learning from which a substantial public benefit is derived.” NRA Special Contribution Fund v. Bd. of Cnty. Comm'rs, 1978-NMCA-096, ¶ 35, 92 N.M. 541, 591 P.2d 672 (internal quotation marks omitted). “It is the taxpayer's burden to claim, apply for, and prove an exemption based on an educational or charitable use.” Georgia O'Keeffe Museum, 2003-NMCA-003, ¶ 32.

II. Determination of Educational Use Exemption

{10} The issue presented in this case is whether the Properties are used for educational purposes and therefore fall under the tax exemption. “[T]he phrase ‘used for educational purposes’ [means] ‘the direct, immediate, primary and substantial use of property that embraces systematic instruction in any and all branches of learning from which a substantial public benefit is derived.’ ” NRA Special Contribution Fund, 1978-NMCA-096, ¶ 35. Our Supreme Court used this definition provided by NRA Special Contribution Fund to establish a three-part eligibility test for what counts as educational use: “(1) use that is direct, immediate, primary, and substantial, (2) use that embraces systematic instruction in any and all branches of learning, and (3) use that imparts a substantial public benefit.” CAVU Co. v. Martinez, 2014-NMSC-029, ¶ 13, 332 P.3d 287; see also NRA Special Contribution Fund, 1978-NMCA-096, ¶ 35 (“[W]e hold the phrase ‘used for educational purposes’ to mean ‘the direct, immediate, primary and substantial use of property that embraces systematic instruction in any and all branches of learning from which a substantial public benefit is derived.’ ”). The Board determined that the Properties failed the first two of the three parts of the test articulated in NRA Special Contribution Fund, because the Properties do impart a substantial public benefit. Upon review of the whole record, the district court affirmed the Board's findings. We address each part of the NRA Special Contribution Fund test below.

A. Direct, Immediate, Primary, and Substantial Use of the Properties

{11} Article VIII, Section 3 of the New Mexico Constitution does not provide that to be exempt, properties need be “exclusively” used for educational purposes. NRA Special Contribution Fund, 1978-NMCA-096, ¶ 34. However, when the facts of a case demonstrate that “the educational function is merely incidental to its activities in pursuance of educational purposes,” then an exemption may be denied. Id. “It is the use of property, not the declared objects and purposes of its owner, which determines the right to exemption.” Albuquerque Lodge, No. 461, 1935-NMSC-022, ¶ 29.

{12} ACC attests to this Court that when an institutional property, like the Properties that are the subject of this case, is used under similar circumstances to that in Albuquerque Alumnae Association, the use meets an institutional need consistent with that institution's purposes. In Albuquerque Alumnae Association, our Supreme Court found that a sorority house on the UNM campus, primarily used as a dormitory for university students, did not constitute as serving an “educational purpose” and therefore was not exempt from taxation under Article VIII, Section 3 of the New Mexico Constitution. 1933-NMSC-011, ¶ 18. While ACC heavily relies on this holding, distinguishing the instant properties from a sorority house, we find the facts before us nearly indistinguishable from those of Albuquerque Alumnae Association and consequently ACC's argument is misplaced.

{13} The property in Albuquerque Alumnae Association was used “as a fraternal home where the active members of the society board, room, study, hold social functions ․ while in attendance at the [u]niversity.” Id. ¶ 2. In the lease agreements between UNM and ACC, each agreed that the Properties were to be used “only for UNM [s]tudent residential housing, parking[,] and ancillary supporting uses, such as (without limitation) a management office, a leasing office, common areas and amenities, recreational rooms, meeting rooms, workout rooms, utility rooms, lobbies, and parking areas, swimming pools[,] and other outdoor amenities.” The Lobo Village property provides eighteen residential buildings, a game/video lounge, a sand volleyball court, theater, a fitness center, as well as an academic support and social gathering space located inside the clubhouse. The Casas del Rio property provides four residential buildings, a fitness center, study group space, communal student lounge areas, and academic support space. Most notably, the Properties combined provide 1,890 beds to be used by UNM students.

{14} While we do not disagree that the construction and use of the Properties enabled UNM to provide needed additional dormitories as well as overdue upgrades to campus facilities, we cannot agree that the record demonstrates that the use of the Properties directly advances the University's educational mission. See id. ¶ 13 (“But we cannot ․ hold that the sorority is an educational institution, or that its occupancy of the premises as a home of refinement and culture and select social activity is an educational use. Its claim must stand or fall upon the part it plays in [u]niversity education.”). Moreover, our review of the whole record proves that the direct, immediate, primary, and substantial use of the properties is residential. The evidence demonstrates that while academic activity organically occurs on the Properties, such activity merely is incidental and secondary to its primary function as dormitories for UNM students. See NRA Special Contribution Fund, 1978-NMCA-096, ¶ 34 (“But when the facts of the case show that the educational function is merely incidental to its activities in pursuance of educational purposes, exemption may be denied.”). Finally, while this Court acknowledges the evidence presented by ACC that students who live on campus “fare better academically” than those who do not, that is a remote and consequential benefit of the Properties’ use, rather than its sole use. See CAVU Co., 2014-NMSC-029, ¶ 17 (stating that an exemption may not be based upon “the remote and consequential benefit derived from the property's use” (alteration, internal quotation marks, and citation omitted).

B. Properties Must Embrace Systematic Instruction

{15} The use of the property must “embrace systematic instruction in any and all branches of learning.” Id. ¶ 27 (alteration, internal quotation marks, and citation omitted). Systematic instruction “requires an ordered, methodical, structured, and regular learning opportunity.” Georgia O'Keeffe Museum, 2003-NMCA-003, ¶ 57. This Court has stated that “matters of education are not restricted to academic curricula or to ivy covered halls.” NRA Special Contribution Fund, 1978-NMCA-096, ¶ 26 (internal quotation marks and citation omitted).

{16} The question presented before us in the second part of the NRA Special Contribution Fund analysis is whether the Properties embrace education through their use and if such use ultimately furthers an educational purpose for UNM students. See CAVU Co., 2014-NMSC-029, ¶ 29. From our review of the record, the only evidence presented by ACC to satisfy the second part of the NRA Special Contribution Fund test rests on an affidavit from Dr. Chris Heasley, a professor in the Department of Educational Leadership and Counseling at Saint Joseph's University. But in his affidavit, Dr. Heasley provided no evidence to support his contentions that the Properties embrace systematic instruction. Nor did his affidavit support that the Properties further an educational purpose for UNM students. Just as the district court noted in its memorandum and order, Dr. Heasley's affidavit did not “identify ordered, methodical, structured[,] and regular learning opportunities on the Properties or otherwise detail how systematic instruction takes place.” We agree.

{17} Dr. Heasley stated that “the diverse offerings and facilities at [the Properties] promotes mental, moral, and physical education” and “[u]nlike off-campus, unaffiliated and non[ ]academic use properties[,] which house some [UNM] students, [the Properties] require affiliation/enrollment with the university. Maintaining all units filled by enrolled college students, provides an academic homogeneous community in which students can and will interact with peers both socially and academically.” This Court has emphasized the importance of reading the language of the tax exemption that “neither favors nor prejudices the taxpayer or the state,” but rather we should “apply a common sense construction.” Georgia O'Keeffe Museum, 2003-NMCA-003, ¶¶ 43-44.

{18} Dr. Heasley's logic regarding systematic instruction suggested a scenario that defeats the purpose of the tax exemption and opens a door for seemingly “standardless property tax exemption determinations.” See id. ¶ 45 (“Too broad a standard means no standard. Without a relatively narrow standard governing the educational purposes exemption, subjective ad hoc decision-making can become the rule, making an objective principled process the exception.”). This Court's adoption of the very broad standard suggested by Dr. Heasley's rationale would undermine the efficacy of taxation to our local governments. See id. ¶ 39.

{19} This Court has stated that the “scope of tax exemption has broadened so that exempt organizations tend to grow wealthier ․ [s]uch increased exemptions may create a serious problem because a diminished tax base lessens the amount available to meet governmental costs.” Id. (internal quotation marks and citation omitted). Further, Dr. Heasley's reasoning implied that a privately owned residential building on campus that requires all tenants to be UNM students, provides spaces for physical activity, and offers spaces that promote social gathering and student-led activities should be tax exempt because such would embrace systematic instruction. This logic implies that fraternity and sorority houses on the UNM campus should too be tax exempt, which would be contrary to the ruling in Albuquerque Alumnae Association. See 1933-NMSC-011, ¶¶ 2, 26 (Concluding that a sorority chapter house at UNM, where active members “board, room, study, hold social functions, and practice the principles of the society while in attendance at the [u]niversity” was not property tax exempt.). To that end, a scenario with identical facts to the ones presented before us would not warrant an opposite outcome.

{20} Based upon Dr. Heasley's affidavit, we remain unconvinced by the evidence presented to support the satisfaction of the second part of the NRA Special Contribution Fund analysis. Because it is the only source of evidence used by ACC to support the second part of the NRA Special Contribution Fund analysis, we find that there was substantial evidence for the Board to find that the Properties do not embrace systematic instruction.

C. Properties Must Create a Substantial Public Benefit

{21} Although we need not do so given our conclusion thus far as to the character of the Properties under the applicable educational use exemption analysis, we briefly address the third part of the NRA Special Contribution Fund analysis. See 1978-NMCA-096, ¶ 36. “[A]ll property should bear its share of the cost of government. Property which is exempt from taxation does not share in the burden. Therefore, in exchange for its exempt status, such property must confer a substitute substantial benefit on the public.” Id. ¶ 38. A “substantial public benefit” must be “derived” from the use of a property. Id. ¶¶ 35-36. “[S]ubstantial public benefit” means “a benefit of real worth and importance to an indefinite class of persons who are a part of the public, which benefit comes to these persons from the use of property.” CAVU Co., 2014-NMSC-029, ¶ 31 (alteration, internal quotation marks, and citation omitted). Here, we consider whether the derived use of the Properties confers a substantial public benefit.

{22} Just as the Board and the district court concluded that the use of the Properties imparted a substantial public benefit, we conclude the same. It is undisputed by both parties that prior to the construction of the Properties; UNM needed improved housing for students. Therefore, the use of the Properties imparts a substantial public benefit because UNM students are now provided with improved and high-quality housing.

{23} Nonetheless, based on our review of the record, we determine the district court was correct that the Properties fail the former two parts of the three-part test established in NRA Special Contribution Fund, consequently deeming the Properties not exempt under Article VIII, Section 3 of the New Mexico Constitution. See 1978-NMCA-096, ¶¶ 20-45.

III. Property Tax Years 2012-2020

{24} Although we have addressed the sole issue in this case and concluded that the Properties are not exempt from taxation under Article VIII, Section 3 of the New Mexico Constitution, we next address ACC's argument that the Assessor is equitably estopped from requiring ACC to pay back taxes for the years it had not applied for the exemption. ACC asserts that it was never informed by the Assessor that either UNM or ACC would have to apply for this exemption, nor did the Assessor send a notice of valuation for the properties.

{25} “Property is presumed to be subject to taxation. It is the taxpayer's burden to claim, apply for, and prove an exemption.” Georgia O'Keeffe Museum, 2003-NMCA-003, ¶ 32 (citation omitted). All property with a taxable situs in New Mexico is subject to valuation for property tax purposes. NMSA 1978, § 7-36-7(A) (2008). The law does not require “any specific investigation by an assessor when considering tax application for an exemption.” Georgia O'Keeffe Museum, 2003-NMCA-003, ¶ 32.

{26} ACC's argument regarding the application for tax exemption, or lack thereof, for the tax years of 2012-2020 is unsupported. ACC ignores the fact that it is the burden of the taxpayer “to claim, apply for, and prove an exemption.” Id. Despite its communications with the Assessor, as a nongovernmental entity ACC was required to report the Properties to the Assessor's office and apply for the exemption. See NMSA 1978, § 7-38-17(B) (2025) (“Other exemptions of real property ․ for nongovernmental entities shall be claimed in order to be allowed.”). Moreover, ACC's reliance on its brief communications with the Assessor before the completion of the Properties does not negate the findings by the Assessor or the Board following the valuation. See Georgia O'Keeffe Museum, 2003-NMCA-003, ¶ 34 (“While it might be good practice for an assessor to perform a field investigation involving a tour of the property and to visit with related personnel about education and charitable programs conducted at the property, the failure of an assessor to do so does not invalidate the decision of a valuation protests board after a protest hearing.”).

{27} Finally, even if ACC had applied for the educational use exemption for the tax years of 2012-2020, it still would not have qualified for the reasons stated above. Accordingly, we see no basis for reversal of the district court's order.

IV. The Assessor's Valuation

{28} ACC takes exception to the district court's determination that its challenge to the Assessor's valuation before the Board was unpreserved, and if preserved argues that the valuation was wrongly based on improvements to the Properties and not the value of ACC's leasehold interest. But before the Board, ACC offered no alternative proposed leasehold valuation, failed to identify a statutory provision the Assessor did not or wrongly applied, and fails now to overcome the presumption of correctness of the Assessor's valuation. See Hannahs v. Anderson, 1998-NMCA-152, ¶ 22, 126 N.M. 1, 966 P.2d 168 (“Taxpayers challenging their assessments have the burden of rebutting this presumption [of correctness] by showing that the assessor did not follow the statutory provisions of [The Inspection of Public Records Act (the Act)] or by presenting evidence tending to dispute the factual correctness of the valuation.” (internal quotation marks and citation omitted)). Stated simply, ACC did nothing to demonstrate to the Board that the Assessor's improvement-based valuation was statutorily or factually incorrect and that the valuation should instead have been something altogether different. As authority for its proposition, ACC now points to a separate opinion, partially concurring and partially dissenting, in Cutter Flying Service, Inc. v. Property Tax Department, 1977-NMCA-105, 91 N.M. 215, 572 P.2d 943, along with another opinion of this Court, to argue that which should have been fully pursued before the Board. Agreeing with the district court, we decline to address ACC's assertion that the Assessor's valuation is erroneous because it was not preserved below. See Princeton Place v. N.M. Hum. Servs. Dep't, 2022-NMSC-005, ¶¶ 21-22, 503 P.3d 319.

CONCLUSION

{29} For the reasons stated above, we affirm the district court.

{30} IT IS SO ORDERED.

J. MILES HANISEE, Judge

WE CONCUR: MEGAN P. DUFFY, Judge GERALD E. BACA, Judge