University Sues Washington County

— The University of Arkansas filed a lawsuit Friday against Washington County, Assessor Jeff Williams and Tax Collector David Ruff over taxes paid for real estate property and university-owned equipment at fast food chains and other retailers on campus.

At A Glance

Businesses At The University Of Arkansas

-From about 1915 to 1940, a privately-operated bookstore owned by Charley Stone served as a student union that also served cold drinks. Records show no Washington County taxes were assessed on that business.

-From about 1904 to 1982, the university operated a dairy program that sold milk, butter, cottage cheese and ice cream to students and the public. Tax records show other dairies were taxed, but not the university creamery.

-Since 1947, the university’s Memorial Hall contained a kitchen offering food to students and the public. No property taxes were assessed.

-Since 1973, the university’s bookstore sold cosmetic products and other necessary products for residence hall rooms. Tax records show those items were not taxed by the county prior to recent years.

Source: University of Arkansas lawsuit CV-12-3060

The lawsuit seeks a refund for taxes paid in 2010 and 2011 and also to keep Washington County from taxing the university again.

The Fayetteville School Board meets today and could also vote to become involved in the lawsuit.

Williams last year denied tax exemptions for 45 real estate parcels. He also denied tax exemptions of equipment such as microwaves, fixtures and some merchandise found at outlets including Burger King, Chick-Fil-A and the Clinique Counter at the Razorback Shop.

The lawsuit comes after the university lost its appeal last year through the county’s Equalization Board and County Judge Marilyn Edwards. The board hears appeals from owners who dispute property values and tax assessments by the assessor’s office.

Scott Varady, general counsel for the University of Arkansas, said Wednesday the university’s position remains unchanged from earlier arguments made before the board and Edwards.

The lawsuit claims the university has sovereign immunity from taxation granted by the state Constitution. Other state laws give the university exemption from taxation, according to the lawsuit.

The real estate properties include green space and also rental properties on the edge of the university’s campus. Those houses are for student housing until the university expands to use those property for other purposes, according to the lawsuit.

As a modern university, certain goods and services are provided to students to keep them engaged in higher education, Varady said. These modern goods and services also keep the university competitive with other universities by making the institution attractive to potential students, according to the lawsuit.

A student eating at a fast food chain operated by the university’s food provider is no different than the same student eating in his or her residence hall, according to the lawsuit.

Williams told the Equalization Board last year the tax exemptions for the equipment used to make fast food or to display makeup and other retail items give an unfair advantage to surrounding businesses.

Neither Williams nor the equalization board provided any evidence showing surrounding businesses have been harmed by the campus eateries and retailers, according to the lawsuit.

“I believe it will probably wind up at the Arkansas Supreme Court,” Williams said Wednesday.

Williams said a decision by the Supreme Court could have far-reaching effects in defining the role of any modern university and what tax exempt services it should provide to students.

A case is pending before the Supreme Court brought by the University of Arkansas for Medical Sciences against the Pulaski County assessor, Varady said. The legal argument is basically the same over a piece of taxed land where the medical school wants to build a clinic, he said.

Friday’s lawsuit claims Donald Pederson, vice chancellor for finance and administration, paid taxes last year and in 2011 and also protested the payment. Neither Ruff nor Varady could say Wednesday the exact amount paid in taxes for both years.

The Fayetteville School Board will consider today whether to become involved in the lawsuit to protect its fiscal interest of at least $135,000 in property taxes it would receive if the university is subject to taxes, said Lisa Morestad, chief financial officer. Superintendent Vicki Thomas is expected to recommend the board hire Fayetteville attorney Jack Butt to represent the district.

No hearing has been scheduled nor judge assigned to the case, according to Circuit Judge William Storey’s office.

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