County assessor says private country clubs have an ‘unfair tax advantage’

Private country clubs in St. Louis County are paying lower taxes than their public counterparts, and County Assessor Jake Zimmerman thinks it’s unfair.

Zimmerman doesn’t have a problem with the clubs being classified as not-for-profit.

“You can be a not-for-profit without being a charity,” said Zimmerman. “If you start the Loyal Order of Moose, that’s a not-for-profit as a private club whether you have a charitable purpose or not. The separate question, though, is whether you’re entitled to special tax treatment on your property.”

Under Missouri Law, golf courses – meaning the land that makes up the fairways and putting greens – are considered residential and taxed accordingly. However, golf course amenities – pro shops, restaurants and clubhouses – are taxed as commercial property, unless these amenities are part of a private club, in which case they are taxed as residential property.

At issue, Zimmerman said, is a vague Missouri law requiring that, for tax purposes, property be classified according to its immediate most suitable economic use should the property be sold. The assessor’s office maintains that the “immediate most suitable economic use” for a private golf club is a public golf course. Hence, the amenities on private golf clubs should be taxed like those on public golf courses: as commercial property.

In 2007, a group representing private country clubs throughout the county filed a lawsuit in the Missouri Court of Appeals against the State Tax Commission arguing that private clubs should be taxed as residential, not commercial. Citing zoning restrictions and existing indentures, they argued, and the court agreed, that the immediate most suitable economic use for any of the clubs should they sell the property would be as residential home sites.

“What the court ultimately held was that we’re not allowed to look at what it’s doing right now, because it’s a not-for-profit organization. Instead, we have to take a guess at what it hypothetically would be if it weren’t a country club,” Zimmerman explained.

Zimmerman said that unless the assessor’s office can prove “beyond a shadow of a doubt” that if a private country club closed down tomorrow it would be turned into a public golf course, it must be treated as residential property.

Zimmerman bemoaned the “fundamental unfairness” in how the tax code treats a country club versus how it treats “a regular old golf course” that both have a restaurant.

“The country club gets a tax break and gets to pretend that a restaurant is a house, while the regular golf course does not get to engage in that fiction. And that’s what’s not fair,” said Zimmerman.

The result of this difference in treatment, according to Zimmerman’s calculations, is almost $800,000 in lost revenue to St. Louis County each year, money that could benefit local fire and school districts.

The Parkway School District, for example, is home to three prestigious clubs: Bellerive, Westwood and Meadowbrook. If these private clubs were taxed in the same manner as public golf courses, Parkway would gain its share (about 56 percent) of the additional $218,850 in taxes these clubs would be paying. Zimmerman might be the district’s best hope at changing the tax classification in its favor.

“Ultimately, I think it will take an act of legislation to fix this problem, and that’s something I intend to advocate for,” he said.

Zimmerman said he plans to argue his case before the legislators when they return to Jefferson City in January.