MURPHY, JUSTICE (dissenting).

I believe the decision of the majority grants an unwarranted tax exemption to an agency engaged in a commercial enterprise. The fact that its operation is located on public property should provide it with no immunity.

North Star Research and Development Institute is a commercial agency, operating a research and testing laboratory which provides services not only to those who have contributed to its establishment but also to the public at large. It advertises for business just as any other commercial enterprise. Its business has grown since it was organized in 1963. In 1968, the last year involved in these proceedings, North Star's dollar volume was $1,167,491, and its profits were $48,569. We are vaguely told, however, that it serves the public weal as a nonprofit enterprise and that it bills its customers on a cost-plus basis. This cost does not include, as a part of its overhead, the item of real estate taxes. The majority opinion would hold that that item of cost of North Star's operation should be subsidized by other real estate taxpayers. The amount of the tax for the year 1965 alone is nearly $6,000. I am of the opinion that this is an unwarranted allowance of an unauthorized tax exemption, and I respectfully dissent.

The original issue, as stated in North Star's brief and litigated below, is: "Whether North Star Research and Development Institute, the appellant, is an 'institution of purely public charity' within Section 1 of Article IX of the Minnesota Constitution, and, if it is, whether real property owned by Special School District No. I of the City of Minneapolis and occupied by the Institute under a lease for two years and eleven months is 'public property used exclusively for any public purpose' within the same section and therefore exempt from taxation." The second issue presented is: "Alternatively, whether the Institute's use of the property is 'in connection with a business conducted for profit' so as to subject the Institute to the tax imposed for the privilege of such use by Minn. Stat. § 272.01, subd. 2."

In North Star's answer in these proceedings to enforce payment of real estate taxes, it admitted occupancy under a lease since May 1, 1963, and alleged that, since that time, the real estate has "been occupied and used by the defendant solely for purposes of purely public charity." On appeal to this court, North Star has vigorously contended that it is a "purely public charity"; that its use of the property in question is for a "public purpose"; and, accordingly, that it is entitled to an exemption under Minn. Const. art. 9, § 1. The majority opinion would indicate that there is some merit to the claim that North Star is a "public charity," but it does not decide the case on that issue. The majority would prefer to have the legislature define the term, "purely public charity."

This is contrary to the long line of decisions of this court applying the well-recognized definition of a purely public charity to varying situations as they have arisen. In In re Petition of Junior Achievement of Greater Minneapolis, Inc. v. State, 271 Minn. 385, 390, 135 N.W.2d 881, 885 (1965), we said:

"The legal meaning of the word 'charity' has a broader significance than in common speech and has been expanded in numerous decisions. Charity is broadly defined as a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons 'by bringing their hearts under the influence of education or religion, by relieving their bodies from disease, suffering, or constraint, by assisting them to establish themselves for life, or by erecting or maintaining public buildings or works, or otherwise lessening the burdens of government.' "

This definition was restated in Madonna Towers v. Commr. of Taxation, 283 Minn. 111, 167 N.W.2d 712 (1969), and expresses the general rule followed by the majority of courts. It was followed in our most recent case of State v. United Church Homes, Inc. 292 Minn. 323, 195 N.W.2d 411 (1972).

In its presentation to this court, North Star equated its function with that of a hospital. This line of reasoning was expressed in argument by North Star's counsel as follows:

"I see no difference between going to the hospital to help me with ails of my body and going to a scientific research institute of this sort to get help with respect to other matters that may be equally important to me."

It is obvious, however, that, unlike the commercial service business conducted by North Star, "public hospitals" are exempt from taxation by the express terms of Minn. Const. art. 9, § 1. Hospitals are intended to relieve human suffering, whereas North Star owes its existence to a project which fosters commerce and assists profit-oriented enterprises in an important aspect of their business. While it may be true that North Star has done some work which may have been related to the public good, the fact is that during 1968, the last year covered by the record in these proceedings, 64 percent of its work pertained to industrial contracts. The majority's reason for evading the "purely public charity" issue escapes me. Our decisions on this point are clear and persuasive and necessarily compel a determination that no organization may clothe itself in the trappings of a nonprofit corporation, engage in a purely commercial enterprise, and escape tax liability by contending that what it does is ultimately for the public good because it might create employment and profits.

The decision of the trial judge, who has had a long experience in the area of real estate tax and has made substantial contributions to our law as evidenced in the landmark case of In re Petition of Dulton Realty, Inc. v. State, 270 Minn. 1, 132 N.W.2d 394 (1964), is helpful. In discussing the factual background of the instant case, the trial court noted that in the beginning some of North Star's organizers sought to acquire land which might be made available to industrial plants seeking a location in this area. To accomplish this purpose, they formed Minneapolis Area Development Corporation and acquired a large tract of land in Scott County, the value of which increased tremendously thereafter. The trial court observed:

"The land in Scott County skyrocketed so it increased in value from what they paid for it, which was in the neighborhood of over $710,000.00, to a value of over $5,500,000.00. However, law of assessment holds that the reasonable market value of real estate is determined on its market value at a given date. So it was assessed at $3,500,000.00 because there would not be a market for the entire tract and it was felt by the assessor that it would be worth $5,500,000.00 if sold in smaller parcels. This terrific accession must be accounted for in profits made for the purpose of Federal and State Incomes.

"The incorporators hit on a plan where they could donate their stock to a new corporation and thus evade this stupendous tax, keeping their original investment with a profit of over 250 percent. As their companies showed large profits, this could be taken off as a loss. However, the railroad was operating at a loss, so this would not be advantageous to it. There were others in the corporations that were likewise situated, so they were bought out.

"They could then establish a research company with a basic capital of at least $3,500,000 as assets in the form of this land. They also found a need for such a research company. Some of the companies had a research department of their own but found they were not equipped to carry out a research on some of their special work, while other companies who did not have a research department would have had to have the researching done by out-state companies. This, therefore, was a valuable addition to their venture. They were safe in the question of patents, as under their contract with the North Star they were protected. They paid the same in the nature of donations rather than payment for services rendered.

"North Star showed a loss in operations, in my opinion, because they were getting no income from the land assets that if liquidated would have at least brought in over $150,000.00 per annum. Donations are not considered earnings, so I suppose the donations received on contracts were carried on the books as capital.

"There was not sufficient business in only taking care of their members, so they advertised for other work, sending out at one time 2,500 brochures showing what they were capable of doing. They did research work for the cities, the counties, the State, and the Federal Government. There was not a scintilla of evidence offered showing what was paid to them for this service. It can be inferred that they were paid a reasonable value for this service.

"They did some work on experiments made by the University as to the heart and kidneys. It is common knowledge that grants are given to the professor making such experiments, so isn't it reasonable to assume in the absence of testimony that they were paid for this as well?"

The trial judge correctly noted that, according to common practice and understanding, charity means "that which is given to relieve the needy, any act of help to the needy; almsgiving." The trial court noted that no one in the factual picture before him was poor or impoverished in the broader sense of the term. Citing In re Petition of Junior Achievement of Greater Minneapolis, Inc. v. State, supra, he characterized charity as —

"* * * a gift to be applied consistently with existing laws for the benefit of an indefinite number of persons by providing relief in the form of education or religion, alleviation from physical pain, assistance in life, public buildings or works, or other relief to lessen the burden of government."

The trial court observed that the corporation falls far short of coming within this broad definition. After reviewing all of the significant authorities on the subject, he correctly observed that this case is controlled by Madonna Towers v. Commr. of Taxation, supra, and concluded:

"Taking all of the evidence into consideration, including the background of the activities of the incorporators in the other corporations, most of whom were representatives if not officers of corporations that were served by the North Star, I cannot escape the conclusion that primarily the North Star's purpose was to serve the corporations that the incorporators represented and that the facilities of the North Star were predominantly used for that purpose. The benefits derived were both direct and incidental — incidental in like manner as a chamber of commerce would serve the economic needs by making the territory serviceable to other corporations that might be interested in establishing their business in this region; directly in that some business, which was unable to maintain a research department because of their size and in giving service to large corporations whose research departments were not equipped to carry out special researches. It is quite true that these representatives of business established this research center partly in loyalty to the community and partly for altruistic purposes, but I cannot escape the conclusion that by far the dominating purpose and activities were for the benefits of business and not of charity.

"I do not wish to convey the idea that this endeavor was entered into as a gimmick to evade paying an ad valorem tax, and to evade the payment of a large Federal and State Income tax and to provide credits on profits made in their main endeavor but the results will be the same, especially in an immunity to their present location, but also later when they build and move into the Scott County property.

"This is not a small matter. The suit asks for a tax judgment of close to $6,000.00 for the year 1965. If successful, it will eliminate the payment of an ad valorem and personal property tax in the future. If the exemption was allowed, other taxpayers must pay this amount, not only for the ad valorem and property tax, but also for the services of fire and police protection and other costs not provided for by special assessments. It is for this reason something must be given in return for the loss of this income.

"It has been argued that these services furnished by the North Star are available to any of the public provided they agree to pay for them. However, it appears to me that the dominating service is given to corporations and individual parties for profit and so are given to special classes all of which are at least paid for in directly by the taxpayers as a whole in that they must be assessed more to fill the void created by the exemption.

"It is also suggested that the North Star's form of corporation and purposes are stated to be for charitable purposes and would qualify them as a nonprofit corporation, but, as stated before, this is not sufficient. If I may be excused from using a corny analogy — A bride dressed in white is supposed to signify purity, but it is no guarantee that she is, so a corporation organized as a charity corporation, dressed as one, does not guarantee that it is.

"If there were evidence that all of the services, or even a large part of the services rendered to governmental units were donated by the North Star; if there were evidence that the researches made by the professors of the University of Minnesota were donated by the North Star, it might be inferred that it lessened the burdens of the government in the first instance and in the second it might be inferred that this was charity because it was services donated to humanity to relieve pain and suffering but there is not a scintilla of evidence that anything was donated by the North Star.

"It is argued that the corporations were not the board of directors although its representatives were. It is hard for me to conceive a corporation being an officer or a member of the executive or other boards of the corporations. They must act through their officers and agents."

Although the case was originally tried on the issue of whether or not North Star was "a purely public charity," the trial court fully examined North Star's belated claim that it should be exempt because it was not "a business conducted for profit" within the meaning of Minn. St. 272.01, subd. 2. Had this issue been properly litigated in the court below, we might have a meaningful record. In any event, the trial court's memorandum states:

"The case was tried on the theory that the defendant was entitled to have an exemption upon the grounds that it was an institution of purely public charity (pleaded), and upon the statement made by the defendant's attorney that the subject property was 'public property used exclusively for a public purpose.'

"Where a case is tried on a certain theory, regardless how erroneous that theory is, they are bound by the result unless the party cannot recover under any view of the law."

It is a simple matter to identify North Star as a commercial enterprise. It operates in the same manner as any other commercial business. It has a preferred clientele and receives its business from many of the area's leading industries. Strangely, however, it asserts the right to carry on its business without the obligation to pay real estate taxes. It is difficult to understand, from an examination of the majority opinion, how such a corporation, the creature of those it serves whose motivating purpose is to produce profits, can have a tax-exempt status. The majority contends that this exemption derives from its privileged corporate character and professed altruistic purposes, which are to be found in a confused and chimerical background of real estate transactions, sophisticated Federal tax arrangements, interrelated corporate connections, as well as extravagant proposals and representations — partly fact and partly fiction.

It appears from the majority opinion that because North Star is in form a nonprofit corporation, "members" of which are the regents of the University of Minnesota, and since the state cannot establish that these "members" have received any pecuniary gain from North Star's operations, it must follow that the corporation is not connected with a business conducted for profit. Why the state should have the obligation of establishing that someone in the North Star operation gets a profit is not explained. The burden of proof to establish the right to tax exemption is North Star's. State v. Northwestern Preparatory School, 249 Minn. 552, 83 N.W.2d 242 (1957).

It is contended the regents, who are members of an official body with responsibilities to the University of Minnesota, are also responsible for the administration of North Star. The majority opinion assures us that control of North Star "was placed in the hands of the Board of Regents, an ever-changing body of men and women elected by the State Legislature." The majority tells us that "the contributors gave all control over North Star to the Board of Regents of the University of Minnesota." The majority repeats: "Here the basic controls are in the Board of Regents and a board of directors of some 80 individuals representative of the entire community, including educators, clergymen, and business, professional and labor leaders." The majority opinion does admit that "[w]hile the first members of North Star were individuals serving on the Board of Regents of the University of Minnesota, the record fails to disclose the identity of subsequent members."

As a matter of fact, the regents have no control, nor did they ever have real control, of North Star. They were named members of the corporation for no other purpose than to give North Star the prestige of a relationship with the University of Minnesota. The Board of Regents, in the context of the case before us, was a figurehead which could serve no real purpose. As individuals, regents, if they chose, could perform the nominal or ritualistic function of appointing members of the board of directors from a list of names that we may assume was provided to them. It may be fairly stated that the relationship between the regents and North Star was passive, ambiguous, and without official legal significance. The Board of Regents has no authority to permit a private institution to integrate with the University of Minnesota. At least no one has ventured to suggest that they have. If the members of the Board of Regents lent their names in any way to the organization of North Star, they did so individually in much the same way as other respected individuals and businesses did to endorse the general idea that the research institute could contribute to the constructive economic growth of the area. The pretense that the Board of Regents, as an official body, could commit the University to participation in the control and management of North Star is without substance.

At any rate, we may take judicial notice of the fact that whatever the nature of the relationship between North Star and the Board of Regents may have been, it has since been terminated. According to a statement by the chairman of the Board of Regents, made in January 1972, North Star's connection with the University has been severed. It is not out of place to quote from The Minneapolis Star, January 22, 1972, p. 3A, col. 1, which states in part:

"* * * [I]t was not until 1967 that frequent criticism of secret research in general and the university's tie with North Star began to be heard.

* * * * *

"At a recent meeting of the board of regents, its chairman, Elmer L. Andersen, announced that the university's remaining tie with North Star would be cut. 'Over the years the relationship has been diminishing,' Andersen said. 'No particular purpose seems to be served by continuing it.'

* * * * *

"* * * 'There was just no reason in continuing this tenuous relationship,' [Andersen] said."

The article also quotes John W. Clegg, president of North Star, as saying that, while he was not pleased with the new relationship with the university, it "should not have any great effect Upon us."

If it is conceded that the endorsement and approval of a large number of distinguished citizens is not sufficient to accord North Star special privilege, and if the purported ties with the University of Minnesota are correctly appraised, there is little left to give North Star the character of an institution which is entitled to a real estate tax exemption. Nevertheless, the majority falls back upon the argument, presented by defendant, which seems to be that exemption is derived from the nature of its corporate character. Great stress is laid upon North Star's character as a nonprofit corporation organized pursuant to the Minnesota Nonprofit Corporation Act, Minn. St. c. 317. The majority seems to assume that because North Star was organized under c. 317, it has acquired the immunity. Here, again, North Star fails to meet its burden of proof. There is nothing in the provisions of c. 317 to warrant such a conclusion. If exemption exists, it must come from the constitution or statutes. The declared objects of a corporation are not controlling in determining whether or not its property is exempt. It is well established that exemption is determined by the activities actually carried on by the corporation. Frank Lloyd Wright Foundation v. Town of Wyoming, 267 Wis. 599, 66 N.W.2d 642 (1954); 84 C.J.S., Taxation, § 282b (1). In the case of the Experiment in International Living, Inc. v. Town of Brattleboro, 127 Vt. 41, 47, 238 A.2d 782, 786 (1968), the Supreme Court of Vermont stated:

"The fact that Experiment has stated in its Articles of Association that it is a charitable organization, or that its income is exempt from taxation under the United States Code has no applicability to its claim that its real and personal property in Brattleboro is tax exempt as 'used for public * * * or charitable uses.' What is determinative of such claim is the direct and immediate use of the property itself. The test is not the ownership, but the use."

The Minnesota Nonprofit Corporation Act is procedural in nature and, as stated in 20A M.S.A. 314, Committee Notes and Comments: "It is not primarily a code of substantive law." In his article in 22 Bench and Bar of Minn., Jan. 1965, p. 33, entitled Tiptoeing Along the Non-Profit Corporation Path, Walter N. Trenerry states:

"That pearl of great price [tax exemption] has drawn many Minnesota lawyers into the show-room of Minnesota's Non-Profit Corporation Code — where they should be grateful to find on the counter infinite entities shaped to that One Great End."

The manner in which the act's provisions may be employed to create a nonprofit corporation in the image of charity and public purpose is limited only by the resourcefulness and imagination of its incorporators. This is evidenced in the case before us by the gratuitous efforts of the incorporators to acquire the image of a public institution by association with the University of Minnesota, which would presumably identify it as having a public purpose and, at the same time, secure the advantages which might be gained from the availability of personnel and facilities of a tax-supported educational institution.

But to return to North Star's claim that it is exempt under Minn. St. 272.01, subd. 2, North Star relies on the fact that it is a nonprofit corporation to support its claim that the property it occupies is not used in connection with a business conducted for profit. Even though its work product provides the industries which support it with valuable services, including patents, formulas, labor-saving devices, and marketing and merchandising techniques and practices, and even though it provides valuable facilities for its sponsors' benefit, North Star claims, nevertheless, that it is a charitable nonprofit organization. As we have already noted, it would have been preferable had North Star taken the trouble to develop this issue in the court below. As the trial court stated in his memorandum:

"There was no testimony as to the research that was actually made or as to the time or expense of making such research, excepting as to whom the services were rendered."

The trial court explained that the meaning of the word "profit" was not limited to the difference between returns and expenditures and observed that the term means "to reap an advantage, financial or otherwise." Webster's New International Dictionary (2 ed. 1947), p. 1976, defines it as "[a]ccession of good; valuable results; useful consequences; avail; gain; as, an office of profit." It may also mean "[a] saving of expense which would otherwise necessarily be incurred." State ex rel. Russell v. Sweeney, 153 Ohio St. 66, 72, 91 N.E.2d 13, 16, 16 A.L.R. 2d 1337, 1342 (1950); 34 Wd. Phr. (Perm. ed.) p. 404.

Whether a business is one conducted for profit is a question of fact to be determined on the basis of the record. The material findings are set forth as follows:

"The Court finds that the clients engaging the services of North Star for all of the projects of research and development paid to North Star the full fair and reasonable value of such services on the same basis as if such research had been conducted by any other organization.

"North Star also conducted research and development programs in the following areas:

"1. A project which developed an automatic recording of the dimensions of the client's packaged products.

"2. A project which resulted in a plant for the production of corn sugar in Western Minnesota, with a similar plant projected for one of the Dakotas.

"3. A project which developed the processing and conversion of waste materials from food industries into animal feed. Such project being jointly sponsored by the Water Pollution Administration of the Federal Government and the Green Giant Company, Ralston Purina, General Mills and Central Soya, all profit-making corporations operating within the State of Minnesota.

"4. A project to develop an ultra-sonic whistle to be utilized by the Cargill Corporation [sic] for the purposes of controlling rodents which were on or about their grain storage and processing facilities.

"5. A project for the Dayton Company making a study of modern billing procedures.

"6. A project making an analysis of sales for an industrial client who had numerous sales outlets.

"7. A project involving the determination of improved methods for the analysis of statistical data.

"8. Other projects as identified by the partial list of industrial clients set forth on Defendant's Exhibit 6 as follows:

Bemis Company, Inc.

The Dayton Company

The Donaldson Company, Inc.

First Bank Stock Corporation

General Mills, Inc.

Gray Company, Inc.

Green Giant Company

Honeymead Products Company

Honeywell, Inc.

International Business Machines Corporation

Minneapolis Star and Tribune Company

Minnesota Valley Natural Gas Company

Munsingwear, Inc.

Otter Tail Power Company

The Peavey Company

The Pillsbury Company

Rosemount Engineering Company

St. Paul Fire and Marine Insurance Company

Superior Plating, Inc.

Torit Corporation

Transistor Electronics Corporation

Western Life Insurance Company

"Again, all clients paid to North Star, pursuant to contract, an agreed reasonable price for the services rendered by North Star, such price being the same as would be paid for such services performed by any research institute.

"The Court finds that the activities of North Star in no way, material to the issues in this case, lessened the burdens of government.

"The Court finds that with reference to the total volume of contracts entered into by North Star for the various research and development projects for the years 1963 through 1968, and as said contracts are broken down between government sponsors, industrial sponsors and others, such contracts and their percentages of the total are as follows:

Percentage of Industrial Total Govt. Industrial Other Contracts Year Contracts Contracts Contracts Contracts to Total — — --------- --------- ---------- --------- ------------- 1963 6 1 3 2 50% 1964 34 2 22 10 64% 1965 40 8 23 9 56% 1966 58 13 33 12 56% 1967 52 13 30 9 57% 1968 67 12 43 12 64% --- --- --- --- Total 257 49 154 54 Average 59.9%

"That the contracts for research and development conducted by North Star were not conducted for charitable purposes but were conducted for the benefit of the contracting sponsors of such projects and were paid for in full by such contracting sponsors, both governmental, industrial and others.

"The Court finds that parties or members of North Star who entered into contracts with North Star for various projects of research and development paid the same rate as any others who would similarly contract with North Star and that the member parties received no special price consideration on their contracts.

* * * * *

"North Star maintained a mailing list of 2500 companies, organizations, and governmental units and that North Star solicited for research and development contracts by mailing, advertising and other means.

"The Court finds that when North Star was involved in a contract of research or development and a patentable process, product or idea was developed as a result of such research, that in such event, the patent rights belonged to the contracting party and not to North Star and that such agreement concerning patent rights was a part of the contract between the sponsor of the project and North Star. The Court further finds that North Star agreed with its clients that it, North Star, would proceed to obtain the patent rights on behalf of the client if the client so desired, for an additional consideration paid by the client to North Star.

"The Court finds that within the general metropolitan area, the following local and industrial and commercial organizations, among others, maintained their own research and development laboratories, which in some instances, such local research labs were not equipped for a particular type of research and accordingly, such research was contracted for with North Star:

Minneapolis Honeywell

Archer-Daniels-Midland Company

Control Data

Economic Laboratories, Inc.

The Pillsbury Company

Minnesota Mining and Manufacturing Company [sic] General Mills, Inc.

* * * * *

"That one of the dominant purposes of North Star Research and Development Institute was to attract new industries to the area by stimulating the economy and trade of the area and also to assist business.

"The Court finds that North Star Research and Development Institute is not an institution of purely public charity within the meaning of Article IX, Section 1, of the Constitution for the State of Minnesota or Minnesota Statutes, Section 272.02.

"The Court further finds that the property herein was not utilized as an academy, college, university or seminary of learning within the meaning of Article IX, Section 1, of the Constitution for the State of Minnesota or Minnesota Statutes, Section 272.02.

"The Court finds that the subject property of this case had been abandoned by the Minneapolis School District as a public school house for 24 years immediately preceding the date of the trial of this case and therefore is not entitled to exemption under Article IX, Section 1 of the Constitution for the State of Minnesota or Minnesota Statutes, Section 272.02, as the same had lost its identity as a public school house.

"The Court finds that the Northwestern National Bank of Minneapolis, the First National Bank of Minneapolis and the First National Bank of Saint Paul, all being directors of North Star acting by and through officers of said banking institutions, extended a line of credit to North Star in an amount of $600,000 and that North Star had utilized such credit by loans from said banking institutions to the extent of $403,000. Such loans bear interest to be paid by North Star amounting to one-half of one percent over and above the prime interest rate which is charged by the said banking institutions from time to time.

"The Court finds that the officers of North Star did not receive any direct remuneration for their services as such officers.

"The Court finds that North Star was considered by the Internal Revenue Department for the United States Government and the Income Tax Division of the Department of Taxation for the State of Minnesota as an organization exempt from the payment of income taxes, both Federal and State, and also that contributions made to North Star were eligible as contributions to a qualified charity for income tax purposes."

In State ex rel. Troy v. Lumbermen's Clinic, 186 Wn. 384, 394, 58 P.2d 812, 816 (1936), the court, in defining the word "profit," said:

"Profit does not necessarily mean a direct return by way of dividends, interest, capital account or salaries. A saving of expense which would otherwise necessarily be incurred is also a profit to the person benefited. If respondent renders to its incorporators or members, or to businesses in which they are interested and in whose profits they share, a service at a cost lower than that which would otherwise be paid for such service, then respondent's operations result in a profit to its members."

We also have the benefit of the trial court's discussion of this issue. The court quoted the following portions of Minn. St. 272.01, subd. 2:

"When any real or personal property which for any reason is exempt from ad valorem taxes, and taxes in lieu thereof, is leased, loaned or otherwise made available and used by a private individual, association or corporation in connection with a business conducted for profit * * * there shall be imposed a tax, for the privilege of so using or possessing such real or personal property, in the same amount and to the same extent as though the lessee or user was the owner of such property."

The court went on to observe:

"This subject property is public property because it was and is owned by a unit of government. It was leased to the North Star for two years and 11 months for a consideration of $52,500.00 with a further provision if the property became subject to ad valorem real estate taxes, the lessee was to pay the sum of taxes in addition thereto.

"The question is as to whether or not this property was leased 'in connection with a business conducted for profit.' It will be noted that the statute reads 'conducted for profit' and not that the business 'was conducted at a profit.' The gist of this is not whether the corporation made a profit. It will also be noted that the statute reads 'connected with a business conducted for profit.' It is not too far out of line to hold that the North Star was connected with many businesses that were conducted for profit. While it is true that the many large businesses were not named as incorporators, their agents and representatives were, and it was to the interest of their companies that this arrangement was made.

"In the business world profit means the difference between material sold and the expense or overhead expense of selling the product, but generally the term means 'to reap an advantage, financial or otherwise.' There are many instances where the same stockholders own other companies that give supplemental services to the other corporation. They may operate at a loss, but for many reasons the owner is of the opinion that the loss is justified because of the benefit to the other business. It would be an easy matter to evade the purpose of this statute by having such an arrangement. It is my opinion, therefore, that the legislature had in mind and it was their intent, when they used the words 'operated at [conducted for] a profit', they meant the general term 'to reap an advantage financial or otherwise.' "

The majority feels as well that compliance with the literal provisions of Minn. St. 273.19, subd. 1, gives immunity to North Star. This statute merely says that when property is "held under a lease for a term of three or more years, and not taxable under section 272.01, subdivision 2, * * * [it] shall be considered, for all purposes of taxation, as the property of the person so holding the same." Even though North Star has occupied the premises for 9 years or more, the majority says it cannot be exposed to real estate tax liability because it has leased the property for consecutive terms of less than 3 years. When the state argues that the series of leases for stated terms of less than 3 years is a contrivance to avoid and evade the intent of the statute, North Star assumes an attitude of injured innocence and argues that it has done no more than it is permitted to do under the law. Here, again, as with every issue in this matter, North Star asks us to ignore the fact that it has made no attempt to meet its burden of proof, and it seems to feel that its expressed purpose and eminent endorsements are sufficient for it to prevail.

It seems to me that this is the ultimate in reliance on form over substance. Clearly, this statute was intended to permit a governmental unit to lease vacant property on a temporary basis without the necessity of encumbering the transaction with tax procedures. It was never intended to permit a lessee of government property to use and occupy it year after year, as has been done here, and to avoid the intended purpose of § 273.19, subd. 1, through the contrivance of short-term leases. This device is consistent with the legal architecture of North Star, the design of which is to structure a business operation beneath a facade which gives it the appearance of a tax-exempt institution although, in reality, it is no such thing. Here, again, the trial court has correctly appraised the situation by saying in his memorandum:

"In order to evade this provision a lease was made between the school and the North Star for a period of two years and 11 months at $1500 per month. If the North Star gave up these premises at the end of this period, it would not be subject to a tax under this provision for the reason that it did not lease the property for three years or more.

"A written lease was entered into between the School District and the North Star leasing these premises to the North Star for a period of two years and 11 months. It is unescapable that this was done under the assumption that M.S.A. 273.19 applied and that if the lease was for less than 3 years, the North Star would be exempt from paying taxes. There must have been some feeling on the part of the school board that there might be a possibility that the Court would not go along with this theory as there was a provision in the lease that 'In the event said premises shall for any reason become subject to ad valorem real estate taxes, the lessee shall pay the amount of said taxes in addition to the rentals hereinabove provided. ['] This lease was entered into on April 9, 1963 so that said lease did not expire until March 9, 1966. On the 21st day of February, 1966, another lease was entered into between the parties on identical terms of $1,500.00 per month rental, but this lease was for two years and 10 months. I understand that before this lease expired, a third lease was entered into between the same parties under identical terms except this third lease was for two years and eight months. As a result of these three leases, the North Star has held this property as lessors for a period of over five years. What was the intention of the legislature in making the three-year provision? Was it for the purpose that public property could be leased to private individuals or corporations for a period of less than three years without being subject to pay an ad valorem tax? If, however, the property was held for three years or longer, the lessee would not be immune from paying such a tax. Was it the intent of the legislature that it would assist the public unit in procuring a renter for a short time but did not intend to continue the immunity forever providing the same tenant and the governmental unit made their leases in periods not for three years or over. It seems to me that to make sense, such was the intention of the legislature and that the statute should be construed that anyone holding the property for a period of three years or over by any lease would not be exempt. What cannot be done by direct method should not be allowed by indirect."

The majority, strangely, seems to find some support for the result it has reached by citing Canon 7, A. B. A. Code of Professional Responsibility, and explains that while North Star's conduct may have been an "avoidance" of taxes, it was not an "evasion" which could be considered legally or morally culpable. There has been no contention that North Star did not have the right to conduct its activities in a manner which resulted in the least tax liability. The trial court made no such suggestion, nor does this writer. The trial court's position was, and this writer agrees with him, that North Star should pay its just real estate taxes and should not expect to be subsidized by other real estate property owners.

Moreover, it seems to me that the majority has failed to consider basic principles of law which should guide a court in construing statutes relating to tax exemption.

Efforts to obtain tax exemption are viewed strictly, public policy dictating that doubts be resolved in favor of the state and against the party seeking special treatment. In Camping and Education Foundation v. State, 282 Minn. 245, 250, 164 N.W.2d 369, 372 (1969), Mr. Justice Nelson stated:

"There are certain general rules which have been long established relating to statutes and constitutional provisions providing for exemption from taxes. The basis for all tax exemption is the accomplishment of some public purpose as opposed to favoring of particular persons or corporations at the expense of the taxpayers generally. State v. Board of Foreign Missions of Augustana Synod, 221 Minn. 536, 22 N.W.2d 642. Accord, State v. Ritschel, 220 Minn. 578, 20 N.W.2d 673, 168 A.L.R. 274; State v. Northwestern Preparatory School, 249 Minn. 552, 83 N.W.2d 242; State v. Northwestern Vocational Institute, Inc. 232 Minn. 377, 45 N.W.2d 653.

"One of the rules that is well established is that taxation is the rule and exemption is an exception in derogation of equal rights. Therefore, there is a presumption that all property is taxable. In consequence, the burden of proof is on the one seeking the exemption to establish that he is entitled to the exemption. See, In re Junior Achievement of Greater Minneapolis, Inc. 271 Minn. 385, 135 N.W.2d 881; Christian Business Men's Committee v. State, 228 Minn. 549, 38 N.W.2d 803; American Ry. Exp. Co. v. Holm, 169 Minn. 323, 211 N.W. 467.

"Another long-established rule is that exemption provisions are to be strictly construed. See, Ramaley v. City of St. Paul, 226 Minn. 406, 33 N.W.2d 19. See, also, St. Peter's Church v. County of Scott, 12 Minn. 280 (395); County of Hennepin v. Bell, 43 Minn. 344, 45 N.W. 615; County of Ramsey v. Church of the Good Shepherd, 45 Minn. 229, 47 N.W. 783, 11 A.L.R. 175."

The trial court correctly saw the transparent character of North Star. The realities of this case establish that North Star is actually an agent and arm of its sponsors, who derive the benefits of its activities in the form of reduced capital cost and increased competitive position through improved access to research and development resources. These benefits, which conclusively establish use of the property in connection with a business conducted for profit, as well as other reasons herein discussed, should require affirmance.

For the foregoing reasons, I respectfully dissent.

KNUTSON, CHIEF JUSTICE (dissenting).

I agree with the conclusion reached by the dissent of Mr. Justice Murphy. I have no difficulty in concluding that this institute is not a purely public charity. I find more difficulty in holding that the institute does not come within the provisions of Minn. St. 273.19, subd. 1, but I am persuaded that the dissent is correct on this issue also. Obviously, the statute was intended to permit short-term leases of public property to avoid payment of taxes. But when the lease is made, as was done here, for 2 years 11 months, with subsequent leases being made of similar duration, it seems to me that the purpose of the statute has been completely ignored. I think that when a lease of this kind is followed by subsequent leases extending in the aggregate beyond the statutory period, the property should become taxable, if not ab initio, at least from the time of the subsequent lease periods. Otherwise, the statute is used as a device for evading the payment of taxes when every intention was to lease the property for more than 3 years. I cannot believe that the legislature intended that property could go tax-free simply by drafting a lease for slightly less than 3 years and then continually making subsequent leases for similar periods. If the statute can be so construed, I think it should be amended by the legislature so that when a lease for less than 3 years is followed by subsequent leases whereby the property is held for more than 3 years, it should become taxable at some point in time. I therefore agree with the dissent that in this case the statute was not used as contemplated by the legislature.

This case has been a troublesome one from the beginning. We have heard oral arguments on it twice and have had many conferences among members of the court. I am convinced that careful consideration has been given to the case by all of us even though we are not in agreement.

MR. JUSTICE TODD and MR. JUSTICE MacLAUGHLIN, not having been members of this court at the time of the argument and submission, took no part in the consideration or decision of this case.