Tax commissioner wrong to deny Moose, Court rules

CHARLESTON - West Virginia's tax commissioner abused the Martinsburg Moose Lodge by denying it a license to raise money for charity with raffles, the Supreme Court of Appeals has ruled.

The Justices took the unusual step of issuing an opinion even though the lodge had regained its license and the case was moot, or pointless.

They wrote that they decided the case so the tax commissioner would not continue to incorrectly interpret and misapply rules on raffles.

They reversed a decision of Berkeley County Circuit Judge David Sanders, who in 2004 upheld the denial of the license.

In 1999, the State Tax Department proposed a six month suspension because the lodge allegedly spent raffle proceeds on internal operations in violation of state law.

Under threat of criminal prosecution the lodge waived a hearing, admitted violations and agreed to contribute $81,018 from general funds for charity or public service.

The lodge did not make the payment.

In 2001 revenue agents alleged that the lodge possessed raffle games for which it could not produce invoices.

The tax commissioner declared a default on the agreement and suspended the license for six months.

Two days before Christmas 2001, agents witnessed raffle games. The tax commissioner ordered revocation of the license and replacement of the lodge's officers.

Instead of carrying out the order, the tax commissioner withdrew it and denied the lodge's application to renew the license for 2002.

The lodge protested. In 2003 the tax commissioner upheld the denial.

The lodge took the case to circuit court, where Sanders declared the denial valid.

The lodge asked the West Virginia Supreme Court of Appeals to reverse Sanders.

For the lodge, Michael Caryl of Martinsburg and Heather Harlan of Charleston argued that the tax commissioner allowed military organizations to spend raffle proceeds on internal operations.

Attorney General Darrell McGraw argued for the tax commissioner that the issue was moot because the lodge regained its license.

Chief Justice Robin Davis and Justices Joseph Albright, Brent Benjamin and Spike Maynard agreed that the tax commissioner interpreted the rule on use of proceeds much too narrowly.

They wrote that because the lodge signed the agreement of 1999 under coercion, the tax commissioner could not rely on the agreement in denying the license.

They quoted state law allowing groups to spend up to a fourth of their proceeds on "reasonable, necessary and actual expenses incurred in connection with the conduct of raffle occasions…"

They wrote that under the law these expenses can include rent, custodial services, equipment, supplies, advertising, security and child care.

They wrote that the tax commissioner "seems to have ignored the aforesaid sections of the Code…"

They wrote that the tax commissioner may have also ignored state law that allows more lenient tax treatment for charitable or public service activity.

They wrote that the lodge donated to United Way, senior services, the Alzheimer's Association, youth awareness, Girl Scouts, Boy Scouts, American Cancer Society and Martinsburg firefighters.

They wrote, "To restrict the Moose Lodge's donations to these and the countless other community related programs would be devastating to the entire region."

Justice Larry Starcher dissented and reserved the right to file a dissenting opinion.