Conn. Constitution May Protect Yale from Taxation

The latest idea to raise revenue for the beleaguered Connecticut state budget may actually require changing the state Constitution, according to the leading expert on state constitutional matters. Legislators may be stopped before they have a chance to drop the amusement game claw into Yale’s substantial pile of money.

Article Eight, Sec. 3 of the Connecticut Constitution states simply, “The charter of Yale College, as modified by agreement with the corporation thereof, in pursuance of an act of the general assembly, passed in May, 1792, is hereby confirmed.” That one sentence may protect Yale from taxation by the state, an idea now being bandied about by some state legislators to solve the fubar budget situation.

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Yale University, New Haven, Conn.

Hartford Attorney Wesley W. Horton wrote the book on the state Constitution—literally. He is the author of The Connecticut State Constitution, the only in-depth study of each provision of the Connecticut Constitution. He says while the question of the state taxing Yale has not been directly tested in court, past cases confirm Yale can’t be taxed by the city of New Haven. So by extension, the state would be unable to as well.

“It really comes down to the definition of ‘is hereby confirmed.’ In a nearly 100-year old case, Corbin v. Baldwin, the [state] Supreme Court, in a 3 – 2 decision, ruled Yale was not subject to the inheritance tax,” Horton said. “The exemption issue was discussed again in cases in 1899 and 1975. The conclusions were: Yale is exempt.”

Grabbing some big-time cash from Yale’s massive endowment is being floated as at least part of the solution to a $220 million deficit facing the state this year and estimated $900 million deficit in 2017. It gets even uglier in the “out years.”

It’s not like Yale can’t afford to spare the dough—it has an endowment of $26.5 billion—but don’t expect the Ivies to cough it up willingly. The proposed bill would tax schools with an endowment of $10 billion or more. Yale is the only institution that would qualify. It seems from what Horton is saying, there is little chance such a law would be constitutional.

Also trying to get in on the “Tax Yale” action is the city of New Haven. Mayor Toni Harp, a former co-chair of the legislature’s Appropriations Committee, is backing a proposal to tax Yale’s commercial real estate as opposed to its educational property. Yale is already shaking its collective head on that one as well.

Yale is the only educational institution mentioned in the state Constitution. So at the very least, the legislature and/or the city of New Haven can expect some pretty well-financed lawsuits.

Horton says the state will have a high burden to meet. “The exact issue hasn’t been decided. But there are cases that decided Yale can’t be taxed.”

The General Assembly could also try to amend the Constitution which is no easy feat. Three-fourths of both the House and Senate must pass a resolution submitting the amendment. “If such a joint resolution fails to win a two-thirds vote in either house but obtains a majority, it must receive a majority in each house during the next legislative session before being submitted to the voters in the next even-numbered year’s general election. An amendment that wins a majority of the votes cast in the referendum is adopted.” Yeah, um, not likely.