What factors will the court consider to determine whether a non-profit institution is exempt from taxation under the California Charities Act?

In a perceptive review of the case law, the court in Peninsula Covenant Church v. County of San Mateo (1979) 94 Cal.App.3d 382, 399, 156 Cal.Rptr. 431, concludes, "From these decisions, two dependent variables emerge as particularly important to the determination of the court: the nature of the use of property, and the degree to which the activity is open to the community as a whole. If the use is one which is deemed particularly necessary to the welfare of the community or is a service which the government otherwise would be compelled to provide for the community, such as a hospital or elementary school, it may be considered a charitable purpose even though only a small number of people are directly benefited. [Citations omitted.] If, on the other hand, the activity serves educational or humanitarian goals and is open to all or virtually all of the community, it may be exempt even though it is not a necessary activity in the same sense as a hospital...." We read the passage as saying that the two variables are to some extent dependent. If an institution serves an interest historically regarded as being closely tied to the public welfare, the courts may require no [7 Cal.App.4th 717] more than indirect public benefit, such as possible tax savings. But if the institution's purpose has received relatively little recognition in judicial decisions and governmental programs, the courts will require a more direct and demonstrable benefit to the community at large.

Fees charged by an institution "will not necessarily prevent its classification as charitable if such sums 'go to pay the expenses of operation and not to the profit of the founders or shareholders'...." (Fredericka Home v. County of San Diego (1950) 35 Cal.2d 789, 793, 221 P.2d 68.) "Both the constitutional provision and the statute contemplate that the exempt institution may have income and even 'net earnings' without losing the benefit of its exemption, provided such earnings are derived from the normal pursuit of its exempt purposes...." (Y.M.C.A. v. County of L.A. (1950) 35 Cal.2d 760, 771, 221 P.2d 47.)