STATE TAX COMMISSION OF MISSOURI
| KNOX COUNTY COMMUNITY CENTER, | ) | Appeal No. | 15-63500 |
| Complainant, | ) | 15-63501 | |
| ) | |||
| v. | ) | ||
| ) | |||
| ANITA JAMES, ASSESSOR | ) | ||
| KNOX COUNTY, MISSOURI, | ) | ||
| Respondent. | ) |
DECISION AND ORDER
HOLDING
Decision of the County Board of Equalization sustaining the assessment made by the Assessor is AFFIRMED. Complainant failed to present substantial and persuasive evidence establishing the property is exempt under Article X, Section 6 of the Missouri Constitution.
ISSUE
Complainant contests the taxability of real property, furniture and equipment.
EVIDENCE
The Complainant filed the following Exhibits:
| EXHIBIT | DESCRIPTION |
| A | 501(c)(3) Exempt Federal Income Tax Letter issued March 2, 2011. |
| B | State of Missouri Limited Exemption from Missouri Sales and Use Tax issued on April 7, 2014. |
| C | By-Laws of Knox County Community Center
Article II: Community Center is organized exclusively for charitable, religious, education and scientific purposes, ….to promote quality of living and well being for people of all ages by education through fitness, recreation and wellness opportunities. Article XII: No part of the net earnings of the Subcommittee shall inure to the benefit of, or be distributed to its members, …If for some reason the subcommittee should dissolve…any excess money will be donated to a charitable, government, religious, or educational institution … |
| D | Articles of Incorporation |
| E | Certificate of Incorporation Missouri Nonprofit |
| F | Articles of Amendment for a Nonprofit Corporation to amended Articles (7)(8) for distribution to one or more tax exempt purposes |
| G | Certificate of Amendment for a Nonprofit Corporation |
| H | List of Events Sponsored by Complainant for outside groups |
| I | Updated List of Events Sponsored by Complainant for outside groups |
| J | Knox County Community Center Webpage setting forth their purpose of the three prongs of healthy living: fitness, nutrition and tobacco-free.” |
| K | Testimony of Lori Moots-Clair |
| L | Testimony of Thomas Christen |
| M | Testimony of Shannon Kiehl |
Complainant states their organization’s purpose is “the three prongs of healthy living: fitness, nutrition and tobacco-free.” Complainant owns and operates a facility which includes a 24 hour fitness facility, “education hall” and kitchen. The educational hall is used for classes taught by staff and for outside events. The events were categorized as “sponsored”, “discounted” and “reduced rate”. The sponsored events included: Red Cross Blood Drive, PTO Game Night and Movie, Marcia Taylor Dance Studio dance classes, Martial Arts, and other activities. Discounted events included those for the City of Edina, MU Extension, Stryker Benefit (fundraiser for a child with cancer), and Chamber of Commerce Trivia Tournament. Reduced rate events included Christmas in Edina, Relay for Life Fundraising Dinner, Nutrition and Fitness Education, Smoking Cessation Course, Basic Nutrition Course, and Holiday Weight Loss Challenge.
The Respondent filed the following Exhibits:
| EXHIBIT | DESCRIPTION |
| 1 | Property Record Card |
| 2 | Ground Lease |
| 3 | 2015 Business Personal Property List |
| 4 | Missouri Revised Statute Section 137.100(5) |
| 5 | State of Missouri Limited Exemption Letter for Sales and Use Tax |
| 6 | Webpage of Knox County Community Center |
| 7 | Copy of KTVO Interview (excluded) |
| 8 | STC Decision 10-10588 Big Bend Woods Bath & Tennis Club |
| 9 | Chapter 2.4 of the Assessor’s Manual |
The Responded elicited testimony on cross-examination that the Complainant sells memberships to the 24 hour fitness facility. The membership prices range from a Student Membership of $5 per day to $120 per year to a Family Membership of $5 per day to $360 per year. The Complainant has no sliding scale for membership prices and offers no scholarships.
The Respondent elicited testimony on cross-examination that the Complainant rents their Education Hall. The Education Hall rates range from $50 plus $50 deposit to $600 plus $200 deposit. The hall may be reserved for classes, meetings, gatherings, events, and weddings. Events held at the hall at the full rental rate include auctions, weddings, employee training by railroad and other companies, and other private events. The witnesses estimated that 25% of the use of the education hall was private events.
FINDINGS OF FACT
- Jurisdiction. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the County Board of Equalization. A hearing on the Complaints for Review of Assessment was conducted on October 24, 2016 in Edina, Missouri.
- Identification of Subject Property. The subject property is located at 207 North 4th Street, Edina, Missouri. The property is identified by map parcel number 07-04.0-18-03W032.001.00.002. The personal property is identified as account number 1942.
- Description of Subject Property The subject property is improvements[1] to real property. The improvements include a building of approximately 11,000 square feet housing a 24 hour fitness facility, rental (Educational) hall and kitchen. The personal property includes equipment found in most fitness facilities (cardio and strength) and those found for meeting and reception rooms including sound system and projectors.
- Ownership of the Property Complainant is a general not-for-profit organization. Complainant describes their organization’s purpose as “the three prongs of healthy living: fitness, nutrition and tobacco-free.”
- Use of the Property The property is used as other 24 hour fitness facilities – cardio and strength training through equipment and instruction. The property is also used for community purposes such as exercise classes by the Arthritis Foundation, blood drives, VFW Memorial Days Services, candidate forums, and Health Department Health Fairs. The property is also used as a rental facility for corporate training, auctions, reunions, weddings, and other events which make up to 25% of its use.
- Operation of the Property Although no financial documents were provided, there was no evidence that any funds in excess of expenses were used for purposes other than the continued maintenance and operation of the subject property.
- Taxation of the Property The evidence presented as to the current use of the property does not establish that the property should be exempt from taxation.
CONCLUSIONS OF LAW AND DECISION
Jurisdiction
The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious. The Hearing Officer shall issue a decision and order affirming, modifying or reversing the determination of the Board of Equalization, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious. Article X, Section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo.
Presumption In Appeal
There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization. Hermel, Inc. v. STC, 564 S.W.2d 888, 895 (Mo. banc 1978); Chicago, Burlington & Quincy Railroad Co. v. STC, 436 S.W.2d 650, 656 (Mo. 1968); May Department Stores Co. v. STC, 308 S.W.2d 748, 759 (Mo. 1958). This presumption is a rebuttable rather than a conclusive presumption. The presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish that the Board’s valuation is erroneous and what the fair market value should have been placed on the property. Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).
Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See, Cupples-Hesse, supra. Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact. The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief. Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).
Exemptions
Tax exemptions are not favored in the law and statutes granting exemptions are to be strictly, yet reasonably, construed against the one claiming the exemption. Missouri Church of Scientology v. State Tax Commission, 560 S.W.2d 837, 844 (Mo. Banc 1987), State ex rel. Union Electric Co. v. Goldberg, 578 SW2d 921,923 (Mo. Banc 1979). The legal authority for property tax exemptions is located in Article X, Section 6, of the Missouri Constitution and at Section 137.100, RSMo. The exemptions include:
…all property, real and personal, not held for private or corporate profit and used exclusively for religious worship, for schools and colleges, for purposes purely charitable, or for agricultural and horticultural societies…. Article X, Section 6, of the Missouri Constitution.
Charitable Exemption
The legal test for a charitable exemption is whether:
(1) The property is dedicated unconditionally to the charitable activity;
(2) The property is owned and operated on a not for profit basis; and
(3) The dominant use of the property is for the benefit of an indefinite number of people and directly or indirectly benefits society generally. Franciscan Tertiary Province of Missouri v. State Tax Commission, 566 S.W.2d 213, 224 (Mo Banc 1978); Twitty v. State Tax Commission, 896 S.W.2d 680, 684 (Mo. App. S.D. 1995).
Owner and Operated on a Not-for-Profit basis
The property must be owned and operated on a not-for-profit basis. The property “must be dedicated unconditionally to the charitable activity in such a way that there will be no profit, presently or prospectively, to individuals or corporations. Any gain achieved in use of the building must be devoted to achievement of the charitable objectives of the project.” Franciscan Tertiary Province v. State Tax Commission, 566 S.W.2d 213, at 224 (Mo. banc 1978). This does not mean that the property or charity cannot operate “in the black”.
In the subject appeal, financial information was not provided therefore it is unknown whether the property operated in the black or on a deficit basis. The issue of profitability was not raised and therefore it will be presumed that the monies collected in membership and rental fees were used to cover the cost of the facility and for the purpose of the organization.
Actual and Regular Use for Charitable Purpose
In order for a property to be exempt from taxation for state, county or local purposes, the property must be actually and regularly used exclusively for a charitable purpose, as charity is defined by Salvation Army v. Hoehn, 188 S.W.2d 826 (Mo. banc 1945). “Charity” is therein defined as “. . .a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing their hearts under the influence of education or religion, by relieving their bodies of disease, suffering or constraint, by assisting them to establish themselves for life, or by erecting or maintaining the public buildings or works or otherwise lessening the burdens of government.” Salvation Army at 830. Exemption rests on the use of the property not merely charitable character of the owner. The phrase “regularly used exclusively” has been interpreted to mean the primary inherent or dominate use of the property as opposed to a mere secondary and incidental use.
The primary and direct beneficiaries of the subject property and its recreational use are those persons who are members using the 24 hour fitness facility after paying their membership fee. Beneficiaries also include those renting the hall for private weddings, family reunions, private auctions and corporate training. While the organization does provide the space for sponsored and reduced rates activities such as Red Cross Blood Drive, PTO Game Night and Movie, Marcia Taylor Dance Studio Dance Classes, Martial Arts, and senior exercise and balancing classes, those are secondary activities of the property.
The use of Complainant’s property as an athletic club and a rental hall does not directly relieve bodies, establish life or lessen the burdens of government. It is possible that while some of the secondary activities occurring at the education hall provides the benefits to society as testified to by the witnesses (new business activity, sidewalks, healthier community), such benefits requires speculation.
Dedicated Unconditionally to the Charitable Activity
The property must be used such that it is available to an indefinite group of people, rendered at cost or less, which brings their hearts under the influence of education or lessens the burden of government. The public nature of a charity is diminished when it is systematically denied to those who need and can least afford the service. Many worthwhile organizations held events at the Education Hall for free or at a reduced rate. However, twenty-five percent of the rentals were used for private purposes including family reunions, weddings, auctions, and corporate training and paid the full rental fee. Such events may not necessarily be “fatal” to the determination of exemption if the events are merely secondary or incidental uses such that they do not interrupt the exclusive use of the building or such that they “dovetail into or rounds out”[2] the charitable organization’s purposes. The private events are substantial enough to be considered more than incidental use of the property and the events, such as private auction and training, do not dovetail or round out the Complainant’s purposes.
Further, the 24 hour fitness facility is only available to those paying the membership fee. There are no free membership opportunities or reduced rate memberships and therefore the property was not shown to be available to an indefinite group of people.
ORDER
The determination of taxability of the subject property as determined by the BOE is AFFIRMED.
Application for Review
A party may file with the Commission an application for review of this decision within thirty days of the mailing date set forth in the Certificate of Service for this Decision. The application shall contain specific facts or law as grounds upon which it is claimed the decision is erroneous. Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.
Failure to state specific facts or law upon which the application for review is based will result in summary denial. Section 138.432, RSMo
Disputed Taxes
The Collector of Knox County, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an Application for Review, unless said taxes have been disbursed pursuant to a court order under the provisions of Section 139.031.8, RSMo.
Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed. Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.
SO ORDERED November 22, 2016.
STATE TAX COMMISSION OF MISSOURI
Maureen Monaghan
Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 22nd day of November, 2016, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.
Jacklyn Wood
Legal Coordinator
[1] Improvements are on real property owned by the County. The County charges nominal rent. As valuation was not an issue, the determination as to the existence of any bonus value was not made.
[2] Salvation Army v. Hoehn , 188 SW2d 826 (SCt 1945)