MERCY LIFECARE SYSTEMS, INC., )

)

Complainant, )

)

v. ) Appeals Number 01-74001 and 01-74002

)

GLORIA GOURLEY, ASSESSOR, )

NEWTON COUNTY, MISSOURI, )

)

Respondent. )

DECISION AND ORDER

HOLDING

Each tax exemption case is peculiarly one which must be decided upon its own facts. Complainant presented sufficient evidence to establish a prima facie case in support of entitlement to an exemption on 98.6% of the subject property. That portion of the subject property is entitled to a property tax exemption.

SUMMARY

Complainant filed appeals with the Commission on two properties identified in the attached bills as parcel number 016-7.0-25-003-006-001.002 and 016-7.0-35-004-001-002.002. It appears from the attachments to the Complaint that the parcels are located at 1401 Waldo Haler Drive, Neosho, Missouri and 2550 Lusk Drive, Neosho, Missouri, respectively. The decision letter from the Newton County Board of Equalization reflects that the Board heard the evidence presented by Complainant on the 2550 Lusk Drive property and later voted to affirm the assessment on that parcel. The Board’s decision letter made no reference to the 1401 Waldo Haler Drive property.

An evidentiary hearing was held on May 13, 2002, before Hearing Officer Aimee Smashey at the Newton County Courthouse in Neosho, Missouri. At hearing, Complainant (1) presented evidence in support of an exemption for the property at 2550 Lusk Drive, Neosho, Missouri, and (2) dismissed the appeal on parcel number 016-7.0-25-003-006-001.002, the property at 1401 Waldo Haler Drive, Neosho, Missouri. Complainant was represented by Jason Higdon, Attorney. Respondent was represented by R. Scott Watson, Prosecuting Attorney for Newton County.

ISSUE

Do Complainant’s operations at the subject medical clinic constitute charity?

FINDINGS OF FACT

1. The subject property is a lot improved with a medical clinic facility containing approximately 15,108 square feet of clinic area (Tr. 18).

2. The facility is primarily used as a medical clinic for a rural health clinic. Additional uses include an area for physical rehabilitation for the Physical Therapy Department of St. John’s Regional Health Center of Joplin, a storage area for medical supplies for the Home Health Department of St. Johns’s Regional Health Center of Joplin, and the occasional lease of exam rooms to private physicians for specialty clinics.

3. The subject property is owned by Mercy Lifecare Systems which is the Complainant in this appeal.

4. Complainant is incorporated as a general not-for-profit corporation with the State of Missouri (Complainant’s Exhibit A and B).

5. St. John’s Regional Medical Center is a not-for-profit hospital which operates out of Joplin, Missouri (Complainant’s Exhibit O, at 1, and Tr. 5, 17, 26 – 27).

6. Complainant leases the clinic facility to St. John’s Regional Medical Center which operates (1) the Rural Health Clinic, (2) the physical therapy clinic, and (3) the storage of Home Health Department medical supplies. (Complainant’s Exhibit O, at 1, and Tr. 6, 19 – 20). St. John’s Regional Medical Center also subleases exam rooms to private practitioners for specialty clinics (Tr. 6; Complainant’s Exhibit C).

7. The area available for use to the private physicians who opt to sublease exam rooms for specialty clinics represents three exam rooms — exam rooms # 106, 107, and 146 (Tr. 21 – 22; Complainant’s Exhibit E). This area appears from Complainant’s Exhibits E and F to represent approximately 732 square feet of clinic area. The accounting records show that this area was leased to private physicians 32.5% of the time in 2000 and 25.4% of the time in 2001 (Complainant’s Exhibit K). Accordingly, 732 square feet multiplied by 29% (average of 25.4% and 32.5%) = 212 square feet attributable to for-profit use (1.4% of subject property).

8. Patients are not denied service at the Rural Health Clinic based upon an inability to pay (Complainant’s Exhibit O, at 4). St. John’s Regional Medical Center utilizes income guidelines for determination of charity services (Complainant’s Exhibit M). For the whole of their operations, St. John’s Regional Medical Center provided $7,999,393 of charity care in 2000 and $8,584,828 of charity care in 2001. Id.

9. Complainant operated at a loss for years 1997, 1998, and 1999 (Complainant’s Exhibit H).

CONCLUSIONS OF LAW

Jurisdiction

Jurisdiction over this appeal is proper. Complainant timely appealed the 2001 assessment on the subject property to the State Tax Commission from the decision of the local Board of Equalization. At hearing Complainant requested a refund of the taxes paid on the subject property for 2000. Complainant’s Complaint filed with the Commission on August 21, 2001, does not extend jurisdiction to the Commission to evaluate the appropriateness of the 2000 assessment on the subject property. Complainant also requested a prospective finding that the subject property was entitled to an exemption for 2001 and future years. The Commission has no jurisdiction to issue an order in this appeal for any year other than 2001. Exempt status for property taxes is dependent on the operation and use being put to the specific property in question. Since such operation and use can change, determinations of exempt status must be revisited each assessment year.

Burden of Proof

Although a taxing statute is construed strictly against the state, an exemption statute is strictly construed against the one claiming the exemption. State ex rel. Union Electric Co. v. Goldberg, 578 S.W.2d 921, 923 (Mo. banc 1979). “The law disfavors claims for exemption from taxation. The substantial burden of establishing the property falls within the exempted class is on the person claiming exemptions under the referenced constitutional and statutory provisions. To prevent the curtailing of the purpose and intended scope of a tax exemption, the tax exemption statute is to be strictly but reasonably construed.” Twitty v. State Tax Commission of Missouri, 896 S.W.2d 680, 684 (Mo. App. S.D. 1995)(citations omitted). Accordingly, in order to prevail, Complainant must demonstrate by substantial and persuasive evidence, that it is entitled to an exemption.

Substantial evidence is that evidence which, if true, has probative force upon the issues, i.e., evidence favoring facts which are such that reasonable men may differ as to whether it established them, and from which the Commission can reasonably decide an appeal on the factual issues. Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

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).

Statutory Exemptions

Properties which can be exempted from taxation are set out within our Constitution and the statutes enacted to enforce that Constitution, to wit:

” . . .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, . . .may be exempt from taxation by general law but any such law may provide for approximate restitution to the respective political subdivisions of revenues lost by reason of the exemption. All laws exempting from taxation property other than the property enumerated in this article, shall be void.

Article X, Section 6, Mo. Const. of 1945.

In support of this Constitutional provision, the Legislature has enacted Section 137.110, RSMo 1994, which provides in relevant part:

The following property shall be exempt from taxation:

(5) All property, real and personal, actually and regularly used exclusively for religious worship, for schools and colleges, or for purposes purely charitable and not held for private or corporate profit, except that the exemption herein granted does not include real property not actually used or occupied for the purpose of the organization but held or used as investment even though the income or rentals received therefrom is used wholly for religious, education or charitable purposes;

 

 

Section 137.110, RSMo 1994.

Case Law on Charitable Use

In order for a property to be exempt from taxation for state, county or local purposes, the following tests must be met:

1. 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.

2. 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).

3. The dominant use of the property must be for the benefit of an indefinite number of persons and must directly or indirectly benefit society generally. “It is required that there be the element of direct or indirect benefit to society in addition to and as a result of the benefit conferred on the persons directly served by the humanitarian activity”. Franciscan at 224. See also, Barnes Hospital v. Leggett, 589 S.W.2d 241 (Mo. banc 1979).

Subject Property Operations

1. 1.4% of the subject facility that is used by private physicians for specialty clinics is not operated on a not-for-profit basis. It is taxable.

2. Complainant put forward sufficient evidence to establish that 98.6% of the subject clinic is used for charitable purposes.

3. Complainant put forward sufficient evidence to establish that the subject clinic is owned and 98.6% of the area is operated on a not-for-profit basis. There was no evidence presented to suggest that the operations at the subject clinic have been outside the corporate charter of either the owning or operating entity.

4. The fact that Newton County has charitable medical services available through a designated rural health clinic is beneficial to the Newton County community.

DECISION

Use

Exemption law requires an unconditional dedication to a charitable objective. Charity is defined as 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. Does Complainant’s operation of the subject clinic constitute a gift? Complainant established that it is a Missouri not-for-profit corporation and operated at a loss in years 1997, 1998, and 1999. It operates to benefit and help carry out the health care functions and purposes of its non-profit parent organization. Complainant’s Exhibit B. In furtherance of that purpose, Complainant leases the subject facility to St. John’s Regional Medical Center which utilizes 98.6% of the facility to provide non-profit medical clinic services through a Rural Health Clinic, physical therapy facilities, and storage of medical supplies for its Home Health Department. St. John’s Regional Medical Center operates the clinics such that patients are not denied service based upon an inability to pay. It uses federal poverty income guidelines for determining appropriate cases for a discounting or full subsidization of its clinical services.

The provision of medical services in a clinic setting clearly qualifies as an appropriate use under the Salvation Army definition in that medical treatment directly benefits people by relieving their bodies of disease, suffering, or constraint and health education assists to establish people for life.

Complainant put forward sufficient evidence to establish that 98.6% of the subject clinic is used for charitable purposes.

Operation

Exemption law requires ownership and operation on a non-profit basis. The subject clinic is owned by Complainant, Mercy Lifecare Systems, which is a Missouri general not-for-profit corporation (Complainant’s Exhibits A & B). Complainant leases the subject clinic to St. John’s Regional Medical Center of Joplin, Missouri, which is also not-for-profit corporation (Complainant’s Exhibit O, at 1, and Tr. 5, 17, 26 – 27). Both not-for-profit corporations are affiliated with and effectively owned by Catholic Health Initiatives (Complainant’s Exhibit O, at 1, and Tr. 26).

Complainant’s Articles of Incorporation state the corporation’s purpose to be:

(1) To operate for the benefit, to perform the health care functions, or to carry out the health care purposes, of Health System of Mercy, a Nebraska non-profit corporation of the Religious Sisters of Mercy of the Union of the United States of America, Omaha Province (Religious Sisters of Mercy), a religious order of the Roman Catholic Church, by owning, organizing, operating, supervising, supporting or managing the affairs, property, business and activities of affiliated corporations which conduct or support the health care mission of Religious Sisters of Mercy in Southwestern Missouri and surrounding areas.

(2) To engage in and conduct charitable, educational, religious, and scientific activities in furtherance of the above purposes.

(3) Incidental to the above purposes, to have and to exercise all of the rights and powers conferred upon non-profit corporations under the General Not for Profit Corporation Law of Missouri.

(Complainant’s Exhibit B, 1 – 2).

The Articles further provide that (1) no part of Complainant’s net earnings may inure to the benefit of any trustee, director, officer, or other private individual except for reasonable compensation for services rendered, and (2) that upon dissolution of the corporation, the corporate assets are to be distributed by vote of the Board of Directors to a qualified charitable organization Id, at 3.

Complainant put forward sufficient evidence to establish that the subject clinic is owned and 98.6% of the area is operated on a not-for-profit basis. There was no evidence presented to suggest that the operations at the subject clinic have been outside the corporate charter of either the owning or operating entity.

Public Benefit

Exemption law further requires “…that there be the element of direct or indirect benefit to society in addition to and as a result of the benefit conferred on the persons directly served by the humanitarian activity.” Franciscan Tertiary Province v. State Tax Commission, 566 S.W.2d 213, at 224 (Mo. banc 1978). The patients seen and treated at the clinic are the persons directly served by the clinic operations. The families of those patients are also directly served by the clinic. Under this analysis the court requires us to consider whether the rendering of the charitable activity inherently confers a benefit to society in general. Is the operation of the subject clinic beneficial to that community in general, even if similar medical services are available elsewhere in the community? In developing this test, the court reasoned as follows:

Another prerequisite for charitable exemption is that the dominant use of the property must be for the benefit of an indefinite number of people, for the purpose, as expressed in Salvation Army, of “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.” 188 S.W.2d at 830. The court at that same point included “humanitarian activities, * * * rendered at cost or less, which are intended to improve the physical, mental and moral condition of the recipients and make it less likely that they will become burdens on society and make it more likely that they will become useful citizens.” Thus, it is required that there be the element of direct or indirect benefit to society in addition to and as a result of the benefit conferred on the persons directly served by the humanitarian activity.

Examples of such humanitarian activities previously held to be exempt as charitable include the operation of hospitals which are open and available to rich and poor (Community Memorial and Jackson County ); a facility operated to provide employment and training for handicapped persons (Goodwill ); operating a YMCA building housing boys and young men, preferably of low income, as a part of a program intended *225 to foster good citizenship and Christian ideals in those boys and young men (YMCA No. 4); providing housing at less than cost to girls and young women, including the needy, intended to promote the welfare of such persons (Salvation Army ); providing good low cost housing for low income people to replace old, dilapidated properties in a slum area which was cleared (Bader Realty ). All of these, while benefitting the individuals served, also were considered to benefit society generally.

Franciscan Tertiary Province v. State Tax Commission, 566 S.W.2d 213, 224-225 (Mo. banc 1978) (emphasis supplied).

The fact that Newton County has charitable medical services available through a designated rural health clinic is beneficial to the Newton County community.

Conclusion

This Hearing Officer is persuaded that Complainant presented sufficient evidence to establish a prima facie case that (1) 98.6% of the subject clinic is used for the provision of medical clinic services in a charitable manner, (2) the subject clinic is owned and 98.6% of the clinic is operated on a not-for-profit basis, and (3) the use of the subject clinic is beneficial to society in addition to those directly served by the subject clinic. Accordingly, 98.6% of the subject clinic is entitled to a property tax exemption.

ORDER

The non-exempt status the subject property for tax year 2001, as determined by the Assessor and approved by the Board of Equalization, is SET ASIDE. The Clerk is HEREBY ORDERED to execute an partial exemption for 98.6% of the assessment on parcel number 016-7.0-35-004-001-002.002 for the 2001 tax year. The assessment on parcel number 016-7.0-25-003-006-001.002 is affirmed.

A party may file with the Commission an application for review of a hearing officer decision within thirty (30) days of the mailing of such decision. The application shall contain specific detailed grounds upon which it is claimed the decision is erroneous.

If an application for review of a hearing officer decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission. If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of Newton County as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal. If any protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

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 December 20, 2002.

STATE TAX COMMISSION OF MISSOURI

Aimee Smashey

Hearing Officer

 

MIZPAH ASSISTED LIVING SERVICES, )

)

Complainant, )

)

v. ) Appeal Number 00-10151

)

PHILIP A. MUEHLHEAUSLER, )

ACTING ASSESSOR, )

ST. LOUIS COUNTY, MISSOURI, )

)

Respondent. )

 DECISION AND ORDER

HOLDING

Assessment by Assessor that subject property was not tax exempt was sustained by St. Louis County Board of Equalization. Commission finds subject property to be exempt under Section 137.100(5), assessment SET ASIDE.

Complainant appeared by Counsels, Bryon E. Francis and Meredith M. Todd, St. Louis, Missouri.

Respondent appeared by Counsel, Edward W. Corrigan, Associate County Counselor, St. Louis County, Missouri.

Case heard and decided by Chief Hearing Officer, W. B. Tichenor.

ISSUE

The Commission takes this appeal to determine whether the subject real and personal property is exempt from taxation for the tax year 2000.

SUMMARY

Complainant appeals the decision of the St. Louis County Board of Equalization. Respondent assessed the subject real and personal property. This assessment was sustained by the Board of Equalization. Complainant contends that the subject property is exempt from taxation under the provisions of Section 137.100(5).

An evidentiary hearing was conducted on August 6, 2002, before W. B. Tichenor, Chief Hearing Officer, at the St. Louis County Government Center, Clayton, Missouri. On September 16, 2002, Attorneys for Complainant filed Complainant’s Brief. On October 16, 2002, Attorney for Respondent filed Respondent’s Brief. Attorneys for Complainant filed Complainant’s Reply Brief on November 6, 2002.

The Commission, having considered all of the competent evidence upon the whole record and the Briefs filed by the parties, enters the following Decision and Order.

FINDINGS OF FACTS

1. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the St. Louis County Board of Equalization.

2. The subject property consists of real and personal property located at 11325 St. Charles Rock Road, Bridgeton, Missouri, locator number 12M511354, at the facility otherwise known as Mizpah Manor (Property).

3.    The Property is used for the sole purpose of providing residential assisted living for the elderly to the community, consistent with the purpose set forth in the Articles of Incorporation of Complainant (Mizpah). Said purpose including:

“To provide elderly and handicapped persons with housing facilities and living services specially designed to assist them in meeting their physical. Social, health, security and psychological needs; to furnish such goods and services as may be deemed by Corporation to be necessary and appropriate in providing assisted living assistance to such persons, and, at all times, to operate such facilities and to provide such services in a charitable, not-for-profit manner, consistent with Section 501(c)(3) of the Internal Revenue Code, or its successor Section.”

Exhibit A.

4. Mizpah is a not-for-profit corporation under the laws of the State of Missouri and a 501(c)(3) tax exempt entity under the Internal Revenue Code. Exhibits A & C.

5. The Property is owned and operated on a not-for-profit basis. It is actually and regularly used exclusively for its stated corporate charitable purpose. The dominate use of the Property benefits an indefinite number of people and directly and indirectly benefits society in general.

6. Complainant’s evidence was substantial and persuasive to rebut the presumption of correct assessment by the Respondent and Board of Equalization and establish the exempt status of the Property.

CONCLUSIONS OF LAW

Jurisdiction

The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious. Article X, Section 14, Missouri Constitution of 1945; Constitution of 1945; Sections 138.430, 138.460(2), RSMo.

Burden of Proof

Complainant has the burden to present substantial evidence to rebut the presumption of correct assessment by the Board of Equalization. Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 895 (Mo. banc 1978). In order to meet this burden in an appeal seeking exemption from taxation, the Complainant must meet the substantial burden to establish that the property falls within an exempted class under the provisions of Section 137.100. State ex rel. Council Apartments v. Leachman, 603 S.W.2d 930, 931 (Mo. 1980). It is well established that taxation is the rule and exemption from taxation is the exception. Exemption is not favored in the law. (See, Missouri Church of Scientology v. STC, 560 S.W.2d 837, 844 (Mo. banc 1977); CSCEA v. Nelson, 898 S.W.2d 547, 548 (Mo. banc 1995), citing Scientology). Complainant seeks exemption of its property from taxation pursuant to Section 137.100(5):

The following subjects are exempt from taxation for state, county or local purposes:

****

(5) All property, real and personal, actually and regularly used exclusively for … purposes purely charitable and not held for private or corporate profit, except that the exemption herein granted does not include real property not actually used or occupied for the purpose of the organization but held or used as investment even though the income or rentals received therefore is used wholly for — charitable purposes;

****

Franciscan Tertiary Test

In meeting its burden of proof that the subject property is used “exclusively for … purposes purely charitable, and not held for private or corporate profit….” Complainant must meet the three prong test set forth by the Missouri Supreme Court in Franciscan Tertiary Province v. STC, 566 S.W.2d 213, 223-224 (Mo. banc 1978). The court said:

The first prerequisite for property to be exempt as charitable under Section 137.100 is that it be owned and operated on a not-for-profit basis. It must be dedicated un-conditionally 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 attainment of the charitable objectives of the project…. [A]n exemption will not be granted covering property which houses a business operated for the purpose of gaining a profit, even though it is turned over to a parent organization to be used for what are admittedly independently…charitable purposes.

The requirement that the property must be operated as a not-for-profit activity does not mean that it is impermissible for the project at times or even fairly regularly to operated in the black rather than on a deficit basis, provided, of course, that any such excess of income over expenses, is achieved incidentally to accomplishment of the dominantly charitable objective and is not a primary goal of the project, and provided further that all of such gain is devoted to the charitable objectives of the project.

Another prerequisite for charitable exemption is that the dominant use of the property must be for the benefit of an indefinite number of people, for the purpose, as expressed in Salvation Army, of “relieving their bodies of disease, suffering, or constraint…or by erecting or maintaining pubic buildings…lessening the burdens of government.” 188 S.W.2d at 830…. Thus it is required that there be the element of direct or indirect benefit to society in addition to and as a result of the benefit conferred on the persons directly served by the humanitarian activity.

Id. At 224.

The three tests to be met under Franciscan are:

1. Property must be owned and operated on a not-for-profit basis;

2. Property must be actually and regularly used exclusively for a charitable purpose; and

3. Property must be used for the benefit of an indefinite number of persons and for society in general, directly or indirectly.

DECISION

APPEAL

In December 2000, Mizpah Assisted Living Services, Inc. (hereinafter “Mizpah”) appealed the final decision of the Board of Equalization of St. Louis County to this Commission with respect to the tax exempt status of both the real and personal property owned by Mizpah located at 11325 St. Charles Rock Road, Bridgeton, Missouri (the AProperty). The Board of Equalization determined that the Property was not exempt from ad valorem taxation. Mizpah timely appealed the decision of the Board of Equalization to this Commission on the grounds that the Property is exempt from ad valorem taxation pursuant to Section 137.100(5), RSMo 2000.

PROCEDURAL HISTORY

After the filing of Mizpah’s complaint in this case, Respondent served on Mizpah its first set of interrogatories. Mizpah filed its answers to these interrogatories on May 30, 2001. Respondent then served upon Mizpah requests to produce documents and the parties thereafter conducted depositions of certain witnesses. Following document discovery and depositions, Mizpah filed the written direct testimony of Edith Brady, Mary Alice Ryan, Jan Schmitt and Mark Christopher Buckley. Respondent filed the written direct testimony of Ruth Sansone and Michael J. Duncan. Mizpah objected to the testimony of Ms. Sansone and Mr. Duncan and to Exhibits 150 through 161 and 164 and 165. This Commission sustained such objections by order dated May 2, 2002, and ordered the testimony and exhibits stricken from the record.

Complainant’s exhibits are listed in Appendix A attached hereto and incorporated by reference.

Respondent’s exhibits are listed in Appendix B attached hereto and incorporated by reference.

(Editor’s note – because of the length of Appendix A and Appendix B, they are not reprinted here.  For a copy of the Appendices, please contact the State Tax Commission).

By order dated March 18, 2002, the parties then each filed a pre-hearing brief and a proposed stipulation of uncontested facts and facts in dispute. The Commission then held an evidentiary hearing with respect to this matter on August 6, 2002, in St. Louis County, Missouri. At the conclusion of the hearing, the Chief Hearing Officer ordered the parties to file written post-hearing briefs.

The sole issue before the Commission is whether Mizpah’s Property is exempt from ad valorem taxation under Section 137.100(5), RSMo 2000.

STANDARD OF REVIEW AND BURDEN OF PROOF

The Commission has the jurisdiction to hear this appeal because Mizpah timely appealed to this Commission from the decision of the St. Louis County Board of Equalization.

In order to prevail, Mizpah has the burden of showing by substantial evidence that the Property is one of the exempt classes of property enumerated in Section 137.100, RSMo 2000. City of St. Louis v. State Tax Commission, 524 S.W.2d 839, 844 (Mo. banc 1975). Substantial evidence is that evidence which, “if true, has probative force upon the issues . . .; it is evidence of a character sufficiently substantial to warrant the trier of facts in finding from it the facts.” Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959) (citing Collins v. Division of Welfare, 270 S.W.2d 817, 820 (Mo. 1954)).

CHARITABLE EXEMPTION

Section 137.100(5) provides that “all property, real and personal, actually and regularly used exclusively for . . . purposes purely charitable and not held for private or corporate profit” shall be exempt from taxation. The Supreme Court of Missouri has established a three prong test in Franciscan Tertiary Province of Missouri, Inc. v. State Tax Commission that owners of real and personal property must establish in order for their property to be exempt pursuant to the charitable exemption set forth in this statute. 566 S.W.2d 213, 224 (Mo. banc 1978).

First, the property must be owned and operated on a not-for-profit basis. Id. at 224. Second, the property must be actually and regularly used exclusively for a charitable purpose. Id. at 224. Third, the dominant use of the property must be for the benefit of an indefinite number of people and must directly or indirectly benefit society generally. Id. at 224.

The evidence presented by Mizpah throughout this appeal proves that Mizpah meets each of the foregoing elements established in Franciscan.

Owned and Operated on a Not-for-Profit Basis

The first element satisfied by Mizpah is that the Property is owned and operated on a not-for-profit basis. In Franciscan, the Supreme Court stated that the property in dispute “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.” Id. at 224. Mizpah has produced evidence that it is a not-for-profit corporation under both state law and federal law and that no part of the net earnings of Mizpah shall inure to the benefit of any private individual. Exhibits A & C. Any profits made by Mizpah are required to be devoted to Mizpah’s charitable purpose according to Mizpah’s charter and the Internal Revenue Code. Exhibit A; I.R.C. Section 501(c)(4)(B). In addition, Mizpah’s policy of providing continued care to its indigent residents provides that a portion of any profits made by Mizpah shall be devoted directly to subsidizing the rent of its indigent residents. Exhibit P.

Respondent has argued that because the property is managed by St. Andrews Management Services, Inc., a for-profit corporation (“STAMS”), the property is not operated on a not-for-profit basis. Respondent’s argument is incorrect. Many for-profit corporations profit from a facility that is operated on a not-for-profit basis. The test is not whether another entity profits from the not-for-profit but whether any revenues that are generated by the not-for-profit are “devoted to the charitable objectives of the project.” Id. at 224.

First, Mizpah is not profitable and has never made a profit. Exhibit KK. Second, Mizpah has never paid STAMS the management fee since the facility has been opened because Mizpah is not generating enough revenue to make the payment. Exhibit KK. Furthermore, in exchange for the fees to be paid to STAMS, STAMS provides basic services to Mizpah, such as personnel administration and accounting services, that all companies, including Mizpah, require in order to properly operate their businesses. Exhibit O. Moreover, according to the testimony of Mary Alice Ryan, the President and Chief Executive Officer of STAMS, this fee was established in order for STAMS to cover its expenses for providing the services to Mizpah. Tr. p. 21. The fee was not established to take the profits, if any, from Mizpah.

Actually and Regularly Used Exclusively for Charitable Purposes

The second element that Mizpah has satisfied is that the Property is actually and regularly used exclusively for purposes that are purely charitable. Franciscan, 566 S.W.2d 213, 224. The Supreme Court of Missouri has defined charity as “a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing the residents 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; as well as humanitarian activities, rendered at cost or less, which are intended to improve the physical, mental, and moral condition of the recipients and make it less likely that they will become burdens on society and make it more likely they will become useful citizens.” Id. at 220 (citing Salvation Army v. Hoehn, 188 S.W.2d 826 (Mo. banc 1945)). The provision of housing to the elderly by not-for-profits “rises to a charitable purpose and tax exempt status if the same is available to both rich and poor.” Cape Retirement Community, Inc. v. Kuehle, 798 S.W.2d 201, 203 (Mo. App. E.D. 1990) (citing Evangelical Retirement Homes of Greater St. Louis, Inc. v. State Tax Commission, 669 S.W.2d 548, 554 (Mo. 1984)).

Mizpah owns and operates a licensed residential assisted living facility for the elderly that consists of thirty 463 square foot studio apartments. Exhibits M & L. Mizpah provides assisted living space, as well as social and educational activities to both the rich and poor. Mizpah has never denied access to anyone based upon the inability to pay its rent. Exhibit II. It is true that of the thirty rooms that are available to rent, Mizpah has only provided rental assistance for two of its residents in the tax year 2001. Exhibit FF. However, a facility may accept payment from those individuals that are able to pay, provided that they extend admission “to the usual and ordinary number of indigent patients applying for admission.” Community Memorial Hospital v. City of Moberly, 422 S.W.2d 290, 295 (Mo. 1967). Furthermore, in addition to the two residents that Mizpah provided rental assistance to in the year 2001, Mizpah agreed to extend rental assistance to a third resident. Exhibit CC.

The Dominant Use of the Property is for the Benefit of an Indefinite Number of People

The third and final element, which Mizpah has satisfied, is that the dominant use of the Property is for the benefit of an indefinite number of people, regardless of race, color, national origin, handicap, sex, age, or religious affiliation. Franciscan, 566 S.W.2d 213, 224. To explain the meaning of the third element, the Supreme Court stated that “it is required that there be the element of direct or indirect benefit to society in addition to and as result of the benefit conferred on the persons directly served by the humanitarian activity.” Id.

Mizpah provides an indirect benefit to society by lessening the burden on government. Mizpah provides rental assistance to elderly individuals who would no longer be able to reside at Mizpah, but for the financial assistance provided by Mizpah. Although these residents are not destitute and may be able to find facilities other than Mizpah in which to reside, the assistance provided by Mizpah reduces the likelihood that these individuals will need to receive public assistance in the future.

In Franciscan, the Supreme Court, in granting the exemption, noted that the residents “assets were so limited that, absent availability of low cost quarters…their assets could have been depleted quickly so as to place them in public housing or, if not so placed, in substandard housing under conditions conducive to increasing the problems of government and society.” Id. at 225.

The following is a list of the income and assets of the individuals that were granted assistance: (i) H.E. was granted assistance in January 2001 and at such time had a monthly income of approximately $930 per month and assets around approximately $74,000; (ii) D.S. was granted assistance on July 24, 2001 and around September 2000 had a monthly income of approximately $1,200 per month and assets of $19,000; and (iii) R.W. was granted assistance in November 2001 and as of April 2000 had a monthly income of approximately $1,200 per month and assets of approximately $50,000. Exhibits Q, S, T, Y BB, Cc & DD.

Without the assistance that Mizpah has provided, each of these individuals would have to find an assisted living facility at which to reside other than Mizpah. With the level of income and assets of these individuals, each individual may be able to find an assisted living facility in which each could reside without public assistance for a period of time. However, the living conditions would most likely be substandard. The rates that Mizpah charges to most of its residents are market rates for an assisted living facility in that area of St. Louis County. Exhibits 60 & 61. In exchange for the payment of rent, residents are provided with a small studio apartment, three meals a day and other basic necessities that are typically provided by an assisted living facility. Exhibit II. If any one of the residents that was granted assistance by Mizpah had to find an assisted living facility at which to reside in St. Louis County, the facility that each of these individuals could afford would probably be in a substandard condition.

On the other hand, even if each of these individuals was able to find a facility in which to reside that was not substandard and that did not require the receipt of any public assistance, each individual would likely have to use his or her assets to pay a portion of the rent at such facility. The assets of these individuals are so limited that their assets would likely be depleted at such a rate that each would probably have to receive some type of public assistance in the future, thus increasing the burden on government and society.

Respondent has argued in its pre-hearing brief that Mizpah should be denied an exemption because Mizpah’s standard application requests financial information and this evidences Mizpah was screening individuals for their ability to pay. This argument is correct in that it does evidence that Mizpah was screening applicant’s for their ability to pay. However, the screening was to ensure that if an individual could pay that he or she would pay and that if an individual was not able to pay that he or she was told about Mizpah’s policy to provide individuals with financial assistance. Tr. p. 60; Exhibit LL.

Respondent cites Cape Retirement v. Kuehle in support of its argument that Mizpah is not exempt from ad valorem taxation because Mizpah requests financial information. 798 S.W.2d 201 (Mo. App. E.D. 1990). The facts in this case are different than those in Cape Retirement. In Cape Retirement, the court denied the facility’s exemption because residents were not admitted to the facility without the payment of a “one-time life occupancy and membership fee,” and because the application procedure utilized in Cape Retirement was structured so that the facility could determine if the resident could pay this fee. Id. at 220. Mizpah does not require a resident to pay an initial endowment prior to entering the facility, and as stated previously, does not request an individual’s financial information as a way to exclude the poor from entering the facility. Tr. p. 82.; Tr. p. 60.

Furthermore, the fact that Mizpah did not provide any rental assistance in the year 2000 should not preclude Mizpah from being exempt from ad valorem taxation. In Abbot Ambulance, Inc. v. Leggett, the construction of a facility that was to be used for charitable purposes in the future was found to be tax exempt from ad valorem taxation. 926 S.W.2d 92 (Mo. App. E.D. 1996). A similar argument can be made with respect to Mizpah. The construction and use of Mizpah in the year 2000 was in furtherance of Mizpah’s charitable purpose. Mizpah has always had a policy of providing financial assistance to the elderly since its inception. Exhibit II. The only reason Mizpah did not provide any assistance in the year 2000 was because it did not receive any requests for assistance. Exhibit II. Mizpah is not to be denied exemption simply because it did not receive any requests for financial assistance in the year 2000.

Furthermore, courts have found that entities may be exempt from taxation even though they did not provide financial assistance in some years. Callaway Community Hospital v. Craighead, 759 S.W.2d 253, 256 (Mo. App. W.D. 1988) (citing Community Memorial Hospital v. City of Moberly, 422 S.W.2d 290, 295 (Mo.1967)). This provides further support that Mizpah should not be denied an exemption from ad valorem taxation because it did not provide financial assistance in the year 2000.

RESPONDENT’S ARGUMENTS NOT PERSUASIVE

In his brief, Respondent has argued that Mizpah has failed to meet its burden to demonstrate that the subject property:

(1) is actually and regularly used exclusively for purposes purely charitable;

(2) is owned and operated on a not-for-profit basis; and

(3) the dominant use of the Property directly or indirectly benefits society generally.

Respondent’s arguments that Mizpah does not meet these requirements are without merit. Moreover, Respondent’s arguments are based upon a misconstruction of the evidence presented to the Commission and/or a misapplication of the applicable case law in Missouri with respect to charitable exemptions.

The Property is actually and regularly used exclusively for purposes purely charitable.

In his brief, Respondent ignores several fundamental arguments raised by Mizpah which are dispositive of the first element for exemption. First, it has been clearly established by the Missouri Court of Appeals that the provision of housing to the elderly by not-for-profits “rises to a charitable purpose and tax exempt status if the same is available to both rich and poor.” Cape Retirement Community, Inc. v. Kuehle, 798 S.W.2d 201, 203 (Mo. App. E.D. 1990) (citing Evangelical Retirement Homes of Greater St. Louis, Inc. v. State Tax Commission, 669 S.W.2d 548, 554 (Mo. 1984)). Respondent argues that Mizpah failed to prove that Mizpah serves both the rich and poor at its facility. However, Mizpah introduced the following evidence that the Property is available to both the rich and poor:

(1) Mizpah has never denied a resident’s application because of the inability of an individual to pay the rental rates established by Mizpah;

(2) Mizpah has a policy to provide financial assistance to its indigent residents; and

(3) pursuant to its policy, Mizpah has granted rental assistance to three residents with limited income and assets since its inception. Exhibits P, Q, S, T, Y, BB, CC, DD and II.

Respondent also argues that the individuals to whom Mizpah has granted rental assistance are not destitute or poor. It is true that these individuals are not destitute or poor in that they have a modicum of income and assets. However, these individuals meet the test established by the Supreme Court in that their “assets [are] so limited that, absent availability of low cost quarters…their assets could have been depleted quickly so as to place them in public housing or, if not so placed, in substandard housing under conditions conducive to increasing the problems of government and society.” Franciscan Tertiary Province of Missouri, Inc. v. State Tax Commission, 566 S.W.2d 213, 225 (Mo. banc 1978).

Respondent further argues that because Mizpah’s rental rates are driven by the market, Mizpah is not charitable. The test established by Missouri case law is clear that a facility may accept payment from those individuals that are able to pay provided that they extend admission “to the usual and ordinary number of indigent patients applying for admission.” Community Memorial Hospital v. City of Moberly, 422 S.W.2d 290, 295 (Mo. 1967). There is no preclusion under Missouri law that a facility is prevented from marketing to those individuals that can pay provided that they do not prevent those individuals that cannot pay from being admitted to the facility. Mizpah clearly meets this test.

This leads to Respondent’s next argument that Mizpah is not actually and regularly used for purposes purely charitable because Mizpah’s admission process requires potential residents to disclose their financial information. Respondent argues that this process is meant to screen potential residents and to prevent admission to those that are unable to pay Mizpah’s rental rates. Respondent’s argument is without merit. The evidence is to the contrary. Mizpah requests financial information prior to admission to determine whether a potential resident is entitled to charitable assistance. Tr. p. 60. Certainly, charging a wealthy individual a reduced rental rate would not be charitable. Ms. Edith Brady testified without contradiction that the purpose of the request was to determine who must pay the full rental rate and not so that the poor could be excluded from admission to Mizpah. Tr. p. 60. How would a facility be able to learn of a potential resident’s financial need without requesting financial information. In order to determine that need, financial information must be disclosed.

In addition, Respondent cites to a recent State Tax Commission case to support its contention that Mizpah should be denied a charitable exemption; however, this case is distinguishable from the Mizpah case. RLDS Church, d/b/a White Oak Living Center v. Robert Boley, Director of Assessment, Jackson County, Missouri, STC Appeal Numbers 99-30060 and 99-30061. In White Oak, the facility denied admission to some residents due to an inability to pay its rental rates. Also, the facility in White Oak failed to produce information regarding two of the three individuals to whom the facility had granted rental assistance. Accordingly, the Commission found that it could not determine whether this assistance benefited society. As previously determined and unlike the facility in White Oak, Mizpah has never denied admission to anyone due to an inability to pay, and Mizpah has produced information regarding the income and assets of each of its subsidized residents.

Accordingly, as previously determined, Mizpah has satisfied its burden of proof that the Property is actually and regularly used exclusively for purposes purely charitable.

The Property is Owned and Operated on a Not-for-Profit Basis.

Respondent asserts that Mizpah has failed to prove that the Property is owned and operated on a not-for-profit basis.

Respondent first contends that the use of the Property is similar to the sale of merchandise involved in Sunday School Board of the Southern Baptist Convention v. Mitchell, and thus, is not owned and operated on a not-for-profit basis. In Sunday School Board of the Southern Baptist Convention however, the court denied an exemption because all merchandise at the bookstore was sold at market rates except that churches were allowed a twenty percent discount. 658 S.W.2d 1, 6 (Mo. banc 1983). The court found that this did not rise to the level of charity because no one was provided merchandise at or below cost. Id.

However, the Mizpah situation is distinguishable because it has provided rooms at or below cost to at least three individuals. Exhibits Q, S, T, Y, BB, CC & DD. Mizpah’s financial statements show expenses of $715,738.00 and $796,010.00 for the years 2000 and 2001, respectively. Exhibits 26a & 40. In order to break-even, Mizpah must charge each resident approximately $2,200.00 per month assuming rentals are at full capacity. The evidence presented shows that Mizpah has rented rooms to individuals well below this breakeven rate or Mizpah’s cost of renting its rooms. Exhibits Q, S, T, Y, BB, CC & DD.

In addition, Respondent argues that Mizpah is not operated on a not-for-profit basis because it pays a management fee to St. Andrews Management Services (STAMS). Respondent’s argument ignores reality and misstates and misconstrues the facts of the record. Mizpah pays this fee to STAMS in exchange for services, such as personnel administration and accounting services, that all companies, including Mizpah, require in order to properly operate their businesses. Exhibit O. If Mizpah did not pay this fee to STAMS, Mizpah would have to hire the personnel to perform these functions or would have to hire another management company to perform these functions. Tr. p. 14. The nature of Mizpah’s business requires these services. Furthermore, Ms. Mary Alice Ryan has testified that the fee charged to Mizpah was established in order for STAMS to cover its expenses for providing these services to Mizpah and not to make a profit. Tr. p. 21.

Respondent also argues in his brief that Mizpah has paid this management fee to STAMS. However, the testimony of Mr. Christopher Buckley is clear that Mizpah has never paid this fee. Tr. p. 39. Moreover, Mr. Buckley testified that the financial statements for Mizpah are prepared on an accrual basis and not a cash basis, and that anything to the contrary in the tax or financial records were in error. Tr. p. 38. Mizpah has not paid the fee, because it has not generated sufficient income to be able to pay the fee.

Mizpah has clearly demonstrated that it meets the second element required to obtain a charitable exemption.

The Dominant Use of the Property Directly or Indirectly Benefits Society Generally.

Respondent finally suggests that the dominant use of the Property does not directly or indirectly benefit society.

Respondent contends that the rental assistance that Mizpah has granted, if any, is de minimis, and that the amount of any charity dispensed by Mizpah is unknown. These statements ignore the evidence before the Commission. Mizpah has been operating at a loss since its inception and despite this fact has reduced the rental rates from $2,400.00 per month for the following three individuals as follows: D.S.- reduced to $1,200.00 per month; R.W.- reduced to $1,300.00 per month; and H.E.- reduced to $1,500.00 per month. Exhibits BB, CC & DD. In addition, as stated above, the cost of maintaining an individual at the property is approximately $2,200 per month, well above the rate at which Mizpah set the rental rates for these three residents.

Respondent further contends that of the three individuals that were granted rental assistance, two of the residents were forced to leave the facility because “presumably” these individuals could not afford the subsidized rental rates. The evidence presented does not support Respondent’s “presumption.” Ms. Brady testified that one resident moved out for family reasons and the second resident’s reason for moving was never mentioned. Tr. p. 77 and p. 78. Respondent’s argument on this point is based upon a misconstruction of the facts.

Furthermore, there is no foundation in the law to support Respondent’s argument that Mizpah should be denied a charitable exemption because it charges its subsidized residents amounts greater than their incomes. “While all needy people are low-income; not all low-income people are needy.” White Oak, p. 6. Accordingly, Mizpah reviews both the income and assets of its residents in setting their rates. Exhibit II. If a resident has assets that are sufficient to pay a portion of the rent, Mizpah will charge a rate over that resident’s income. The purpose of Mizpah’s charity is to provide charity to residents that have such limited assets that “absent availability of low cost quarters…their assets [would be] depleted quickly so as to place them in public housing or, if not so placed, in substandard housing under conditions conducive to increasing the problems of government and society.” Franciscan, 566 S.W.2d at 225.

Finally, the fact that Mizpah did not provide any rental assistance to its residents in the year 2000 is not a factor which is sufficient to deny Mizpah’s request for charitable exemption. Mizpah has always had a policy of providing financial assistance to the elderly since its inception. It did not provide assistance in the year 2000 because it did not receive any requests. Exhibit II. The first request Mizpah received for assistance was in January 2001, at which time, Mizpah granted the assistance. Exhibit BB. In Abbot Ambulance, Inc. v. Leggett, the court stated that “activities in preparation for the rendition of charitable services are either charitable uses or they are not; the imminence of the rendition of charitable services is immaterial.” 926 S.W.2d 92, 96 (Mo.App.E.D. 1996). Mizpah has produced evidence that it has provided charitable services. The fact that it was not able to provide assistance in 2000 is not the controlling factor in making a determination on Mizpah’s request for exemption, because as the court stated in Abbott “the imminence of the rendition of charitable services is immaterial.” Id.

CONCLUSION

For all of the reasons set forth above, Mizpah is exempt from the ad valorem taxes levied by St. Louis County, Missouri. The denial of Mizpah’s appeal by the St. Louis County Board of Equalization is set aside and the Property is found to be exempt from ad valorem taxes.

ORDER

The assessment of the subject property made by the Assessor and sustained by the Board of Equalization for St. Louis County for the subject tax day is SET ASIDE.

The assessor is ordered to enter the subject property on the list of exempt property into the supplemental tax book for the county for the tax year 2000.

A party may file with the Commission an application for review of this decision within thirty (30) days of the mailing of such decision. The application shall contain specific grounds upon which it is claimed the decision is erroneous. Failure to state specific facts or law upon which the appeal is based will result in summary denial. Section 138.432, RSMo 1994.

If an application for review of this decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission. If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of St. Louis County, as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal. If any or all protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

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 December 10, 2002.

STATE TAX COMMISSION OF MISSOURI

W.B. Tichenor

Chief Hearing Officer

 

ORDER

AFFIRMING HEARING OFFICER DECISION

UPON APPLICATION FOR REVIEW

On December 10, 2002, Chief Hearing Officer W. B. Tichenor entered his Decision and Order (Decision) setting aside the assessment by the St. Louis County Assessor which had been sustained by the St. Louis County Board of Equalization and the St. Louis County Council and finding the subject property to be tax exempt under Missouri statutory and case law.

Respondent timely filed his Application for Review of the Decision (January 9, 2003). Complainant timely filed its Response in Opposition to the Application for Review (February 12, 2003). Both parties had briefed the issue of exemption in post hearing briefs, which were considered by the Hearing Officer in rendering his Decision.

The Hearing Officer as the trier of fact may consider the evidence on the record and give it as much weight and credit as he may deem it entitled to when viewed in connection with all other circumstances. St. Louis County v. Boatmen’s Trust Co., 857 S.W.2d 453, 457 (Mo. App. E.D. 1993); Vincent by Vincent v. Johnson, 833 S.W.2d 859, 865 (Mo. 1992); Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. banc 1981).

DECISION

A review of the record in the present appeal provides support for the determinations made by the Hearing Officer. There is competent and substantial evidence to establish a sufficient foundation for the Decision of the Hearing Officer. A reasonable mind could have conscientiously reached the same result based on a review of the entire record. The Commission finds no basis to support a determination that the Hearing Officer acted in an arbitrary or capricious manner or abused his discretion as the trier of fact and concluder of law in this appeal. Hermel, Inc. v. STC, 564 S.W.2d 888 (Mo. 1978); Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998); Holt v. Clarke, 965 S.W.2d 241 (Mo. App. W.D. 1998); Smith v. Morton, 890 S.W.2d 403 (Mo. App. E.D. 1995). Phelps v. Metropolitan St. Louis Sewer Dist., 598 S.W.2d 163 (Mo. App. E.D. 1980).

The Hearing Officer appropriately applied the relevant statutory and case law concerning exemption from taxation in this case. He did not err in his determinations as challenged by Complainant.

ORDER

The Commission upon review of the record and Decision in this appeal, finds no grounds upon which the Decision of the Hearing Officer should be reversed or modified. Accordingly, the Decision is affirmed.

Judicial review of this Order may be had in the manner provided in Sections 138.470 and 536.100 to 536.140, RSMo within thirty days of the date of the mailing of this Order.

SO ORDERED March 19, 2003.

STATE TAX COMMISSION OF MISSOURI

Sam D. Leake, Chairman

Bruce E. Davis, Commissioner

Jennifer Tidwell, Commissioner

 

ST. JOHN’S HEALTH SYSTEM, INC., )

)

Complainant, )

)

v. )

)

JEAN TWITTY, Greene County Assessor, ) Appeal No. 00-32500

BRENDA BELL, Dent County Assessor, ) Appeal No. 00-55500

JACK HARRIS, Phelps County Assessor, ) Appeal No. 00-78000

ROGER HARRISON, Pulaski County Assessor, ) Appeal No. 00-80000

STAN CONWAY, Shannon County Assessor, ) Appeal No. 00-87000 & 00-87001

BILL CRABTREE, St. Clair County Assessor ) Appeal No. 00-83500

BRUCE WILSON, Texas County Assessor, ) Appeal No. 00-90000

BRENDA DAY, Wright County Assessor, ) Appeal No. 00-94000

)

Respondents. )

DECISION AND ORDER

Holding: Complainant did not provide persuasive evidence that the primary and inherent purpose of the subject clinics is the provision of cost-based and subsidized medical care. Complainant failed to establish that the physician compensation plans utilized by the SJRMO clinics and the Mercy clinics do not provide for profit-sharing with the physicians. Accordingly, the requests for exemption are denied.

SUMMARY

Complainant filed appeals from the local Boards of Equalization of Greene, Dent, Phelps, Pulaski, Shannon, St. Clair, Texas, and Wright counties claiming exempt status for the 2000 tax year on the following medical clinics:

In the interest of judicial expediency and economy, the parties agreed to the consolidation of the above-cited appeals. Thereafter, the parties agreed to waive the evidentiary hearing and submit the case for decision on the basis of the following evidence:

1. The direct testimony and exhibits filed by each party; and

2. The deposition testimony and exhibits of Dr. Jon Roberts, Dr. David O. Barbe, Gerald Dowdy, and Elysa Fabian.

The parties also submitted briefs to the Commission.

Complainant was represented by Michael P. Merrigan. Respondents were represented by Theodore L. Johnson III, and Glenn P. Green.

ISSUES

Do the operations of the subject medical clinics evidence a primary and inherent charitable use or a mere secondary and incidental charitable use? Further, does the compensation packages for the physicians allow them to share in the net proceeds, i.e. profits, of the operation of the clinics?

FINDINGS OF FACT

1. The subject properties consist of nine medical clinics in eight counties. The clinics in Birch Tree, Eminence, Houston, Mountain Grove, Osceola, and Republic, Missouri (hereafter SJRMO Clinics) provide family practice medical services in a clinic setting. The clinics at Salem, Rolla, and Waynesville/St. Robert, Missouri (hereafter Mercy Clinics) provide medical services in a clinical setting.

2. Complainant’s goal has been to provide primary care physicians in rural areas. Complainant’s Exhibit R- Dowdy at 5.

3. Many of the subject clinics were acquired by Complainant from private-practice physicians. There was no change in the primary use of those medical clinic practices once they were acquired and operated by SJRMO. Respondents’ Exhibit – Deposition of Elysa Fabian, at 69- 70. Physicians who sold their practices and went to work for St. John’s have practiced in the same manner that they had before the transition. Respondents’ Exhibits – Deposition Upon Oral Examination of Dr. Jon Roberts, at 11, 16 – 17; Deposition of David O. Barbe M.D., at 14 – 15.

4. Fees for medical services at SJRMO clinics are set by the Board based on a market analysis of the usual and customary rates in the area. Complainant’s Exhibit R – Fabian, at 9.

5. The only medical services provided by the subject clinics on a “at cost or less” basis are services to patients covered by Medicare, Medicaid, and charity care.

6. Some physicians operating SJRMO clinics exercised discretion in setting fees and determining when charity care was appropriate. Respondents’ Exhibit – Deposition Upon Oral Examination of Dr. Jon Roberts, at 11, & 16 – 17.

7. The Mercy clinics have used the same fee structure established by the SJRMO board.

8. Complainant failed to distinguish how much charity care was provided at any of the subject clinics.

9. The primary purpose of the operation of the subject clinics is to provide access to primary care for the communities that the clinics serve.

10. Complainant has subsidized such clinics in years where they have not been self-sustaining, however, it appears that Complainant has the goal that the clinics become self-sustaining over the long term. Respondents’ Exhibits – Deposition of Gerald Dowdy, at 20 & 41; Deposition of Elysa Fabian, at 70 – 71.

11. Complainant has extended medical services to Medicare and Medicaid patients even though such reimbursements only cover cost or some fraction of the cost of the services rendered.

12. The Birch Tree, Eminence, Houston, Mountain Grove, Osceola, and Republic clinics are owned and operated by St. John’s Regional Medicine of the Ozarks (SJRMO), a Missouri Nonprofit Corporation. Complainant’s Exhibit E. SJRMO is a wholly owned subsidiary of St. John’s Health System, Inc. (Complainant) which is also a Missouri Nonprofit Corporation. Complainant’s Exhibit C. As of the tax day, the Rolla, Salem, and Waynesville/St. Robert clinics were owned by St. John’s Health System, Inc. operating as part of the “Mercy Medical Group” under that system. Respondents ‘Exhibit – Deposition of Gerald Dowdy at 4 – 5.

13. The physician compensation plan used by SJRMO clinics is complicated and certain terms are not defined in the written agreement. The formula for practice compensation provides that the physician receives as compensation the greater of :

(A) the physicians’ draw (85% of previous year’s cash compensation or 100% of income guarantee), or

(B) the fiscal year cash compensation calculated as follows:

“-Calculate Net Professional Revenue of each physician in the business unit;

-Calculate Net Ancillary Revenues of all physicians in the business unit that are allocated to each physician in the business unit based on the physician’s percentage of Net Professional Revenue to the business unit’s Total Net Professional Revenue. …

-Add each physician’s Net Professional Revenue and allocated Net Ancillary Revenue to determine the physician’s Total Combined Revenue;

-Calculate the Amount Available for Provider Compensation by applying the following percentages:

Level of Total Combined Revenue			% of Total Combined Revenue For Provider Comp
$0 to $225,000			45%
$225,000 – $325,000			55%
325,000 and above			70%

 

-Deduct the cost of physicians benefits, physician extender salary and physician extender benefit costs from the Amount Available for Physician Compensation.”

Complainant’s Exhibit N, Attachment A, at 2 – 3.

14. The SJRMO physician compensation plan fails to clarify whether revenue is measured in terms of patient load (expressed in billings) or receipts. Complainant’s Exhibit N – Attachment A. SJRMO physicians testified that the formula is applied to receipts/actual collections. Respondents’ Exhibits – Deposition upon Oral Examination of Dr, Jon Roberts, at 18 – 19, & 26; Deposition of David O. Barbe, M.D., at 11 – 12.

15. Mercy Medical Group’s compensation plan directs that any year-end balance after expenses are deducted from revenues to go to the physicians in terms of production bonus. Respondents’ Exhibit – Deposition of Gerald Dowdy, at 24 – 28, 40 – 41.

CONCLUSIONS OF LAW

Jurisdiction

Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decisions of the respective County Boards of Equalization.

Burden of Proof

Although a taxing statute is construed strictly against the state, an exemption statute is strictly construed against the one claiming the exemption. State ex rel. Union Electric Co. v. Goldberg, 578 S.W.2d 921, 923 (Mo. banc 1979). “The law disfavors claims for exemption from taxation. The substantial burden of establishing the property falls within the exempted class is on the person claiming exemptions under the referenced constitutional and statutory provisions. To prevent the curtailing of the purpose and intended scope of a tax exemption, the tax exemption statute is to be strictly but reasonably construed.” Twitty v. State Tax Commission of Missouri, 896 S.W.2d 680, 684 (Mo. App. S.D. 1995) (citations omitted). Accordingly, in order to prevail, Complainant must demonstrate by substantial and persuasive evidence, that it is entitled to an exemption.

Substantial evidence is that evidence which, if true, has probative force upon the issues, i.e., evidence favoring facts which are such that reasonable men may differ as to whether it established them, and from which the Commission can reasonably decide an appeal on the factual issues. Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

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).

Statutory Exemptions

Properties which can be exempted from taxation are set out within our Constitution and the statutes enacted to enforce that Constitution, to wit:

. . .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, . . .may be exempt from taxation by general law but any such law may provide for approximate restitution to the respective political subdivisions of revenues lost by reason of the exemption. All laws exempting from taxation property other than the property enumerated in this article, shall be void.

 

 

Article X, Section 6, Mo. Const. of 1945.

In support of this Constitutional provision, the Legislature has enacted Section 137.110, RSMo, which provides in relevant part:

The following property shall be exempt from taxation:

(5) All property, real and personal, actually and regularly used exclusively for religious worship, for schools and colleges, or for purposes purely charitable and not held for private or corporate profit, except that the exemption herein granted does not include real property not actually used or occupied for the purpose of the organization but held or used as investment even though the income or rentals received therefrom is used wholly for religious, education or charitable purposes;

 

 

Section 137.110, RSMo.

Case Law on Charitable Use

1. In order for a property to be exempt from taxation for state, county or local purposes, the following tests must be met:

A. 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.

B. 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).

C. The dominant use of the property must be for the benefit of an indefinite number of persons and must directly or indirectly benefit society generally. “It is required that there be the element of direct or indirect benefit to society in addition to and as a result of the benefit conferred on the persons directly served by the humanitarian activity”. Franciscan at 224. See also, Barnes Hospital v. Leggett, 589 S.W.2d 241 (Mo. banc 1979).

2. “Exclusive use” has been construed by our courts to mean the “primary and inherent use” of the property rather than “a mere secondary and incidental use.” Central States Christian Endeavors Association v. Nelson, 898 S.W.2d 547, 549 (Mo. banc 1995).

3. Salvation Army, supra, indicates that the provision of products or services to the public at cost or less constitutes a gift. Id., at 830. Provision of services “at cost or less” does not mean that it is impermissible for the operator “…at times or even fairly regularly to operate in the black rather than on a deficit basis, provided of course, that any excess of income over expense is achieved incidentally to the accomplishment of the dominantly charitable objective and is not a primary goal of the project….” Tri-State Osteopathic Hospital Association v. Blakeley, 898 S.W.2d 693 (Mo. App. S.D. 1995).

Subject Property Operations

1. The provision of services to Medicare, Medicaid, and other patients qualifying for charity care on a cost-based or subsidized basis does not appear from the evidence to be the priority of the clinic operations. The procedure for qualifying for charity care is suggestive of an incidental purpose.

2. Complainant has not provided persuasive evidence that the primary and inherent purpose of the subject clinics is the provision of cost-based and subsidized medical care.

3. Complainant failed to establish that the physician compensation plans utilized by the SJRMO clinics and the Mercy clinics do not provide for profit-sharing with the physicians.

4. Complainant failed to establish entitlement to an exemption on any of the nine appealed clinics.

DECISION

Use

Exemption law requires actual and regular use exclusively for a charitable objective. “Exclusive use” has been construed by our courts to mean the “primary and inherent use” of the property rather than “a mere secondary and incidental use.” Central States Christian Endeavors Association v. Nelson, 898 S.W.2d 547, 549 (Mo. banc 1995). Charity is 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 v. Hoehn, 188 S.W.2d 826, 830 (Mo. banc 1945).

The required elements under this prong of the Franciscan test are (1) whether the primary and inherent use of the property is for a gift (2) to an unlimited class of people (3) which works to accomplish one of the specifically listed goals for the recipient.

Under the first element one must analyze what the primary and inherent use of each subject clinic is and evaluate what constitutes a gift. The clinics in Birch Tree, Eminence, Houston, Mountain Grove, Osceola, and Republic (hereafter SJRMO Clinics) provide family practice medical services in a clinic setting. The clinics at Salem, Rolla, and Waynesville/St. Robert (hereafter Mercy Clinics) provide medical services in a clinical setting, however, the record does not specify whether the services provided are general or specialized in nature. However, on the whole, Complainant’s goal has been to provide primary care physicians in rural areas. Complainant’s Exhibit R- Dowdy at 5.

Medical services from primary care physicians can be provided on a for-profit and/or charitable basis. We must look at the manner in which these medical services are provided in order to determine whether the clinics’ primary and inherent purpose is to provide a gift of such medical services. The discussion in Salvation Army indicates that the provision of products or services to the public at cost or less constitutes a gift. Id., at 830. Provision of services “at cost or less” does not mean that it is impermissible for the operator “…at times or even fairly regularly to operate in the black rather than on a deficit basis, provided of course, that any excess of income over expense is achieved incidentally to the accomplishment of the dominantly charitable objective and is not a primary goal of the project….” Tri-State Osteopathic Hospital Association v. Blakeley, 898 S.W.2d 693 (Mo. App. S.D. 1995) (Emphasis supplied).

SJRMO Clinics

Of the six SJRMO clinics at issue, at least five (Birch Tree, Eminence, Houston, Mountain Grove, and Osceola) were practices that were purchased from private-practice physicians. There was no change in the primary use of those medical clinic practices once they were acquired and operated by SJRMO. Respondents’ Exhibit – Deposition of Elysa Fabian, at 69- 70. Physicians who sold their practices and went to work for St. John’s indicate that they are practicing in the same manner that they had before the transition. Respondents’ Exhibits – Deposition Upon Oral Examination of Dr. Jon Roberts, at 11, 16 – 17; Deposition of David O. Barbe M.D., at 14 – 15.

Complainant’s Chief Operating Officer for St. John’s Regional Medicine of the Ozarks (SJRMO) testified that fees for the medical services at SJRMO clinics are set by the Board after the central business office has performed a market analysis of the usual and customary rates in the area and made recommendations to the Board. Complainant’s Exhibit R – Fabian, at 9. The only medical services which appear from the record to be provided by the subject clinics on a “at cost or less” basis would be services to patients covered by Medicare, Medicaid, and charity care. The SJRMO clinics at issue receive the following percentages of revenue from Medicare and Medicaid services:

Complainant’s Exhibit L. Complainant failed to distinguish how much charity care was provided at each clinic as such costs were lumped into the category of “uncompensated care” which includes contractual allowances for Medicare and Medicaid, managed care contract discounts, bad debt, and charity. Complainant’s Exhibit L and R – Fabian, at 7.

Complainant has no policies, targets, or limits established for the percentage of medical care that it provides to Medicare and Medicaid patients. Complainant’s Exhibit R – Fabian, at 9. Complainant has no specific policy or procedure regarding the amount of charity care to be provided, however, it has an established mission, vision, and values for the operation of its clinics. Id. The mission statement stresses a concern for people who are economically poor. Complainant’s Exhibit O. As to the process for obtaining charity care, Ms. Fabian testified that it is clinic policy to request payment at the time of services. The clinic will bill insurance companies on behalf of the patient, including Medicare and Medicaid. If patients are unable to pay at the time of services, the clinics work with them to establish an acceptable payment plan. If they are able to establish that they are unable to make payments, charity care is provided. Complainant’s Exhibit R – Fabian, at 10 – 11.

Respondents offered the testimony of Dr. Jon Roberts. Dr. Jon Roberts was formerly a private practitioner who sold his clinical practice at the Birch Tree and Eminence locations to SJRMO and went to work for SJRMO at these clinics. Concerning the transition from a private medical practice to a SJRMO clinic, he testified as follows:

Q: Following the sale and following your execution and entry into employment with St. John’s who did you work for or who was your supervisor or who gave you instructions as to your work in these clinics?

 

A: Immediate supervisor was George Flynn.

Q: And what types of instruction did he give you after you entered into employment following the sale in 1991?

A: Basically we were left alone. That was one of the good things with working with St. John’s that they did not put any demands on us and they let us continue to practice the same way we were practicing before our association with St. John’s. That was the reason we chose to go with St. John’s instead of going with some other organization. Right up front we wanted to set what we were going to charge. We were wanting to give free service if we felt like we didn’t want to charge a patient. We talked to Mr. Flynn about it and he said, well, since you are giving half of it up out of your salary we can give half of it out from St. John’s if you feel like somebody warrants a no charge, then we were allowed to do that. And so these are the type of agreements that we had. It may not have been in writing but in fact we were able to follow through with it.

Respondents’ Exhibit – Deposition Upon Oral Examination of Dr. Jon Roberts, at 11. He testified that he had discretion to set the fees charged for services and determine when charity care would be provided and that this arrangement has continued since affiliation with St. John’s. Id., at 16 – 17. The policy on charity care has changed through the years. According to Dr. Roberts, the general practice has been that the physicians and St. John’s shared the income loss evenly, though there was a period of time when the cost of the charitable services was charged solely against the physician’s income. Id. 22 – 23.

Respondents also offered the testimony of Dr. David O. Barbe. Dr. Barbe also sold his medical practice, clinic building, and equipment in Mountain Grove, Missouri, to St. John’s Health System, Inc. and went to work for St. John’s at said clinic. This transaction took place in 1997. Dr. Barbe judged that the affiliation with St. John’s has allowed the clinic to add two new physicians, so the clinic can handle a larger patient load, and they have not had to cut back on any services that might have otherwise been at risk. Respondents’ Exhibit – Deposition of David O. Barbe M.D. at 29 – 30. Dr. Barbe described the process to access charity care at the Mountain Grove clinic as follows:

Q: Do you know of any manner when somebody is registering as a new patient that they would be informed that despite what their financial circumstances are, they could receive medical care from your facility?

A: They are — I was going to say “regularly,” but that may be –our reception desk and checkout clerks are well versed in St. John’s charity policy and know how to implement that and which forms to sign and which buttons to push to see that program implemented and to assist the patient in applying for that or qualifying for that charity care. So, I guess from that standpoint, the answer is mostly yes to that, to your last question.

Our girls are pretty much patient advocates along those lines. They’re pretty good about being sensitive to the patient’s financial status and helping them apply either for charity care through St. John’s or exploring other options like Medicaid to help subsidize or underwrite their care.

Q: Do you know in what manner those staff members try to find out whether a particular patient is within that charity category?

A: They know whether or not there is insurance based on when they come to check out. They ask, you know, “How do you want to pay for this?” When it’s self pay, usually they get a sense in terms — based on if the person is eager and willing, and, you know, whips their checkbook out and says, “Sure, here’s my hundred dollars.” I think as they are asked if payments can be made or can I defer this until I get paid at the end of the month, then I think they advance the issue of charity care or make some inquiries. I don’t know exactly what their script is for that, but that’s my speculation as to how it happens.

Id., at 23 – 25.

Mercy Clinics

The Mercy clinics are operated for the primary purpose of “provid[ing] medical services through physicians specializing in a number of medical specialties.” Complainant’s Exhibit R – Dowdy, at 4. The Mercy clinics have used the same fee structure established by the SJRMO board, but in the future will set their own fees.

Like the SJRMO clinics, the only medical services which appear from the record to be provided by the subject clinics on a “at cost or less” basis would be services to patients covered by Medicare, Medicaid, and charity care. The Mercy clinics at issue receive the following percentages of revenue from Medicare and Medicaid services:

Complainant’s Exhibit L. Complainant failed to distinguish how much charity care was provided at each clinic as such costs were lumped into the category of “uncompensated care” which includes contractual allowances for Medicare and Medicaid, managed care contract discounts, bad debt, and charity. Complainant’s Exhibit L and R – Dowdy, at 6.

Complainant has no policies, targets, or limits established for the percentage of medical care that it provides to Medicare and Medicaid patients. Complainant’s Exhibit R – Dowdy, at 9. Complainant has no specific policy or procedure regarding the amount of charity care to be provided, however, it has an established mission, vision, and values for the operation of its clinics which stresses a concern for people who are economically poor. Id., Complainant’s Exhibit O. As to the process for obtaining charity care, Mr. Dowdy testified that it is clinic policy to request payment at the time of services. The clinic will bill insurance companies on behalf of the patient, including Medicare and Medicaid. If patients are unable to pay at the time of services, the clinics work with them to establish an acceptable payment plan. If they are able to establish that they are unable to make payments, charity care is provided. Complainant’s Exhibit R – Dowdy, at 10.

Conclusion

From the whole of the testimony and exhibits, this Hearing Officer finds that the primary purpose of the operation of the subject clinics is to provide access to primary care for the communities that the clinics serve. Complainant has subsidized such clinics in years where they have not been self-sustaining, however, it appears that Complainant has the goal that the clinics become self-sustaining over the long term. Respondents’ Exhibits – Deposition of Gerald Dowdy, at 20 & 41; Deposition of Elysa Fabian, at 70 – 71.

Thus far in the clinic operations, Complainant has extended medical services to Medicare and Medicaid patients even though such reimbursements only cover cost or some fraction of the cost of the services rendered. The provision of these instances of cost-based and subsidized services does not appear from the evidence to be the priority of the clinic operations. The procedure for qualifying for charity care is suggestive of an incidental purpose.

Accordingly, this Hearing Officer is not persuaded that the primary and inherent purpose of the subject clinics is the provision of cost-based and subsidized medical care.

Operation

Exemption law requires ownership and operation on a non-profit basis. The Birch Tree, Eminence, Houston, Mountain Grove, Osceola, and Republic clinics are owned and operated by St. John’s Regional Medicine of the Ozarks (SJRMO), a Missouri Nonprofit Corporation. Complainant’s Exhibit E. SJRMO is a wholly owned subsidiary of St. John’s Health System, Inc. (Complainant) which is also a Missouri Nonprofit Corporation. Complainant’s Exhibit C. As of the tax day, the Rolla, Salem, and Waynesville/St. Robert clinics were owned by St. John’s Health System, Inc. operating as part of the “Mercy Medical Group” under that system. Respondents’ Exhibit – Deposition of Gerald Dowdy at 4 – 5.

As discussed, supra at 10, the clinics operate as primary health care clinics. The key element of this prong is that 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) (emphasis supplied).

The physician compensation plan used by SJRMO clinics is complicated and certain terms are not defined in the written agreement. The formula for practice compensation provides that the physician receives as compensation the greater of :

(A) the physician’s draw (85% of previous year’s cash compensation or 100% of income guarantee), or

(B) the fiscal year cash compensation calculated as follows:

“-Calculate Net Professional Revenue of each physician in the business unit;

-Calculate Net Ancillary Revenues of all physicians in the business unit that are allocated to each physician in the business unit based on the physician’s percentage of Net Professional Revenue to the business unit’s Total Net Professional Revenue. …

-Add each physician’s Net Professional Revenue and allocated Net Ancillary Revenue to determine the physician’s Total Combined Revenue;

-Calculate the Amount Available for Provider Compensation by applying the following percentages:

Level of Total Combined Revenue			% of Total Combined Revenue For Provider Comp
$0 to $225,000			45%
$225,000 – $325,000			55%
325,000 and above			70%

 

-Deduct the cost of physicians benefits, physician extender salary and physician extender benefit costs from the Amount Available for Physician Compensation.”

Complainant’s Exhibit N, Attachment A, at 2 – 3. Complainant explains the compensation package as a biweekly draw based upon historical productivity plus a bonus where the physician’s production exceeds established production levels. Complainant’s Exhibit R – Fabian, at 8-9. In this explanation, there is no clarification as to whether the term “production” is measured in terms of patient load (expressed in billings) or receipts. Dr. Roberts testified that the percentage available for provider compensation was applied to receipts and not gross or net billings. Respondents’ Exhibit – Deposition upon Oral Examination of Dr, Jon Roberts, at 18 – 19, & 26. Dr. Barbe testified that in 1999, the physician compensation package switched from a gross charges-based formula to a net revenue-based formula which used actual collections for determination of the appropriate physician compensation. Respondents Exhibit – Deposition of David O. Barbe, M.D., at 11 – 12.

The Mercy Medical Group’s physician compensation package provided that the physician would receive 85% of the previous year’s compensation plus an equal division between physicians of any remaining revenues after deduction of expenses. Respondents’ Exhibit – Deposition of Gerald Dowdy, at 24 – 28, 40 – 41. Administrator Dowdy testified that “…our compensation plan allows for at the end of the year the revenues minus expenses if there is any left that is not spent, that goes to the physicians in terms of production bonus.” Id.

In light of the testimony provided in this case, Complainant failed to establish that the physician compensation plans utilized by the SJRMO clinics and the Mercy clinics do not provide for profit-sharing with the physicians.

Given the findings and conclusions under the first two prongs of the Franciscan test, this Hearing Officer concludes that no further analysis is necessary. Complainant has failed to establish entitlement to an exemption on any of the nine appealed clinics.

ORDER

The assessed values for the subject clinics as determined by the Assessors and approved by the various Boards of Equalization are hereby affirmed.

A party may file with the Commission an application for review of a hearing officer decision within thirty (30) days of the mailing of such decision. The application shall contain specific detailed grounds upon which it is claimed the decision is erroneous.

If an application for review of a hearing officer decision is made to the Commission, any protested taxes presently in an escrow account in accordance with these appeals shall be held pending the final decision of the Commission. If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collectors of Greene, Dent, Phelps, Pulaski, St. Clair, Shannon, Texas, and Wright Counties as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in these appeals. If any protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

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 December 3, 2002.

STATE TAX COMMISSION OF MISSOURI

Aimee Smashey

Hearing Officer

THE PLAYERS CLUB AT ST. LOUIS, )

)

Complainant, )

)

v. ) Appeal Number 01-10810

)

PHILIP A. MUEHLHEAUSLER, )

ACTING ASSESSOR, )

ST. LOUIS COUNTY, MISSOURI, )

)

Respondent. )

DECISION AND ORDER

HOLDING

Decision of the St. Louis County Board of Equalization sustaining the assessment made by the Assessor, SET ASIDE, Hearing Officer finds true value in money for the subject property for tax years 2001 and 2002 to be $2,000,000, assessed value of $380,000.

Complainant appeared by Counsel, David L. Walsh, St. Louis, Missouri.

Respondent appeared by Counsel, Paula J. Lemerman, Associate County Counselor.

Case decided by Chief Hearing Officer, W. B. Tichenor.

ISSUE

The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2001.

SUMMARY

Complainant appeals the decision of the St. Louis County Board of Equalization which sustained the valuation of the subject property. The Assessor determined an appraised value of $2,955,000 (assessed value of $561,170). Complainant proposed a value of $2,000,000.

The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.

Complainant’s Evidence

Complainant filed the following exhibits:

Exhibit A    Summary Appraisal Report of Matthew E. Burghoff, MAI, SRA.

Exhibit B    Survey of subject property.

Respondent’s Evidence

Respondent did not file any exhibits.

FINDINGS OF FACT

1. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the St. Louis County Board of Equalization.

2. The subject property consists of the property known as The Players Club at St. Louis, 745 Lewis Road, St. Louis County, Missouri. The locator number for the property is 27U510061

3. There was no evidence of new construction and improvement from January 1, 2001, to January 1, 2002.

4. Complainant’s evidence was substantial and persuasive to rebut the presumption of correct assessment by the Board and establish the true value in money as of January 1, 2001, to be $2,000,000, as proposed.

5. By order dated, October 9, 2002, Respondent was given until and including October 24, 2002, to show cause why this case should not be submitted on exhibits filed by Complainant. Respondent did not file any response to the October 9, 2002, Show Cause Order. Respondent failed to comply with the Scheduling Order date May 1, 2002, and accordingly did not file any exhibits on the issue of value. The only evidence of value in this appeal is the appraisal report submitted by Complainant.

CONCLUSIONS OF LAW

Jurisdiction

The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious. Article X, section 14, Mo. Const. of 1945; Sections 138.430, 138.431, RSMo. 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. Section 138.431.4, RSMo.

Board of Equalization Presumption

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). There is no presumption that the assessor’s valuation is correct. Section 138.431.3, RSMo.

Standard for Valuation

Section 137.115, RSMo 1994, requires that property be assessed based upon its true value in money which is defined as the price a property would bring when offered for sale by one willing or desirous to sell and bought by one who is willing or desirous to purchase but who is not compelled to do so. St. Joe Minerals Corp. v. State Tax Commission, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993); Missouri Baptist Children’s Home v. State Tax Commission, 867 S.W.2d 510, 512 (Mo. banc 1993). It is the fair market value of the subject property on the valuation date. Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 897 (Mo. banc 1978).

Market Value

Market value is the most probable price in terms of money which a property should bring in competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeable and assuming the price is not affected by undue stimulus.

Implicit in this definition is the consummation of a sale as of a specific date and the passing of title from seller to buyer under conditions whereby:

1. Buyer and seller are typically motivated.

2. Both parties are well informed and well advised, and each acting in what they consider their own best interests.

3. A reasonable time is allowed for exposure in the open market.

4. Payment is made in cash or its equivalent.

5. Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.

6. The price represents a normal consideration for the property sold unaffected by special financing amounts and/or terms, services, fees, costs, or credits incurred in the transaction.

 

Real Estate Appraisal Terminology, Society of Real Estate Appraisers, Revised Edition, 1984; See also, Real Estate Valuation in Litigation, J. D. Eaton, M.A.I., American Institute of Real Estate Appraisers, 1982, pp. 4-5; Property Appraisal and Assessment Administration, International Association of Assessing Officers, 1990, pp. 79-80; Uniform Standards of Professional Appraisal Practice, Glossary.

Weight to be Given Evidence

The Hearing Officer is not bound by any single formula, rule or method in determining true value in money, but is free to consider all pertinent facts and estimates and give them such weight as reasonably they may be deemed entitled. The relative weight to be accorded any relevant factor in a particular case is for the Hearing Officer to decide. St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977); St. Louis County v. STC, 515 S.W.2d 446, 450 (Mo. 1974); Chicago, Burlington & Quincy Railroad Company v. STC, 436 S.W.2d 650 (Mo. 1968).

Trier of Fact

The Hearing Officer as the trier of fact may consider the testimony of an expert witness and give it as much weight and credit as he may deem it entitled to when viewed in connection with all other circumstances. The Hearing Officer is not bound by the opinions of experts who testify on the issue of reasonable value, but may believe all or none of the expert’s testimony and accept it in part or reject it in part. St. Louis County v. Boatmen’s Trust Co., 857 S.W.2d 453, 457 (Mo. App. E.D. 1993); Vincent by Vincent v. Johnson, 833 S.W.2d 859, 865 (Mo. 1992); Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. banc 1981).

Opinion Testimony by Experts

If specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert on that subject, by knowledge, skill, experience, training, or education, may testify thereto.

The facts or data upon which an expert bases an opinion or inference may be those perceived by or made known to the expert at or before the hearing and must be of a type reasonably relied upon by experts in the field in forming opinions or inferences upon the subject and must be otherwise reliable, the facts or data need not be admissible in evidence. Section 490.065, RSMo; Courtroom Handbook on Missouri Evidence, Wm. A. Schroeder, Sections 702-505, pp. 325-350; Wulfing v. Kansas City Southern Industries, Inc., 842 S.W.2d 133 (Mo. App. E.D. 1992).

Complainant’s Burden of Proof

In order to prevail, Complainant must present an opinion of market value and substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on January 1, 2001. Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, at 897. Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See, Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959). 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).

Methods of Valuation

Missouri courts have approved the comparable sales or market approach, the cost approach (replacement or construction) and the income approach as recognized methods of arriving at fair market value. St. Joe Minerals Corp. v. STC, 854 S.W.2d 526, 529 (App. E.D. 1993); Aspenhof Corp. v. STC, 789 S.W.2d 867, 869 (App. E.D. 1990); Quincy Soybean Company, Inc., v. Lowe, 773 S.W.2d 503, 504 (App. E.D. 1989), citing Del-Mar Redevelopment Corp v. Associated Garages, Inc., 726 S.W.2d 866, 869 (App. E.D. 1987) and State ex rel. State Highway Comm’n v. Southern Dev. Co., 509 S.W.2d 18, 27 (Mo. Div. 2 1974).

DECISION

The only evidence of value presented is the Complainant’s appraisal. The appraisal by a state certified real estate appraiser constitutes substantial and persuasive evidence of value. Complainant has met its burden of proof and establish the fair market value of the subject property to be $2,000,000 as of January 1, 2001.

ORDER

The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization for St. Louis County for the subject tax day is SET ASIDE.

The assessed value for the subject property for tax years 2001 and 2002 is set at $380,000.

A party may file with the Commission an application for review of this decision within thirty (30) days of the mailing of such decision. The application shall contain specific grounds upon which it is claimed the decision is erroneous. Failure to state specific facts or law upon which the appeal is based will result in summary denial. Section 138.432, RSMo 1994.

If an application for review of this decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission. If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of St. Louis County, as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal. If any or all protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

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 27, 2002.

STATE TAX COMMISSION OF MISSOURI

W. B. Tichenor

Chief Hearing Officer

 

HENRY COUNTY WATER COMPANY, )

)

Complainant, )

)

v. ) Appeals No. 01-59500 through 01-59508

)

JAMES KECK, ASSESSOR, )

HENRY COUNTY, MISSOURI, )

)

Respondent. )

DECISION AND ORDER

An evidentiary hearing was held in the above matter on July 24, 2002, at the Henry County Courthouse, Clinton, Missouri, before Hearing Officer Luann Johnson. Complainant appeared through counsel, Wayne Tenenbaum. Respondent appeared through counsel, John Kopp.

ISSUE

The only issue in this case is whether or not a not-for-profit corporation, by the act of hiring a for-profit corporation to manage some of the day-to-day business, loses its tax exemption under Section 137.100(5), RSMo. We find that property owned by Complainant is tax exempt, and Complainant’s decision to hire an expert to assist in the running of its water plant does not destroy its entitlement to a tax exemption.

FINDINGS OF FACT

1. Complainant, Henry County Water Company, is a not-for-profit corporation created for the sole purpose of providing a safe water source for the residents of Clinton, Missouri and the surrounding county. Complainant owns the property under appeal identified as parcels number 012-4.0-19-000-000-002.000; 013-7.0-35-004-002-005.006; 018-2.0-03-004-002-001.000; 018-2.0-03-004-034-008.000; 018-2.0-10-002-007-010.000; 018-6.0-13-000-000-002.001; 048-8.0-08-000-000-073.000; 048-8.0-08-000-000-074.000; and 053-7.0-36-000-000-001.000.

2. Under the terms of its Articles of Incorporation, “All income, revenues, receipts and profits received or collected by the Company from the operation of the Water System, which it is herein authorized to acquire, shall be held and disposed of for the purpose of paying the cost of operation of such Water System and other proper corporate expenses, and for the purpose of paying the interest and principal on any evidences of indebtedness. . .the Company shall . . operate such property substantially without profit and any smaller profit which may accrue through such operation shall be paid to the City of Clinton or shall be rebated to customers of water purchase from the Company”

3. Complainant’s purchase and operation of the water plant is funded through a bonded indebtedness approved by the Board of the City of Clinton.

4. Under the terms of the bond indenture, the physical plant must be transferred to the City of Clinton, Missouri, when the bonded indebtedness is retired. Further, at any time prior to the retirement of the bonds on said property, the City of Clinton may demand and receive possession of the water plant from Complainant, Henry County Water Company. Additionally, no physical improvements can be made to the plant without the express permission of the City of Clinton.

5. Water rates and any increase in water rates, are approved by the Board of Aldermen of Clinton, Missouri.

6. Henry County Water Company is operated pursuant to policies promulgated by a Board of Directors, which board includes residents of the City of Clinton, Missouri. Each Board member receives a remuneration of $1,000 per year for attending Board meetings, and the Board meets approximately 12 times per year.

7. In order to handle the day-to-day operation of the facility, the Board of Directors have hired Alliance Water Resources, Inc. a for-profit corporation with expertise in providing safe water to users. The Board of Directors also contracts out other services, such as auditors, plumbers and lawn care specialists.

8. The contract between Complainant and Alliance Water Resources, Inc. is based upon a flat fee, paid monthly, which fee is renegotiated every year based upon a budget approved by the Board of Directors. There is no provision which allows Alliance to share in any profits that the water company may make. However, if Alliance operates in such a way that some expense items come in under the budgeted amount, Alliance will refund fifty percent of the savings to Complainant. If Alliance exceeds the budgeted expenditures, it is not entitled to additional reimbursement.

CONCLUSIONS OF LAW

Burden of Proof

Although a taxing statute is construed strictly against the state, an exemption statute is strictly construed against the one claiming the exemption. State ex rel. Union Electric Co. v. Goldberg, 578 S.W.2d 921, 923 (Mo. banc 1979).

In order to prevail, Complainant must demonstrate by substantial and persuasive evidence, that it is entitled to an exemption.

Substantial evidence is that evidence which, if true, has probative force upon the issues, i.e., evidence favoring facts which are such that reasonable men may differ as to whether it established them, and from which the Commission can reasonably decide an appeal on the factual issues. Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

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).

Statutory Exemptions

Properties which can be exempted from taxation are set out within our Constitution and the statutes enacted to enforce that Constitution, to wit:

“. . .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, . . .may be exempt from taxation by general law but any such law may provide for approximate restitution to the respective political subdivisions of revenues lost by reason of the exemption. All laws exempting from taxation property other than the property enumerated in this article, shall be void. Article X, Section 6, Mo. Const. Of 1945.

 

In support of this Constitutional provision, the Legislature has enacted Section 137.110, RSMo, which provides in relevant part:

The following property shall be exempt from taxation:

(5) All property, real and personal, actually and regularly used exclusively for religious worship, for schools and colleges, or for purposes purely charitable and not held for private or corporate profit, except that the exemption herein granted does not include real property not actually used or occupied for the purpose of the organization but held or used as investment even though the income or rentals received therefrom is used wholly for religious, education or charitable purposes; Section 137.110, RSMo.

 

Case Law on Charitable Use

In order for a property to be exempt from taxation for state, county or local purposes, the following tests must be met:

1. 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.

2. 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).

3. The dominant use of the property must be for the benefit of an indefinite number of persons and must directly or indirectly benefit society generally. “It is required that there be the element of direct or indirect benefit to society in addition to and as a result of the benefit conferred on the persons directly served by the humanitarian activity”. Franciscan at 224. See also, Barnes Hospital v. Leggett, 589 S.W.2d 241 (Mo. banc 1979).

DISCUSSION

Complainant is a not-for-profit corporation organized to benefit an indefinite number of persons through the provision of a safe and sufficient water supply. In so doing, the Complainant has lessened the burden of government, by providing a function that should be provided by the City of Clinton, Missouri. Indeed, the City of Clinton actively participates in the management of the facility by approving water rates, placing a city leader on the Board, and controlling Complainant’s ability to change the physical structure of the premises. Additionally, at any point in time, the City of Clinton may demand that title to the physical plant be transferred to the City. Finally, under the Articles of Incorporation, any profit realized through the operation of the water company must be rebated to the consumers or paid to the City of Clinton. In all respects, the dominant use of the property is for a charitable purpose.

Respondent argues that Complainant’s decision to hire a for-profit corporation to handle the operation of the plant in some way destroys the charitable use of the facilities. We disagree. The operation of the plant is governed by the policies enacted by the Board of Directors, who meet on a monthly basis to oversee the operation of the plant and who determine and approve the budgetary requirements for operation.

The fact that the Board of Directors has elected to hire individuals experienced in the operation of water plants to carry out the day-to-day operations of the facility does not destroy the charitable nature of the operation of the plant. Likewise, the fact that the company hired to run the plant may realize a profit through its efforts to run the plant, is not sufficient to destroy the charitable nature of the operation of the plant. Where the Board of Directors of Complainant are essentially volunteers with no expertise in providing a safe water system, prudence would dictate that they seek out and employ organizations which have the requisite experience and technical expertise to enable the Directors to fulfill the corporate purpose.

ORDER

The assessment is hereby SET ASIDE. The Clerk of Henry County is hereby ordered to place this property on the tax rolls as exempt.

A party may file with the Commission an application for review of a hearing officer decision within thirty (30) days of the mailing of such decision. The application shall contain specific detailed grounds upon which it is claimed the decision is erroneous. Failure to state specific facts or law upon which the appeal is based will result in summary denial.

If an application for review of a hearing officer decision is made to the Commission, any protested taxes presently in an escrow account in accordance with these appeals shall be held pending the final decision of the Commission. If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of Henry County as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in these appeals. If any protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

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 October 24, 2002.

STATE TAX COMMISSION OF MISSOURI

Luann Johnson

Hearing Officer

 

ORDER

AFFIRMING HEARING OFFICER DECISION

UPON APPLICATION FOR REVIEW

On October 24, 2002, Hearing Officer, Luann Johnson, entered her Decision and Order (Decision) setting aside the assessments by the Henry County Board of Equalization and finding Complainants properties to be exempt from taxation under Section 137.100(5), RSMo.

Respondent filed his Application for Review of the Decision (11/25/02). Complainant filed Response in Opposition to Application for Review (1/2/03).

Respondent’s Grounds for Review

Respondent set forth four grounds for review. They are:

1. The Hearing Officer in her Decision and Order and in her consideration of the matter failed and refused to consider the State Tax Commission’s own criteria for considering the tax exempt status of an entity.

2. The finding of fact by the Hearing Officer that the Henry County Water Company did not confer upon its operator, Alliance Water Resources, Inc., an element of profit is not supported by the record.

3. There was no evidence that the activities of the Henry County Water Company provided a direct or indirect benefit to society in addition to the benefit conferred on the persons directly served as required by applicable case law.

4. The activities of the Henry County Water Company are not exclusively charitable as required by applicable case law.

Complainant’s Response in Opposition

Complainant opposed granting the relief sought in Respondent’s application for review on the grounds that Respondent (1) misstated the law with regard to the grant of charitable exemptions; and, (2) applied circular and inconsistent reasoning to the facts in the case in an attempt to make its interpretation of the law appear reasonable.

DECISION

Respondent’s Point 1

The argument raised by Respondent under his first point is not well taken. Respondent asserts that the testimony of Respondent set forth that the Commission had provided an “Exemption Analysis” for use by the assessors in the state. Respondent further argues that this analysis is “tantamount to a rule because it announces the Commissions’s statement of policy or interpretation of law of future effect which acts on unnamed or unspecified facts.” The argument is defective on at least two grounds.

First, none of the testimony of Respondent, written direct (Exhibit 14) or cross-examination and redirect testimony (Tr. 43, Line 1 – Tr. 57, Line 16) contain any reference to an “Exemption Analysis.” None of the exhibits (Exhibits 1-13) prefiled with the Commission on behalf of Respondent is a copy of the “Exemption Analysis.” Nothing in Respondent’s testimony referenced or related to the issue of exemption. The only reference to an exemption analysis provided by the Commission is in the opening statement of Counsel for Respondent. Opening statements, closing arguments and other statements of counsel for a party are not testimony or evidence before the Commission. The Commission’s exemption analysis is not part of the record in this appeal.

Point 1 is not well taken for another basic reason. The exemption analysis provided to assessors by the Commission is neither a rule, nor is it “tantamount to a rule.” The exemption analysis is nothing more or less than a summary of factors which an assessor should consider in a given case in addressing exemption issues. It is not intended as a statement of the applicable law, nor a rule by which the Commission will decide exemption cases. Each exemption case must be decided upon the specific facts involved in that case.

The Hearing Officer correctly applied the existing law on exemption to the facts of this case. The record in this case clearly establishes that the use of the subject properties by Complainant meets all three tests for exemption as set forth by the Supreme Court of Missouri in its interpretation of the State’s constitution and statutes. The Hearing Officer did not err in her determinations as challenged by Respondent in Point 1.

Respondent’s Point 2

The second argument raised by Respondent is, likewise, not well taken. Respondent’s argument ignores the plain, uncontested record in these appeals. Finding of Fact No. 8 (Decision, p. 3) is clearly established by the evidence and is controlling on this point. The fact that Alliance Water Resources, Inc. is a for profit corporation is not the question at issue in these appeals. The question at issue is whether a not-for-profit corporation, by the act of hiring a for-profit corporation to manage some of the day-today business, loses its tax exemption under Section 137.100(5), RSMo.

Respondent, in essence, argues that Complainant could not hire any profit making entity to perform services for it. If this were the case, not-for-profit organizations could not exist because they could hire no outside services or, by extension of the argument to the extreme, even pay their employees, for that would be a prohibited benefit to an individual from the operations of an otherwise exempt organization. In other words, under Respondent’s argument, only organizations operated totally by volunteers could be granted tax exempt status. This plainly and simply is not the applicable case law.

The Hearing Officer did not err in her determinations as challenged by Respondent in Point 2.

Respondent’s Point 3

The argument put forth in Point 3 of Respondent’s Application for Review is also unpersuasive. The controlling explanation of the third test set forth in Franciscan Tertiary Province of Missouri, Inc. v. STC, 566 SW2d 216 (S.Ct. 1978) was supplied in the case of Affiliated Medical Transport, Inc. v. STC, 755 SW2d 646 (Mo. App. E.D. 1988). The court stated, “Additionally, the dominate use of the property must benefit society generally or an indefinite number of people.” Affiliated, Id., p. 650.

The provision of a clean and sanitary water system to the citizens of Clinton, Missouri both benefits society in general, as well as an indefinite number of people (any and all people who may have occasion to use water in Clinton). If the city of Clinton did not have a clean, sanitary water system as is provided by Complainant, disease would run rampant in the community. The provision of a public work, such as a water system, which assists in the elimination, eradication and prevention of disease is clearly a benefit to society in general. If Complainant’s water system were not in place, the citizens of Clinton would be required to take steps to put such a system in place. By the very fact that Complainant’s water system is a public work and as such lessens the burden of the government of Clinton, this establishes a benefit to society in general.

The Hearing Officer did not err in her determinations as challenged by Respondent in Point 3.

Respondent’s Point 4

The final point asserted by Respondent is not persuasive for two reasons. Respondent’s argument does not account for the court decisions which have defined the phase “actually and regularly used exclusively,” and Respondent is in error as to the proper definition of charity.

The phrase “actually and regularly used exclusively” has been interpreted and defined in various court decisions. The phrase has reference to the primary and inherent use as opposed to a mere secondary and incidental use. Central States Christian Endeavors Ass’n v. Nelson, 898 S.W.2d 547 (S. Ct., 1995); Missouri United Methodist Retirement Homes v. STC, 522 S.W.2d 745 (S. Ct. 1975); Community Memorial Hospital v. City of Moberly, 422 S.W.2d 290 (S. Ct. 1967). In the present appeals, the primary and inherent (exclusive) use of Complainant’s properties is the providing of a public work (water system) and thereby lessening the burdens of government.

Respondent’s argument based on a definition of charity dependent upon the ability of Complainant’s customers to pay for the services Complainant provides is fallacious and does not follow the law, as set forth in decisions of Missouri Courts. Respondent’s reliance upon Westminister Gerontology Foundation, Inc. v. STC, 522 SW2d 754 (1975) and Paraclete Manor of Kansas City v. STC, 447 SW2d 311 (1969) is misplaced, in light of the Missouri Supreme Court’s decision in Franciscan, supra, pp. 223-224.

In like manner, Cape Retirement Community, Inc. v. Kuehl, 798 SW2d 201 (Mo. App. E.D. 1990) is not applicable to the present appeals. In Cape Retirement it was established that the application procedure of the retirement and nursing facility was structured to avoid providing services to the low-income elderly. Cape Retirement, Id., p. 203. There is nothing in the present record to even remotely suggest, let alone, establish as a fact, that Complainant has an application procedure or a payment structure for its water service which is structure to avoid providing services to low-income persons.

Respondent also seeks support for this line of argument from Callaway Community Hospital Association vs. Craighead, 759 SW2d 253 (Mo. App. W.D. 1988). Callaway only provides support for the Decision of the Hearing Officer. In Callaway, there was no substantial evidence to support a conclusion that the hospital did not treat both rich and poor. Callaway, Id., p. 256. In like manner in the present case, there is no evidence that water services are not provided to rich and poor alike.

Complainant provides what is, for all intents and purposes, a government service. The standard to be applied is that the service is available to all. If the city of Clinton were operating this service it would not be required to keep providing water service to non-paying customers. In like manner in this instance, the test is not whether Complainant will provide water free of cost. Complainant is providing a benefit to all of the citizens of Clinton irrespective of their economic status. In any case, economic status of the beneficiaries of Complainant’s service is not a criterion for determining whether to grant tax exempt status. Not-for-profit activities are not limited solely to the relief of the destitute. Affiliated, supra, p. 651.

The Hearing Officer did not err in her determinations as challenged by Respondent in Point 3.

Summary

A review of the record in the present appeals provides support for the determinations made by the Hearing Officer. There is competent and substantial evidence to establish a sufficient foundation for the Decision of the Hearing Officer. A reasonable mind could have conscientiously reached the same result based on a review of the entire record. The Commission finds no basis to support a determination that the Hearing Officer acted in an arbitrary or capricious manner or abused her discretion as the trier of fact and concluder of law in this appeal. Hermel, Inc. v. STC, 564 S.W.2d 888 (Mo. 1978); Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998); Holt v. Clarke, 965 S.W.2d 241 (Mo. App. W.D. 1998); Smith v. Morton, 890 S.W.2d 403 (Mo. App. E.D. 1995). Phelps v. Metropolitan St. Louis Sewer Dist., 598 S.W.2d 163 (Mo. App. E.D. 1980).

The Hearing Officer properly applied the law relating to tax exemption based upon the facts of these appeals.

ORDER

The Commission upon review of the record and Decision in this appeal, finds no grounds upon which the Decision of the Hearing Officer should be reversed or modified. Accordingly, the Decision is affirmed.

Judicial review of this Order may be had in the manner provided in Sections 138.470 and 536.100 to 536.140, RSMo within thirty days of the date of the mailing of this Order.

SO ORDERED January 28, 2003.

STATE TAX COMMISSION OF MISSOURI

Sam D. Leake, Chairman

Bruce E. Davis, Commissioner

Jennifer Tidwell, Commissioner 

 

HAIH & COMPANY, INC. )

)

Complainant, )

)

v. ) Appeal Number 01-79009

)

CHRISTINE MCQUITTY, ASSESSOR, )

PLATTE COUNTY, MISSOURI, )

)

Respondent. )

DECISION AND ORDER

The above matter came on regularly for hearing on September 11, 2002, in Platte County. Complainant appeared by counsel, Joseph Mulvihill; Respondent appeared by counsel, John Shank. Respondent confessed or stipulated that the named Complainant had no legal interest in the real property in question.

ISSUES

Complainant raised the issues of exemption, discrimination, and wrongful assessment. We find that Complainant was not a party in interest and has no taxable interest in the real property. We further find that Complainant, having no interest in the subject real property, has no standing to allege exemption or discrimination.

FINDINGS OF FACT

1. The subject real property is identified as parcel no. 17-5.0-16–000-000-001-02.

2. Complainant Haith & Company, Inc. is a management company which manages properties for Kansas City Air Cargo Services, Inc.

3. On June 18, 1986, Complainant entered into a lease with the City of Kansas City, Missouri to develop and operate an air cargo terminal on the said property.

4. On August 26, 1986, Complainant assigned all of its right, title and interest in the aforementioned lease to Kansas City Air Cargo Services, Inc.

5. Said lease and assignment are recorded in the Platte County Recorder of Deeds Office, but that the records of the Platte County Assessor’s Office have not been changed to reflect the assignment of interest.

6. At the informal hearing with the Assessor’s Office, and the subsequent Board of Equalization hearing, the County was made aware of the fact that Complainant had no interest in the subject property. However, there is no evidence that the County took any steps to correct this error.

7. On August 13, 2001, Complainant filed its appeal with the State Tax Commission asserting discrimination and exemption. Complainant did not assert erroneous assessment.

8. On May 20, 2002, after Respondent’s appraiser had determined that Kansas City Air Cargo Services, Inc. had a taxable interest in the subject property, Complainant moved that Kansas City Air Cargo Services, Inc. be added as an additional party Complainant.

9. State Tax Commission Rule 12 CSR 30.3.020(2) provides: “Any person may apply for leave to intervene in any contested case before the commission by serving a motion for leave to intervene upon all then existing parties and upon the commission. The motion shall state the grounds for it and whether the applicant is seeking to intervene on behalf of the complainant or the respondent. The motion shall be filed within thirty (30) days of the time of the notice of institution of the case. . . .”

10. Although Complainant Haith & Company, Inc.; Kansas City Air Cargo Services, Inc.; and counsel for both entities were aware that Complainant’s lease had been assigned to Kansas City Air Cargo Services, Inc. at least as early as the informal hearing with the Assessor’s Office, no action was taken to include Kansas City Air Cargo Services, Inc. in the appeal until nine months after the original filing and after significant discovery and prehearing preparation had occurred and without giving the Board of Equalization an opportunity to hear any complaint which Kansas City Air Cargo Services, Inc. might have concerning the assessment. Complainant’s motion to add an additional Complainant was denied, but Complainant was given additional time to amend its Complaint to assert erroneous assessment.

11. Complainant Haith & Company, Inc. is not responsible for taxes on the subject property.

ORDER

The assessment against Haith & Company, Inc. on parcel number 17-5.0-16–000-000-001-02. is hereby SET ASIDE. The Platte County Board of Equalization is hereby ORDERED to amend its tax books to show the correct party in interest and to give said party an opportunity for a hearing on the issues of discrimination and exemption.

A party may file with the Commission an application for review of a hearing officer decision within thirty (30) days of the mailing of such decision. The application shall contain specific detailed grounds upon which it is claimed the decision is erroneous. Failure to state specific facts or law upon which the appeal is based will result in summary denial.

If an application for review of a hearing officer decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission. If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of Platte County as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal. If any protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

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 October 8, 2002.

STATE TAX COMMISSION OF MISSOURI

Luann Johnson

Hearing Officer

 

 

ORDER

AFFIRMING HEARING OFFICER DECISION

UPON APPLICATION FOR REVIEW

On October 8, 2002, Hearing Officer, Luann Johnson, entered her Decision and Order (Decision) setting aside the assessment against Complainant on the subject property. The Hearing Officer found that Complainant was not a party in interest and has no taxable interest in the subject property and accordingly has no standing to allege exemption or discrimination.

Complainant timely filed its Application for Review of the Decision on November 6, 2002.

Respondent filed Suggestions in Opposition to Application for Review on November 19, 2002.

Complainant filed its Reply to Respondent’s Suggestions in Opposition to Application for Review on December 13, 2002.

DECISION

A review of the record in the present appeal provides support for the determinations made by the Hearing Officer. There is competent and substantial evidence to establish a sufficient foundation for the Decision of the Hearing Officer. The Hearing Officer properly applied the controlling law in this appeal. The Commission finds no basis to support a determination that the Hearing Officer acted in an arbitrary or capricious manner or abused her discretion as the trier of fact and concluder of law in this appeal. Hermel, Inc. v. STC, 564 S.W.2d 888 (Mo. 1978); Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998); Holt v. Clarke, 965 S.W.2d 241 (Mo. App. W.D. 1998); Smith v. Morton, 890 S.W.2d 403 (Mo. App. E.D. 1995); Phelps v. Metropolitan St. Louis Sewer Dist., 598 S.W.2d 163 (Mo. App. E.D. 1980).

The Hearing Officer did not err in her determinations as challenged by Complainant.

ORDER

The Commission upon review of the record and Decision in this appeal, finds no grounds upon which the Decision of the Hearing Officer should be reversed or modified. Accordingly, the Decision is affirmed.

Judicial review of this Order may be had in the manner provided in Sections 138.470 and 536.100 to 536.140, RSMo within thirty days of the date of the mailing of this Order.

SO ORDERED April 8, 2003.

STATE TAX COMMISSION OF MISSOURI

Sam D. Leake, Chairman

Bruce E. Davis, Commissioner

Jennifer Tidwell, Commissioner 

 

DNS ELECTRONIC MATERIALS, INC., )

)

Complainant, )

)

v. ) Appeal Number 01-32620

)

EUGENE ZIMMERMAN, ASSESSOR, )

ST. CHARLES COUNTY, MISSOURI, )

)

Respondent. )

DECISION AND ORDER

HOLDING

Decision of the St. Charles County Board of Equalization sustaining the assessment made by the Assessor, SET ASIDE, Hearing Officer finds true value in money for the subject property for tax years 2001 and 2002 to be $3,906,595 ($3,859,425 – commercial; $47,170 – agricultural); assessed value of $1,240,660.

Complainant appeared by Counsel, David Dempsey, St. Louis, Missouri.

Respondent appeared by Counsel, Lisa Leslie, Assistant County Counselor.

Case heard and decided by Chief Hearing Officer, W. B. Tichenor.

ISSUE

The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2001.

SUMMARY

Complainant appeals the decision of the St. Charles County Board of Equalization which sustained the valuation of the subject property. The Assessor determined an appraised value of $13,448,870 (assessed value of $4,294,190, as commercial property). Complainant proposed a value of $5,440,000. A hearing was conducted on August 6, 2002, at the St. Charles County Administration Building, St. Charles, Missouri.

Order was issued August 19, 2002, for Respondent to provide listing of assessed and appraised values and classification on the Complainant’s properties. Respondent provided said listing on September 3, 2002.

Order was issued September 6, 2002, for Respondent to provide the number of acres classified as agricultural for three of the subject parcels. Respondent provided said information on September 13, 2002.

The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.

Complainant’s Evidence

Complainant offered into evidence the following exhibits:

Exhibit A     Appraisal Report of Thomas R. McReynolds, MAI and J. Lawrence Von Trapp, MAT, State Certified Real Estate Appraisers.

Exhibit B    Written Direct Testimony of Mr. McReynolds.

Exhibit C    Depreciation calculations derived from Comparable Sales 2 and 5 of   Exhibit A.

Mr. McReynolds testified under cross-examination, redirect and questions by the Hearing Officer. The testimony of Mr. McReynolds at the evidentiary hearing also constitutes part of the record in this appeal.

Respondent’s Evidence

Respondent did not offer any evidence.

FINDINGS OF FACT

1. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the St. Charles County Board of Equalization.

2. Pursuant to Section 138.430.2, RSMo, the Hearing Officer requested information relative to the assessment of individual parcels of the subject property following the evidentiary hearing (Orders, dated 8/19/02 & 9/6/02), in order to make appropriate allocation as to value and to account for the portion of the property classified as commercial and that classified as agricultural. The information provided in response to the two requests is identified as STC Exhibit 1 and STC Exhibit 2, respectively, and are received as part of the record in this appeal.

3. The subject property is located at 501 Pearl Drive, St. Peters, Missouri. It is known as the MEMC Property. The property consists of six tracts of land owned by Complainant and an additional seven tracts of land owned by the City of O’Fallon. The O’Fallon property is tax exempt. The subject property is improved with a number of hi-tech industrial buildings and ancillary buildings used in the manufacture of polished silicon wafers for the semi-conductor industry. Exhibit A, p. 6.

4. The six parcels which are the subject of this appeal are further identified as follows (STC Exhibit 1):

The percentage of total commercial assessed value of tract 1 represents approximately 92% of the total commercial assessed value. The percentage of total commercial assessed value of tract 4 represents approximately 7% of the total commercial assessed value. The percentage of total commercial assessed value of tracts 3 and 6 represents approximately 1% of the total commercial assessed value. It is appropriate to utilized these percentages in making an allocation of the assessed value for the entire subject property to the individual parcels

5. There was no evidence of new construction and improvement from January 1, 2001, to January 1, 2002.

6. Complainant did not appeal the classification of the portions of the subject property which were valued and assessed as agricultural property. There is a total of 72.57 acres of the subject property which is agricultural land. The total assessed value of the agricultural land is $5,660 (agricultural use value – $47,170) (STC Exhibit 2, Exhibit A, p. 12).

7. Complainant’s evidence was substantial and persuasive to establish the per acre value of the subject land to be $21,780 (.50 cents per square foot; 43,560 x .50 = $21,780) Exhibit A, pp. 81-85. The land value of the 72.57 acres of agricultural land must be deducted from the value determined by Complainant’s appraiser for the total subject property. This deduction is $1,580,575 (72.57 x $21,780 = $1,580,574.60, rounded to $1,580,575).

8. The contributory market value of the property owned by the City of O’Fallon, which is exempt from assessment and taxation is $2,000,000. Exhibit A, pp. 7, 97.

9. The properties relied upon by Complainant’s appraiser in performing his appraisal were comparable to the subject property for the purpose of making a determination of value of the subject property. Exhibit A, pp. 72 – 77. Complainant’s appraiser considered adjustments for various relevant factors in arriving at an opinion of value for the subject property as is appropriate within the appraisal field. Exhibit A, p. 78.

10. Complainant’s evidence was substantial and persuasive to rebut the presumption of correct assessment by the Board, relating to the commercially assessed property, and to establish the true value in money as of January 1, 2001, to be $7,440,000, for the entire subject property (Complainant’s property and City of O’Fallon’s property).

11. The deductions for the contributory value of the agriculturally assessed land and the contributory market value of the City of O’Fallon property result in a contributory market value for the Complainant’s commercial property of $3,859,425 ($7,440,000 – $2,000,000 = $5,440,000; $5,440,000 – $1,580,575 = $3,859,425). This is an assessed value of $1,235,000 ($3,859,425 x .32 = $1,235,016, rounded to $1,235,000) for the commercial property.

12. The assessed value for the subject property is $1,240,660, it is allocated as follows, based upon the percentages of commercial assessment calculated and the agricultural assessments set forth in Finding of Fact 4:

CONCLUSIONS OF LAW

Jurisdiction

The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious. Article X, section 14, Mo. Const. of 1945; Sections 138.430, 138.431, RSMo. 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. Section 138.431.4, RSMo.

Board of Equalization Presumption

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). There is no presumption that the assessor’s valuation is correct. Section 138.431.3, RSMo.

Standard for Valuation

Section 137.115, RSMo 1994, requires that property be assessed based upon its true value in money which is defined as the price a property would bring when offered for sale by one willing or desirous to sell and bought by one who is willing or desirous to purchase but who is not compelled to do so. St. Joe Minerals Corp. v. State Tax Commission, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993); Missouri Baptist Children’s Home v. State Tax Commission, 867 S.W.2d 510, 512 (Mo. banc 1993). It is the fair market value of the subject property on the valuation date. Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 897 (Mo. banc 1978).

Market Value

Market value is the most probable price in terms of money which a property should bring in competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeable and assuming the price is not affected by undue stimulus.

Implicit in this definition is the consummation of a sale as of a specific date and the passing of title from seller to buyer under conditions whereby:

1. Buyer and seller are typically motivated.

2. Both parties are well informed and well advised, and each acting in what they consider their own best interests.

3. A reasonable time is allowed for exposure in the open market.

4. Payment is made in cash or its equivalent.

5. Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.

6. The price represents a normal consideration for the property sold unaffected by special financing amounts and/or terms, services, fees, costs, or credits incurred in the transaction.

 

 

Real Estate Appraisal Terminology, Society of Real Estate Appraisers, Revised Edition, 1984; See also, Real Estate Valuation in Litigation, J. D. Eaton, M.A.I., American Institute of Real Estate Appraisers, 1982, pp. 4-5; Property Appraisal and Assessment Administration, International Association of Assessing Officers, 1990, pp. 79-80; Federal Register, vol. 55, no. 163, August 22, 1990, pages 34228 and 34229; Uniform Standards of Professional Appraisal Practice, Glossary; Exhibit A, p. 8.

Duty to Investigate

In order to investigate appeals filed with the Commission, the Hearing Officer has the duty to inquire of the owner of the property or of any other party to the appeal regarding any matter or issue relevant to the valuation, subclassification or assessment of the property. The Hearing Officer’s decision regarding the assessment or valuation of the property may be based solely upon its inquiry and any evidence presented by the parties, or based solely upon evidence presented by the parties. Section 138.430.2, RSMo.

Weight to be Given Evidence

The Hearing Officer is not bound by any single formula, rule or method in determining true value in money, but is free to consider all pertinent facts and estimates and give them such weight as reasonably they may be deemed entitled. The relative weight to be accorded any relevant factor in a particular case is for the Hearing Officer to decide. St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977); St. Louis County v. STC, 515 S.W.2d 446, 450 (Mo. 1974); Chicago, Burlington & Quincy Railroad Company v. STC, 436 S.W.2d 650 (Mo. 1968).

Trier of Fact

The Hearing Officer as the trier of fact may consider the testimony of an expert witness and give it as much weight and credit as he may deem it entitled to when viewed in connection with all other circumstances. The Hearing Officer is not bound by the opinions of experts who testify on the issue of reasonable value, but may believe all or none of the expert’s testimony and accept it in part or reject it in part. St. Louis County v. Boatmen’s Trust Co., 857 S.W.2d 453, 457 (Mo. App. E.D. 1993); Vincent by Vincent v. Johnson, 833 S.W.2d 859, 865 (Mo. 1992); Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. banc 1981).

Opinion Testimony by Experts

If specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert on that subject, by knowledge, skill, experience, training, or education, may testify thereto.

The facts or data upon which an expert bases an opinion or inference may be those perceived by or made known to the expert at or before the hearing and must be of a type reasonably relied upon by experts in the field in forming opinions or inferences upon the subject and must be otherwise reliable, the facts or data need not be admissible in evidence. Section 490.065, RSMo; Courtroom Handbook on Missouri Evidence, Wm. A. Schroeder, Sections 702-505, pp. 325-350; Wulfing v. Kansas City Southern Industries, Inc., 842 S.W.2d 133 (Mo. App. E.D. 1992).

Complainant’s Burden of Proof

In order to prevail, Complainant must present an opinion of market value and substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on January 1, 2001. Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, at 897. Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See, Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959). 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).

Methods of Valuation

Missouri courts have approved the comparable sales or market approach, the cost approach (replacement or construction) and the income approach as recognized methods of arriving at fair market value. St. Joe Minerals Corp. v. STC, 854 S.W.2d 526, 529 (App. E.D. 1993); Aspenhof Corp. v. STC, 789 S.W.2d 867, 869 (App. E.D. 1990); Quincy Soybean Company, Inc., v. Lowe, 773 S.W.2d 503, 504 (App. E.D. 1989), citing Del-Mar Redevelopment Corp v. Associated Garages, Inc., 726 S.W.2d 866, 869 (App. E.D. 1987) and State ex rel. State Highway Comm’n v. Southern Dev. Co., 509 S.W.2d 18, 27 (Mo. Div. 2 1974).

Valuation of Agricultural Property

True value in money for land which is in use as agricultural property is the value which such land has for agricultural use. Agricultural land shall be valued based upon agricultural grades established by Commission rules. Sections 137.017 & 137.021, RSMo; 12 CSR 30-4.010.

DECISION

The only evidence of value presented on this record is that developed by appraisers McReynolds and Von Trapp. The presumption in favor of the Board is not evidence. A presumption simply accepts something as true without any proof to the contrary. In an evidentiary hearing before the Commission, the valuation determined by the Board, even if simply to sustain the value made by the Assessor, which is not presumed to be correct, is accepted as true only until and so long as there is no proof to the contrary.

Once the Complainant comes forward with credible evidence, especially evidence under a recognized methodology for valuing property, which demonstrates a lower value than that set by the Board, the presumption is gone. It possesses no further weight, unless evidence is put on the record which rebuts Complainant’s evidence of value. If no such evidence is forthcoming, as was the case in the present appeal, then the only evidence on the record upon which a determination of value can be made is that presented by the Complainant.

The Complainant’s appraisal constitutes substantial and persuasive evidence to rebut the presumption of correct assessment by the Board and to establish the fair market value of the subject property. The unrefuted evidence of value in this appeal establishes the fair market value of the subject property to be $7,440,000 before necessary deductions are made.

Two deductions or adjustments to the fair market value are required to be made to the final value arrived at by Complainant’s appraisers. One deduction is for the value of the property owned by the City of O’Fallon which is not subject to assessment and taxation. This deduction was appropriately made by the appraisers. The other adjustment relates to the subject land that is assessed as agricultural land.

Complainant did not appeal the assessment for the agricultural land which comprises a portion of the subject property. The adjustment to be made for the agricultural land is to simply deduct from the value the commercial value of the land determined under the cost approach in the McReynolds’ appraisal and then to add back the agricultural assessed value to the commercial assessed value. This is set forth in detail in Findings of Fact 6, 11 and 12, supra.

ORDER

The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization for St. Charles County for the subject tax day is SET ASIDE.

The assessed value for the subject property for tax years 2001 and 2002 is set at $1,240,660, as commercial and agricultural property, as set forth and allocated to the following parcel numbers:

A party may file with the Commission an application for review of this decision within thirty (30) days of the mailing of such decision. The application shall contain specific grounds upon which it is claimed the decision is erroneous. Failure to state specific facts or law upon which the appeal is based will result in summary denial. Section 138.432, RSMo 1994.

If an application for review of this decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission. If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of St. Charles County, as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal. If any or all protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

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 October 8, 2002.

STATE TAX COMMISSION OF MISSOURI

W. B. Tichenor

Chief Hearing Officer

 

DOMINION HOSPITALITY, )

)

Complainant, )

)

v. ) Appeal Number 00-33019

)

EUGENE ZIMMERMAN, ASSESSOR, )

ST. CHARLES COUNTY, MISSOURI, )

)

Respondent. )

DECISION AND ORDER

HOLDING

Decision of the St. Charles County Board of Equalization sustaining the assessment made by the Assessor, SET ASIDE, Commission finds classification to be part residential and part commercial for tax year 2000 with an assessed value of $416,810, as residential property and $468,000 as commercial property.

Complainant represented by Counsel, James P. Gamble, St. Louis, Missouri.

Respondent represented by Counsel, Lisa Leslie, Assistant County Counselor.

Case heard by Chief Hearing Officer, W. B. Tichenor.

Decision and Order rendered by Commissioners Sam D. Leake, Bruce E. Davis and Jennifer Tidwell.

ISSUE

The Commission takes this appeal to determine the classification for the subject property on January 1, 2000, specifically, this is a case of first impression for the Commission interpreting and applying Section 137.016.1(2) relating to transient housing and whether the subject property is real property improved by a structure which is used or intended to be used for residential living by human occupants and is not used primarily for transient housing.

SUMMARY

Complainant appeals the decision of the St. Charles County Board of Equalization which sustained the classification of the subject property as commercial property. Complainant proposed a classification of 60 percent as residential and 40 as commercial property, based upon Complainant’s claim that the subject property was used for both transient and non-transient housing.

An evidentiary hearing was held on July 2, 2002, at the St. Charles County Administration Building, St. Charles, Missouri. The parties were given until and including August 5, 2002, to file Proposed Findings of Fact, Proposed Conclusions of Law and Briefs. Counsel for both parties so filed.

The Commission, having considered all of the competent evidence upon the whole record, the Proposed Findings of Fact, Proposed Conclusions of Law and Briefs of both parties, enters the following Decision and Order.

FINDINGS OF FACT

1. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the St. Charles County Board of Equalization.

2. Valuation is not at issue. The fair market value of the subject property is $3,656,226, as determined by Respondent and affirmed by the Board of Equalization. Exhibit Z, Q & A 9; Complaint for Review of Assessment.

3. After Complainant filed and served its exhibits and prefiled testimony, Respondent moved for summary judgment, asserting that there was no genuine issue of material fact. Respondent chose not to proffer any evidence.

4. The following exhibits have been received into evidence and constitute the record of evidence in this appeal:

Exhibit A    Affidavit of Bruce Cockerill, custodian of records for Marriott International, Inc., with 131 pages of records of arrivals and departures of guests at TownePlace Suites (subject property).

Exhibit B    Recompilation of long-term stay arrivals during 2000.

Exhibit C    Recompilation of long-term stay arrivals during 2000.

Exhibit D    Copies of 138 registration cards and one residence ledger.

Exhibit E    FLASH Report, January 31, 2000.

Exhibit F    FLASH Report, February 29, 2000.

Exhibit G    FLASH Report, March 31, 2000.

Exhibit H    FLASH Report, April 30, 2000.

Exhibit I    FLASH Report, May 31, 2000.

Exhibit J    FLASH Report, June 30, 2000.

Exhibit K    FLASH Report, July 31, 2000.

Exhibit L    FLASH Report, August 31, 2000.

Exhibit M    FLASH Report, September 30, 2000.

Exhibit N    FLASH Report, October 31, 2000.

Exhibit O    FLASH Report, November 30, 2000.

Exhibit P    FLASH Report, December 31, 2000.

Exhibit Q    Advertising brochure.

Exhibit R    Rate Sheet for November 1, 2000, to March 31, 2001.

Exhibit S    Photograph of subject property.

Exhibit T    Photograph of subject property.

Exhibit U    Photograph of subject property.

Exhibit V    Web page of TownePlace Suites.

Exhibit W Web page of TownePlace Suites.

Exhibit X    Web page of TownePlace Suites.

Exhibit Y    Written Direct Testimony of Christopher M. Stabile, Hospitality Accountant of Mullenix Companies.

Exhibit Z        Written Direct Testimony of Mark A. Krug, owner of Marquette Tax Associates.

Exhibit AA Amended Written Direct Testimony of Christopher Stabile.

Exhibit BB Written Direct Testimony of Sharon Hill.

5. The subject property is located at 1800 Zumbehl Road, St. Charles, Missouri, known as the TownePlace Suites. The property is identified by parcel number 6-0013-7944-00-20B. The property is improved by two three-story brick veneer and vinyl-sided structures containing a total of 95 dwelling units. The structures are intended for use and are used for residential living by human occupants. Exhibit Z, Q & A 6, 8, 12-13; Exhibit AA, Q & A 11-12, 14-15; Complaint for Review of Assessment.

6. Complainant uses the subject land and buildings as a TownePlace Suites facility. In appearance, the facility resembles an apartment complex. Each unit has a full kitchen. There are laundry facilities for the residents’ use. Complainant furnishes housekeeping to each unit three times per week. Each unit has its individual telephone line, with voice mail. There is no gift shop or restaurant. The facility is marketed toward persons needing temporary residences for stays of 30 consecutive days or more; residents are accepted for shorter stays. Exhibits Q through X; Exhibit Z, Q & A 16; Exhibit AA, Q & A 15, 27, 29, 35.

7. Upon arrival, residents sign registration cards. Exhibit D; Exhibit AA, Q & A 23, 26; Exhibit BB, Q & A 5. There are a few registration cards that are unsigned by residents, but the number is not material. Exhibit D. By signing a registration card, each resident agrees to stay for the time shown on the registration card. Exhibit R; Exhibit AA, Q & A 31; Exhibit BB, Q & A 6. By accepting the favorable rate for a stay of 30 consecutive days or more without signing a registration card, a resident agrees to stay for 30 days or more.

8. Complainant’s practice is to charge each resident state sales tax from the first day of occupancy. Beginning with the thirty-first consecutive day of his or her stay, each resident who has stayed for 30 consecutive days or more is not charged state sales tax for the remainder of his or her stay. In addition, each such resident should be credited for state sales tax previously charged. Until recently, that was not occurring because of an internal error. However, Complainant is issuing the proper credits to the residents affected. Exhibit AA, Q & A 20; Tr. at 30.

9. Complainant presented three computations of the percentage of use of the property by residents for long-term stays – that is, stays of 30 or more consecutive days. Exhibits B, C, E through P. All three compared the number of days of all long-term stays to the number of days of all stays.

10. The subject property is not used primarily for transient housing. The property is used for more than one purpose and such uses result in different classifications – residential and commercial.

11. The percentage of use of the property by residents for long-term stays for the years at issue is 60 percent.

12. Complainant rebutted any presumption that the Board of Equalization properly classified the subject property. The classification for the property for tax year 2000 is 60 percent residential and 40 percent commercial. The assessed value of the residential portion of the property is $416,810 ($3,656,226 x .60 x .19 = $416,810), and the assessed value of the commercial portion of the property is $468,000 ($3,656,226 x .40 x .32 = $468,000).

CONCLUSIONS OF LAW

Jurisdiction

The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious. Article X, section 14, Mo. Const. of 1945; Sections 138.430, 138.431, RSMo. The Commission 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. Section 138.431.4, RSMo.

Construction of Tax Statutes

Ambiguities in taxing statutes are resolved against the taxing authority and in favor of the taxpayer. Morton v. Brenner, 842 S.W.2d 538, 542 (Mo. banc 1992).

Board of Equalization Presumption

There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization. Hermel, Inc. v. State Tax Com’n, 564 S.W.2d 888, 895 (Mo. banc 1978); Chicago, Burlington & Quincy Railroad Co. v. State Tax Com’n, 436 S.W.2d 650, 656 (Mo. 1968); May Department Stores Co. v. State Tax Com’n, 308 S.W.2d 748, 759 (Mo. 1958).

Complainant’s Burden of Proof

In order to prevail, Complainant must present substantial and persuasive evidence that the subject property as of January 1, 2000, met the statutory definition of residential property. Hermel, Inc. v. State Tax Com’n, 564 S.W.2d at 897. Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See, Cupples-Hesse Corporation v. State Tax Com’n, 329 S.W.2d 696, 702 (Mo. 1959). 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).

Residential and Commercial Property

For purposes of ad valorem taxation, real property is classified as residential if the property is improved by a structure which is used or intended to be used for residential living by human occupants and is not used primarily for transient housing. Commercial property is all other property not included in either the residential or agricultural classification. Section 137.016.1, RSMo.

DECISION

The subject property has been classified by the Assessor and the Board of Equalization as commercial property under subsections (1) and (3) of Section 137.016.1, RSMo. It is undisputed that the property is improved by structures that are used for residential living by human occupants.

The exclusion from residential classification for property used primarily for transient housing refers to the sales tax law, Section 144.020.1(6), RSMo, and through it to the Department of Revenue’s regulation at 12 CSR 10-110.220. In substance, the regulation provides that a permanent resident is not subject to sales tax on his or her lease or rental payments. A permanent resident is defined as a person who contracts in advance for a period of 30 consecutive days or more and actually remains for 30 consecutive days or more.

A substantial percentage of residents at the subject property receive a favorable rate for stays of 30 days or more. With a few exceptions, they sign registration cards showing beginning and ending dates of their stays and a rate. By signing, they acknowledge that the rate is determined by length of stay. If a resident leaves early, his or her rate is adjusted up to the appropriate rate for the length of his or her actual stay. Alternative sanctions for leaving early would equally support the conclusion that there is mutuality of obligation and therefore a contract. Only a contract is required, not a highly formal or long contract. In the few cases where a resident accepts the favorable rate for a stay of 30 consecutive days or more without signing a registration card, there is an implied contract, which is sufficient. There are sufficient contracts here.

It is not material that residents may arrange for employers or other third parties to pay for their rent, as long as the resident agrees to stay, and actually stays, for 30 consecutive days or more. Under the Department of Revenue’s regulation, businesses do not qualify as permanent residents. That disqualification applies to businesses reserving rooms or apartments for successive use by more than one person. There is no evidence that such activity is taking place at the subject property.

Likewise, it is not material that a permanent resident may go elsewhere for short periods of time, as long as the resident’s use of the property continues-that is, as long as the resident does not remove his or her property and check out. Landlords at traditional apartment complexes generally do not keep track of the comings and goings of residents, nor do operators of hotels. Complainant should not be required to do that here.

As long as use by permanent residents makes up a substantial percentage of use of a property, Section 137.016.4, RSMo should apply to allocate the assessment between residential and commercial. The exclusion from residential classification in Section 137.016.1(1), RSMo for facilities that are used primarily for transient housing should apply only if use by permanent residents is not a substantial percentage of use. That exclusion does not apply here.

For the purposes of allocating the assessment between residential and commercial, use by permanent and non-permanent residents should be determined according to the actual use of the property. The Commission cannot assume that an unused unit would be used by a permanent resident or by a non-permanent resident, since each unit is suitable for use by either type of resident. Rather, use by permanent residents must be compared to use by non-permanent residents. Furthermore, the measurement of use must take into account the time that each resident uses his or her unit. On the evidence before the Commission here, simply counting the two types of residents and comparing those numbers without factoring in the length of stay of each resident would understate the use of the subject property by permanent residents. Complainant has properly accounted for the two uses of the subject property.

The primary use of the subject property based upon the actual use of rooms occupied by permanent and transient residents is for use by permanent residents. Sixty percent of occupied rooms were occupied by permanent residents. Accordingly, a residential classification must be given to sixty percent of the value of the subject property, with the remaining forty percent being classified as commercial property.

The facts in this appeal were actually undisputed. Only the interpretation of law as applied to the facts was really contested. Complainant’s evidence was substantial and persuasive to established that sixty percent of the rooms occupied during 2000 were rented by or for individuals who stayed thirty days or longer at a time. These facts were sufficient and persuasive to rebut the presumption of correct assessment by the Board of Equalization and/or the Assessor. The presumption in favor of the Board is not evidence. Assuming that there does still exist a presumption that the Assessor correctly classified the subject property, that presumption, likewise, is not evidence. A presumption simply accepts something as true without any proof to the contrary. In an evidentiary hearing before the Commission, the classification determined by the Assessor and the Board is accepted as true only until and so long as there is no proof to the contrary. In a case such as the present appeal, when the Complainant comes forward with facts which establish a residential use of the property under appeal, the Assessor/Board presumption is rebutted.

ORDER

The classification for the subject property as determined by the Assessor and sustained by the Board of Equalization for St. Charles County for the subject tax day is SET ASIDE.

The classification for the subject property for tax year 2000 is 60 percent residential and 40 percent commercial.

The assessed value for the subject property for tax year 2000 is set at $416,810 residential and $468,000 commercial.

Judicial review of this Order may be had in the manner provided in Sections 138.470 and 536.100 to 536.140, RSMo within thirty days of the date of the mailing of this Order.

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 September 10, 2002.

STATE TAX COMMISSION OF MISSOURI

Sam D. Leake, Chairman

Bruce E. Davis, Commissioner

Jennifer Tidwell, Commissioner

 

ST. CHARLES HOSPITALITY, INC., )

)

Complainant, )

)

v. ) Appeal Number 01-32601

)

EUGENE ZIMMERMAN, ASSESSOR, )

ST. CHARLES COUNTY, MISSOURI, )

)

Respondent. )

DECISION AND ORDER

HOLDING

Decision of the St. Charles County Board of Equalization sustaining the assessment made by the Assessor, SET ASIDE, Hearing Officer finds true value in money for the subject property for tax years 2001 and 2002 to be $1,945,355, assessed value of $622,500.

Complainant appeared by Counsel, Richard Magee, St. Louis, Missouri.

Respondent appeared by Counsel, Lisa Leslie, Assistant County Counselor.

Case heard and decided by Chief Hearing Officer, W. B. Tichenor.

ISSUES

The Commission takes this appeal (1) to determine the true value in money for the subject property on January 1, 2001, and (2) whether the subject property was discriminated against in the assessment process by being assessed at a greater percentage of true value of money than other commercial properties in general in St. Charles County.

SUMMARY

Complainant appeals the decision of the St. Charles County Board of Equalization which sustained the valuation of the subject property. The Assessor determined an appraised value of $2,373,150 (assessed value of $759,410, as commercial property). Complainant proposed a value of $1,945,355 (assessed value of $622,500). A hearing was conducted on July 2, 2002, at the St. Charles County Administration Building, St Charles, Missouri.

The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.

Complainant’s Evidence

Complainant offered into evidence the following exhibits:

Exhibit A  Business Entity Information on Complainant from the Secretary of State of Missouri.

Exhibit B  Assessment Data on Hotels in St. Charles County.

Exhibit C  Hotel Sales Data on Missouri and Illinois Hotels.

Exhibit D  Photographs of subject and comparable hotel properties.

Exhibit E  Property Record Cards on subject and comparable hotel properties shown in Exhibit B.

Exhibit F  Complainant’s Statements of Revenue and Expenses for 1999 and 2000.

Exhibit G  Written Direct Testimony of Bob Maddipati, Licensed Real Estate Broker and Property Tax Consultant.

Exhibit H  Written Direct Testimony of Sharad Shah, manager of subject property and shareholder of Complainant.

All exhibits were received into evidence. Mr. Shah and Mr. Maddipati testified under cross-examination.

Respondent’s Evidence

Respondent did not offer any evidence on the issues of valuation or discrimination

FINDINGS OF FACT

1. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the St. Charles County Board of Equalization.

2. The subject property is located at 1377 South 5th Street, St. Charles, Missouri. It is identified by locator number 6014C7641005, Assessor’s Account number A976000111. The property is otherwise known as the Ramada Limited. It consists of a tract of land improved by a 64 unit mid-rate limited service motel, constructed in 1997, with paved parking area, landscaping, signage and lighting.

3. There was no evidence of new construction and improvement from January 1, 2001, to January 1, 2002.

4. The income approach is the appropriate methodology for the valuation of an income producing property such as the subject.

5. The Effective Gross Income for the subject property is $931,819. Exhibit F; Exhibit H, Q & A 6.

6. Allowable expenses, including a 6% management fee and salaries to the owner/partners of $100,000, are $670,347. Exhibit H, Q & A 6.

7. Net Operating Income (NOI) is $261,472. Exhibit H, Q & A 6.

8. The appropriate capitalization rate is 10% and the effective tax rate is 2.23% for an overall capitalization rate of 12.23%. Exhibit H, Q & A 6.

9. The value of furniture, fixtures and equipment (FF&E) that is not to be valued as part of the real property is $192,600. Exhibit H, Q & A 6.

10. The NOI capitalized at .1223 produces an indicated value of $2,137,955 ($261,472/.1223 = $2,137,955). Exhibit H, Q & A 6.

11. Deducting the FF & E gives an indicated value under the income approach for the subject property of $1,945,355 ($2,137,955 – $192,600 = $1,945,355). Exhibit H, Q & A 6.

12. Complainant’s evidence relying on the Income Approach was substantial and persuasive to rebut the presumption of correct assessment by the Board of Equalization and to establish the true value in money as of January 1, 2001, to be $1,945,355, as proposed. Exhibit F; Exhibit H, Q & A 6.

13. The true value in money for the subject property on January 1, 2001, was $1,945,355, assessed value of $622,500.

CONCLUSIONS OF LAW

Jurisdiction

The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious. Article X, section 14, Mo. Const. of 1945; Sections 138.430, 138.431, RSMo. 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. Section 138.431.4, RSMo.

Board of Equalization Presumption

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). There is no presumption that the assessor’s valuation is correct. Section 138.431.3, RSMo.

Standard for Valuation

Section 137.115, RSMo 1994, requires that property be assessed based upon its true value in money which is defined as the price a property would bring when offered for sale by one willing or desirous to sell and bought by one who is willing or desirous to purchase but who is not compelled to do so. St. Joe Minerals Corp. v. State Tax Commission, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993); Missouri Baptist Children’s Home v. State Tax Commission, 867 S.W.2d 510, 512 (Mo. banc 1993). It is the fair market value of the subject property on the valuation date. Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 897 (Mo. banc 1978).

Market Value

Market value is the most probable price in terms of money which a property should bring in competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeable and assuming the price is not affected by undue stimulus.

Implicit in this definition is the consummation of a sale as of a specific date and the passing of title from seller to buyer under conditions whereby:

1. Buyer and seller are typically motivated.

2. Both parties are well informed and well advised, and each acting in what they consider their own best interests.

3. A reasonable time is allowed for exposure in the open market.

4. Payment is made in cash or its equivalent.

5. Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.

6. The price represents a normal consideration for the property sold unaffected by special financing amounts and/or terms, services, fees, costs, or credits incurred in the transaction.

 

Real Estate Appraisal Terminology, Society of Real Estate Appraisers, Revised Edition, 1984; See also, Real Estate Valuation in Litigation, J. D. Eaton, M.A.I., American Institute of Real Estate Appraisers, 1982, pp. 4-5; Property Appraisal and Assessment Administration, International Association of Assessing Officers, 1990, pp. 79-80; Uniform Standards of Professional Appraisal Practice, Glossary.

Weight to be Given Evidence

The Hearing Officer is not bound by any single formula, rule or method in determining true value in money, but is free to consider all pertinent facts and estimates and give them such weight as reasonably they may be deemed entitled. The relative weight to be accorded any relevant factor in a particular case is for the Hearing Officer to decide. St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977); St. Louis County v. STC, 515 S.W.2d 446, 450 (Mo. 1974); Chicago, Burlington & Quincy Railroad Company v. STC, 436 S.W.2d 650 (Mo. 1968).

Trier of Fact

The Hearing Officer as the trier of fact may consider the testimony of a witness and give it as much weight and credit as he may deem it entitled to when viewed in connection with all other circumstances. The Hearing Officer is not bound by the opinions of witnesses who testify on the issue of reasonable value, but may believe all or none of the testimony and accept it in part or reject it in part. St. Louis County v. Boatmen’s Trust Co., 857 S.W.2d 453, 457 (Mo. App. E.D. 1993); Vincent by Vincent v. Johnson, 833 S.W.2d 859, 865 (Mo. 1992); Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. banc 1981).

Complainant’s Burden of Proof

In order to prevail, Complainant must present an opinion of market value and substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on January 1, 2001. Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, at 897. Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See, Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959). 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).

Owner’s Opinion of Value

The owner of property is generally held competent to testify to its reasonable market value. Boten v. Brecklein, 452 S.W.2d 86, 95 (Sup. 1970). The owner’s opinion is without probative value however, where it is shown to have been based upon improper elements or an improper foundation. Shelby County R-4 School District v. Hermann, 392 S.W.2d 609, 613 (Sup. 1965).

Methods of Valuation

Missouri courts have approved the comparable sales or market approach, the cost approach (replacement or construction) and the income approach as recognized methods of arriving at fair market value. St. Joe Minerals Corp. v. STC, 854 S.W.2d 526, 529 (App. E.D. 1993); Aspenhof Corp. v. STC, 789 S.W.2d 867, 869 (App. E.D. 1990); Quincy Soybean Company, Inc., v. Lowe, 773 S.W.2d 503, 504 (App. E.D. 1989), citing Del-Mar Redevelopment Corp v. Associated Garages, Inc., 726 S.W.2d 866, 869 (App. E.D. 1987) and State ex rel. State Highway Comm’n v. Southern Dev. Co., 509 S.W.2d 18, 27 (Mo. Div. 2 1974).

Discrimination

In order to obtain a reduction in assessed value based upon discrimination, the Complainant must (1) prove the true value in money of their property on January 1, 2001. Koplar v. State Tax Commission, 321 S.W.2d 686, 690 (Mo. 1959); and (2) show an intentional plan of discrimination by the assessing officials resulting in an assessment of that property at a greater percentage of value than other property, generally, within the same class within the same taxing jurisdiction. Koplar, supra, at 695.

Complainant must first establish the market value of the subject property in order to determine the percentage of true value at which it is being assessed. Next, the true value of the other properties generally which it is claimed are assessed at a lower percentage of true value than the subject property, must be established. Evidence of value and assessments of a few properties does not prove discrimination. Substantial evidence must show that all other property in the same class, generally, is actually undervalued. State ex rel. Plantz v. State Tax Commission, 384 S.W.2d 565, 568 (Mo. 1964). Then the ratio of assessed value to true value for both the subject property and the comparable properties must be compared to establish that the subject property is being assessed at a higher percentage of value. This difference in ratios must be shown to be grossly excessive. Savage v. State Tax Commission of Missouri, 722 S.W.2d 72, 79 (Mo. banc 1986). No other methodology is sufficient to establish discrimination. Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696 (Mo. 1958).

DECISION

Complainant Proves Value

The valuation issue in this appeal is very simple. A determination of the income stream for the subject property capitalized by the appropriate overall rate, with a deducation for personal property that cannot be valued with the real property provides an appropriate methodology for valuation. The owner’s opinion of value in this appeal, provided by Mr. Shah, who is both the manager of the subject property and co-owner (partner) of Complainant, is based upon the income approach which is recognized both by the Commission and the Courts of Missouri as an appropriate method for valuation.

Mr. Shah’s income approach was based on the actual operating income and expenses for the subject property. An appropriate overall capitalization rate, including the effective tax rate, was utilized to arrive at the indicated value. A deduction was appropriately made for the value of the personal property of the motel.

There is, of course, no presumption that the Assessor correctly valued this property. Section 138.431.3, RSMo. It is not known what was the basis upon which the Board determined that the fair market value of the property was the same as that determined by the Assessor. One could reasonably assume that whatever evidence of value was presented by the Assessor at the Board hearing which was found to be persuasive would have been offered into evidence before the Commission. However, no such evidence was forthcoming.

In any event, Complainant’s evidence rebuts the presumption that the Board correctly assessed the subject property. The presumption in favor of the Board is not evidence. A presumption simply accepts something as true without any proof to the contrary. In an evidentiary hearing before the Commission, the valuation determined by the Board, even if simply to sustain the value made by the Assessor, which is not presumed to be correct, is accepted as true only until and so long as there is no proof to the contrary.

Once the Complainant comes forward with credible evidence, especially evidence under a recognized methodology for valuing property, which demonstrates a lower value than that set by the Board, the presumption is gone. It possesses no further weight, unless evidence is put on the record which rebuts Complainant’s evidence of value. If no such evidence is forthcoming, as was the case in the present appeal, then the only evidence on the record upon which a determination of value can be made is that presented by the Complainant.

The evidence presented by the co-owner as to actual income and expenses for the subject property was clearly credible evidence. In point of fact, such evidence is the type of information that a prospective purchaser of the subject property would first look to when considering a purchase of the subject. None of the facts and data presented by the owner were rebutted, contradicted or disputed in any way by Respondent. For all intents and purposes, the facts relating to the most probative and persuasive method for valuing the subject property stand admitted by Respondent in this appeal.

The evidence on this record provides for only one determination of value. That conclusion is that the fair market value of the subject property as of January 1, 2001, was $1,945,355 as advocated by the co-owner and as supported by the income approach to value. This appeal could have easily been resolved without an evidentiary hearing by the Respondent’s staff making the simple calculation of value based on the income approach as done by Mr. Shah.

Discrimination Discussion

Where there is a claim of discrimination based upon a lack of valuation consistency, Complainant has the burden to prove:

1. The level of assessment for the subject property in 2001. This is done by independently determining the market value of the subject property and dividing the market value into the assessed value of the property as determined by the assessor’s office.

2. The average level of assessment for commercial property in St. Charles County in 2001. This is done by (a) independently determining the market value of a representative sample of commercial properties in St. Charles County; (b) determining the assessed value placed on the properties by the assessor’s office for the relevant year; (c) dividing the assessed value by the market value to determine the level of assessment for each property in the sample; and (d) determining the mean and median of the results.

3. That the disparity between (1) and (2) is grossly excessive. The difference between the actual assessment level of the subject property and the average level of assessment for all commercial property, taken from a sufficient representative sample in St. Charles County must demonstrate a disparity that is grossly excessive. Savage v. State Tax Commission of Missouri, 722 S.W.2d 72, 79 (Mo. banc 1986).

Complainant’s evidence established the fair market value (true value in money) of the subject property to be $1,945,355. The subject property had been given an assessed value by the Assessor, which the Board sustained, of $759,410. In other words, the subject motel was assessed for 2001 and 2002 at 39% of its fair market value instead of 32% as required by Section 137.115, RSMo (759,410/1,945,355 = .39).

Complainant offered into evidence the Property Record Cards (PRC) on thirteen other motel properties in St. Charles County. Exhibits B and E. The PRCs establish that each of these properties are being assessed at 32% of the fair market value as determined by the Assessor. No attempt was made by Complainant to establish that any of these properties, or that the properties as a whole were overvalued or undervalued. Complainant was, in effect, agreeing that the fair market value of these properties as determined by the Assessor was appropriate.

Therefore, there is no basis upon which the Hearing Officer can assess the subject property at a lower percentage of true value in money than 32% as required by statute and which is the assessment ratio utilized by Respondent in assessing the thirteen motels listed by Complainant in its Exhibit B. Complainant’s claim of discrimination is satisfactorily addressed by applying the statutory assessment ratio to the true value in money determined in this decision.

ORDER

The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization for St. Charles County for the subject tax day is SET ASIDE.

The assessed value for the subject property for tax years 2001 and 2002 is set at $622,500.

A party may file with the Commission an application for review of this decision within thirty (30) days of the mailing of such decision. The application shall contain specific grounds upon which it is claimed the decision is erroneous. Failure to state specific facts or law upon which the appeal is based will result in summary denial. Section 138.432, RSMo 1994.

If an application for review of this decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission. If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of St. Charles County, as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal. If any or all protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

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 August 26, 2002.

STATE TAX COMMISSION OF MISSOURI

W. B. Tichenor

Chief Hearing Officer

 

BIG SPRINGS MEDICAL ASSOCIATION, INC., )

)

Complainant, )

)

v. ) Appeal Number 01-82500

)

RICK PARKER, ASSESSOR, )

REYNOLDS COUNTY, MISSOURI, )

)

Respondent. )

 DECISION AND ORDER

SUMMARY

Complainant appeals the tax status of its personal property for tax year 2001, and alleges entitlement to an exemption.

On April 26, 2002, an evidentiary hearing was held before State Tax Commission Hearing Officer, Aimee Smashey, at the Reynolds County Courthouse in Centerville, Missouri. Complainant was represented by Michael Hackworth. Respondent was represented by Robert Johnson, Reynolds County Prosecuting Attorney.

ISSUE

Does Complainant’s operations of its medical equipment and other listed personal property constitute a charitable operation and use?

HOLDING

Each tax exemption case must be decided upon its own facts. Complainant has the burden to establish entitlement to a property tax exemption. Complainant presented evidence to establish that the machinery and equipment in question in this assessment appeal is actually and regularly used exclusively for charitable purposes, is owned and operated on a not-for-profit basis, and that its use is beneficial to society in addition to those directly served by the subject property. Accordingly, this Hearing Officer finds that the subject personal property should be exempt from property taxes.

FINDINGS OF FACT

1. The subject personal property consists of machinery and equipment used in the operations of a medical clinic.

2. The subject personal property is owned and operated by Big Springs Medical Association (Complainant). Complainant is organized as a not-for-profit corporation with the Missouri Secretary of State. Complainant’s Exhibit C; Tr. 24.

3. Complainant is organized for the purpose of providing “…comprehensive health care for the total person, through the medium of managing and operating coordinated health facilities and programs” in Carter, Shannon, Reynolds, and Iron counties. Complainant’s Exhibit B, at 1 and Complainant’s Exhibit AA at 1. In furtherance of this purpose, Complainant operates four primary care clinics. Tr. 55.

4. Complainant is exempt from federal income taxes. Complainant’s Exhibit D.

5. Complainant submitted its Form 990, Return of Organization Exempt for Income Tax from 1996 through 2001. Complainant operated at a loss for four of the five years of returns submitted.

Excess or [Deficit] for the Year

Complainant’s Exhibits E – I.

6. 35.5% to 52.4.% of Complainant’s revenues came from government contributions in the form of grants. Complainant’s Exhibits E – I.

7. Complainant’s clinics provide medical services to patients without regard to their ability to pay for such services. Complainant’s Exhibit AA, at 3.

8. In setting the charges for its services, Complainant “…attempts to determine what the usual and customary charges for the medical services are in [the] operating area and then the rates charged are set somewhat below those usual and customary charges in most instances.” Complainant’s Exhibit AA, at 3. The ultimate rates set for the medical services are highly subsidized rates. Id.

9. No part of Complainant’s net earnings may inure to the benefit of any of the staff doctors. Complainant’s Exhibit AA at 4.

10. The funds to purchase the subject machinery and equipment used in Complainant’s clinic in Ellington (Reynolds County) originated from the Department of Health and Human Services through a Community Health Center Grant. Id., at 3 – 4.

11. Complainant receives some governmental funding for its medical operations. Two of Complainant’s clinics have been funded through the state of Missouri as a “330 project.” Of the grants received by Complainant, at least 45 – 50% of those funds must be used for nonreimbursable care. Tr. 30 – 31.

12. As a consequence of the governmental funding through grants, Complainant’s clinics have frequent audits. They have audits from the Office of Inspector General, Medicare audits, Medicaid audits, PCER audits, and are required to have an annual audit from an outside auditor. Tr. 45.

CONCLUSIONS OF LAW

Jurisdiction

Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the Reynolds County Board of Equalization.

Burden of Proof

Although a taxing statute is construed strictly against the state, an exemption statute is strictly construed against the one claiming the exemption. State ex rel. Union Electric Co. v. Goldberg, 578 S.W.2d 921, 923 (Mo. banc 1979). “The law disfavors claims for exemption from taxation. The substantial burden of establishing the property falls within the exempted class is on the person claiming exemptions under the referenced constitutional and statutory provisions. To prevent the curtailing of the purpose and intended scope of a tax exemption, the tax exemption statute is to be strictly but reasonably construed.” Twitty v. State Tax Commission of Missouri, 896 S.W.2d 680, 684 (Mo. App. S.D. 1995) (citations omitted). Accordingly, in order to prevail, Complainant must demonstrate by substantial and persuasive evidence, that it is entitled to an exemption.

Substantial evidence is that evidence which, if true, has probative force upon the issues, i.e., evidence favoring facts which are such that reasonable men may differ as to whether it established them, and from which the Commission can reasonably decide an appeal on the factual issues. Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

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).

Statutory Exemptions

Properties which can be exempted from taxation are set out within our Constitution and the statutes enacted to enforce that Constitution, to wit:

. . .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, . . .may be exempt from taxation by general law but any such law may provide for approximate restitution to the respective political subdivisions of revenues lost by reason of the exemption. All laws exempting from taxation property other than the property enumerated in this article, shall be void.

 

 

Article X, Section 6, Mo. Const. of 1945.

In support of this Constitutional provision, the Legislature has enacted Section 137.110, RSMo 1994, which provides in relevant part:

The following property shall be exempt from taxation:

(5) All property, real and personal, actually and regularly used exclusively for religious worship, for schools and colleges, or for purposes purely charitable and not held for private or corporate profit, except that the exemption herein granted does not include real property not actually used or occupied for the purpose of the organization but held or used as investment even though the income or rentals received therefrom is used wholly for religious, education or charitable purposes;

Section 137.110, RSMo.

Case Law on Charitable Use

In order for a property to be exempt from taxation for state, county or local purposes, the following tests must be met:

1. 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.

2. 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).

3. The dominant use of the property must be for the benefit of an indefinite number of persons and must directly or indirectly benefit society generally. “It is required that there be the element of direct or indirect benefit to society in addition to and as a result of the benefit conferred on the persons directly served by the humanitarian activity”. Franciscan at 224. See also, Barnes Hospital v. Leggett, 589 S.W.2d 241 (Mo. banc 1979).

Subject Property Operations

1. The provision of medical services to the public at cost or less constitutes a gift.

2. Medical treatment and administrative services that enable medical treatment directly benefit people by relieving their bodies of disease, suffering, or constraint. Health-related education assists to establish people for life.

3. The performance history of the Complainant’s operations evidences an intent to provide medical and health-related educational services on a non-profit basis.

4. The availability of subsidized medical services at the Ellington clinic accessible to rich and poor alike is beneficial to the Reynolds County community.

DECISION

1. Use

Exemption law requires an unconditional dedication to a charitable objective. Charity is 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. Does Complainant’s operation of the subject machinery and equipment at the subject clinic constitute a gift? The provision of medical services to the public at cost or less constitutes a gift. Complainant is organized as a not-for-profit corporation. Complainant operated at a loss for four of the five years preceding the tax date.

Excess or [Deficit] for the Year

Complainant’s Exhibits E – I. This was true despite 35.5 to 52.4% of its revenues coming from government contributions in the form of grants.

Tax Year		Revenue from Operations		Revenue from Government Contributions		Misc. Revenue		Total Revenues
1996		$503,198		$461,467 (47.7%)		$1,369		$966,034
1997		$444,379		$495,314 (52.4%)		$5,912		$945,605
1998		$636,269		$702,493 (52.2%)		$6,139		$1,344,901
1999		$775,796		$831,611 (51.5%)		$4,946		$1,612,353
2000		$1,279,805		$708,647 (35.5%)		$4,479		$1,992,931

Complainant’s Exhibits E – I.

Complainant annually sets the charges for its services after reviewing the usual and customary rates for medical services in the operating area and considering the ability of the community to pay for such services. Complainant’s Exhibit AA, at 3; Tr. 60. The charges set by Complainant have been significantly below the cost incurred to provide such services. Complainant’s Exhibits E – I; Tr. 60 – 61. Complainant’s performance history evidences an intent to provide medical and health-related educational services at cost or less.

The provision of medical services in a clinic setting and the provision of administrative support to such a medical clinic clearly qualify as appropriate uses under the Salvation Army definition in that the medical treatment directly benefits people by relieving their bodies of disease, suffering, or constraint and health education assists to establish people for life.

2. Operation

Exemption law requires ownership and operation on a non-profit basis. Complainant has machinery and equipment that is owns and some that it leases in use at the subject clinic. Only the machinery and equipment that Complainant owns and operates can qualify for exempt status. Complainant Corporation was established as a Missouri Nonprofit Corporation in February of 1975. Complainant’s Bylaws state the corporation’s objectives to be:

A. To serve as a primary resource in all health facility education activities relating to rendering care to the sick and injured, or to the promotion of health that, in the opinion of the BOARD OF DIRECTORS, may be justified by the facilities, personnel, funds, and other requirements that are, or can be, made available.

B. To participate, so far as circumstances may warrant, in any activity designed and carried on to promote the general health of the community.

C. To care for the sick and afflicted without regard to race, sex, color, political or religious beliefs.

D. To assist in the development of project plans, progress reports, and renewals, representing the views of the community and individuals most knowledgeable about health problems and the means available for alleviating those problems.

E. To offer suggestions, amendments, and revisions to the health projects, such as:

1. Selection and elimination of health care services;

2. Hours and locations of services;

3. Priorities for allocation of project funds;

4. Methods of evaluating health programs.

F. To determine health program policies.

G. To see that proper professional standards are maintained.

H. To direct the Executive Director of the health program in carrying out policies.

I. To provide adequate financing and control of expenditures.

Complainant’s Exhibit A at 2. No part of Complainant’s net earnings may inure to the benefit of any of the staff doctors. Complainant’s Exhibit AA at 4.

As referenced in the use discussion above, Complainant presented evidence which established that its performance history shows an intent to provide medical and educational services on a non-profit basis.

3. Public Benefit

Exemption law further requires “…that there be the element of direct or indirect benefit to society in addition to and as a result of the benefit conferred on the persons directly served by the humanitarian activity.” Franciscan Tertiary Province v. State Tax Commission, 566 S.W.2d 213, at 224 (Mo. banc 1978). The patients seen and treated at the Ellington clinic are the persons directly served by the clinic operations. The families of those patients are also directly served by the clinic. Under this analysis, the court requires us to go further and consider whether the rendering of the charitable activity inherently confers a benefit to society in general. Is the operation of the subject clinic beneficial to that community in general, even if similar medical services are available elsewhere in the community? In developing this test, the court reasoned as follows:

Another prerequisite for charitable exemption is that the dominant use of the property must be for the benefit of an indefinite number of people, for the purpose, as expressed in Salvation Army, of “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.” 188 S.W.2d at 830. The court at that same point included “humanitarian activities, * * * rendered at cost or less, which are intended to improve the physical, mental and moral condition of the recipients and make it less likely that they will become burdens on society and make it more likely that they will become useful citizens.” Thus, it is required that there be the element of direct or indirect benefit to society in addition to and as a result of the benefit conferred on the persons directly served by the humanitarian activity.

Examples of such humanitarian activities previously held to be exempt as charitable include the operation of hospitals which are open and available to rich and poor (Community Memorial and Jackson County ); a facility operated to provide employment and training for handicapped persons (Goodwill ); operating a YMCA building housing boys and young men, preferably of low income, as a part of a program intended *225 to foster good citizenship and Christian ideals in those boys and young men (YMCA No. 4 ); providing housing at less than cost to girls and young women, including the needy, intended to promote the welfare of such persons (Salvation Army ); providing good low cost housing for low income people to replace old, dilapidated properties in a slum area which was cleared (Bader Realty ). All of these, while benefitting the individuals served, also were considered to benefit society generally.

 

 

Franciscan Tertiary Province v. State Tax Commission, 566 S.W.2d 213, 224-225 (Mo. banc 1978) (emphasis supplied).

The evidence on the record establishes that the medical services provided by the subject clinic are provided on a subsidized basis and that patients are not denied service at the Ellington clinic based upon an inability to pay. Complainant’s Exhibit AA, at 3. The fact that Reynolds County has subsidized medical services at the subject clinic available to rich and poor alike is beneficial to the Reynolds County community.

Conclusion

The evidence persuasively supports a conclusion that the machinery and equipment in question in this assessment appeal is actually and regularly used exclusively for a charitable purposes, is owned and operated on a not-for-profit basis, and that its use is beneficial to society in addition to those directly served by the subject property. Accordingly, Complainant is entitled to an exemption on the machinery and equipment that it owns and uses at its Ellington primary care clinic and administrative offices. Any equipment not owned by Complainant but leased and used at the subject clinic and administrative offices should continue to be reported by and taxed to the appropriate owner.

ORDER

The non-exempt status the subject machinery and equipment for tax year 2001, as determined by the Assessor and approved by the Board of Equalization, is SET ASIDE. The Clerk is HEREBY ORDERED to show this personal property as exempt for tax year 2001.

A party may file with the Commission an application for review of a hearing officer decision within thirty (30) days of the mailing of such decision. The application shall contain specific detailed grounds upon which it is claimed the decision is erroneous.

If an application for review of a hearing officer decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission. If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of Reynolds County as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal. If any protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

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 August 5, 2002.

STATE TAX COMMISSION OF MISSOURI

Aimee Smashey

Hearing Officer