AAIM Education Center v. Zimmerman (SLCo)

State Tax Commission of Missouri

AAIM EDUCATION CENTER, INC. ,                        )

)

Complainant,                    )

)

v.                                                                            ) Appeal No.12-10855

)

JAKE ZIMMERMAN, ASSESSOR,                             )

ST. LOUIS COUNTY, MISSOURI,                              )

)

Respondent.                      )

DECISION AND ORDER

HOLDING

Assessor’s assessment sustained by the St. Louis County Board of Equalization, request for
exemption was denied.Hearing Officer finds subject property to be exempt under Section 137.100(5) assessment is SET ASIDE, property to be placed on the list of exempt property in the supplemental tax book for St. Louis County for the tax year of 2012.

Complainant appeared by Counsel, Neal Griffin, Stinson Leonard Street LLP, St. Louis, Missouri.

Respondent appeared by Assistant County Counselor, Stephanie L. Hill

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

ISSUE

Complainant appeals the decision of the St. Louis County Board of Equalization on the ground
of exemption from taxation.The Board sustained the Assessor’s determination that the subject personal property was
taxable.The Commission takes this appeal to determine whether the subject personal property is exempt from ad valorem taxation under Section 137.100(5), RSMo for the tax year 2012.

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

FINDING OF FACTS

1.Jurisdiction.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.Evidentiary Hearing.Evidentiary Hearing was held at the St. Louis County Government Center, Clayton, Missouri on April 2, 2014.

3.Identification of Subject Property.The subject property is identified by Assessor’s Personal Property Account Number B00433186.The property is located at 1600 S. Brentwood Blvd, Suite 400, St. Louis, Missouri.

4.Description of Subject Property.The subject property consists of various items of office furniture and equipment, computers and supplies.1

5.Assessment.The Assessor placed an assessed value of $24,428, on the property that is the subject of this appeal.

6.Complainant’s Evidence.Complainant offered into evidence the following:

No objections were made to Exhibits A through M and no rebuttal exhibits were tendered to rebut any
facts presented in Exhibits A through M. The exhibits were received into evidence.

7.Respondent’s Evidence:

No objections were made to Exhibits 1 through 7 and no rebuttal exhibits were tendered to rebut any facts presented in Exhibits 1 through 7.The exhibits were received into evidence.

8.Purpose, Character and Use.The following specific Findings of Fact are made relative to the general purpose and character of Complainant (Academy) and the use made of the subject property:

a.Complainant’s Legal Status. 2 Complainant is incorporated under the laws of the state of Missouri as a General Not-For-Profit (Nonprofit) Corporation. Incorporation as a nonprofit corporation does not automatically qualify the Academy’s property as exempt for ad valorem tax purposes.This does establish that Complainant is operated as a nonprofit corporation.

b.Corporation Purpose.3 The Complainant was formed for charitable, educational and religious purposes and more particularly for the purpose to introduce and encourage constructive educational efforts in those fields that add to the efficiency and advancement of employees, to provide significant learning experiences for effective supervisory and management development, and assist individuals in the acquisition of skills which lead to improved job performance.The Complainant’s stated corporate purpose does not automatically qualify AAIM Education Center, Inc., property as exempt for ad valorem tax purposes. The corporate purpose does establish that the purpose for the use of the property under appeal is to bring individuals under the influence of education to assist them to establish themselves for life.

c.501 (c) (3) Status. 4 Complainant has been granted exemption from Federal income tax under section 501 (c) (3) of the Internal Revenue Code by letter dated August 14, 1978.Being a 501 (c) (3) entity does not automatically qualify Complainant’s property as exempt for ad valorem tax purposes.This does further establish that Complainant operates as a nonprofit entity.

d.Missouri Sales & Use Tax Exemption. 5  Complainant has been granted Limited Exemption from Missouri Sales and Use Tax on Purchases and Sales (Charitable).Exemption from sales and use tax does not automatically qualify Complainant’s property as exempt for ad valorem tax purposes.This does further establish that Complainant
operates as a nonprofit entity.

e.Ownership of Subject Property. 6 The subject property is owned by Complainant.Ownership of the property under appeal by Complainant, as a nonprofit entity, is one of the requirements for the property to be granted tax exempt status, but does not automatically qualify the Academy’s property as exempt for ad valorem tax
purposes.

f.Operation of Complainant. 7  The subject property is operated as an educational entity to carry out the following purposes:

“A.To develop, provide, and determine the needs and desires of members and other
relative to enhanced productivity in the workplace and elsewhere, so as to maximize individual and corporate productivity, to improve economic conditions through improved methods of productivity, and to carry out such productivity programs, studies, consultation, research, investigation, and to further provide educational and related materials to such end.

B.To provide educational programs and services for supervisors and managers, educators, business, government, and the general public . . . .

C.To determine the needs and desires of supervisors and managers with regard to professional education and development.

D.To develop and implement educational courses and programs that will meet the needs and desires of supervisors and managers.

E.To encourage the supervisory and management profession in the development and adoption of technical and managerial information.

                                F.To develop and implement research and educational programs.

G.To assist individuals in the acquisition of skills which will lead to improved job performance.

                               H.To assist educational institutions.

                               I.To develop and release publications primarily devoted to the attainment of the objectives of                                   the Center.

                               J.To provide funding sufficient to implement these objectives.”

g.Operation of Subject Property on a Nonprofit Basis. 8 Complainant is restricted by its Articles of  Incorporation (Articles) to function on a nonprofit basis.Nonprofit operation under the Articles, encompasses the following two elements: (1) upon dissolution and remaining assets must be distributed to organizations operated
for charitable, educational or religious purposes in accordance with Section 501 (c) (30 of the Internal Revenue Code; and (2) no part of the net earnings can enure to the benefit of or distributed to directors, officers, other private persons, except for payment of reasonable compensation for services rendered.The operation of the subject
property under appeal on a nonprofit basis is one of the requirements for the Complainant’s property to be granted tax exempt status, but does not automatically qualify the property as exempt for ad valorem tax purposes.

h.Use of Subject Property 9 The subject property is used to carry out the Complainant’s purpose of operation as an educational entity.Complainant’s personal property is actually and regularly used exclusively for this  purpose.No part of the Complainant’s property is used as an investment or for any private purpose or for corporate profit.

i.Benefit Provided by Use of Subject Property. 10 The use of Complainant’s property brings the persons,
who take the courses and programs provided by Complainant, under the influence of education, and assists them to establish themselves for life.

j.Non-Discrimination Policy.11 Complainant admits to its programs and courses persons of any race, sex, color, religion, national or persons with disabilities.

k.Benefit to Persons and Society. 12 Persons who are members of AAIM Management Services 13 and individuals from the general public are eligible to take the courses and programs offered by Complainant.This
provides an educational benefit specifically to the members of AAIM Management Services, but also to the general public. Society is directly and indirectly benefited by individuals being educated, trained and equipped to improve in their individual career positions.

9.Presumption of Correct Assessment Rebutted.Complainant’s evidence was substantial and
persuasive to rebut the presumption of correct assessment by the Board and establish the subject property to be exempt from ad valorem taxes under section 137.100 (5) RSMo.See, Presumption In Appeal, Burden
of Proof, Section 137.100 RSMo, Franciscan Tertiary Test, & Complainant Proves Exemption, infra.

CONCLUSIONS OF LAW

Jurisdiction

The Commission has jurisdiction to hear this appeal and correct any assessment shown to be
unlawful, unfair, arbitrary or capricious.14 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. 15 Assessing a property the use of which qualifies it for exemption from ad valorem taxation would be an unlawful assessment requiring correcting.

Presumption In Appeal

There is a presumption of validity, good faith and correctness of assessment by the County
Board of Equalization. 16 This presumption is a rebuttable rather than a conclusive presumption.In an
exemption appeal, the presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish the actual and regular use of the property under appeal qualifies for exemption from ad valorem taxation, thereby establishing that the Board’s assessment was erroneous. 17 Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.18 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.19 As has heretofore been set forth in the FINDINGS OF FACT and will be further developed and discussed below, Complainant has presented substantial and persuasive evidence to rebut the presumption of correct assessment by the Board.20 

Burden of Proof

Complainant has the burden to present substantial evidence to rebut the presumption of correct
assessment by the Board of Equalization. 21 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. 22  It is well established that taxation is the rule
and exemption from taxation is the exception. Exemption is not favored in the law.23 The Hearing Officer concludes based upon the Findings heretofore made that Complainant has satisfied the substantial burden to establish exemption.

Section 137.100(5), RSMo

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 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, educational or charitable purposes;”

Actually and Regularly Used Exclusively

The statutory requirement for the actual and regularly use to be exclusively for an exempt purpose has been addressed by various court decisions.Specifically, the phrase “used exclusively” in Section 137.100(5) refers to the primary and inherent use of a given property, as against mere secondary and incidental use. 24 The history and consistency of the courts on this point provide no basis for the Hearing Officer to conclude or apply any other meaning for this phrase to the present appeal.In the absence of the primary and inherent use of Complainant’s properties being for an exempt purpose the claim for exemption from ad valorem taxation must be denied.The evidence for the primary and inherent use of Complainant’s property for an exempt purpose rises to the level of clear and convincing.
Complainant’s personal property is actually and regularly used exclusively for educational purposes. The fact that Complainant is not a school, college or university in the traditional sense of those words is of no  import. According to the testimony at trial, Complainant offers programs and courses similar to adult education courses offered through community college programs.The purpose for which Complainant exists is educational.There is no other use of the property.Complainant is not holding the property in order to gain any profit.

It is not an investment for Complainant. It is plainly and simply being used as an educational endeavor by
Complainant.Under the controlling case law and educational purpose or use comes under the umbrella of “charitable” use  or purpose. Under the plain language of the statute the property must be granted exemption from ad valorem property taxation. See, FINDING OF FACT 8, supra.

Franciscan Tertiary Test

In meeting its  burden of proof that the subject property is “actually and regularly used exclusively” for religious, educational and charitable purposes 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 . 25  The court said:

The first prerequisite for property to be exempt as charitable under §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 “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, . . . .” 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. 26 Emphasis added.

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.

Complainant has satisfied each of the Franciscan tests.See, FINDING OF FACT 8, supra.

Complainant Proves Exemption

The subject property is owned and operated on a not-for-profit basis.The ownership of the property by a not-for-profit corporation is without question. Complainant operates, that is uses, the personal property on a
not-for-profit basis.The primary use of the property is to educate and train individuals, this constitutes a charitable
purpose.The office equipment and furniture is utilized from time to time by AAIM Management Services – AMS (See, FN 13).However, this use is de minimis and further promotes and advances the not-for-profit purposes of Complainant.The use by AMS is secondary to and in support of the use of the equipment and furniture by
Complainant in carrying out its educational mission.

The educational benefits which accrue to persons taking the courses and programs offered by Complainant are limited only to the extent of Complainant’s ability to hold a limited number of classes, with a limited number of students at any one time.However, the number of persons who will continue to receive an educational benefit from the utilization of the subject personal property is indefinite. It is both directly and indirectly beneficial to society that an institution such as the Complainant exists. The imparting of specialized management and career educational
instruction and training, as conducted by Complainant, promotes a better trained workforce and citizenry.See, FINDING OF FACT 8, supra.

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. 27

The Assessor is ordered to enter the subject property on the list of exempt property into the
supplemental tax book for St. Louis County for the tax year 2012.

A party may file with the Commission an application for review of this decision within thirty days
of the mailing date set forth in the Certificate of Service.The application shall contain specific facts
or law as grounds upon which it is claimed the decision is erroneous.Said application must be in writing addressed
to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.

Failure to state specific facts or law upon which the appeal is based will result in summary denial. 28

The Collector of St. Louis County, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an Application for Review, unless said taxes have been disbursed pursuant to a court order under the provisions of Section 139.031.8, RSMo.

Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed.Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.

SO ORDERED May 19, 2014.

STATE TAX COMMISSION OF MISSOURI

W. B. Tichenor

Senior Hearing Officer