State Tax Commission of Missouri
BIG BEND WOODS BATH)
& TENNIS CLUB, INC,)
)
Complainant,)
)
v.) Appeal No.10-10588
)
JAKE ZIMMERMAN, ASSESSOR,)
ST. LOUIS COUNTY, MISSOURI,)
)
Respondent.)
DECISION AND ORDER
HOLDING
Assessment by Assessor that subject property was not tax exempt was sustained by County Board of Equalization.Hearing Officer finds subject property to not be exempt under Section 137.100(5), valuation of $301.600, assessed residential value of $57,300, as determined by the Board is AFFIRMED.
Complainant appeared by Counsel, John Rahoy, St. Louis, Missouri.
Respondent appeared by Counsel, Paula J. Lemerman, Associate County Counselor.
ISSUE
Complainant appeals the decision of the St. Louis County Board of Equalization on the grounds of exemption.The Commission takes this appeal to determine whether the subject property is exempt from taxation under Section 137.100(5), RSMo for the tax year 2010.
The Hearing Officer having considered all of the competent evidence upon the whole record enters the following Decision and Order.
FINDINGS OF FACT
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.A hearing was conducted on August 9, 2011, at the St. Louis County Government Center, Clayton, Missouri.
2.Assessment.The Assessor valued the property at $513,900, a residential assessed value of $97,640.[1]The Board reduced the value to $301,600, residential assessed value of $57,300.[2]The Board denied Complainant’s Petition for Exemption.[3]
3.Complainant’s Status.Complainant is a general not for profit corporation organized under the laws of the state of Missouri.[4]The purpose for which Complainant was organized is as an Athletic and Social Club with a membership comprised of home owners in a subdivision known as BIG BEND WOODS, and such additional memberships as shall be set in the By-Laws of the corporation.[5]Complainant is to be operated as an athletic and social organization for the benefit of its members and participants, and no part of the income or property of the corporation shall be distributed to the corporation’s members, directors or officers, except as reasonable compensation for services rendered.[6]Complainant has three classes of members: (1) Class A – members who joined the club subsequent to October 27, 1972, and paid the full membership fee; (2) Class B – members who are a resident of Big Bend Woods subdivision or BBW condominiums, and join for one season; and (3) Non-Resident – members not residing in Big Bend Woods subdivision or BBW Condominiums and who join for one season.[7]
4.Subject Property – Identification and Description.The subject property is located at 732 Big Bend Woods Dr., Manchester, Missouri.The property is identified by locator number 24Q130714.The property consists of five acres lot improved with a swimming pool, tennis courts, parking lot and related amenities to support the pool and tennis courts.[8]
5.Subject Property – Ownership, Operation and Use.The subject property is owned by Complainant, therefore it is owned on a not for profit basis.[9]The subject property is operated so that there is no distribution of income, profits or dividends to its members.[10]All funds in excess of expenses are retained for the continued maintenance and operation of the subject property and the Complainant.[11]The primary, inherent and dominant use of the subject property is as a recreation and social facility for its members, not for any charitable use or purpose.
6.Complainant’s Evidence.The following exhibits and written direct testimony were received into evidence on behalf of Complainant
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EXHIBIT |
DESCRIPTION |
|
A |
Petition for Exemption before the St. Louis County Board of Equalization |
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B |
BOE Decision Letter, dated 10/6/10 |
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C |
Real Estate Tax History Statement – Cedarmill Bath & Tennis Club, Inc. – 1999-2006 |
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D |
Real Estate Tax History Statement – Big Bend Woods Bath & Tennis Club, Inc. – 1999-2010 |
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E |
Articles of Incorporation of Complainant |
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F |
General Warranty Deed, dated 8/10/1973 – subject property |
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G |
2008 & 2009 Income and Expense Statements for Complainant |
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H |
Written Direct Testimony – Dana Baker, Membership Chairman – Complainant |
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I |
Written Direct Testimony – Martin Story, President – Complainant |
Ms. Baker testified at the evidentiary hearing.
Complainant’s evidence was not substantial and persuasive to rebut the presumption of correct assessment by the Board and establish the subject property to be exempt from taxation under §137.100(5), RSMo.See, FINDINGS OF FACT 7, supra, andxxx, infra.
7.Respondent’s Evidence.Respondent’s Exhibit 1 was received into evidence.The exhibit consisted of the following documents:
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EXHIBIT |
DESCRIPTION |
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1-A |
BOE Decision Letter, dtd 10/6/10 – Exemption Denied |
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1-B |
Complainant’s By-Laws |
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1-C |
Certificate of Incorporation as Not for Profit Corp – Complainant |
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1-D |
General Warranty Deed, dated 8/10/1973 – Subject Property |
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1-E |
Complainant’s St. Louis County BOE – Petition for Exemption |
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1-F |
Internet Webpage for Complainant |
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1-G |
Assessor’s Internet Property Record Card – Subject Property & Real Estate Tax History 1999 – 2009 |
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1-H |
BOE – Field Inspection Report – Subject Property |
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1-I |
Commercial/Industrial Review Document (Property Record Card) – Subject |
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1-J |
Assessor Recommendation to BOE |
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1-K |
Assessor’s Internet Property Record Card |
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1-L |
Two photographs of Subject Property |
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1-M |
List of Seven Recreational Tax Exempt Organizations – St. Louis County |
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1-N |
BOE Petition Recommendation – Subject |
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1-O |
Articles of Incorporation – Complainant |
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1-P |
Complainant’s Income & Expense Statements – 2008-09, List of Equipment & Advertisement for Complainant |
CONCLUSIONS OF LAW AND DECISION
Jurisdiction
The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious.The hearing officer shall issue a decision
and order affirming, modifying or reversing the determination of the board of equalization, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious.[12]
Complainant Fails to Establish Subject Property
To Be Exempt Under §137.100, RSMo
Complainant’s Burden of Proof
There is a presumption of validity, good faith and correctness of assessment by the Board of Equalization.[13]This presumption is a rebuttable rather than a conclusive presumption.Complainant has the burden to present substantial evidence to rebut the presumption of correct assessment by the Board of Equalization.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.[14]It is well established that taxation is the rule and exemption from taxation is the exception.Exemption is not favored in the law.[15]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, . . . ;
As will now be addressed, Complainant’s substantial burden of proof has not been met in the present case.
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.[16]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 thepurpose, 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.[17]
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’s Property Fails to Qualify Under Franciscan Test
First Franciscan Test Met
The subject property is owned and operated on a not-for-profit basis. See, FINDING OF FACT 5, supra.The ownership of the property by a not-for-profit corporation is without question.Complainant operates the property on a not-for-profit basis.The fact that Complainant may in any given year realize a net income in excess of expenses does not operate to defeat the Complainant from meeting the first Franciscan test.It is not necessary that the property always operate in the red.It may operate in the black and still satisfy the criteria to be operated on a not-for profit basis. Therefore, the Complainant has satisfied the first test.
Second Franciscan Test Not Met
Complainant fails to satisfy the requirements of the second Franciscan test.The statutory language requires the property to be actually and regularly used exclusively for a charitable purpose.The phrase “regularly used exclusively” has been interpreted by the courts to mean that the primary, inherent or dominant use of the property, as opposed to a mere secondary and incidental use, must be for a charitable purpose.[18]This is the point at which the subject property falls short of the second Franciscan test.The primary use of this property is to provide swimming and tennis facilities for the use of its members.Its inherent use is simply as stated in its Articles of Incorporation as “an Athletic and Social Club.”The dominant use of the property under appeal is to serve the dues paying members by providing recreational activities.[19]
This primary, inherent and dominant use of the property does not constitute a charitable use of the property.Under the Salvation Army[20] case cited in Franciscan, charity or a charitable use consists of a gift for the benefit of an indefinite number of persons, by 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 maintain public buildings or works or otherwise lessening the burdens of government.[21]The use of Complainant’s property as an athletic and social club is not intended, nor is its primary use bringing the hearts of Complainant’s members under the influence of education or religion.Neither does the use of the property for swimming, playing tennis and socializing related to those activities relieve the bodies of members from disease, suffering, or constraint.The dominant use of the property does not assist members in establishing themselves for life.The stated purpose of the Complainant has nothing to do with erecting or maintain public buildings or works or otherwise lessening the burdens of government and the use of the property certainly does not fit this description.
Charitable Work
Complainant’s reliance on what was proffered as examples of “charitable work” by Complainant does not satisfy the use test required by Franciscan.Exemption rests on the use of the property, not merely any charitable character of the owner.[22]Complainant cites the Hearing Officer to the following “charitable” works of the corporation in relation to the property under appeal:[23]
1.Boy Scouts – annual camp out.
2.Girl Scouts – water safety and lifesaving demonstrations
3.Big Ben Woods Subdivision – Annual Easter Egg Hunt
4.Donation of an annual memberships to be auctioned off for fund raising by Holy Infant Catholic Church, Sacred Heart Catholic Church, Wren Hollow School PTA
First, these activities are simply incidental uses of the subject property.Secondly, the fact that Complainant makes no charge for these four uses of the property does not render the uses “charitable.”These four activities or events are nothing more than an extension of the dominant use of Complainant’s property as property used primarily, inherently and dominantly for recreational and social activities, but not for charitable use.
The use by both the Boy and Girl Scouts, albeit some element of “education”[24] may take place, is clearly a recreational use by these two organizations.This is the predominant activity that would be associated with the Scouts’ use.It is essentially no different than the use of the property than can be made by any member day to day.[25]
The conducting of an Easter Egg Hunt is nothing more than a recreational activity for children in the Big Bend subdivision.The fact that the homeowners’ association donates the candy for the hunt[26] does not render the use as charitable.The giving away of candy by the association is the act of charity, not the use of the property.The use is a matter of children’s recreation.
The donation of memberships to the two churches and the PTA, while helping those organizations raise money, actually results in nothing more than three families[27] being able to purchase the use the subject facilities for recreation.Accordingly, the use of the property that results from Complainant’s donation of membership is in line with the inherent and dominant use of the property day in and day out.
Third Franciscan Test Not Met
The failure of a taxpayer to meet any one of the tests under Franciscan results in a denial of the claim for exemption.Therefore, Complainant having failed to meet the second Franciscan test, the request for exemption must be denied.However, the Hearing Officer would observe that the third Franciscan test was also not met.
It appears there is no limit on membership based on any criteria other than what the pool and tennis courts might reasonably be able to accommodate for their uses during the year. There are no requirements or prohibitions which make the class of persons who might become members restricted.Therefore, the property is potentially able to be “used for the benefit of an indefinite number of persons.”
However, the general well-being of society in the Ballwin community was not shown to be benefitted directly or indirectly by the recreational use to which Complainant’s property is currently put.The primary and direct beneficiaries of the existence of the subject property and its recreational use are only those persons who are members of Complainant.No indirect benefit to the Ballwin community by a private club operating a swimming pool and tennis courts was established by the evidence.[28]The Hearing Officer will not engage in surmise and conjecture to conclude some speculative indirect benefit that might or might not exist for the community in which the subject is located.Accordingly, it is concluded that Complainant also failed to establish that the recreational use of the property under appeal satisfied the third Franciscan test.
Discrimination Claim
Complainant puts forth what is a unique exemption claim under its asserted ground of discrimination.This claim rests upon the fact that the Cedar Mill Bath and Tennis Club, Incorporated (Cedar Mill) property located at 1896 Cedar Mill Dr., Chesterfield, St. Louis County, Missouri has apparently been exempt from ad valorem real estate taxes since 2007.[29] The rational for Complainant’s discrimination argument is quite simple:
A. Cedar Mill’s property is used for recreation just like Complainant’s property; B. Cedar Mill’s property is exempt from ad valorem real estate taxes; therefore,
C. Complainant’s property should be exempt from ad valorem real estate taxes.
Complainant argues to grant Cedar Mill exemption and deny it to Complainant is discrimination in the application of §137.100(5).The basis for the conclusion that the Cedar Mill and Big Bend recreational facilities are used in the same manner rests upon a conversation that took place between Complainant’s representatives, Dana Baker, Mike Hoffer and Martin Story with George Smith a representative of Cedar Mill.[30] In this meeting Mr. Smith explained what he had done to get tax exemption for the Cedar Mill property, the similarities between the Cedar Mill and Big Bend properties, and what Big Bend needed to do to obtain tax exempt status for its property.
The Hearing Officer ventures no opinion relative to the exemption status of the Cedar Mill property since that matter is not before him.Furthermore, the extremely limited hearsay[31] on this matter would be totally insufficient to make a determination as to whether the granting of the tax exemption to Cedar Mill was or was not in accordance with the controlling statute and case law.More importantly, the exempt status of the Cedar Mill property is totally irrelevant to a determination of the tax status of Complainant’s property.There is no provision in §137.100(5) authorizing the granting of an exemption on the basis that exemption has been granted to a property with a similar or even identical use.
Each exemption case must stand on its own facts.The facts in this appeal establish Complainant’s property fails to meet the required statutory standard and case law tests to receive exemption from ad valorem taxes.The holding of the Courts is clear that the pivotal question is the use of the property under appeal,[32] not whether another property has been granted the benefit of exemption.There is no case which the Hearing Officer has found establishing that an exemption may be granted to one property on the basis of an exemption having been granted to another property of the same use.In other words, an allegation of discrimination for the granting of an exemption to one property and denying exemption to another has never been recognized by the courts of Missouri as a basis for the granting of an exemption.Therefore, Complainant’s argument is not well taken.Exemption cannot be granted based upon the claim of discrimination.
ORDER
The assessment of the subject property made by the Board of Equalization for St. Louis County for the subject tax day is AFFIRMED.Complainant’s property does not qualify for exemption under Section 137.100(5), RSMo.
The assessed value for the subject property for tax year 2010 is set at $57,300.
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. [33]
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 September 16, 2011.
STATE TAX COMMISSION OF MISSOURI
_________________________________
W. B. Tichenor
Senior Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 16th day of September, 2011, to: John Rahoy, 824 Wheelwright Dr., Manchester, MMO 63021, Attorney for Complainant; Paula Lemerman, Associate County Counselor, County Government Center, 41 South Central Avenue, Clayton, MO 63105, Attorney for Respondent; Jake Zimmerman,Assessor, County Government Center, 41 South Central Avenue, Clayton, MO 63105; John Friganza, Collector, County Government Center, 41 South Central Avenue, Clayton, MO 63105.
___________________________
Barbara Heller
Legal Coordinator
Contact Information for State Tax Commission:
Missouri State Tax Commission
301 W. High Street, Room 840
P.O. Box 146
Jefferson City, MO 65102-0146
573-751-2414
573-751-1341 Fax
[1] Section 137.115, residential property is assessed at 19% of its true value in money (appraised/fair market value).
[13] 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)
[15]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.
[18] See, Bethesda Barclay House v. Ciarleglio, 88 S.W.3d 85 (Mo. App. E.D. 2002); Home Builders Ass’n of Greater St. Louis v. St. Louis Co. BOE, 803 S.W.2d 636 (Mo. App. E.D. 1991); Pentecostal Church of God of America v. Hughlett, 601 S.W.2d 666 (Mo. App.S. D. 1980); Barnes Hospital v. Leggett, 589 S.W.2d 241 (Mo. 1979); Missouri United Methodist Retirement Homes v. State Tax Commission, 522 S.W.2d 745 (Mo. 1975)
[19] Exhibit A – Answer to Item (8): Describe all activities that take place at the property and the frequency of these activities:This is a subdivision swimming pool and tennis courts.The pool is in operation from Memorial Day weekend to Labor Day each year.Tennis courts are used in good weather.Each day that the pool is on operation, it is open for unstructured swimming.Activities include swim team practice, unstructured swimming, etc.Tennis courts are for tennis lessons, scheduled tennis leagues, matches, etc.
[22] Home Builders, supra; Sunday School Bd. of Southern Baptist Convention v. Mitchell, 658 S.W.2d 1 (Mo. 1983); St. John’s Mercy Hospital v. Leachman, 552 S.W.2d 723 (Mo. 1977);
[23] Exhibit A – Answer to Item (17) C.4; Exhibit H: Q/A 25, 26, 27, & 28; Exhibit I: Q/A’s on page 3 – 4
[25] No evidence was presented to establish that a member of BBWBTC could not camp out over night on the grounds, if they so desired to.Members can receive water safety instruction from the staff lifeguards while making use of the swimming pool.
[26] The Hearing Officer assumes that candy is donated, and that the children are not charged to take part in the hunt.
[27] Exhibit 1-B – Article II, Section 2 – All memberships shall be considered family memberships and shall entitle the member and all residents of the same household to all of the rights and benefits of his class of membership.
[28] There was, in fact, no evidence tendered that even addressed this aspect of the Franciscan test.