EAGLE FORUM EDUCATION CENTER, )
v. ) Appeal Nos. 01-10968, 02-11310 & 03-12276
PHILIP MUEHLHEAUSLER, ASSESSOR, )
ST. LOUIS COUNTY, MISSOURI, )
DECISION AND ORDER
Assessment by Assessor that subject property was not tax exempt for tax years 2001, 2002 and 2003, sustained by St. Louis County Board of Equalization is SET ASIDE in part. Hearing Officer finds subject property for tax years 2001, 2002 and 2003 to be exempt in part under Section 137.100(5) and taxable in part.
Complainant appeared by Counsel, Jerome Wallach, St. Louis, Missouri.
Respondent appeared by Counsel, Edward Corrigan, Associate County Counselor.
The Commission takes this appeal to determine whether the subject property is exempt in part from taxation for the tax years 2001, 2002 and 2003.
Complainant appeals the decision of the St. Louis County Board of Equalization. Respondent assessed the subject property as commercial property. This assessment was sustained by the Board of Equalization. Complainant contends that sixty-two percent (62%) the subject property is exempt from taxation under the provisions of Section 137.100(5). An evidentiary hearing was conducted on April 28, 2004, before W. B. Tichenor, Hearing Officer, at the St. Louis County Government Center, Clayton, Missouri. Parties filed Briefs and Reply Briefs. Reply Brief of Complainant was received by the Commission on September 27, 2004. Reply Brief of Respondent was received by the Commission on September 27, 2004.
The Hearing Officer, having considered all of the competent evidence upon the whole record and the Briefs and Reply Briefs filed by the parties, enters the following Decision and Order.
FINDING 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. Complaints for Review of Assessment, with Board of Equalization Decision Letters attached.
2. The subject property is located at 7800 Bonhomme Avenue, Clayton, Missouri. The property is identified by locator number 19 K 640581. The Assessor assessed the property as commercial property at an assessed value of $398,080 for the 2001-2002 assessment cycle and at an assessed value of $399,584 for the 2003-2004 assessment cycle. Complaints for Review of Assessment.
3. Complainant=s Exhibits A through FF were received into evidence. Tr. 5, Lines 24-25; Tr. 40, Line 10. Said exhibits are described in the Exhibit Exchange List filed by Counsel for Complainant on December 10, 2003, and in the Order issued March 5, 2004. Said listings and descriptions are incorporated by reference as if set out in full in his Decision.
4. Respondent=s Exhibits 1 through 75 were received into evidence. Tr. 44, Lines 7-8. Said exhibits are described in the Exhibit Exchange List filed by Counsel for Respondent on December 17, 2003, and in the Order issued March 5, 2004. Said listings and descriptions are incorporated by reference as if set out in full in his Decision.
5. The total square footage of the subject building is 14,598 square feet. The Eagle Forum Education & Legal Defense Fund (Fund) is headquartered at Complainant=s property. Exhibit AA.
(A) As of January 1, 2001, the Fund occupied 6,250 square feet in the subject building (2,460 square feet on the lower level, 3,790 square feet on the first floor, and no space on the second floor). The total square footage occupied by the Fund represents 43% (6,250/14,598 = .429, rounded to .43) of the total area of the building.
(B) As of January 1, 2002, the Fund occupied 8,576 square feet in the subject building (2,460 square feet on the lower level, 3,790 square feet on the first floor, and 2,326 square feet on the second floor). The total square footage occupied by the Fund represents 59% (8,576/14,598 = .588, rounded to .59) of the total area of the building.
(C) As of January 1, 2003, the Fund occupied 9,049 square feet in the subject building (2,460 square feet on the lower level, 3,790 square feet on the first floor, and 2,799 square feet on the second floor). The total square footage occupied by the Fund represents 62% (9,049/14,598 = .62) of the total area of the building.
Exhibits: 3, 7, 8, 9, 10, N, & O; Testimony of Complainant=s and Respondent=s witnesses.
6. The Eagle Forum Education Center was duly incorporated as a General Not-For- Profit Corporation under the laws of the State of Missouri on September 21, 1993. The original purpose of the corporation was: ATo hold title to property, collect income therefore, and turn over the entire amount less expenses to an organization that is exempt from income tax.@ The purpose was amended on December 1, 1993: ATo hold title to property for the exclusive benefit of an organization that is exempt from income tax as described in Section 501(c)(3) of the Internal Revenue Code; and in furtherance of that purpose, to turn over to such exempt organization the entire amount less expenses of any income collected from the property.@ Exhibit H; Exhibit EE, p. 9, Lines 13-23.
7. For tax years, 2001, 2002 and 2003, Complainant was in good standing as a Missouri Nonprofit Corporation, having filed its annual registration reports. Exhibit I, Annual Registration Reports; Exhibit EE, p. 9, Line 24 – p. 10, Line 3.
8. Complainant is a wholly owned subsidiary of Eagle Forum Education and Legal Defense Fund (Fund), a Missouri not-for-profit corporation. The Fund is the sole member of the corporation. Exhibit EE, p. 9, Lines 14-21; Exhibit H, Articles of Incorporation; Minutes of 1993 Annual Meeting of Board of Directors of Fund, p. 5 – Formation of Subsidiary.
9. The Eagle Forum Education and Legal Defense Fund is exempt from Federal Income Tax under section 501(c)(3) of the Internal Revenue Code. Exhibits J & L, Exhibits 13 & 17.
10. No part of the funds received by Complainant inure to the benefit of, or are distributed to the Directors, Officers, or other private persons, except for salaries for staff. Exhibit EE, page 29, Line 19 – p. 30, Line 8; page 31, Lines 4-10.
11. The activities organized, administered or conducted at Complainant=s property by the Fund include the following:
(A) Literacy Program. First Reader, a comprehensive, user-friendly phonics-based system of reading instruction that enables parents without formal teaching credentials to teach their own children to read. Eight separate programs involving in excess of 150 students involved in reading activities and exercises were conducted in 2001. Eight other Literacy Opportunity Projects were conducted in 2002. (Exhibit S);
(B) Collegians Leadership Summit held in Washington, D.C. involves hundreds of students from 118 colleges and universities, who are given information and instruction on national issues and campus activism from a conservative political perspective and exposure to national conservative leaders. (Exhibits T & U);
(C) Eagle Forum University is an on-line educational web-site, which offers various courses related to current events, the political process, political science. In excess of 6,000 individuals were enrolled in ten different courses offered beginning in May 2001. (Exhibit V).
(D) Education Report, a newspaper of education rights. (Exhibit X).
(E) Educational project on dangers of Marijuana. (Exhibit Z).
(F) A library of approximately 20,000 volumes is maintained in the subject facility and is available for use by persons doing research.
12. The Fund=s activities organized, administered or conducted at the subject property are not restricted as to the persons who may participate and no charge is made for participation in the programs.
13. The Fund=s activities organized, administered or conducted at the subject property as listed in Finding of Fact 11 constitute educational activities in furtherance of an exempt purpose.
14. The portion of the subject property utilized for an exempt purpose by the Fund for 2001 was 43%, therefore 57% of the property was used for a non-exempt purpose. The assessed value of the non-exempt portion of the subject property is $226,900 ($398,080 x .57 = $226,905, rounded to $226,900).
15. The portion of the subject property utilized for an exempt purpose by the Fund for 2002 was 59%, therefore 41% of the property was used for a non-exempt purpose. The assessed value of the non-exempt portion of the subject property is $163,210 ($398,080 x .41 = $163,212, rounded to $163,210).
16. The portion of the subject property utilized for an exempt purpose by the Fund for 2003 was 62%, therefore 38% of the property was used for a non-exempt purpose. The assessed value of the non-exempt portion of the subject property is $151,840 ($399,584 x .38 = $151,841, rounded to $151,840).
CONCLUSIONS OF LAW
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. 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.
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. Bethesda Barclay House v. Ciarleglio, 88 S.W.3d, Mo. App. E.D. 2002; Two Pershing Square, L.P. v. Boley, 981 S.W.2d 635 (Mo. App. W.D. 1998); Central States Christian Endeavors Ass=n v. Nelson, 898 S.W.2d 547 (Mo. 1995); Tri-State Osteopathic Hosp. Ass=n, Inc. v. Blakeley, 848 S.W.2d 571 (Mo. App. S.D. 1993); United Cerebral Palsy Ass=n of Greater Kansas City v. Ross, 789 S.W.2d 798 (Mo. 1999); Callaway Community Hosp. Ass=n v. Craighead, 759 S.W.2d 253 (Mo. App. W.D. 1988); Affiliated Medical Transport, Inc. v. State Tax Com=n of Missouri, 755 S.W.2d 646 (Mo. App. E.D. 1988); Missouri Conference Ass=n of Seventh Day Adventists v. State Tax Com=n, 727 S.W.2d 940 (Mo. App. W.D. 1987); Evangelical Retirement Homes of Greater St. Louis, Inc. v. State Tax Com=n of Missouri, 669 S.W.2d 548 (Mo. 1984); Sunday School Board of Southern Baptist Convention v. Mitchell, 658 S.W.2d 1 (Mo. 1983); Pentecostal Church of God of America v. Hughlett, 601 S.W.2d 666 (Mo. App. S.D. 1980); City of St. Louis v. State Tax Commission, 524 S.W.2d 839 (Mo. 1975).
Property Exempt from Taxation
The following subjects are exempt from taxation for state, county or local purposes:
A(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;@
Section 137.100, RSMo.
The exclusive use of a property means the primary and inherent use rather than merely a secondary or incidental use. Central States Christian Endeavors Association v. Nelson, 898 S.W.2d 547, 549 (Mo. banc 1995).
Partial Exemption from Taxation
The Constitutional provision of Mo. Const. art. X, Sec. 6 and Section 137.100(5), RSMo which exempt from taxation property Aused exclusively … for purposes purely charitable,@ authorize a partial exemption of real property where the building or land is used in part for charitable purposes and in part for non-charitable purposes. Barnes Hospital v. Leggett, 589 S.W.2d 241 (Mo. banc 1979).
Franciscan Tertiary Test
In meeting its burden of proof that the subject property is used Aexclusively 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 ‘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 Arelieving 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 case law definition of charity followed in Missouri has been set out as follows:
A 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 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. A charity may restrict its admissions to a class of humanity, and still be public; it may be for the blind, the mute, those suffering under special diseases, the aged, for infants, for women, for men, for different callings or trades by which humanity earns its bread, and as long as the distinction which involuntarily affects or may affect any of the whole people, although only a small number may be directly benefited, it is public.@
Salvation Army v. Hoehn et al., 188 S.W.2d 826, 830, (Mo. 1945).
Complainant=s Property Qualifies Under Franciscan Test
In the case of State ex rel. St. Louis Young Men=s Christian Ass=n v. Gehner, 11 S.W.2d 30, 31 (Mo. 1928), the Missouri Supreme Court made the following observation with reference to the case before it:
AThe issue is clear-cut. There is no dispute about the facts, counsel having filed in this court an agreed statement, which Judge Sherwood some years ago said was a very good way for lawyers to try a case.@
In nearly all exemption cases the same could and should be applied. The importance of various facts, or the inferences that might be drawn from certain facts, can be disputed and argued between opposing counsel. However, in many, if not all exemption cases certain basic and fundamental facts could simply be agreed to by a stipulation. Such stipulations would save not only a great deal of paper, but also valuable time of all parties. Such is the situation in the present case. There are various facts that are not in dispute. Those facts are identified and are set out under FINDINGS OF FACTS, supra. The next course of action is to make an application of the appropriate law to those facts.
Franciscan Test Applied to Use of Subject Property
The three tests to be met under Franciscan may be summarized as follows:
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.
Each of these prongs of the test will be examined and analyzed in relation to the evidence presented on behalf of Complainant.
Not-For-Profit Ownership and Operation
The initial point of inquiry in an exemption appeal before the Commission must be what is the nature of the entity which owns the property. Is the property owned on a not-for-profit basis? If this threshold standard is not met, there is no need to do any further analysis.
The property under appeal in the present case is owned by a not-for-profit corporation, i.e. Eagle Forum Education Center, Complainant (hereafter, Center). The fact that Complainant is a wholly owned subsidiary of Eagle Forum Education and Legal Defense Fund (hereafter, Fund), another not-for-profit corporation, does not render the ownership in violation of the standard established by Franciscan. There was no factual dispute on this point. Respondent does not argue that the ownership of the subject property is on any other basis than that of not-for-profit ownership. The subject property meets this prong of the Franciscan test. A stipulation to this point would have been appropriate.
The present case does not deal with that portion of the subject property that was rented to tenants during 2001, 2002 and 2003. Although that portion of the subject building is owned on a not-for-profit basis, it is not so operated. Neither the Center nor the Fund are asserting any claim of tax exemption for the leased area. Complainant has conceded that the leased area of the subject building is operated on a for-profit, as opposed to a not-for-profit basis. The Hearing Officer does not reach the issue of whether the portion of the subject building leased to another not-for-profit entity could be exempt, since Complainant did not assert that argument.
The only operation issue relates to the operation of the 43, 59 or 62 percent of the space of the subject facility being utilized in carrying out the various activities of the Fund. There was no dispute as to the various parts of the facility occupied by the Fund being used for any other purpose than activities of the Fund. Respondent did not challenge this simple factual element. The dispute is whether the activity conducted constituted an exempt use. However, the operation of the space utilized by the Fund on a not-for-profit basis was not challenged. No profit was shown to have been generated from the space being occupied by the Fund. A stipulation to these facts would have been appropriate.
It is the rule in Missouri that a property may be used for both a tax exempt and a non-exempt purpose. A partial exemption may be granted for that portion of the property which is used for the exempt purpose. Barnes Hospital, supra. In the present case, Complainant asserted an exempt use of sixty-two percent (62%) of the subject building for each of the years in question. As determined in Finding of Fact 5, supra, the evidence did not establish an exempt use of 62% for each of the tax years. The exempt use varied from year to year based upon the amount of space that was rented out and not used by Complainant for its educational activities, programs and purposes.
The Hearing Officer=s review of the relevant exhibits on this point was not in accord with either the position advanced by Complainant for each year, or the position advanced by Respondent. Only for tax year 2003 were the parties in agreement (Respondent=s Brief, p. 7) as to the amount of space being occupied by Complainant. This was based upon Exhibits 3 & O which were identical and purported by Complainant to represent the allocation of floor space for all three years. However, the evidence does not establish that.
The actual leases only provide that 2,100 square feet of the lower level were under lease, but both Respondent (Respondent=s Brief, p. 6) and Complainant (Exhibit O) allocate 2,406 square feet as being leased to Clayton Personal Training and only 2,460 square feet being occupied by Complainant.
There is no dispute between Exhibits 3 & O, and the leases (Exhibits 10 & N) on the square footage being leased on the first floor. The parties were in agreement for the leased space (1,076 square feet) in all three years.
As to the second floor, Complainant was not occupying any of the floor on January 1 of 2001 and 2002. However, the lease which was applicable for 2003 only had 1,700 square feet being leased (Exhibits 8 & N), while Exhibits 3 & O indicate 2,067 square feet under lease. If Complainant did in fact lease 3,166 square feet, instead of only 2,799 square feet that was not asserted. Complainant=s witness testified under cross-examination that the tenant on the second floor for 2003 was occupying what was shown on Exhibits 3 & O. Tr. 14, Lines 2-4.
These particular factual matters would have been better addressed if the parties had jointly reviewed the documents and arrived at an agreement as to the total square footage occupied by Complainant and utilized for the Fund=s activities on January 1 of each year and filed a stipulation to that effect. That course of action would have taken far less time and effort than assembling duplicate documents to file as exhibits. The filing stacks of documents and written direct testimony and the cross-examination of witness on such uncontested matters could have been dispensed with and the case submitted on agreed facts and briefs.
The evidence establishes that the determined areas, portions and percentages of the subject improvement space occupied by Complainant for activities conducted and sponsored by the Fund were being operated on a not-for-profit basis. There was in point of fact no dispute as to the use of these areas, the only real dispute was as to the amount of space being used in a not- for-profit manner. Accordingly, the operation portion of the Franciscan test was met by Complainant.
Exclusively Used for Charitable Purpose
The next factor of the Franciscan test which must be examined is whether the areas of the subject building used to carry out the programs and activities of the Fund constitute an exclusive use for a charitable purpose.
The exclusive use issue requires no great analysis. The areas of the subject building utilized for the programs and activities of the Fund are exclusively used for those purposes and no other. The other areas of Complainant=s building which are rented on a for-profit basis are not at issue, nor are they relevant to the discussion as to the exclusive use of the portion of the subject property for which Complainant seeks exemption. Exclusive use has a particular meaning in exemption law.
The primary or inherent use is what qualifies as the exclusive use. The use must not be simply a secondary use, or incidental to the predominant use of the property seeking exemption. Central States Christian, supra. In the present case, the areas of the subject building in question as to the issue of exemption have no real secondary or incidental use, the only use is to provide space for the organizing, administering and conducting the programs and activities of the Fund. This is not a situation in which there are a variety of activities, some of which are not being conducted by a not-for-profit entity in the space under appeal. The primary and inherent use of the areas at issue is to carry on the work of the Fund. Again, there is no real dispute on this matter.
It is now possible to turn to the real matter at controversy in this appeal, which is whether the activities conducted in those portions of the building utilized by the Fund constitute work that is a charitable purpose. It is appropriate to review the controlling case law definition of charitable or charity from the Salvation Army decision.
Under the Salvation Army, holding in order for work or activity to constitute a charitable endeavor there must be a gift which brings the hearts of individuals under the influence of education. At 830. This is all of the definition that needs be addressed at this point in this discussion. Although there are a number of other endeavors which will qualify as charitable work, it is not required that a property have all of the various activities being conducted in order to qualify as supporting a charity. Complainant is not seeking exemption under any other asserted activity than educational programs and endeavors.
The gift component of the definition was not challenged in this case. There is no charge for the educational services and activities. The programs of the Fund are underwritten by charitable contributions, not by charging for services. A stipulation to this point would have been appropriate.
Complainant does not claim the subject property is being used to relieve bodies of disease or for a religious purpose. It is obvious the undertakings conducted in the subject facility by the Fund are not those of a licensed or accredited college or university, or of a primary or secondary school. No claim was made that the subject property is a school or university, notwithstanding that one of the programs conducted at the facility, over the Internet, calls itself a Auniversity.@ The claim for exemption is that the activities and programs conducted on Complainant=s property under the auspices of the Fund are educational in nature. Some of the programs are in fact similar to school or college course work.
The various activities which are carried on or administered at the Complainant=s property as set forth in Finding of Fact 11, supra, are educational in nature. The fact that they do not lead to the awarding of an elementary or high school diploma, or a college degree, make them no less educational in nature. They are charitable operations. All of the space in Complainant=s building that is utilized by the Fund is devoted to the carrying out of Fund=s educational programs.
The Hearing Officer recognizes that the programs of the Fund proceed from or are based upon a particular political perspective or persuasion which would generally be considered and recognized as a conservative one. However, this does not disqualify the activities in question from being educational. The fact that one particular political persuasion is advanced through the Funds programs, as opposed to presenting various political points of view, cannot be utilized to deny the educational claim for exemption.
It is necessary to consider the general area of religious exemption to understand the nature of the political perspective endorsed by the Fund is irrelevant to the issue of whether an educational activity is being conducted. In considering whether a religious exemption should be granted, it would be improper for the Hearing Officer to deny an exemption simply because a church, temple, mosque or other property only present one particular religious viewpoint. The fact that a Catholic congregation does not use its church building to present the religious views offered in a Muslim mosque or a Buddhist temple is not a basis to deny a religious exemption. The Catholic congregation is going to naturally present the Catholic religious doctrine. The critical factor is that religious worship, of whatever particular belief, is being conducted, not that all faiths are being equally represented.
In like manner, Complainant=s property and its use by the Fund for the various educational programs conducted or administered there do not have to come from some generic, general or all encompassing political point of view. Even assuming that there is such a political perspective, it is enough that the Fund operates educational programs. The particular political perspective weighs neither for nor against exemption.
The Fund=s activities at the subject property qualify as a charitable use with regard to the elements of exclusive use and charitable purpose.
Benefit to Indefinite Number of Persons and Society
The final prong of the Franciscan test to be met is that the educational activities conducted on a not-for-profit basis by the Fund at Complainant=s property provides a benefit to both an indefinite number of persons and to society in general. The benefit can be direct or indirect to meet the test.
Benefit to Indefinite Number of Persons
It is not necessary that the activities of an entity seeking exemption must be made available to each and every person in the city or state where the activity is carried on. In the present case, the programs offered by the Fund are not restricted. In the case of the Internet educational program (Eagle Forum University), any individual with access to a computer and the Internet can avail themselves of this educational opportunity. The Collegians Leadership Summits are open to any college student desiring to attend. The Literacy Programs developed, administered and conducted by the Fund are not restricted as to which children may participate.
All persons participating in any of the various programs of the Fund receive the particular and direct benefit of the given program. Expanded knowledge of American history and other topics, better insight into the political process in America, information relative to the dangers of the use of marijuana, and the ability to read at a more advanced level, are all various direct benefits conferred on those persons who take advantage of the various educational activities offered by the Fund.
The activities and endeavors organized, conducted or administered by the Fund at Complainant=s facilities provide a direct benefit to an indefinite number of people.
Benefit to Society in General
Society receives a benefit from the activities conducted and administered at the subject facility. Citizens who are educated and informed as to our nation=s history can be more responsible citizens and more active in the political process. Children who are assisted to improve their reading skills will be more apt to succeed in school and thereby go on to higher levels of education. This can result in a high level of employment for the individuals and greater productivity for the nation in general.
College and university students who are exposed to the political process in a more in- depth fashion than may be offered in the college classroom are better informed and more likely to be politically active. A republic functions best when the greatest number of citizens are knowledgeable as to current affairs and issues. Government leaders and officials are best held accountable to the citizenry when the largest number of citizens take part in the political give and take which is part of a representative democracy. Society is benefited when young people, because of their exposure to the political process, are equipped to take roles of leadership in society and government.
Education and information relating to dangers of drug use is a benefit to society at large. It can hardly be asserted by anyone who has done the most fundamental research into the problems of drug use by young people, that prevention is the best means of combating drug use. Prevention can only come about when people are informed as to the inherent dangers and problems associated with the use of marijuana. The fact that the government may have efforts to prevent drug use, does not negate the fact that informational programs by private entities likewise provide a benefit which supplements government efforts in the same area.
The very fact that the various programs which constitute the not-for-profit education activity conducted and administered at or through the subject facility directly benefit an unrestricted number of citizens, not just in this state but in other states, confers a direct benefit on the society at-large. Bringing the hearts and minds of an unrestricted class of people under the influence of education, even though limited to certain areas of subjects, also benefits society. The improvement of the condition of our citizens is an improvement of our society.
The activities and endeavors organized, conducted or administered by the Fund at the Complainant=s facilities provide a direct benefit to society in general.
The evidence presented by Complainant meets the standard of substantial and persuasive evidence to establish the use of those portions of the subject property utilized by the Fund meets each of the tests required by Franciscan. The subject property is owned and operated on a not-for-profit basis. The ownership of the property by a non-for-profit corporation is without question. Complainant operates the property for which exemption is sought (certain areas of the building) on a not-for-profit basis. It was uncontested that for the percentage of space for which exemption was sought there was no income derived.
The specific areas in questions provide an educational use which benefits an indefinite number of persons and society in general. The property is actually and regularly used for an educational purpose. The primary and inherent use of the property is for an educational purpose. Accordingly an exemption for the percentages of area set out in Findings of Fact 14, 15 and 16 for the relevant tax years is appropriate.
Counsel for Respondent in his Brief and Reply Brief presents a number of arguments against granting tax exempt status to Complainant. For purposes of addressing Respondent=s arguments, the Hearing Officer has summarized them as follows: (1) Complainant=s corporate purpose is not educational or charitable; (2) property is not used as a school or college; (3) the primary and inherent use of the subject property is not 100% educational; (4) Content of the Leadership Summit is not educational but conservative indoctrination; (5) use of property does not lessen a governmental burden; and (6) alleged education use is occasional, inconsistent and secondary. Any other arguments put forth, in the mind of the Hearing Officer, simply dovetail into one of the above arguments.
Corporate Purpose Not Educational
The Complainant=s corporate purpose is to hold property and turn over income less expenses to an 501(c)(3) exempt organization (the Fund). The only member of Complainant corporation is the Fund, the tax exempt entity for which the property is held and who actually conducts the activities which are organized, administered and conducted at the subject property. What were the legal considerations which prompted this type of ownership arrangement are not relevant for purposes of this analysis and decision. The Hearing Officer recognizes it is different than most exemption cases in which the Complainant is both the owner of the property in question, as well as, the entity carrying on the asserted exempt use.
However, notwithstanding the legal distinction that there are two corporate not-for-profit entities involved in this matter. For all intents and purposes, there is really only one – the Fund. Complainant is controlled by the Fund. The purposes (Exhibit BB) and activities of the Fund are educational. Educational use is a part of the general definition of charity under Salvation Army, supra. It is not necessary that a use be both educational and charitable, if it is educational it is charitable under the applicable case law. Respondent=s point is not well taken.
Property Not Used As A School or College
Complainant did not seek an exemption on the grounds that it was a school or college. It sought an exemption because of the educational use of the property. An exemption for educational use does not require exclusive use by a school or college. Respondent=s argument is not relevant in the present appeal.
The controlling statute makes a clear distinction concerning this issue. Property actually and regularly used for schools and colleges is exempt. Likewise, property actually and regularly used for purposes purely charitable is exempt. As previously noted the case law definition of charity in Missouri includes bringing the hearts of people under the influence of education. Salvation Army, supra.
Primary And Inherent Use of Property Not 100% Educational
Respondent appears to be arguing that in order to obtain an exemption for educational use, the entirety of Complainant=s building must be used for the educational purpose. Respondent argues that various portions of Complainant=s building were leased to for-profit tenants at market competitive lease rates. This matter was not in dispute, although the exact
percentage of the building utilized by the programs and activities of the Fund and the percentage being leased was in dispute, as addressed above.
Respondent=s argument is the old and now discarded Aall-or-nothing interpretation of the exemption statute.@ Had this case come before the Commission prior to 1979, then indeed the reasoning and rational that was articulated in St. John=s Mercy Hospital v. Leachman, 552 S.W.2d 723 (Mo. banc 1977) would have applied. Under Leachman, there could be no partial exemption.
However, in 1979 in Barnes v. Leggett, supra, Leachman was overruled. The Supreme Court of Missouri established that Aa partial exemption of a building or tract, where the building or tract, is used in part for charitable purposes and in part for non-charitable purposes is acceptable.@ Barnes, at 244. In the present appeal Complainant made no claim that the entirety of the building was used for a charitable purpose. Actually, the Asubject property@ in this appeal is only the parts of the Complainant=s building which are used by the Fund for the carrying on of its various programs. Complainant never sought an exemption of 100% of the building. Respondent argues a point that was not at issue and is not applicable in this appeal.
Content Of Leadership Summit is Conservative Indoctrination
Respondent=s argument on this point focuses upon the fact that the College Leadership Summit sponsored and conducted by the Fund is presented only from a conservative political perspective. Respondent characterizes the Summit as indoctrination not education. This argument is not well taken.
One person=s education may be another person=s indoctrination. Just as one person=s religious faith is another person=s heresy. As discussed above, the political perspective from which this particular program is presented does not render it non-educational. Furthermore, the evidence in this record fails entirely to persuade the Hearing Officer that the Summit is indoctrination. The burden was not on Complainant to prove that the content and purpose of the Summit was not to indoctrinate. That is not an element required to be established under any relevant case law on exemption.
Respondent raised the contention on alleged indoctrination. Respondent therefore assumed the burden of proving up this contention. See, Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003) on the burden to prove issues raised by one party. Neither questions asked by Counsel for Respondent during cross-examination, nor claims asserted in Briefs as the interpretation and opinion of Counsel, constitute evidence upon which his claim of indoctrination can be established. Although Respondent=s Counsel raised the issue, he failed to offer proof to establish this conclusion.
It is obvious to the Hearing Officer one of our most precious and fundamental rights in this country is the right to hold opinions on issues of public, and even private import. Consistent with that right and inseparable from it is the further right to share those opinions, be they conservative, liberal, moderate, socialist, communist, anarchist or whatever. The right to share opinions and beliefs carries with it the right to educate.
For a religious entity to be granted an exemption, there is no requirement that all religious perspectives be presented. Likewise, there is no requirement under Franciscan that, when offering education on political and social issues, all perspectives must be presented. The argument advanced by Respondent is irrelevant and is without merit in the case.
Property Use Does Not Lessen Burden Of Government
Respondent=s argument under this point is not well taken. This argument is premised upon an erroneous understanding of the Franciscan test. Counsel for Respondent=s argument implies that in addition to establishing a religious or educational or healing use there must also be a Alessening the burdens of government@ use. This is simply not the case under Franciscan.
The definition of charity set forth in Salvation Army, supra and cited in Franciscan, at 224, is not in the conjunctive. It is in the disjunctive. The dominate use of the property must be for Abringing their hearts under the influence of education or religion, … or by erecting or maintaining public buildings or works or otherwise lessening the burdens of government.@ The lessening the burdens of government criterion is not tied to an educational or religious use, nor is it tied to a relieving from disease and suffering use. The list of charities are connected by the word Aor@ not the word Aand.@ It appears that Alessening the burdens of government@ actually refers back to erecting or maintaining public buildings and works.
Complainant did not claim that it was seeking an exemption because the use of the property under appeal was to Alessen the burdens of government.@ Although Respondent asserts in his Brief, at page 4, that Complainant claimed a use which lessens a government burden, no cite was given to any part of the record on this point. The Hearing Officer, after review of the record, finds none. Complainant=s brief, at page 6, clearly articulates that the use upon which exemption is being claimed is educational and no other. There is not a single reference in Complainant=s Brief or Reply Brief that the claimed use of the property is for the purpose of lessening the burdens of government. The claim for exemption was based upon educational use and no other.
Complainant did not seek an exemption on any other ground. It is not appropriate for Respondent to dictate under what particular use a Complainant may seek exemption. The issue is not whether a use fulfills each and every charitable use set forth in Salvation Army. The issue is whether a use fulfills one of the uses. The use of the part of Complainant=s property for which exemption is sought is an educational use and does not also have to be a use to lessen a burden of government. ATo establish a tax-exempt status, however, the property owner need not prove that the specific activity or project was one which government had a burden to provide. … To the contrary, it is only necessary that there be a clear and convincing showing that the specific activity in question does fall within an accepted category found in the definition. Of those, >education= has been explicitly and firmly established as one by the case law of this state.@ City of St. Louis et al., v. State Tax Commission, et al., 524 S.W.2d 839, 845 (Mo. banc 1975) (Engineer=s Case). Respondent=s argument on this point bases an argument on a point which has previously been addressed and found contrary to Respondent=s position in the relevant case law.
Alleged Education Use Is Occasional, Inconsistent And Secondary
The final line of argument put forth by Respondent is that the alleged educational use is occasional, inconsistent and secondary in contrast to the use of property in the Engineer=s case, supra. As reiterated in the Engineer=s case and stated in numerous other exemption cases, Aeach tax exemption case is peculiarly one which must be decided on its own facts, …@ At 843. It is not necessary that Complainant establish an educational use that is exactly the same as the use in Engineer=s. It is sufficient if the individual and rather unique educational programs and activities of the Fund at the property under appeal are actually and regularly conducted or administered there. Section 137.100.5, RSMo. Further, that the uses are the primary and inherent uses to which those portions of Complainant=s building utilized by the Fund are routinely put. Central States, supra.
The record shows a variety of programs are being carried out by the Fund. Not all of the programs and events take place at the Complainant=s building. All of the work related to the educational work of the Fund is organized and administered at the subject property, irrespective of where an actual event is conducted, makes the use no less of an exempt use. Complainant=s reasoning on this point is logical, rational and persuasive.
ATo argue that a portion of the property was utilized to administer to educational activities and therefore not subject to tax exemption would disqualify the principal=s office in every privately funded school in the state. Likewise the administrative office building of the Archdiocese of St. Louis would not be entitle to tax exemption.@
Complainant=s Reply Brief, page 1.
The record establishes that all of the various work that occurs under the direction of the Fund for its tax exempt purposes is a combination of organizing, administering and conducting the various educational program. The fact that each and every one of the educational uses does not take place each and every week at the subject facility does not fail the tests of active and regular, or primary and inherent use. The evidence is actually uncontroverted that the activities sponsored by the Fund occurring at the subject building are the complete extent of activities conducted in those portions for which Complainant is seeking exemption.
There are no other business activities, for-profit or not-for-profit, that are being conducted at those areas utilized by the Fund. Since there is no other business activity, the sole educational activities cannot be considered to be secondary in any sense of the word. In like manner, the only day-to-day functions carried out in those portions of Complainant=s facility for which exemption is sought relate to the education purpose and use carried on by the Fund. Therefore, these activities are not considered to be occasional activities. The activities demonstrated by this record, irrespective of whether they are consistent with activities being conducted in the Engineer=s case, are consistent with an educational use which qualifies for and merits exempt status under the applicable statute and case law.
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 in part and AFFIRMED in part.
The Assessor for St. Louis County is ordered to enter the subject property on the list of exempt property into the supplemental tax book for the county for the tax years 2001, 2002, 2003 and 2004, as a partially exempt property.
The assessed value for tax year 2001 for the non-exempt commercial portion of the subject property is $226,900.
The assessed value for tax year 2002 for the non-exempt commercial portion of the subject property is $163,210.
The assessed value for tax years 2003 and 2004 for the non-exempt commercial portion of the subject property is $151,840.
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 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 ‘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 5, 2004.
STATE TAX COMMISSION OF MISSOURI
W. B. Tichenor