State Tax Commission of Missouri
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EAST MISSOURI ACTION AGENCY, |
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| ) | ||
| Complainant(s), | ) | |
| ) | ||
| v. | ) | Appeal No. 15-55500 |
| ) | ||
| TINA WHITAKER, ASSESSOR, | ) | |
| DENT CO., MISSOURI, | ) | |
| ) | ||
| Respondent. | ) |
DECISION AND ORDER
HOLDING
Decision of the Dent County Board of Equalization sustaining the assessment made by the Assessor is AFFIRMED. Complainant failed to present substantial and persuasive evidence establishing the property is exempt under Article X, Section 6 of the Missouri Constitution.
ISSUE
Complainant appealed on the grounds of overvaluation and exemption. Complainant failed to present evidence as to true value in money for the subject property on January 1, 2015, and, therefore, the issue of overvaluation is deemed to have been abandoned.
The issue remaining is whether the subject property is exempt from taxation.
EVIDENCE
Complainant filed the following exhibits, which were admitted into the record:
| EXHIBIT | DESCRIPTION |
| A | Certificate of Incorporation & Related Documents |
| B | IRS Letter |
| C | Missouri Secretary of State Documents |
| D | Written Direct Testimony of William Bunch |
Respondent filed the following exhibits which were admitted into the record:
| EXHIBIT | DESCRIPTION |
| 1 | Written Direct Testimony of Tina Whitaker |
| 2 | Valuations Summary |
| 3 | Background Information from Government Sites |
| 4 | Salem Properties LP Income and Expense Statements |
| 5 | Excerpts from Daniel Craig Cap Rate Study |
| 6 | Rebuttal Testimony of Tina Whitaker |
| 7 | Letter |
| 8 | LURA dated 11/14/1996 |
| 9 | LURA dated 5/28/2010 |
| 10 | 2013 Form 990 Tax Return of Complainant |
The parties agreed to submit the appeal upon the record.
FINDINGS OF FACT
- Jurisdiction. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the County Board of Equalization. The appeal was submitted on the record by agreement of the parties.
- Identification of Subject Property. The subject property is located at 200 & 202 S. Warfel, Salem, Dent County, MO. The property is identified by map parcel number 09-4.0-18-3-43-005.002. (Exhibit 2)
- Description of Subject Property. The subject property consists a 2 ½ acre parcel of property with 8 residential structures with 3,834 square feet containing 4 apartment units each and one commercial structure with 720 square feet. All of the improvements were constructed in 1996.
Complainant is incorporated as a Not for Profit in Missouri and is exempt from federal income tax as a 501(c)(3) organization. In an unsigned “Resolution” of June 13, 1968, which changed the name of Complainant to its present name, such Resolution states that “[s]aid corporation is organized exclusively for charitable, religious, educational and scientific purposes, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under section 501 (c) (3) of the Internal Revenue Code of 1954….” Such property operates under Low Income Housing Tax Credit restrictions. (Exhibits A through D & 6 through 9).
- Use and Operation of the Property The only statements regarding the use and operation of the property is that “[t]he purpose of the East Missouri Action Agency is set forth in Exhibit A” and that “[t]he operations that are conducted in the subject property are inclusive of the information contained within Exhibit A.” (Exhibits A & D). Exhibit A lists the purposes as (a) operating as a non-profit; (b) “engage in study, research, community planning, community coordination, and community action programs….to combat poverty and its root causes”; (c) to accept and receive federal grants and gifts; and (d) carry out all necessary business functions.
In the event of a dissolution of Complainant, the assets are to be distributed for one or more exempt purposes within the meaning of § 501(c)(3) of the Internal Revenue Code, or shall be distributed to “the Circuit Court of the County in which the principal office of the corporation is then located, exclusively for such purpose or to such organization or organizations, as said Court shall determine, which are organized and operated exclusively for such purposes.”
Complainant makes no assertions regarding any indigent policy for the waiving or reduction of rent for tenants who may be unable to afford their monthly rent. Complainant makes no assertions of any services it provides to tenants, if any. Complainant also makes no assertions regarding how it benefits society in general. Finally, Complainant does not assert how it serves an indefinite number or people. (Exhibits A through D).
- Taxation of the Property. The evidence was not substantial and persuasive to establish the property qualifies as exempt under Article X, Section 6 of the Missouri Constitution.
CONCLUSIONS OF LAW AND DECISION
Jurisdiction
The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious. The Hearing Officer shall issue a decision and order affirming, modifying or reversing the determination of the Board of Equalization, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious. Article X, Section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo.
Presumption In Appeal
There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization. Hermel, Inc. v. STC, 564 S.W.2d 888, 895 (Mo. banc 1978); Chicago, Burlington & Quincy Railroad Co. v. STC, 436 S.W.2d 650, 656 (Mo. 1968); May Department Stores Co. v. STC, 308 S.W.2d 748, 759 (Mo. 1958). This presumption is a rebuttable rather than a conclusive presumption. The presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish that the Board’s valuation is erroneous and what the fair market value should have been placed on the property. Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).
Issuance of Decision Absent Evidentiary Hearing
The Hearing Officer, after affording the parties reasonable opportunity for fair hearing, shall issue a decision and order affirming, modifying or reversing the determination of the Board of Equalization, correcting any assessment which is unlawful, unfair, improper, arbitrary or capricious. Section 138.431.5 RSMo; 12 CSR 30-3.080 (2). Both parties agreed to submit this case upon the record. The filing of exhibits and written direct testimony establishes the basis upon which opportunity for an evidentiary hearing can be held. The Complainant has the burden to present substantial and persuasive evidence. The Hearing Officer considered all the exhibits and written direct testimony and then proceeded to ascertain if said exhibits and written direct testimony met the standard of substantial and persuasive evidence to establish the market value of the property.
Exemptions
Tax exemptions are not favored in the law and statutes granting exemptions are to be strictly, yet reasonably, construed against the one claiming the exemption. Missouri Church of Scientology v. State Tax Commission, 560 S.W.2d 837, 844 (Mo. Banc 1987), State ex rel. Union Electric Co. v. Goldberg, 578 SW2d 921,923 (Mo. Banc 1979). The legal authority for property tax exemptions is located in Article X, Section 6, of the Missouri Constitution and at Section 137.100, RSMo. The exemptions include:
…all property, real and personal, not held for private or corporate profit and used exclusively for religious worship, for schools and colleges, for purposes purely charitable, or for agricultural and horticultural societies…. Article X, Section 6, of the Missouri Constitution.
Charitable Exemption
The legal test for a charitable exemption is whether:
(1) The property is dedicated unconditionally to the charitable activity;
(2) The property is owned and operated on a not for profit basis; and
(3) The dominant use of the property is for the benefit of an indefinite number of people and directly or indirectly benefits society generally. Franciscan Tertiary Province of Missouri v. State Tax Commission, 566 S.W.2d 213, 224 (Mo Banc 1978); Twitty v. State Tax Commission, 896 S.W.2d 680, 684 (Mo. App. S.D. 1995).
I. Owned and Operated on a Not-for-Profit basis
The property must be owned and operated on a not-for-profit basis. The property “must be dedicated unconditionally to the charitable activity in such a way that there will be no profit, presently or prospectively, to individuals or corporations. Any gain achieved in use of the building must be devoted to achievement of the charitable objectives of the project.” Franciscan Tertiary Province v. State Tax Commission, 566 S.W.2d 213, at 224 (Mo. banc 1978). This does not mean that the property or charity cannot operate “in the black.”
II. Actual and Regular Use for Charitable Purpose
In order for a property to be exempt from taxation for state, county or local purposes, the property must be actually and regularly used exclusively for a charitable purpose, as “charity” is defined by Salvation Army v. Hoehn, 188 S.W.2d 826, 830 (Mo. banc 1945): “. . . a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing their hearts under the influence of education or religion, by relieving their bodies of disease, suffering or constraint, by assisting them to establish themselves for life, or by erecting or maintaining the public buildings or works or otherwise lessening the burdens of government.” Exemption rests on the use of the property, not merely the charitable character of the owner. The phrase “regularly used exclusively” has been interpreted to mean the primary inherent or dominate use of the property as opposed to a mere secondary and incidental use. 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). Complainant did not offer substantial and persuasive evidence to meet this element of its burden of proof. Rather, Complainant offered only documentation of exemption from sales and income tax, its articles of incorporation and statements claiming the use of the property is to engage in study, research and activities to combat poverty but no evidence of activities was presented.
III. Dedicated Unconditionally to the Charitable Activity
The property must be used such that it is available to an indefinite group of people, rendered at cost or less, which brings their hearts under the influence of education or lessens the burden of government. “The public nature of a charity is diminished when it is systematically denied to those who need and can least afford the service.” Evangelical Retirement Homes of Greater St. Louis, Inc. v. State Tax Commission, 669 S.W.2d 548, 554 (Mo. banc 1984). Complainant did not offer evidence to meet this element of its burden of proof.
IV. Benefit to Society
To fulfill the Franciscan test, the subject property must benefit society. Although Respondent put forth evidence that the subject property operates under Low Income Housing Tax Credit restrictions, Complainant put forth no evidence of how the subject property benefits society in general. Based upon the evidence presented, Complainant simply operates a subsidized housing complex. Many for profit entities do the same. Complainant did not offer evidence to meet this element of its burden of proof.
Discussion Regarding Exemption
Complainant failed to meet its burden of proof as to multiple required elements to qualify for exemption. Complainant’s failure to prove any single element is sufficient for denial of exemption. 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); Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. 1991). Consequently, Complainant is denied exempt status for ad valorem tax purposes.
Complainant Fails to Prove Value
Complainant failed to present any evidence to establish a fair market value as of January 1, 2015, for the subject property. Consequently, Complainant failed to meet its burden of proof.
ORDER
The assessed valuation for the subject property as determined by the Board of Equalization for Dent County for the subject tax day is AFFIRMED.
Application for Review
A party may file with the Commission an application for review of this decision within thirty days of the mailing date set forth in the Certificate of Service for this Decision. The application shall contain specific facts or law as grounds upon which it is claimed the decision is erroneous. Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.
Failure to state specific facts or law upon which the application for review is based will result in summary denial. Section 138.432, RSMo
Disputed Taxes
The Collector of Dent 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 this 2nd day of February, 2017.
STATE TAX COMMISSION OF MISSOURI
John Treu
Senior Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 2nd day of February, 2017, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.
richard@dvoraklaw.com; trish.hughes@libertylawoffices.com
Jacklyn Wood
Legal Coordinator