State Tax Commission of Missouri
ESTATE OF LEROY W. HARRIS,)
v.) Appeal Number 07-12144
PHILIP MUEHLHEAUSLER, ASSESSOR, )
ST. LOUIS COUNTY, MISSOURI,)
DECISION AND ORDER
ON THE ISSUE OF EXEMPTION
RESPONSE TO ISSUE OF VALUATION
RAISED IN COMPLAINANT’S BRIEF
Assessment by Assessor that subject property was not tax exempt was sustained by St. Louis County Board of Equalization.Hearing Officer finds presumption of correct assessment not rebutted.Subject property not exempt under Section 137.100(5), assessment as taxable property AFFIRMED.
Complainant appeared by Counsel,Modupe B. Oji, Wilson & Associates, St. Louis, Missouri.
Respondent appeared by Associate County Counselor, Paula J. Lemerman.
Case decided by Senior Hearing Officer, W. B. Tichenor.
The Commission takes this appeal to determine whether the subject property is exempt from taxation for the tax year 2007 and 2008 under section 137.100.5 Revised Statutes of Missouri (RSMo).
Complainant appeals the decision of the St. Louis County Board of Equalization.Respondent assessed the subject property as residential property with an appraised value of $15,700.This assessment was sustained by the Board of Equalization.Complainant contends that the subject property is exempt from taxation under the provisions of Section 137.100(5). Complainant also contends the value of the property should be set at $40,000.Complaint for Review of Assessment.Issue of value was stayed by Order dated 2/5/08.
On March 27, 2008, Attorney for Complainant filed Complainant’s Brief.The certificate of service on said brief did not show that a copy had been served upon Counsel for Respondent. Respondent was given until and including April 28, 2008, to file Reply Brief.None was filed. The Hearing Officer, having considered the Briefs filed by the parties on the issue of exemption, enters the following Decision and Order.
1.Jurisdiction over this appeal is proper.Complainant timely appealed to the State Tax Commission from the decision of the St. Louis County Board of Equalization.
2.The subject real property is located at 424 Meacham Street, Kirkwood, Missouri.It is identified by locator number 25M541188.
3.By Order dated February 5, 2008, the Hearing Officer stayed the appeal on the issue of valuation – true value in money, pending a ruling on the issue of exemption. A briefing schedule was established on the issue of exemption only.
4.Complainant’s Brief raised two Points:
Point I was:The subject property is a part of the residuary estate of a decedent, which forms a part of a charitable trust, and thus is no longer subject to tax assessment.
Point II was:Two comparable parcels have already been sold for sums in excess of $50,000.00 each.This is three times the proposed assessed valuation on the subject property.Therefore the proposed assessment is arbitrary and capricious.
5.The evidence and argument presented by Complainant did not establish a basis under Missouri Constitutional, Statutory and Case Law that the subject property qualifies for exemption from ad valorem taxation.
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.
Constitutional and Statutory Exemption Provisions
Article X, Section 6 of the Missouri Constitution allows for the legislature to exempt from taxation real property “not held for private or corporate profit and used exclusively for .. purposes purely charitable.”Section 137.100(5) exempt from taxation real property “actually
and regularly used exclusively … for purposes purely charitable and not held for private or corporate profit.”
Specifically, Section 137.100(5) provides:
“The following subjects are exempt from taxation for state, county or localpurposes:
(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; … .”
As is discussed below, the evidence fails to establish that the use of the property under appeal satisfies the statutory mandate.
Complainant’s Burden of Proof
Complainant has the burden to present substantial evidence to rebut the presumption of correct assessment by the Board of Equalization.Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 895 (Mo. banc 1978).In order to meet this burden in an appeal seeking exemption from taxation, the Complainant must meet the substantial burden to establish that the property falls within an exempted class under the provisions of Section 137.100. State ex rel. Council Apartments v. Leachman, 603 S.W.2d 930, 931 (Mo. 1980).It is well established that taxation is the rule and exemption from taxation is the exception.Exemption is not favored in the law.(See, Missouri Church of Scientology v. STC, 560 S.W.2d 837, 844 (Mo. banc 1977); CSCEA v. Nelson, 898 S.W.2d 547, 548 (Mo. banc 1995), citing Scientology).Complainant seeks exemption of its property from taxation on the ground that it is part of a charitable trust. Complainant’s substantial burden of proof has not been met in the present case.
Statement of Facts
Assuming, without finding, the Statement of Facts presented in Complainant’s Brief to be accurate as presented, since no certified copies of the Last Will and Testament of Leroy W. Harris, Deceased, and the probate records were provided as exhibits to Complainant’s Brief, the “actual and regular” use of the subject property is not establish.It is not established if the 424 Meacham Street property was a rental property on January 1, 2007, or it is was vacant and unused, only being held for future sale.
According to Complainant’s Brief, Leroy W. Harris died on or about February 16, 2005. His Last Will and Testament was admitted to probate in St. Louis County on August 24, 2005, as Estate No. 05PS-PR00850-01.The sixth paragraph of said Will directed that all of his personal and real property be sold and the proceeds added to his estate.Therefore, Complainant is the owner of the property that is the subject of this appeal.
The eighth paragraph of the Will directed that the residue of his estate be “used to establish a fund in memory of my late, devoted wife, LOLA WALLACE HARRIS and myself to benefit young persons of African American descent in need of support for careers, particularly in music, cosmetology and other worthy fields with the stipulation that the corpus of the fund shall be held inviolate and only the income shall be sued for the purpose of the fund.”Complainant’s Brief asserts that the subject property is a part of the residuary estate and therefore has become a part of the assets of the fund for the Harris Trust for a charitable purpose. Complainant’s Brief, pp. 4-5.There is no evidence the Harris Trust has been established as a legal charitable entity under applicable state and federal statutes.It is clear the Harris Trust, if it is a legal charitable
entity, does not hold title to the property that is the subject of this appeal.The Estate of Leroy W. Harris holds title to the real property.
Complainant’s Argument – Charitable Trust Assets
Counsel for Complainant argues that because the residue of the estate is to be used as a charitable bequest – benefiting young people of African American descent in need of support for careers – that this qualifies the property under appeal to be tax exempt as a bequest for educational purposes.Counsel contends that assets of a charitable trust are tax exempt, and are therefore not subject to tax assessment.Complainant’s Brief, pp. 7.The argument is unsupported by any statutory or case citation.
The Hearing Officer found no statute exempting real property from ad valorem taxation because it is part of a residuary estate to be used for a charitable purpose.Neither was the Hearing Officer able to locate any Missouri case law standing for the proposition that real property held as part of a residuary estate to be used for a charitable purpose is exempt from ad valorem taxation.Section 137.100(5) specifically addresses this point.
The statutory mandate is contrary to the position advanced by Complainant’s Counsel.The statute in relevant part states:
“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; … .”
Even if the income or rentals received from a property owned by a tax exempt entity are to be used “wholly for — charitable purposes” the property itself it not exempt unless the actual and regular use of the property qualifies as a charitable activity.In other words, if a charitable entity owns an apartment building and all the net income – profit – is paid over to provide scholarships for a certain class of individuals, the apartment building is not tax exempt under the statute.Even if the real property is simply being held for sale so that the proceeds can be given over to a charitable trust, it is not exempt under §137.100(5).
Complainant’s Point I is not well taken.There is no case law or statute to support the claim that the real property under appeal is exempt from ad valorem taxation simply because it is to be sold as part of a residuary estate and the proceeds paid into charitable trust fund (Harris Fund), yet to be established.
Franciscan Tertiary Test
Although, Counsel for Complainant did not advance an argument for tax exemption under the actual use of the property being for a charitable (educational) purpose, the Hearing Officer provides a brief analysis under the controlling Missouri case on exemption from taxation for charitable use of property.The case of Franciscan Tertiary Province v. STC, 566 S.W.2d 213, 223-224 (Mo. banc 1978) establish the three prong test or three tests to determine a charitable use of property necessary to qualify for tax exemption.
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.
Based upon the limited evidence in this record a few relevant conclusions can be reached with regard to the Franciscan standards.The Estate of Leroy W. Harris does not qualify as a not-for-profit entity.The Hearing Officer is aware of no case law establishing that estates of decedents are not for profit entities.Therefore the Meacham property is not owned and operated by a not-for-profit entity.It does not meet the first test.
The evidence does not establish how the property has been used since the death of Mr. Harris or how it was being used on January 1, 2007.There is no evidence to establish it was being used for a charitable purpose.The property fails to qualify for tax exemption under the second Franciscan test.
Turning to the third test, the property (424 Meacham Street, Kirkwood, Missouri) was not shown to meet this test either.There is no evidence from which the Hearing Officer can conclude that since the death of Mr. Harris, the opening of the probate of his Will, or on
January 1, 2007, that the property has and was being used for the benefit of an indefinite number of persons and for society in general, directly or indirectly.The fact that at some point in the future the proceeds of the sale of this property will go to establish the Harris Trust is irrelevant.That event has not occurred and it does not establish the actual and regular use of the property on January 1, 2007.
Response to Issue of Valuation
Point II presented in Complainant’s Brief does not establish the fair market value of the subject property.Neither does the value of $15,700 set by the Assessor and affirmed by the Board establish what a willing buyer and seller for the property might have agreed to for the purchase of the property on January 1, 2007.There is no statute requiring the property be marketed at only $15,700.Complainant is free to list the property for whatever price it feels may be obtained in the market at this time.
By Commission rule, if the Respondent presents evidence of value in an appeal that is greater than the value set by the Assessor or the Board, it cannot be used by the Commission to increase the value.It can only be used to affirm the value of the Assessor or the Board whichever is higher.12 CSR 30-3.075.Therefore in this appeal, there is no need for Respondent to present evidence of value.
If Complainant and Respondent wish to stipulate that the value of the property is $40,000, $45,000, $50,000 or whatever, based upon the sales of the two other properties or other sales of additional properties, they may do so.Complainant may also file its Voluntary Dismissal of the claim as to valuation and proceed as to only the issue of exemption.The third alternative would be to hold an evidentiary hearing on the issue of valuation, at which time Complainant could present its evidence in support of the opinion of value tendered in the Complaint for Review of Assessment, or some other value.
Complainant is given until and including June 30, 2008, to file a Stipulation of Value, or a Voluntary Dismissal of the valuation claim, or advise the Hearing Officer that it desires to have an evidentiary hearing on the issue of value.
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 that the subject property is subject to taxation is AFFIRMED.
The Order entered herein affirming the Assessor and Board’s determination that the property under appeal is subject to ad valorem taxation is not a decision and order affirming, modifying or reversing the determination of the board of equalization on the issue of value of the property under appeal under §138.431.4, RSMo.It is an interlocutory order.It is not an appealable order under §§138.431.4 and 138.433, RSMo, until a Hearing Officer decision and order on the issue of valuation of the subject properties is issued or the issue of valuation is otherwise disposed of by stipulation or dismissal.At such time the ruling on the issue of exemption may be raised as a point under a timely filed Application for Review to the full Commission.See, Parker v. Wallace, 431 S.W.2d 136 (Mo. 1968); McCormack v. Maplewood-Richmond Heights School Dist. Bd. of Educ. 935 S.W.2d 703 (Mo. App. E.D. 1996); Reis v. Peabody Coal Co., 935 S.W.2d 625 (Mo. App. E.D. 1996); Gilmore v. Erb, 900 S.W.2d 669 (Mo. App. E.D. 1995).
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 further order of the Commission.
SO ORDERED June 5, 2008.
STATE TAX COMMISSION OF MISSOURI
W. B. Tichenor
Chief Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 5thday of June, 2008, to:Modupe Oji, 4054 Lindell Boulevard, St. Louis, MO 63108, Attorney for Complainant; Paula Lemerman, Associate County Counselor, County Government Center, 41 South Central Avenue, Clayton, MO 63105, Attorney for Respondent; Philip A. Muehlheausler, Assessor, County Government Center, 41 South Central Avenue, Clayton, MO 63105; John Friganza, Collector, County Government Center, 41 South Central Avenue, Clayton, MO 63105.