STATE TAX COMMISSION OF MISSOURI
| INTERNATIONAL HOUSE OF PRAYER – | ) | |
| FORERUNNER CHRISTIAN FELLOWSHIP, | ) | |
| ) | ||
| Complainant, | ) | |
| ) | ||
| v. | ) | Appeal No. 17-30015 & 17-30016 |
| ) | ||
| ROBERT MURPHY, ASSESSOR | ) | |
| JACKSON COUNTY, MISSOURI, | ) | |
| ) | ||
| Respondent. | ) |
ORDER
AFFIRMING HEARING OFFICER DECISION
UPON APPLICATION FOR REVIEW
HOLDING
On June 8, 2018, Chief Counsel Maureen Monaghan (Hearing Officer), entered her Decision and Order (Decision) setting aside the assessment by the Board of Equalization of Jackson County (BOE) and finding that the subject property is exempt from taxation.
Robert Murphy, Assessor of Jackson County, (Respondent) filed his Application for Review of the Decision. International House of Prayer – Forerunner Christian Fellowship (Complainant) filed their Response. Respondent filed his Reply.
We affirm the Decision and Order of the Hearing Officer. Segments of the Hearing Officer’s Decision may have been incorporated into our Decision without further reference.
FINDINGS OF FACT
The property is identified by parcel numbers 64-330-01-05-00-0-00-000 and 64-330-01-06-00-0-00-000. The subject property was constructed as an apartment building and is currently being used for residential living.
Complainant appealed Respondent’s ad valorem taxation of the subject property on the ground that the subject property qualified for exemption for tax year 2017 because Complainant, a not-for-profit Internal Revenue Service Section 501(c)(3) organization, used the property for religious purposes. Complainant did not challenge the assessed valuation of the subject property.
Complainant offered the following Exhibits:
| Exhibit | Description |
| Exhibit A | Articles of Incorporation dated April 18, 2011 |
| Exhibit B | Articles of Incorporation, Amended dated June 28, 2017 |
| Exhibit C | Bylaws as amended December 2013 and May 2014 |
| Exhibit D | Missouri Secretary of State Corporation in Good Standing |
| Exhibit E | IRS 501(c)(3) dated November 26, 2013 |
| Exhibit F | IRS Letter 4715 October 11, 2016 |
| Exhibit G | IRS 501(c)(3) dated July 26, 2001 |
| Exhibit H | Housing Agreement |
| Exhibit I | Rent Role |
| Exhibit J | Apartment Lease |
| Exhibit K | House Leader over Interns |
| Exhibit L | Intern Schedule |
| Exhibit M | Camp |
| Exhibit N | Apartment |
Eric Oppriecht (Oppriecht) testified on behalf of Complainant and explained that International House of Prayer – Forerunner Christian Fellowship (generally known as International House of Prayer or IHOPKC) was founded in 1999 and that its primary purpose “is to exist as a Christian church…to wholeheartedly love Jesus Christ and others through establishing perpetual worship and intercession; serving the poor, infirmed, and orphans; planting churches and houses of prayer; proclaiming Jesus Christ locally, nationally and to the nations of the world; calling forth, training and mobilizing this generation as worshipping, interceding prophetic messengers; and joining with others to accomplish this mission.” IHOPKC is a recognized tax-exempt Missouri nonprofit corporation operated exclusively for charitable, religious, and educational purposes.
Members of IHOPKC can become part of the International House of Prayer religious Order (the “Order”), an IRS recognized tax-exempt religious order who take part in intense full immersion training and are required to dedicate their lives to the Gospel. Members are required to spend, at a minimum, twenty-four hours per week praying at IHOPKC’s 24/7 prayer room, to spend another twenty-four hours per week engaging in service, and to commit at least two years to IHOPKC. Such commitments include working at the prayer room, e.g., gospel singers/choir, media, and ministry, as well as working for IHOPKC, e.g., accountants, janitorial, etc.
One of the fundamental missions of IHOPKC is education. IHOPKC operates IHOPU, a college devoted to ministry. IHOPU consists of several schools ranging from the School of Ministry, Music Academy, Media Institute, and a Study in Chinese. IHOPU attracts students from throughout the world. Students submit an application to IHOPU. Tuition may include room and board. Scholarships are available to qualified individuals based on need.
IHOPKC also provides an internship program for individuals across the world to take part in the program. Some programs are day-time programs while others require the interns to study and take part in the overnight worship services. The foundation of both programs is the teaching of the Gospel. Interns are generally required to stay at the Hernnhut Apartments, the property subject to this appeal.
Hernnhut Apartments, which comprises the two parcels in dispute, is a 132-unit facility. It houses students, interns, and members and staff of IHOPKC and the Order. Only those associated with IHOPKC, i.e., students, interns, members, and staff, are allowed to enter into a lease there. Residents must follow IHOPKC’s guidelines and sacred vows. Residents must follow the church’s rules and religious tenets in order to reside there.
Oppriecht testified that the apartments are integral to IHOPKC’s spiritual and educational mission. Approximately 41% of the units are occupied by IHOPU students or interns. Housing is included in the cost of tuition for interns and they are provided a license to live in the complex. (Exhibit H). House leaders, like resident advisors, reside at the complex. House leaders provide religious counsel and lead weekly prayer sessions in the complex for his or her core group. Some of the IHOPU and internship programs take place at the complex.
The remaining units, other than one, are provided to members and staff of IHOPKC and the Order. The one unit is occupied by an elderly couple, the Suttons, who reside in a 975 square foot unit (entire parcel is 227,533.61 square feet) and who resided at the complex long before IHOPKC obtained the complex. The Suttons pay a reduce rent. IHOPKC has not, and will not, increase their rental rate. Oppriecht testified that the Suttons rent would not be increased and that Complainant will not evict the Suttons even if they could not afford rent. Further, the church provides financial assistance to those members who no longer follow the central tenets of the church and assist the ex-members with finding and financing new accommodations elsewhere.
The complex fulfills the community component outlined by the IRS. The ability to reside in a close-knit community is an integral part of the overall operation of IHOPKC’s religious and school institution, its members, students, and interns. Students and interns coexist with practicing members and are otherwise shaped and guided by the members, faculty and staff who may reside at the complex. Prayer occurs onsite as well as the 24/7 prayer room located nearby.
Respondent offered only the testimony of Christina Drews whom Complainant noted was not disclosed as an “individual likely to have discoverable information—along with the subjects of that information—that the disclosing party may use to support its claims or defenses” as Ordered.
CONCLUSIONS OF LAW
Respondent’s Points on Review
- The Decision relies on a community aspect which, based on the factual evidence, is not present;
- The activities which take place on-site amount only to an incidental use, not a primary and inherent use; and
- The Decision concludes that the facility benefits an indefinite number of people because it “reduces the likelihood that its residents ever become public charges,” however, the facts do not support this.
STC’s Ruling
For the reasons that follow, the STC finds Complainant’s arguments to be unpersuasive. The STC, having thoroughly reviewed the whole record and having considered the Hearing Officer’s Decision, the Application for Review of Complainant, and the Response of Respondent, concludes that the Hearing Officer’s Decision was correct and proper.
Standard of Review
A party subject to a Decision and Order of a Hearing Officer with the State Tax Commission may file an application requesting the case be reviewed by the Commission. Section 138.432 RSMo Cum. Supp. 2015; 12 CSR 30-3.080(4). The Commission may then summarily allow or deny the request. Section 138.432; 12 CSR 30-3.080(5). The Commission may affirm, modify, reverse, set aside, deny, or remand to the Hearing Officer the Decision and Order of the Hearing Officer on the basis of the evidence previously submitted or based on additional evidence taken before the Commission. Section 138.432; 12 CSR 30-3.080(5)(A).
The Commission, having reviewed the record and having considered the Decision of the Hearing Officer and the briefs of the parties, enters its Decision. Segments of the Hearing Officer’s Decision may have been incorporated into our Decision without further reference.
Complainant’s Burden of Proof
The taxpayer in a Commission appeal bears the burden of proving the vital elements of the case, i.e., the assessment was “unlawful, unfair, improper, arbitrary or capricious.” 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. Such must be proved by substantial and persuasive evidence. Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact. The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief. Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).
Weight to be Given Evidence
The Hearing Officer is free to consider all pertinent facts and estimates and give them such weight as reasonably they may be deemed entitled. The relative weight to be accorded any relevant factor in a particular case is for the Hearing Officer to decide. St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977); St. Louis County v. STC, 515 S.W.2d 446, 450 (Mo. 1974); Chicago, Burlington & Quincy Railroad Company v. STC, 436 S.W.2d 650 (Mo. 1968).
Exemptions
Under Missouri law, all property, real and personal, actually and regularly used exclusively for religious worship, for schools and colleges, or for purposes purely charitable and not held for private or corporate profit, except that the exemption herein granted does not include real property not actually used or occupied for the purpose of the organization but held or used as investment even though the income or rentals received therefrom is used wholly for religious, educational or charitable purposes, are exempt from taxation for state, county or local purposes. Section 137.100(5) RSMo (2013).
The legal test for a charitable exemption is whether:
(1) The property is owned and operated on a not-for-profit basis;
(2) The property is dedicated unconditionally to the charitable activity; 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).
DECISION
In this appeal, Complainant’s exhibits and evidence were substantial and persuasive on the issue of exemption. We find Respondent’s arguments to be unpersuasive to warrant either a modification or overturning of the Decision. Substantial evidence can be defined as such relevant evidence that a reasonable mind might accept as adequate to support a conclusion. Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959). Persuasive evidence is evidence that has sufficient weight and probative value to convince the trier of fact. Cupples Hesse Corp., 329 S.W.2d at 702. The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief. Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975). See also, 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).
Point on Review #1: The Decision relies on a community aspect which based on the factual evidence is not present:
Respondent argues that because “the residents are varied members of the organization,” because “less than half of the residents are students,” because “not all students live on-site” that “there is a question as to whether there is indeed a ‘community’ aspect met.” The Hearing Officer was persuaded that the subject property met the elements of the Franciscan test. As stated above, persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact. Respondent’s assertion invades the province of the fact-finder regarding was evidence was persuasive to meet the requirements for exemption. As set forth below it is clear that the overall mission of the subject property meets the requirements for exemption.
Point on Review #2: The activities which take place on-site amount only
to an incidental use, not a primary and inherent use:
The phrase “used exclusively” means that the property’s charitable use must be the primary and inherent use as opposed to a mere secondary and incidental use. Id.; Pentecostal Church of God of Am. v. Hughlett, 601 S.W.2d 666, 668–69 (Mo. Ct. App. 1980). The Missouri Supreme Court ruled in Cent. States Christian Endeavors Ass’n v. Nelson, 898 S.W.2d 547, 550 (Mo. 1995) that a Christian association who rented rooms to students was eligible for a tax exemption. The Court further stated that “[i]f the incidental use, in this case renting rooms to students, does not interrupt the exclusive occupation of the building for religious worship, but dovetails into or rounds out that purpose, then it … authorizes the exemption.” Id. at 549. The subject property is exclusively used for educational, charitable, and religious worship purposes. Residents include IHOPKC students, interns, resident advisors, members, and Order members. Residents are required to abide by IHOPKC’s guidelines and vows, and students and interns living there must take part in weekly prayer sessions hosted by house leaders and other religious activities. Prayer, baptisms, mentoring, and educational programs regularly take place on site. The residential component thus “rounds out” the facility’s other uses, providing a safe, supportive, and immersive environment to learn, pray, and preach.
The Missouri Supreme Court also found in Midwest Bible & Missionary Inst. v. Sestric, 260 S.W.2d 25, 31(1953) that a Bible school’s building, which housed eighteen students who lived and studied there as well as faculty members, was tax exempt because it was located within half block of school’s main school buildings and was used to further that its educational objective. Id. at 28-29. The subject property is designed to be proximate to IHOPKC’s other educational and religious facilities, which is essential for the carrying out of regular IHOPKC operations. The facility is mere feet away from the church – where residents carry out regular duties as students, interns, church or Order members, and ministers – and the prayer room – which resident Order members must staff 24 hours a day, seven days per week.
As the Hearing Officer noted, this “symbiotic relationship furthers the central mission of IHOPKC of spreading God’s word. Moreover, residents can merely walk to IHOPKC’s central church to take part in prayer or there other duties towards the church. And although there is one elderly couple living on the premises, their presence preceded IHOPKC’s purchase. The couple receives a vastly discounted rate for their rent while still abiding by IHOPKC’s housing rules. Providing housing for this couple furthers the service component of IHOPKC’s mission: helping others who do not have the resources to help themselves. Simply put, the presence of the couple does not destroy the property’s charitable exclusive use.” The primary and inherent use of the subject property meets the Franciscan test.
Point on Review #3: The Decision concludes that the facility benefits an
indefinite number of people because it “reduces the likelihood that its residents
ever become public charges,” however, the facts do not support this:
Respondent’s stated point is unduly narrow as the third prong of the Franciscan test is more broad, requiring the dominant use of the property to be 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). Reduction of the likelihood that residents ever become public charges is one factor in an analysis.
Another factor can be an intention “to improve the physical, mental, and moral condition of the recipients and make it less likely that they will become burdens on society and make it more likely that they will become useful citizens.” Franciscan, 566 S.W.2d at 225 (quoting Salvation Army, 188 S.W.2d at 830). Further, an organization can restrict its admissions to certain “class of humanity” and still benefit the public. Salvation Army v. Hoehn, 188 S.W.2d at 830 (Mo. 1945).
The Court reasoned that even though the residence was restricted to a certain class of individuals, the building benefitted an indefinite number of persons because “the state has a distinct interest in the physical as well as the moral well-being of this class of its citizens,” and providing housing to its citizens “serves the public welfare” by providing a “place of study… under wholesome and decent influences and with proper protection and surroundings calculated to inculcate Christian character and develop good citizenship.” Id. at 831. In this appeal the public benefits from the subject property which promotes good citizenship by teaching students, interns, and members of the church a philosophy of traits that contribute to good citizenship –including service, forgiveness, and compassion, among others – and supports the many community service and outreach activities of the organization.
Regarding the limited factor of reducing the likelihood that its residents would ever become public charges, the subject property reduces the likelihood that its residents ever become public charges by educating students in many subjects that are relevant to today’s workforce and provides interns and students with the tools to become employable ministers. In the end, the property benefits the public by providing a place for those to fully immerse themselves into the life of ministry, learn from the community, and then take those skills and lessons across the globe.
Summary & Conclusion
Complainant carried its burden of proving the subject property qualified for exemption by satisfying all three prongs of the Franciscan test. The subject property is owned and operated on a not-for-profit basis and furthers IHOPKC’s mission by providing a place where students, interns, faculty, and members co-exist and providing a place that allows students and interns natural growth and mentorship while also allowing those members to devote their time at IHOPKC’s 24/7 prayer center. Complainant’s evidence was substantial and persuasive to the Hearing Officer, and the record supports the Decision.
A review of the record in the present appeal provides ample support for the determinations made by the Hearing Officer. A reasonable mind could have conscientiously reached the same result based on a full review of the entire record. The Commission finds no basis to support a determination that the Hearing Officer acted in an erroneous, arbitrary, capricious or unreasonable manner, or that she abused her discretion as the trier of fact and concluder of law in this appeal. Hermel, Inc. v. STC, 564 S.W.2d 888 (Mo. 1978); Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998); Holt v. Clarke, 965 S.W.2d 241 (Mo. App. W.D. 1998); Smith v. Morton, 890 S.W.2d 403 (Mo. App. E.D. 1995); Phelps v. Metropolitan St. Louis Sewer Dist., 598 S.W.2d 163 (Mo. App. E.D. 1980).
The Hearing Officer did not err in his determinations as challenged by Complainant.
ORDER
The Decision of the Hearing Officer is AFFIRMED. The Decision and Order of the Hearing Officer, including the findings of fact and conclusions of law therein, is incorporated by reference, as if set out in full, in this final decision of the STC.
Judicial review of this Order may be had in the manner provided in Sections 138.432 and 536.100 to 536.140, RSMo within thirty days of the mailing date set forth in the Certificate of Service for this Order.
If judicial review of this decision is made, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the courts unless disbursed pursuant to Section 139.031.8, RSMo.
If no judicial review is made within thirty days, this decision and order is deemed final and the Collector of Jackson 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.
SO ORDERED October 30th, 2018.
STATE TAX COMMISSION OF MISSOURI
Bruce E. Davis, Chairman
Victor Callahan, Commissioner
Will Kraus, Commissioner
Certificate of Service
I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 30th day of October, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.
Jacklyn Wood
Legal Coordinator
IN THE STATE TAX COMMISSION OF MISSOURI
| INTERNATIONAL HOUSE OF PRAYER – | ) | |
| FORERUNNER CHRISTIAN FELLOWSHIP, | ) | |
| Complainant, | ) | |
| ) | ||
| v. | ) | Appeal No. 17-30015 & 17-30016 |
| ) | ||
| ROBERT MURPHY, ASSESSOR | ) | |
| JACKSON COUNTY, MISSOURI, | ) | |
| Respondent. | ) | |
| ) |
DECISION AND ORDER
HOLDING
The decision of the Jackson County Board of Equalization (BOE) sustaining the assessment made by Robert Murphy, Assessor, Jackson County, Missouri (Respondent) is SET ASIDE. International House of Prayer – Forerunner Christian Fellowship (Complainant) presented substantial and persuasive evidence establishing that the subject property is exempt from ad valorem taxation under Article X, Section 6, of the Missouri Constitution for tax year 2017-2018.
Complainant appeared by counsel Peter Corsale.
Respondent appeared by counsel Tamika Logan.
Case heard and decided by Chief Counsel Maureen Monaghan (Hearing Officer).
ISSUE
Complainant appealed Respondent’s ad valorem taxation of the subject property on the ground that the subject property qualified for exemption in 2017 because Complainant, a not-for-profit Internal Revenue Service Section 501(c)(3) organization, used the property for religious purposes. Complainant did not challenge the assessed valuation of the subject property.
FINDINGS OF FACT
- Jurisdiction. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission (STC) from the decision of the BOE.
- Evidentiary Hearing. The issue of exemption was presented at an evidentiary hearing on April 16, 2018 using the State of Missouri’s telepresence. Hearing Officer appeared at the Harry S Truman Building in Jefferson City, Missouri. Complainant appeared at the Harry S. Truman Building in Jefferson City, Missouri. Respondent appeared at the Daniels-Fletcher Building in Kansas City, Missouri. After conclusion of the evidence, the parties submitted briefs on May 11, 2018.
- Identification of Subject Property. The property is identified by parcel numbers 64-330-01-05-00-0-00-000 and 64-330-01-06-00-0-00-000. The subject property was constructed as an apartment building and is currently being used for residential living.
- Assessment. Respondent classified subject parcels as residential property and determined the following values as of January 1, 2017:
| Appeal No. | TVM | Assessed Value |
| 17-30015 | $1,422,804 | $270,333 |
| 17-30016 | $1,270,303 | $241,358 |
| Total | $2,693,107 | $511,691 |
- Board of Equalization. The BOE sustained Respondent’s values of the subject property.
- Complainant. Complainant is a not-for-profit organization recognized as exempt from federal income taxation under IRS Section 501(c)(3). (Exhibit A)
- Complainant’s Evidence. Complainant offered the following Exhibits:
| Exhibit | Description |
| Exhibit A | Articles of Incorporation dated April 18, 2011 |
| Exhibit B | Articles of Incorporation, Amended dated June 28, 201 7 |
| Exhibit C | Bylaws as amended December 2013 and May 2014 |
| Exhibit D | Missouri Secretary of State Corporation in Good Standing |
| Exhibit E | IRS 501(c)(3) dated November 26, 2013 |
| Exhibit F | IRS Letter 4715 October 11, 2016 |
| Exhibit G | IRS 501(c)(3) dated July 26, 2001 |
| Exhibit H | Housing Agreement |
| Exhibit I | Rent Role |
| Exhibit J | Apartment Lease |
| Exhibit K | House Leader over Interns |
| Exhibit L | Intern Schedule |
| Exhibit M | Camp |
| Exhibit N | Apartment |
Eric Oppriecht (Oppriecht) testified on behalf of Complainant. He explained that International House of Prayer – Forerunner Christian Fellowship (generally known as International House of Prayer or IHOPKC) was founded in 1999. The primary purpose of IHOPKC “is to exist as a Christian church…to wholeheartedly love Jesus Christ and others through establishing perpetual worship and intercession; serving the poor, infirmed, and orphans; planting churches and houses of prayer; proclaiming Jesus Christ locally, nationally and to the nations of the world; calling forth, training and mobilizing this generation as worshipping, interceding prophetic messengers; and joining with others to accomplish this mission.” (Exhibit C). IHOPKC is a recognized tax-exempt Missouri nonprofit corporation operated exclusively for charitable, religious, and educational purposes. (Exhibits. A, E, and F).
Oppriecht testified that members of IHOPKC can become part of the International House of Prayer religious Order (the “Order”), an IRS recognized tax-exempt religious order. (Exhibit G). Members of the Order take part in intense full immersion training and are required to dedicate their lives to the Gospel. Members of the Order are required to spend, at a minimum, twenty-four hours per week praying at IHOPKC’s 24/7 prayer room. Members are also required to spend another twenty-four hours per week engaging in service (e.g., teaching in the school, running sound for the broadcasted prayer room, accounting, etc.) Members of the Order are required to commit at least two years to IHOPKC. Such commitments include working at the prayer room, e.g., gospel singers/choir, media, and ministry, as well as working for IHOPKC, e.g., accountants, janitorial, etc.
One of the fundamental missions of IHOPKC is education. IHOPKC operates IHOPU, a college devoted to ministry. IHOPU consists of several schools ranging from the School of Ministry, Music Academy, Media Institute, and a Study in Chinese. IHOPU attracts students from throughout the world. Students submit an application to IHOPU. Tuition may include room and board. Scholarships are available to qualified individuals based on need.
IHOPKC also provides an internship program. Again, interns come from across the world to take part in the program. Two programs are offered – a 3 month and 6 month program. Some programs are day-time programs while others require the interns to study and take part in the overnight worship services. Both programs center around teaching the Gospel. Interns are generally required to stay at the Hernnhut Apartments, the property subject to this appeal.
Hernnhut Apartments, which comprises the two parcels in dispute, is a 132 unit facility. It houses students, interns, and members and staff of IHOPKC and the Order. Only those associated with IHOPKC, i.e., students, interns, members, and staff, are allowed to enter into a lease there. (Exhibits J and N, lease and webpage). Residents must follow IHOPKC’s guidelines and sacred vows. Residents must follow the church’s rules and religious tenets in order to reside there.
Oppriecht testified that the apartments are integral to IHOPKC’s spiritual and educational mission. Approximately 41% of the units are occupied by IHOPU students or interns. Housing is included in the cost of tuition for interns and they are provided a license to live in the complex. (Exhibit H). House leaders, like RAs, reside at the complex. (Exhibit K). House leaders provide religious counsel and lead weekly prayer sessions in the complex for his or her core group. (Exhibit L). Some of the IHOPU and internship programs take place at the complex. (Exhibit L).
The remaining units except for one[1] are provided to members and staff of IHOPKC and the Order. The complex fulfills the community component outlined by the IRS. The ability to reside in a close-knit community is an integral part of the overall operation of IHOPKC’s religious and school institution, its members, students, and interns. Students and interns coexist with practicing members and are otherwise shaped and guided by the members, faculty and staff who may reside at the complex. Prayer occurs onsite as well as the 24/7 prayer room located nearby.
- Respondent’s Evidence. Respondent offered the testimony of Christina Drews.
- Taxation of the Property. Complainant’s evidence was substantial and persuasive to establish that the subject property qualifies as exempt from ad valorem taxation under Article X, Section 6 of the Missouri Constitution on January 1, 2017.
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 BOE. 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 BOE’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).
Exemptions
Taxation of property is the rule and exemption from taxation is the exception. United Cerebral Palsy Ass’n of Greater Kansas City v. Ross, 789 S.W.2d 798, 799 (Mo. banc 1990). 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). A property owner who claims the exemption bears a substantial burden to prove that his property falls within the exempted class. United Cerebral Palsy Ass’n of Greater Kansas City, 789 S.W.2d at 799.
Under Missouri law, all property, real and personal, actually and regularly used exclusively for religious worship, for schools and colleges, or for purposes purely charitable and not held for private or corporate profit, except that the exemption herein granted does not include real property not actually used or occupied for the purpose of the organization but held or used as investment even though the income or rentals received therefrom is used wholly for religious, educational or charitable purposes, are exempt from taxation for state, county or local purposes. Section 137.100(5) RSMo (2013).
Under the three-pronged Franciscan test, a Complainant claiming exemption from property taxation must prove that (1) the subject property is actually and regularly used exclusively for purposes purely charitable; (2) the property is owned and operated on a not-for-profit basis; and (3) the dominant use of the property must be for the benefit of an indefinite number of people and must directly or indirectly benefit society generally. United Cerebral Palsy Ass’n of Greater Kansas City, 789 S.W.2d at 801, citing Franciscan Tertiary Province of Missouri, Inc. v. State Tax Commission, 566 S.W.2d 213 (Mo. banc 1978). 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).
The actual use of the real property is the controlling factor in a determination of whether or not the real property is exempt from taxation. Franciscan Tertiary Province of Missouri, Inc., 566 S.W.2d at 224. The dominate use of the property must be for the benefit of an indefinite number of people, for the purpose of “bringing their hearts under the influence of education or religion, by relieving their bodies from disease, suffering, or constraint, by assisting them to establish themselves for life, or by erecting or maintaining public buildings or works or otherwise lessening the burdens of government.” Id.
Discussion
Subject property is owned and operated on a not-for-profit basis. The subject property, an apartment like complex, furthers IHOPKC’s mission by providing a place where students, interns, faculty, and members co-exist. This setting allows students and interns natural growth and mentorship while also allowing those members to devote their time at IHOPKC’s 24/7 prayer center. Units dedicated to the students and interns sit vacant should they not be needed in a given semester. As described by Mr. Oppriecht, all income received by IHOPKC – whether through donations, tuition, or moderate rent – goes towards furthering the organization’s central tenets: serving the poor and sick, preaching the gospel, training the next generation of ministers, and establishing a center of perpetual worship.
Similarly, in Community Memorial Hospital v. City of Moberly, 422 S.W.2d 290, 292 (Mo.1967), the Missouri Supreme Court ruled that a large income from paying patients did not jeopardize a hospital’s charitable tax exempt status due to a hospital policy under which “[n]o charge for board, room, general nursing, medicines, medical care and attention shall be made of those patients who are unable to pay.” Because of this policy, the Court found that its purpose was not to make profits but to devote any income from its operation to its patients, whether or not they could pay. Id. at 297. As in Community Memorial Hospital, IHOPKC has never permitted the forcible eviction or removal of any tenant (be it through a rent and possession or unlawful detainer action) and instead makes scholarships available to students in need who reside there. The organization even provides financial assistance to those members who no longer follow the church’s central tenets and assists ex-members with finding and financing accommodations elsewhere.
Simply put, IHOPKC owns and operates the property on a not-for-profit basis. It simply is an extension of the religious worship and educational experience provided by IHOPKC.
The second prong of the Franciscan test is that the property must be dedicated unconditionally to a charitable activity. In Salvation Army v. Hoehn, 354 Mo. 107, 188 S.W.2d 826, 830 (1945), the Supreme Court defined charity as:
… 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. Id.
The phrase “used exclusively” means that the property’s charitable use must be the primary and inherent use as opposed to a mere secondary and incidental use. Id.; Pentecostal Church of God of Am. v. Hughlett, 601 S.W.2d 666, 668–69 (Mo. Ct. App. 1980). In practice, this means that a charity must be available to all who need it and must not appear to place obstacles of any character in the way of those who need or take advantage of the charitable benefits. Evangelical Ret. Homes of Greater St. Louis, Inc. v. State Tax Comm’n of Missouri, 669 S.W.2d 548, 555 (Mo. 1984).
In Cent. States Christian Endeavors Ass’n v. Nelson, 898 S.W.2d 547, 550 (Mo. 1995), for example, the Missouri Supreme Court ruled that a Christian association who rented rooms to students was eligible for a tax exemption. In that case, a Christian association owned a property where they held prayer groups, Bible study, and ministry office hours and rented bedrooms to students who met certain criteria as campus ministry leaders. Id. at 548-549. The Court found that “[m]erely because more hours … are devoted to eating, resting, studying, fellowship, administration and counseling services than to purely religious worship does not disqualify a property from being exclusively used for religious worship.” Id. at 550. As the Court stated, “If the incidental use, in this case renting rooms to students, does not interrupt the exclusive occupation of the building for religious worship, but dovetails into or rounds out that purpose, then it … authorizes the exemption.” Id. at 549. The housing “rounded out” the purpose there because providing “housing to persons required to actively participate in advancing a religious worship purpose … is incidental to religious worship.” Id. at 550. As in Cent. States Christian Endeavors Ass’n, IHOPKC’s Hernnhut facility is exclusively used for educational, charitable, and religious worship purposes. Residents include IHOPKC students, interns, resident advisors, members, and Order members. Residents are required to abide by IHOPKC’s guidelines and vows, and students and interns living there must take part in weekly prayer sessions hosted by house leaders and other religious activities. Prayer, baptisms, mentoring, and educational programs regularly take place on site. The residential component thus “rounds out” the facility’s other uses, providing a safe, supportive, and immersive environment to learn, pray, and preach.
Similarly, in Midwest Bible & Missionary Inst. v. Sestric, 260 S.W.2d 25, 31(1953) the Missouri Supreme Court found that the Bible school’s building, which housed eighteen students who lived and studied there as well as faculty members, was tax exempt. In that case, the Court found that the property “used exclusively” for school purposes to exempt it from taxation because it was located within half block of school’s main school buildings and was used to further that objective. Id. at 28-29. As the Court stated, “When resident under the same roof those student-faculty contacts are almost constant in dormitory life and clearly are promotive of the ends sought to be achieved by plaintiff’s broad school program…” Id. at 30–31. As in Midwest Bible & Missionary Inst., the Hernnhut facility is designed to be proximate to IHOPKC’s other educational and religious facilities, which is essential for the carrying out of regular IHOPKC operations. The facility is mere feet away from the church – where residents carry out regular duties as students, interns, church or Order members, and ministers – and the prayer room – which resident Order members must staff 24 hours a day, seven days per week.
Students, interns, faculty, members and staff co-exist at Hernnhut. This symbiotic relationship furthers the central mission of IHOPKC of spreading God’s word. Moreover, residents can merely walk to IHOPKC’s central church to take part in prayer or there other duties towards the church. And although there is one elderly couple living on the premises, their presence preceded IHOPKC’s purchase. The couple receives a vastly discounted rate for their rent while still abiding by IHOPKC’s housing rules. Providing housing for this couple furthers the service component of IHOPKC’s mission: helping others who do not have the resources to help themselves. Simply put, the presence of the couple does not destroy the property’s charitable exclusive use.
The third prong of the Franciscan test requires that the property benefits an indefinite number of persons. This can include, among other things, an intention “to improve the physical, mental, and moral condition of the recipients and make it less likely that they will become burdens on society and make it more likely that they will become useful citizens.” Franciscan, 566 S.W.2d at 225 (quoting Salvation Army, 188 S.W.2d at 830). The organization can restrict its admissions to certain “class of humanity” and still benefit the public. Salvation Army, 188 S.W.2d at 830. The only restriction is that “there [must] 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.” Franciscan, 566 S.W.2d at 225.
For example, in Salvation Army v. Hoehn, the Missouri Supreme Court ruled in favor of exemption for the Salvation Army with regard to a property that served as a residence for women and girls. 188 S.W.2d 826, 830 (1945). In that case, the residence was restricted to only (1) women and girls (2) who were applied and were accepted and (3) who paid the agreed upon rent. Id. at 827. The Court reasoned that even though the residence was restricted to a certain class of individuals, the building benefitted an indefinite number of persons because “the state has a distinct interest in the physical as well as the moral well-being of this class of its citizens,” and providing housing to its citizens “serves the public welfare” by providing a “place of study… under wholesome and decent influences and with proper protection and surroundings calculated to inculcate Christian character and develop good citizenship.” Id. at 831. As in Salvation Army, the public benefits from the facility. The facility promotes good citizenship by teaching students, interns, and members of the church a philosophy of traits that contribute to good citizenship –including service, forgiveness, and compassion, among others – and supports the many community service and outreach activities of the organization.
Similarly, in Franciscan Tertiary Prov. v. State Tax Com’n, 566 S.W.2d 213, 226 (Mo.banc 1978), the Missouri Supreme Court found that the charitable exemption applied to an apartment complex for elderly people because dominant use of property was to benefit of an indefinite number of people.. The Court concluded that the public benefited because, aside from furthering the moral wellbeing of its tenants, the property designed its activities to reduce likelihood that its residents would ever become public charges. Id. As in Franciscan, the Herrnhut facility reduces the likelihood that its residents ever become public charges. IHOPKC educates students in many subjects that are relevant to today’s workforce and provides interns and students with the tools to become employable ministers.
In the end, the property benefits the public by providing a place for those to fully immerse themselves into the life of ministry, learn from the community, and then take those skills and lessons across the globe.
ORDER
The assessed valuation for the subject property as determined by the BOE for the subject tax day is SET ASIDE. Subject parcels are exempt from ad valorem taxation.
Application for Review
A party may file with the Commission an application for review of this decision within 30 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. The 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 Jackson 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 8th day of June, 2018.
STATE TAX COMMISSION OF MISSOURI
Maureen Monaghan
Chief Counsel
Certificate of Service
I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 8th day of June, 2018, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.
Jacklyn Wood
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] One elderly couple, the Suttons, resides in a 975 square foot unit (entire parcel is 227,533.61 square feet). The Suttons pay $600/mo, which is $75/month lower than what others pay for an identical unit. IHOPKC has not, and will not, increase their rental rate. The Suttons resided at the complex long before IHOPKC obtained the complex. Oppriecht testified that Complainant will not evict the Suttons even if they could not afford rent. Further, the church provides financial assistance to those members who no longer follow the central tenets of the church and assist the ex-members with finding and financing new accommodations elsewhere.