Islamic Community Center v. Zimmerman (SLCO)

State Tax Commission of Missouri

 

THE ISLAMIC COMMUNITY CENTER, INC., )

)

Complainant, )

)

v.                                                                            ) Appeal No. 11-10000 & 11-10001

)

JAKE ZIMMERMAN, ASSESSOR, )

ST. LOUIS COUNTY, MISSOURI, )

)

Respondent. )

 

ORDER

AFFIRMING HEARING OFFICER DECISION

UPON APPLICATION FOR REVIEW

 

On October 3, 2012, Senior Hearing Officer W. B. Tichenor entered his Decision and Order (Decision) affirming the assessments by the St. Louis County Board of Equalization and denying Complainant’s claim of exemption for taxation under Section 137.100(5), RSMo.

Complainant filed its Application and Amended Application for Review of the Decision.[1] Respondent filed his Response.[2] Complainant filed its Reply.[3]

CONCLUSIONS OF LAW & DECISION

Standard Upon 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. The Commission may then summarily allow or deny their request. The Commission may affirm, modify, reverse or set aside the decision. The Commission may take any additional evidence and conduct further hearings.[4]

Points Raised Upon Application for Review

Complainant initially raised two grounds in its Application for Review. Those were (1) the Hearing Officer erred because Complainant presented substantial and persuasive evidence that the subject property was exempt from taxation under Section 137.100(5), RSMo; and (2) Complainant was not notified about the hearing date, and therefore, was not provided with an opportunity to be heard in person. Complainant’s Amended Application withdrew the claim that notice of hearing was not properly provided by the Commission.[5] Accordingly, the Commission’s review will only go to the single point raised in the Application.

The sole ground presented by the Application for Review and the Amended Application for Review does not constitute a statement of either specific findings of fact or conclusions of law that were in error in the Decision. The stated claim upon which Complainant seeks to have the Decision overturned is simply a general argument that Complainant presented substantial and persuasive evidence that the property was exempt.

No Error in Findings of Fact

The Hearing Officer made twelve findings of fact to reach his conclusion that the subject property was not exempt.[6] Complainant did not directly challenge any of the findings of fact.

The Hearing Officer found: “No evidence was presented to establish any actual or regular use of the property for any religious, educational or charitable purposes. The property is vacant and unused real estate.” It is noted that the Hearing Officer specifically found: “The existence of architectural drawings for proposed structures and improvements to the subject property does not establish that the actual and regular use of the subject property is for religious, educational or charitable purposes.”[7] Although Complainant’s witness asserted that renovations for the subject property had not stopped,[8] the evidence fails to establish what if any “renovations,” have actually taken place. No evidence was presented as how any renovations had made the vacant structure actually and regularly useable as a community center or for any educational, religious or charitable use. The development of “plans for renovation” does not constitute renovation or an actual and regular educational, religious or charitable use. The Commission concludes this was not in error.

The only citation to evidence as to use of the property or evidence to describe the activities that take place on the property and the frequency of the activities is in Exhibit 1: “Community picnick (sic) 5 time each year.” On the same Exhibit, Complainant reported, “This is place for community picnick (sic), get together children playground.” The Commission finds that the Hearing Office did not err in his determination that the foregoing failed to constitute substantial and persuasive evidence to establish an “actual and regular use of the property for any religious, educational or charitable purposes.

No Error in Conclusions of Law

The Hearing Officer examined in detail the test under Franciscan Tertiary Province v. STC.[9] The Commission is persuaded that the Decision made an appropriate application of the Franciscan test to the facts present in this case. There is no reasonable basis upon which it can be concluded that the Decision is in error as a matter of law.

Summary

A review of the record in the present appeal provides support for the determinations made by the Hearing Officer. There is competent and substantial evidence to establish a sufficient foundation for the Decision of the Hearing Officer. A reasonable mind could have conscientiously reached the same result based on a review of the entire record. The Commission finds no basis to support a determination that the Hearing Officer acted in an arbitrary or capricious manner or abused his discretion as the trier of fact and concluder of law in this appeal.[10]

The Hearing Officer did not err in his determination that the subject property is vacant and unused real estate and as a matter of fact and law failed to meet the standard required under Section 137.100(5), RSMo, and the test under Franciscan.[11]

ORDER

The Commission upon review of the record and Decision in this appeal, finds no grounds upon which the Decision of the Hearing Officer should be reversed or modified. Accordingly, the Decision is affirmed, exemption is denied. 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 Commission.

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 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.

SO ORDERED March 12, 2013.

STATE TAX COMMISSION OF MISSOURI

Bruce E. Davis, Chairman

Randy B. Holman, Commissioner

Victor Callahan, Commissioner

 

DECISION AND ORDER

 

HOLDING

 

Assessment by Assessor that subject property was not tax exempt was sustained by County Board of Equalization. Hearing Officer finds subject property to not be exempt under Section 137.100(5), assessment AFFIRMED.

Complainant appeared by Counsel, Jay L. Kanzler, Jr., Witzel Kanzler Dimmitt Kenney & Kanzler LLC.

Respondent appeared by Assistant County Counselor, Stephanie L. Hill.

ISSUE

The Commission takes this appeal to determine whether the subject property is exempt from taxation under Section 137.100(5), RSMo for the tax years 2011 and 2012. The Hearing Officer, having considered all of the competent evidence upon the whole record enters the following Decision and Order.

FINDINGS OF FACT

1. Jurisdiction. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the St. Louis County Board of Equalization.

2. Evidentiary Hearing. The appeals were set for an Evidentiary Hearing at

1:00 p.m., Thursday, September 13, 2012, at the St. Louis County Government Center, 41 South Central Avenue, Clayton, Missouri.

3. Submission on Exhibits. Case called at 1:00 p.m., Thursday, September 13, 2012. Complainant appears not. Respondent appears by Counsel. Complainant’s Counsel had not appeared by 1:30 p.m. Counsel for Respondent waived cross-examination of Complainant’s witness and consent to submission of the case on the exhibits filed by each party. Appeals are taken up for Decision based upon the exhibits filed.

4. Subject Property. The subject property in Appeal 11-10000 is identified by locator number 28H410742. The property is located at 2537 Lemay Ferry, St. Louis, Missouri. The property consists of a 1.28 acre unimproved tract of land. The subject property in Appeal 11-10001 is identified by locator number 28H410733. The property is located at 2521 Lemay Ferry, St. Louis, Missouri. The property consists of a 3.44 acres tract of land with a warehouse building and paved parking. The two properties adjoin one another.[12] For purpose of this Decision, the two parcels will be referred to in the singular.

5. Assessment. The Assessor assessed the property in Appeal 11-10000 at $181,980 as commercial property. The Assessor assessed the property in Appeal 11-10001 at $289,510 as commercial property. The Board of Equalization sustained both assessments.[13]

6. Complainant’s Evidence. Complainant filed the following Exhibits:

 

Complainant’s evidence was not substantial and persuasive to rebut the presumption of correct assessment by the Board and establish the actual and regular use of the subject property during 2011 and 2012 for religious, educational or charitable purposes.

7. Respondent’s Evidence. Respondent filed the following Exhibits:

Appeal 11-10000:

 

Appeal 11-10001:

 

8. Not-For-Profit Status. The Complainant is a not-for-profit corporation under the laws of the State of Missouri.[14] The fact Complainant is a not-for-profit corporation does not establish that the actual and regular use of the subject property is for religious, educational or charitable purposes.

9. Federal Tax Exempt Status. The Complainant is exempt from Federal Income Tax under section 501(c)(3) of the Internal Revenue Code.[15] The fact Complainant is exempt from Federal Income Tax does not establish that the actual and regular use of the subject property is for religious, educational or charitable purposes.

10. State Sales Tax Exempt Status. The Complainant is exempt from Missouri Sales and Use Tax on purchases.[16] The fact Complainant is exempt from Missouri Sales and Use Tax on purchases does not establish that the actual and regular use of the subject property is for religious, educational or charitable purposes.

11. Plans for Construction. The existence of architectural drawings for proposed structures and improvements to the subject property does not establish that the actual and regular use of the subject property is for religious, educational or charitable purposes.

12. Actual and Regular Use. No evidence was presented that established any actual or regular use of the property for any religious, educational or charitable purposes. The property is vacant and unused real estate.

CONCLUSIONS OF LAW

Jurisdiction

The Commission has jurisdiction to hear these appeals and correct any assessment shown to be unlawful, unfair, arbitrary or capricious.[17]

Burden of Proof

Complainant has the burden to present substantial evidence to rebut the presumption of correct assessment by the Board of Equalization.[18] 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.[19] It is well established that taxation is the rule and exemption from taxation is the exception. Exemption is not favored in the law.[20] Complainant seeks exemption of its property from taxation pursuant to Section 137.100(5):

The following subjects are exempt from taxation for state, county or local purposes:

 

****

(5) All property, real and personal, actually and regularly used exclusively for …

purposes purely charitable and not held for private or corporate profit, 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;

 

****

 

Complainant’s substantial burden of proof has not been met in the present case.

Franciscan Tertiary Test

In meeting its burden of proof that the subject property is used “exclusively for … purposes purely charitable, and not held for private or corporate profit….” Complainant must meet the three prong test set forth by the Missouri Supreme Court in Franciscan Tertiary Province v. STC.[21] 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 “relieving their bodies of disease, suffering, or constraint…or by erecting or maintaining pubic buildings…lessening the burdens of government.” 188 S.W.2d at 830…. Thus it is required that there be the element of direct or indirect benefit to society in addition to and as a result of the benefit conferred on the persons directly served by the humanitarian activity.[22]

 

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 religious, educational or charitable purpose; and

 

3. Property must be used for the benefit of an indefinite number of persons and for society in general, directly or indirectly.

 

Complainant’s Property Does Not Qualify Under Franciscan Test

Owned by, but Not Operated

The subject property is owned on a not-for-profit basis. The ownership of the properties by a non-for-profit corporation is without question. However, the issue of “operation of the property” presents a fatal problem to the granting of an ad valorem tax exemption. There is no “operation” of the property for any religious, educational or charitable use, irrespective of there being no income or profit generated by the property. The property has been vacant and unused since it was purchased by Complainant in 2006. There is no evidence of any sort of activities or events being conducted on the property. The drawing of plans for the building to one day be constructed there does not constitute a religious, educational or charitable use of the property. Accordingly, the property only meets half of the first of the Franciscan tests.

No Actual and Regular Use

The foregoing is simply a precursor to the failure to satisfy the second of the three tests. There has been no actual and regular use of any kind on the subject property by Complainant. Having the property vacant and unused does not qualify in a fashion as a religious, educational or charitable use, irrespective of the best intentions of Complainant to one day be able to construct a community center on the site and therefore offer religious, educational and charitable programs and ministries.

No Benefit to Indefinite Number of People or Society in General

Since the property is simply idle, there can be no benefit, direct or indirect, to any people or to society in general. There is no evidence from which the Hearing Officer could rationally draw any such conclusion. The fact that some day out in the future a community center is to be constructed on the site does not at the presented benefit either the Complainant’s congregation or any other group of people, or society from the use of the property. At such time as the plans for the construction of the community center structure and improvements come to fruition, then Complainant should be in a position to establish the required use of the property to receive an exemption under Section 137.100 and the Franciscan tests.

Summary and Conclusion

The property fails in its use to meet the three tests establish under Franciscan. Accordingly, Complainant has not met its burden of proof. The presumption of correct assessments by the Board has not been rebutted.

ORDER

The assessments of the subject properties, made by the Assessor and sustained by the Board of Equalization for St. Louis County for the subject tax day, are AFFIRMED.

The assessed value of the property in Appeal 11-10000 as commercial property for tax years 2011 and 2012 is $181,980.

The assessed value of the property in Appeal 11-10001 as commercial property for tax years 2011 and 2012 is $289,510. A party may file with the Commission an application for review of this decision within thirty days of the mailing date set forth in the Certificate of Service. The application shall contain specific facts or law as grounds upon which it is claimed the decision is erroneous. Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.

Failure to state specific facts or law upon which the appeal is based will result in summary denial. [23]

The Collector of St. Louis County, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an Application for Review, unless said taxes have been disbursed pursuant to a court order under the provisions of Section 139.031.8, RSMo.

Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed. Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.

SO ORDERED October 3, 2012.

STATE TAX COMMISSION OF MISSOURI

W. B. Tichenor

Senior Hearing Officer