State Tax Commission of Missouri
K. LLEWELLYN McGHEE MINISTRIES,)
)
Complainant,)
)
v.) Appeal Number 09-14680
)
MICHAEL BROOKS,)
ACTING ASSESSOR,)
ST. LOUIS COUNTY, MISSOURI,)
)
Respondent.)
DECISION AND ORDER
HOLDING
Assessment by Assessor that subject property was not tax exempt sustained by the St. Louis County Board of Equalization is AFFIRMED.Hearing Officer finds subject property to not be exempt under Section 137.100(5).
Complainant appeared by Counsel, Scott Sherman, Clayton, Missouri.
Respondent appeared by Counsel, Stephanie Hill, Assistant County Counselor.
ISSUE
Complainant appeals the decision of the St. Louis County Board of Equalization which sustained the Assessor’s assessment of the Complainant’s personal property.The Commission takes this appeal to determine whether the subject property (three automobiles) is exempt from taxation under Section 137.100(5), RSMo for the tax year 2009, specifically if the subject personal property is actually and regularly used exclusively for religious worship or if the property meets the requirements of the Franciscan Tertiary case.[1]The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.
FACTS
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.A hearing[2] was conducted on October 5, 2010, at the St. Louis County Government Center, Clayton, Missouri.
2.Assessment.The Assessor assessed the Complainant’s personal property at a total assessed value as personal property for 2009 at $14,790.The Board of Equalization sustained the assessment and declined to exempt Complainant’s property from ad valorem taxes.
3.BOE Appeal.Petition for exemption of personal property was filed before the St. Louis County Board of Equalization on July 13, 2009, on the property under account B00321808 on the ground of religious use.Hearing was held on October 15, 2009.The Board issued its Decision Letter on October 20, 2009, denying the requested exemption.[3]
4.Subject Property.The property that is the subject of this appeal is identified in the Assessor’s records for tax year 2009 as Account No. B00321808.The property consists of three automobiles: (1) 1995 Jaguar XJS-VIN-SAJHX176SC722864 – Assessed Value $1,020; (2) 2006 Infiniti QX56-VIN-5N3AA08C66N814278 – Assessed value $7,830; and (3) 2007 Toyota Avalon-4T1BK36B77U219677 – Assessed Value $5,940.[4]The automobiles are titled in the name of Global Village Ministries – K. Llewellyn McGhee, the predecessor corporation to the Complainant.[5]The property address for the automobiles is: 6465 Hadden Bay Drive, Florissant, Missouri, which is the residence address for the McGhees,[6] and the address for Complainant.[7]
5.Complainant’s Evidence.Complainant filed and exchanged the following exhibits, which were received into evidence.
6.Respondent’s Evidence.Respondent filed and exchanged the following exhibits, which were received into evidence.
|
EXHIBIT |
DESCRIPTION |
|
1 |
Notice of Board of Equalization Hearing |
|
2 |
Petition for Exemption of Personal Property |
|
3 |
Field Inspection Report |
|
4 |
Notice of Decision of BOE |
|
5 |
Written Direct Testimony-Joseph Craven |
|
6 |
Written Direct Testimony-Shelby Locke |
7.Not-For-Profit Corporation.The Complainant is a not-for-profit corporation under the laws of the State of Missouri.The incorporators of the corporation were: K. Llewellyn McGhee and Michelle M. McGhee.The corporation has two directors: K. Llewellyn McGhee and Michelle McClendon McGhee.The officers of the corporation are: President and Treasurer – K. Llewellyn McGhee and Vice-President and Secretary – Michelle M. McGhee.The initial Registered Agent of the corporation was K. Llewellyn McGhee.[10]The McGhee’s are husband and wife.[11]
No certificate of good standing for 2009 and 2010 or copy of the last annual registration report was offered into evidence.It is assumed, but not found, that the corporation was, as of January 1, 2009, and on the date of hearing, in good standing with the Office of the Secretary of State of Missouri and is, and was on January 1, 2009, and on the date of hearing, a legal entity under the laws of the state of Missouri, no evidence to the contrary having been presented.
Complainant’s status as a not-for-profit corporation does not establish that the subject motor vehicles are exempt from taxation under Section 137.100(5).
8.Corporate Purposes.The Complainant is organized for the following purposes:“to spread the Word of God to St. Louis and to the world by our words and our deeds, and it is organized exclusively and is to be operated exclusively for religious, charitable, educational and scientific purposes, all within the meaning of Section 501(c)(3) of the Internal Revenue Code.[12]
Complainant’s corporate purposes do not establish that the subject motor vehicles are exempt from taxation under Section 137.100(5).
9.501(c)(3) Status.No exhibit was filed establishing that the Internal Revenue Service of the United States has recognized Complainant as a 501(c) (3) entity.No exhibit was filed establishing that Complainant comes under the provisions of any Internal Revenue Service determination that Complainant is a subsidiary organization under an existing 501(c) (3) organization.
Status as a 501(c) (3) entity or as a subsidiary organization under a 501(c) (3) entity does not establish that the subject motor vehicles are exempt from taxation under Section 137.100(5).
10.Sales and Use Tax Exemption.The Complainant is exempt from Missouri Sales and Use Tax on purchases if conducted within the organization’s exempt religious functions and activities.The exemption is not an exemption from personal property tax.[13]
Exemption from Missouri Sales and Use Tax does not establish that the subject motor vehicles are exempt from taxation under 137.100(5).
11.Form 4361 Application for Exemption.K. Llewellyn McGhee and Michelle M. McGhee each filed a Form 4361[14] with the Internal Revenue Service.Both have been approved for exemption from self-employment tax on ministerial earnings.[15]
Exemption from self-employment tax on ministerial earnings does not establish that the subject motor vehicles are exempt from taxation under 137.100(5).
12.Ministerial Positions.K. Llewellyn McGhee holds the following ministerial designations:Elder – African Methodist Episcopal Church; Elder – The United Methodist Church,[16] License to Preach – African Methodist Episcopal Church,[17] Itinerant Elder – African Methodist Episcopal Church,[18] Ecclesiastical Endorsement by the General Board of Higher Education and Ministry of The United Methodist Church to serve as an Army National Guard Chaplain,[19] and Doctor of Ministry from St. Paul School of Theology-Kansas City, Missouri.[20]Dr. Rev. McGhee is a Lieutenant Colonel in the United States Army serving as a chaplain.[21]
Michelle M. McGhee holds the ministerial designation of Member in Full Connection in The United Methodist Church,[22] Masters of Divinity – Eden Theological Seminary, and pastor of The Village Church of St. Louis and Christ Community United Methodist Church.She is an employee of The United Methodist Church.
The ministerial designations or positions that Dr. Rev. McGhee and Pastor McGhee hold do not establish that the subject motor vehicles are exempt from taxation under Section 137.100(5).
13.2006 Income Tax Review.The results of the review of the examination of the tax return for 2006 of Kevin L & Michelle M McGhee[23] was not connected to any tax issues related to Complainant and therefor has no relevance to the issue of whether the subject motor vehicles are exempt from taxation under 137.100(5).
14.Religious Activity of Complainant.No evidence was presented to establish and substantiate any religious activity by Complainant.Complainant does not exist as a church.Complainant is not a subsidiary of any religious organization.No evidence was presented to establish in what manner Complainant is carrying out its corporate purpose.
15.No Religious Use of Subject Property.No evidence was presented to establish the primary use of the subject automobiles was connected to any religious activity or purpose of Complainant.The primary use of the automobiles is to provide personal transportation for Dr. Rev. McGhee’s and Rev. Mrs. McGhee.
CONCLUSIONS OF LAW
Jurisdiction
The Commission has jurisdiction to hear this appeal and correct any assessment shown to be unlawful, unfair, arbitrary or capricious.[24]
Burden of Proof
Complainant has the burden to present substantial evidence to rebut the presumption of correct assessment by the Board of Equalization.[25]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.[26] It is well established that taxation is the rule and exemption from taxation is the exception.Exemption is not favored in the law.[27]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 religiousworship and not held for private or corporate profit, … .
Complainant’s substantial burden of proof has not been met in the present case.
The Courts have interpreted the phrase “used exclusively” as referring to the primary and inherent use of the property, as opposed to a mere secondary and incidental use.[28]The use of the property being appealed is the main focus of any claim for exemption.[29]In the present case, there is no evidence to establish that Complainant actually carries out any religious activity.It is not engaged in religious worship since Complainant is not a church or temple or other place of
worship.There is no evidence upon which the Hearing Officer can find any work or ministry of Complainant to carry out its corporate purpose.
No financial records were produced to demonstrate any source or amount of contributions to the Complainant in recent years, i.e. 2008, 2009, 2010.No financial records were provided to establish how the funds received (if any) by Complainant were expended to either carry out the corporate purpose of K. Llewellyn McGhee Ministries or to conduct some form of religious worship/ministry.No corporate records were submitted to show what, if any, persons are actually employed by Complainant.No corporate records or individual records of Dr. Rev. or Mrs. Rev. McGhee were tendered establishing the mileage driven and for what purposes during any recent calendar year.
The position of Dr. Rev. and Mrs. Rev. McGhee that they minister 24/7 does not establish that there is no personal use of the subject motor vehicles.Use of a car to drive back and forth to work does not constitute a religious use, even if the individual is a Chaplin in the United States military.Nor does driving a car to one’s place of employment as a pastor, that is to the church to conduct services constitute a religious use.In both instances, the automobile is simply being used to get the employee to work.
Even though the McGhees are of the belief that they are doing ministry all the time, when they drive to pick up the cleaning, buy groceries, go out for a meal at a restaurant, or do any of the things everyone does as daily activities requiring transportation they are engaged in personal use of the automobiles to simply provide personal transportation.The record fails to establish by substantial and persuasive evidence that the primary use of the three automobiles is for a religious use.The best the Hearing Officer can conclude is that the automobiles are simply the personal vehicles of Mr. and Mrs. McGhee who happen to be Christian ministers.This does not meet the statutory standard to grant exemption from ad valorem taxes on the motor vehicles.
Franciscan Tertiary Test
An examination of the exemption issue under the Franciscan Tertiary Test provides the same conclusion that the property under appeal is not exemption under Section 137.100 (5).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.[30]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.
…
Another prerequisite for religious exemption is that the dominant use of the property must be for the benefit of an indefinite number of people, for thepurpose, as expressed in Salvation Army, of “… bringing their hearts under the influence of … religion … .”[31]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 religious activity.[32]
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 purpose; and
3.Property must be used for the benefit of an indefinite number of persons and for society in general, directly or indirectly.
The three automobiles are titled in Complainant’s name, therefore they are owned on a not for profit basis.Since the cars are not being leased out apparently, they are not used to make money, although a benefit is conferred on the two officers of the corporation by providing transportation for them.The automobiles are not actually and regularly used exclusively for a religious purpose to carry on any work of Complainant.There is no actual work of Complainant based on the evidentiary record in this appeal.All that can be concluded regarding the Complainant is that it exists only on paper and carries on no actually activity, work or ministry.
The primary use of the vehicles is not for any religious purpose, but rather for personal use of the two corporate officers.There is no benefit to an indefinite number of people in how the cars are used.There is only a benefit to the McGhees by providing three automobiles for their personal use.Society is not benefit directly or indirectly by the use for personal transportation of the three cars which are the subject of this appeal.
Complainant failed to establish by substantial and persuasive evidence that the subject personal property is exempt from ad valorem taxation under 137.100 (5) and the Franciscan Test.Accordingly, the request for exemption must be denied.
ORDER
The assessment of the subject property made by the Assessor and sustained by the Board of Equalization for St. Louis County for the subject tax day is AFFIRMED.
The subject property is not exempt from ad valorem taxation.
Complainant 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 application for review is based will result in summary denial. [33]
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.If no application for review is filed the disputed taxes shall be disbursed to the various taxing jurisdictions.
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 December 21, 2010.
STATE TAX COMMISSION OF MISSOURI
_________________________________
W. B. Tichenor
Senior Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 21stday of December, 2010, to:Scott Sherman, 231 S. Bemiston, Suite 910, Clayton, MO 63105, Attorney for Complainant; Stephanie Hill, Assistant County Counselor, Attorney for Respondent, County Government Center, 41 South Central Avenue, Clayton, MO 63105; Michael Brooks, Acting Assessor, County Government Center, 41 South Central Avenue, Clayton, MO 63105; John Friganza, Collector, County Government Center, 41 South Central Avenue, Clayton, MO 63105.
___________________________
Barbara Heller
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
[2] Commission Exhibit C-1 – List of Complainant’s exhibits and Exhibit R-1 – List of Respondent’s exhibits were received into evidence at the evidentiary hearing, rather than read into the record the list of exhibits.
[14] Form 4361 – Application for Exemption from Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners.
[15] Mr. McGhee’s approval for exemption was granted on December 10, 1996.Mrs. McGhee’s approval for exemption was granted on August 10, 2009.
[27](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).
[28] CSCEA v. Nelson, 898 S.W.2d 547, 549 (Mo. banc 1995); Pentecostal Church of God v. Hughlett, 601 S.W.2d 666, 668 ( Mo. App. 1980); Community Memorial Hospital v. City of Moberly/Missouri U. Meth. Retire. Homes v. STC, 522 S.W.2d 745, 751 (Mo. Div 2, 1975); Salvation Army v. Hoehn et al, 188 S. W. 2d 826, 830 (Mo. banc 1945)