State Tax Commission of Missouri
MARIES MANOR, LLC.,)
v.) Appeal Nos.06-69000 & 06-69001
JUDY LOGAN, ASSESSOR,)
MARIES COUNTY, MISSOURI,)
DECISION AND ORDER
Assessment by Assessor that subject property was taxable was sustained by Maries County Board of Equalization.Hearing Officer finds subject property to be exempt under Section 137.100(5), RSMo, assessment SET ASIDE.
Complainant appeared by Counsel, G. Stanton Masters, North Kansas City, Missouri.
Respondent appeared by Counsel, Terry Daly Schwartze, Maries County Prosecuting Attorney.
Case heard and decided by Senior Hearing Officer W. B. Tichenor.
The Commission takes this appeal to determine whether the subject property is exempt from taxation under Section 137.100(5) for the tax year 2006.
Complainant appeals the decisions of the Maries County Board of Equalization.Respondent assessed the subject property as residential and personal property.The real property under appeal was valued by the Assessor at $2,427,700, assessed value of $461,260.The personal property was valued by the assessor at $15,000, assessed value of $5,000.These assessments were sustained by the Board.Complainant contends that the subject property is exempt from taxation under the provisions of Section 137.100(5).
An evidentiary hearing was conducted on July 5, 2007, before W. B. Tichenor, Senior Hearing Officer, at the Maries County Courthouse, Vienna, Missouri.Transcript was certified to the Commission on July 27, 2007.On August 31, 2007, Attorney for Complainant filed Complainant’s Brief (received by Commission on September 4, 2007).Respondent had until and including October 1, 2007, to file Respondent’s Brief.No brief from Respondent was filed with the Commission.
The following exhibits were received into evidence on behalf of Complainant:
Complaint for Review of Assessment 9-22-06 (Real Property)
Complaint for Review of Assessment 9-22-06 (Personal Property)
Maries County Application for Tax Exemption for the Year 2006
Maries County Clerk letter denying exemption for 2006, dated 8-17-06
Maries Manor, LLC Certificate of Organization and Articles of Organization, 5-16-02
Operating Agreement of Maries Manor, LLC, 5-16-02
Amendment to Maries Manor Operating Agreement 4-19-07
Eden Heritage Foundation Certificate of Incorporation and Articles of Incorporation of a Nonprofit Corporation, 4-21-97
Eden Heritage Foundation Mission Statement
Maries Manor Brochure “Welcome to our Home”
Maries Manor Brochure “Eden Heritage Academy”
IRS Advanced Ruling Determination Letter of Tax Exempt Status, 9-4-97
IRS Determination Letter of Tax Exempt Status, 2-28-02
Eden Heritage Foundation’s Missouri Sales and Use Tax Exemption Certificate, 7-11-02
IRS Form 990 for Tax Year 7-1-01 to 6-30-02
IRS Form 990 for Tax Year 7-1-02 to 6-30-03
IRS Form 990 for Tax Year 7-1-03 to 6-30-04
IRS Form 990 for Tax Year 7-1-04 to 6-30-05
Maries Manor Statement of Operations, 6-30-03
Maries Manor Statement of Operations, 6-30-04
Maries Manor Statement of Operations, 6-30-05
Maries Manor Statement of Operations, 6-30-06
Maries County Assessor’s 9-10-2 Letter
Respondent’s Supplemental Responses to Complainant’s First Interrogatories to Respondent, 1-1-07
Therapy Support Inc. invoices and statements for equipment supplied to patients “J.O.” and “C.R.”
Maries Manor Letter, 8-29-06
Missouri Foundation for Health Grant, 10-4-06
Missouri Department of Transportation Missouri Elderly and Handicap Transportation Assistance Program Grant, 6-24-05
Maries Manor LLC Key Operating Statistics, year ended 6-30-04
Maries Manor LLC Key Operating Statistics, year ended 6-30-05
Maries Manor LLC Key Operating Statistics, year ended 6-30-06
Summary and Maries Manor Invoices for Patient “L.N.”, 2-22-06 through 11-4-06
Maries Manor Admissions Agreement
Written Direct Testimony of John H. Simmons, President of Eden Heritage Foundation
11 Month Financial Statement, 5-30-07
Exhibits X, Y, Z, AA, BB, CC, DD, GG, HH, KK, LL, NN, RR, UU, VV and WW were prefiled but were not offered into evidence.
At hearing Counsel for Complainant filed Hearing Brief and Motion for Commission to Take Judicial Notice of Federal Laws Regarding Disregarded Entities, with Brief Exhibits A through F attached.The Hearing Brief, with exhibits, was received into the file and the Motion taken under advisement.
The following exhibits were received into evidence on behalf of Respondent:
Exhibit A (R-A)
Copy of the Notice of Change of Assessed Value for the subject real property dated
April 28, 2004
Exhibit B (R-B)
Copy of the Notice of Change of Assessed Value for the subject real property dated
April 18, 2005
Exhibit F (R-F)
Written Direct Testimony of Judy Logan
Respondent’s Exhibits C, D and E were excluded from evidence by Order issued July 3, 2007.The response to the next to the last and the second from the last questions of Exhibit F were stricken from evidence by Order issued July 3, 2007.
The Hearing Officer, having considered all of the competent evidence upon the whole record and the Briefs filed by Complainant, enters the following Decision and Order.
1.The subject property is both real and personal property.The address of the real property and location of the personal property is 174 Ballpark Road, Vienna, Missouri.Complainant operates as this location a nursing care facility known as Maries Manor Nursing Home.The real property is identified by Locator Number 08-4.0-20-003-01-0002.01.The personal property is identified by Assessor’s Account Number 00 02015.
2.The Complainant is a limited liability company under the laws of the State of Missouri and it operates under the following purpose statement:
“The limited liability company is organized exclusively for charitable, educational, religious, or scientific purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code, including acquiring, developing, maintaining, operating, leasing and managing skilled and intermediate long-term nursing facilities and adult congregate care residential facilities for the elderly on behalf of Eden Heritage Foundation, a Missouri nonprofit corporation exempt from federal income tax pursuant to section 501(a) and 501( c)(3) of the Internal Revenue Code.Such projects will offer help and nursing care, and supervise residential living services for persons have such a need, including the indigent, sick and other persons of low income, regardless of race, creed, color, sex or national origin.No substantial part of the activities of the limited liability company shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the limited liability company shall not participate in, or interfere in (including the publishing or distribution of statements) any political campaign on behalf of or in opposition to any candidate for public office.Notwithstanding any other provision of these articles, the limited liability company shall not carry on any other activities not permitted to be carried on (a) by an organization exempt from federal income tax under section 501(c) (3) of the Internal Revenue Code or the corresponding section of any future federal tax code, or (b) by an organization, contributions to which are deductible under section 170 (c)(2) of the Internal Revenue Code, or the corresponding section of any future federal tax code.”
3.Complainant operates under the following dissolution provision:
“In the event of liquidation, dissolution or termination of Complainant for any reason, the managing member (Eden Heritage Foundation) shall, after paying or making provision for the payment of all liabilities of the LLC dispose of all of the assets of the LLC exclusively for purposes of the LLC in such manner or to such organization or organizations organized and operated, exclusively for charitable, educational, religious or scientific purposes and shall at the time qualify as an exempt organization or organizations under Section 501 (c)(3) of the Internal Revenue Code of 1954 (or the corresponding provisions of any future United States Internal Revenue law) as the managing member shall determine.” Exhibit E; See also, Exhibit F, Item 9.
4.There is one (1) member of the Complainant, Eden Heritage Foundation (Eden/Foundation), a Missouri non-for-profit corporation and there is no provision for any additional members.Exhibit E.
5.As of January 1, 2006, the operating agreement between Complainantt and Eden provided: “ DISTRIBUTIONS.The Company’s Operating Proceeds shall be distributed to the Member at such times as the Member shall determine.” Exhibit F, Item 5.On April 19, 2007 Item 5 of the Operating Agreement of Maries Manor, LLC was amended to read as follows:
“DISTRIBUTIONS.Any excess in revenue over expenses incurred in the operations of the Company shall be used exclusively to further the charitable, non-profit purposes of the Company, including but not limited to expanding services provided by the Company; repairing, renovating or providing other upkeep for the Company’s facilities; and/or holding such funds in reserves for anticipated future expenses of the Company in the performance of its charitable, non-profit purposes.”Exhibit G.
6.Eden Heritage Foundation is exempt from Federal Income Tax under section 501(c)(3) of the Internal Revenue Code and operates exclusively for charitable purposes as described in Section 501(c)(3) of the Internal Revenue Code.Exhibits H, L and M.Eden is exempt from Missouri Sales and Use Tax on purchases.Exhibit N.
7.The Foundation operates under the following purpose statement:
“The Corporation is organized exclusively for charitable, educational, religious, or scientific purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code. The Corporation is formed for the purposes of acquiring, constructing, developing, maintaining, operating, leasing and managing skilled and intermediate long-term care nursing homes and adult congregate care residential facilities for the elderly.Such projects will offer long-term health and nursing care and supervised residential living services to persons having such a need, including the indigent, sick and other persons of low income, regardless of race, creed, color, sex or national origin.”Exhibit H.
8.The Foundation operates under the following dissolution provision:
“In the event of liquidation, dissolution, or termination of this Corporation for any reason, the Board of Directors shall, after paying or making provisions for the payment of all the liabilities of the Corporation, dispose of all the assets of the Corporation exclusively for the purposes of the Corporation in such manner or to such organizations, or organizations organized and operated exclusively for charitable, educational, religious, or scientific purposes and shall at the time qualify as an exempt organization or organizations under Section 501 (c)(3) of the Internal Revenue Code of 1954 (or the corresponding provision(s) of any future United States Internal Revenue law), as the Board of Directors shall determine.Any such assets not so disposed of shall be disposed of by the Circuit Court of Greene County, Missouri, or the county in which the principal office of the Corporation is then located, exclusively for such purposes or to such organizations, as said Court shall determine, which are organized and operated exclusively for such purposes.”Exhibit H.
9.The Foundation operates under the following limitation of activities provision:
“Notwithstanding any other provisions of these Articles, the Corporation shall not carry on any other activities not permitted to be carried on (2) by a corporation exempt from Federal Income Tax under Section 501(c)(3) of the Internal Revenue Code of 1954 (or the corresponding provision(s) of any future United States Internal Revenue Law), (b) by a corporation, contributions to which are deductible under Section 170(c)(2) of the Internal Revenue Code of 1954 (or the corresponding provision(s) of any future United States Internal Revenue Law).Exhibit H.
10.The Foundation operates under the following net earnings provision:
“The Corporation has not been formed for pecuniary profit or financial gain, and no part of the net earnings of the Corporation shall inure to the benefit of, or be distributed to, its members, directors, officers, or other private persons, except that the Corporation shall be authorized and empowered to pay reasonable compensation for services rendered to the Corporation and to make payments and distributions in furtherance of the [corporate purposes].Exhibit H.
11.The Foundation operates under the following political activities provision:
No substantial part of the activities of the Corporation shall be the carrying on of propaganda or otherwise attempting to influence legislation and the Corporation shall not participate in or intervene in (including the publishing or distribution of statements) any political campaign on behalf of or in opposition to any candidate for public office.Exhibit H.
12.Complainant is a “disregarded entity” under federal tax laws, and is treated as a division of Eden Heritage Foundation for tax purposes.See, Disregarded Entity, infra.
13.The subject property is owned and operated on a not-for-profit basis.It is unconditionally dedicated to a charitable use.The dominant use of the property benefits an indefinite number of people and benefits society directly and indirectly.
14.Complainant’s evidence was substantial and persuasive to rebut the presumption of correct assessment by the Respondent and Board of Equalization and establish the exempt status of the subject property.
CONCLUSIONS OF LAW AND DECISION
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.
Official and Judicial Notice
Agencies shall take official notice of all matters of which the courts take judicial notice.Sections 490.080; 536.070(6), RSMo.Official notice is taken of Federal Laws Regarding Disregarded Entities as set forth in Complainant’s Hearing Brief, filed July 5, 2007.
Whether an organization is an entity separate from its owners for federal tax purposes is a matter of federal tax law and does not depend on whether the organization is recognized as an entity under local law.26 CFR § 301.7701-1(a)(1).Certain Organizations that have a single owner can choose to be recognized or disregarded as entities separate from their owners.26 CFR § 301.7701-1(a)(4).A business entity is any entity recognized for federal tax purposes including an entity with a single owner that may be disregarded as an entity separate from its owner.A business entity with only one owner is classified as a corporation or is disregarded; if the entity is disregarded, its activities are treated in the same manner as a sole proprietorship, branch, or division of the owner. 26 CFR § 301.7701-2(a).An eligible entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner.26 CFR § 301.7701-3(a).Unless the entity elects otherwise, a domestic eligible entity is disregarded as an entity separate from its owner if it has a single owner.26 CFR § 301.7701-3(b)(ii).Complainant is a single member limited liability company.As a result, it is a “disregarded entity” under Federal tax laws.See, Brief Exhibits D & E.
Counsel for Complainant argues in his Hearing Brief that the statutory provisions of Section 347.187, RSMo provide a basis for Complainant to be treated as a tax exempt organization.However, subsection 2 of Section 347.187 specifically provides that the applicability of the section is solely for the purposes of Chapters 143, 144 and 288, that a limited liability company and its members shall be classified and treated on a basis consistent with the limited liability company’s classification for federal income tax purposes.Therefore, Section 347.187 does not mandate that Complainant be treated as a disregarded entity for purposes of seeking exemption from taxation under Section 137.100.
Nevertheless, Complainant’s argument on this point is not without merit. As a disregarded entity under Federal tax laws, Complainant becomes a not-for-profit entity because its sole member – Eden Heritage Foundation – is a Missouri not-for-profit corporation, exempt from federal taxation as a 501(c)(3), entity.Furthermore, any distributions from Complainant to Eden as its sole member can then only be used for the tax exempt purposes of Complainant and Eden, which for all intents and purposes in substance are identical.Therefore, for the purposed of this decision, it is appropriate to treat Complainant as a “disregarded entity” or maybe more properly to treat Maries Manor, LLC and Eden Heritage Foundation as a single not-for-profit entity, as the owner and operator of the real and personal property under appeal.
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’s burden of proof has been met in the present case as is developed below.
Section 137.100(5), RSMo
Complainant seeks exemption of its real and personal property from taxation pursuant to Section 137.100(5):
“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; … .
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, 566 S.W.2d 213, 223-224 (Mo. banc 1978). 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 thepurpose, 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.
Id. At 224.
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.
When these tests are applied to the evidentiary record, Complainant has established that Maries Manor Nursing Home (real and personal property) is exempt from taxation under section 137.100(5) RSMo and the controlling case law.
MARIES MANOR IS OWNED AND OPERATED ON A NOT-FOR-PROFIT
BASIS SO THERE CAN BE NO PROFIT, PRESENTLY OR
PROSPECTIVELY, TO INDIVIDUALS OR CORPORATIONS
To be entitled to a property tax exemption, a nursing home must be owned and operated on a not-for-profit basis so there can be no profit, presently or prospectively, to individuals or corporations.See Franciscan, 566 S.W.2d at 224.
A. OWNED AND OPERATED ON A NON-PROFIT BASIS
Maries Manor meets the first prong of the Franciscan test because the property is owned and operated on a not-for-profit basis.See, FACTS 2 – 13, supra.The only activities permitted to a 501 (C) (3) exempt organization are those exclusively religious, charitable, or scientific; testing for public safety; literary or educational purposes; or to foster national or international amateur sports competition; or the prevention of cruelty to children or animals, but only if no part of the net earnings of those activities inure to the benefit of any private shareholder or individual.See 26 U.S.C. § 501 (C) (3).These are non-profit activities by definition.Complainant operates in accordance with these purposes.Exhibit XX, Nos. 81-82.Maries Manor’s Articles of Organization, therefore, demonstrate that profit is not a primary goal of the project. See Franciscan, 566 S.W. 2d at 219.
In addition, Maries Manor is a single-member limited liability company, and Eden Heritage Foundation is its sole member. See, FACTS 4, supra; Exhibit XX, No. 7.Eden Heritage Foundation is organized as a Missouri not-for-profit corporation, and is exempt from Federal taxation under I.R.C. 501 (C) (3).See, FACTS 6 – 11, supra; Exhibit XX, Nos. 11-17, 24-28.At its creation, Maries Manor elected not to be treated like a corporation.Exhibits E & XX, No. 85.As a result, Maries Manor is a “disregarded entity” under Federal tax laws, and is treated as a division of Eden Heritage Foundation for tax purposes.Generally, disregarded entity status means that all the activities of the entity are treated as if they were actually performed by the single owner.Thus, Maries Manor’s income and losses are attributed to the tax-exempt Eden Heritage Foundation, and Maries Manor comes within Eden Heritage’s tax-exempt status.See, FACTS 12; Disregarded Entity, supra; Exhibit XX, Nos. 83 – 84.
As a disregarded entity, Maries Manor uses the same tax identification number as Eden Heritage, and Eden Heritage’s annual Form 990 filed with the IRS covers not only Eden Heritage’s operations, but Maries Manor’s operations as well.Exhibits O, P, Q, R & XX, Nos. 86 – 96. In addition, Maries Manor has responded to donors with a written reference to its tax exempt status through Eden Heritage Foundation.Exhibits II & XX, Nos. 83, 97 – 99. Furthermore, Maries Manor qualified for a Missouri Foundation for Health Basic Support Grant in 2006 as an exempt entity under IRC 501 (C)(3), and the terms of the grant require that it maintain such status throughout the grant term.Exhibit JJ & XX, Nos. 175 – 178.Maries Manor operations are both non-profit and tax exempt.
B.NO PROFIT TO ANY INDIVIDUAL OR ENTITY
The first prong of the Franciscan test also requires that there be no profit, presently or prospectively, to individuals or corporations.Maries Manor meets this requirement as well.
Because Maries Manor is operated as a not-for-profit entity, it technically has no “profits,” although it could have a surplus of revenues over expenses.At no time in the past has there been a distribution of surpluses to another person or entity because there have been no surpluses.Exhibit XX, Nos. 100, 101.From 2002 to the present, Maries Manor has operated at net losses ranging from approximately $227,000 to as much as $538,000.Exhibits S, T, U, V & XX, Nos. 102-110.Similarly, Maries Manor’s financial statements for 11 months of fiscal year 2006 reflect a net loss of at least $544,000.Tr. 8 – 9; Exhibit YY.At no time from fiscal years 2002 to the present has Maries Manor distributed any net profits to any person or entity.Exhibit XX, No. 112; Tr. 9, lines 11 – 18.
Not only have no surpluses been distributed in the past or at present, there are structural barriers in place to prevent such distributions from occurring in the future.These barriers are found in Maries Manor’s Articles of Organization and Operating Agreement, as amended.Non-profit entities like Maries Manor are required to follow the requirements of their governing documents.Cf. generally Higginsville Memorial Post 6270 v. Benton, 108 S.W.3d 28 (Mo. App W.D. 2003) (non-profit corporation).Since Eden Heritage Foundation is the sole member of Complainant, any distribution of excess revenues over expenses would have to be made to the Foundation, whose funds must then be used for the same charitable corporate purposes as Complainant’s purposes.Any such distribution although made from Complainant to the Foundation is in fact not a distribution from one entity to another, as Complainant is a disregarded entity for purposes of Federal tax purposes and the issue of tax exemption under Section 137.100, RSMo.See, Disregarded Entity, supra.
Maries Manor’s Articles of Organization explicitly prohibit it from carrying on any activities not permitted to be carried on by an organization exempt from federal income tax under section 501 (C) (3) of the Internal Revenue Code.Exempt organizations are prohibited from distributing net earnings to private persons.See 26 U.S.C. 501 (C) (3).Exhibits E & XX, No. 114.Similarly, Complainant’s Operating Agreement, as amended, provides that any excess in revenues over expenses incurred in the operation of Maries Manor shall be used exclusively to further the charitable, non-profit purposes of Maries Manor, including but not limited to expanding services; repairing, renovating or providing other upkeep for facilities; and/or holding such funds in reserve for anticipated future expenses in the performance of its charitable, non-profit purposes. Exhibits E, G, & XX, Nos. 114 – 118.Furthermore, the Eden Heritage Mission Statement, which Maries Manor has adopted, disseminates to the public and posts states that “operational surpluses will be used, to the extent possible, to provide services, at reduced costs, or no cost, to individuals who cannot afford or who are not eligible for Medicaid or Medicare coverage.”Exhibits I & XX, Nos. 18 – 23; Tr. 17, lines 11 – 21.Maries Manor meets the first prong of the Franciscan test.See, Citizens Memorial Health Care Foundation v. Johnson, State Tax Commission (2004).
C. PAYMENT OF MANAGEMENT FEE
Although Maries Manor has not and cannot distribute surpluses to any person or entity, Maries Manor does pay a management fee to Eden Heritage, which includes payments for administrative and management services Eden Heritage provides for Maries Manor and a contribution toward management salaries paid by Eden Heritage.Exhibit XX, Nos. 39-42.Because Maries Manor is still in a start up mode and is not yet able to pay the full share of its administrative costs at this time, Eden Heritage does not charge Maries Manor a management fee that fully reflects the amount of time Eden Heritage Foundation employees commit to assist Maries Manor.Exhibit XX, Nos.155 – 156; Tr. 11, lines 14-18.Payment of a reasonable management fee does not preclude exemption.Mizpah Assisted Living Services v. Muehlheausler, State Tax Commission (2003).
MARIES MANOR’S PROPERY IS DEDICATED
UNCONDITIONALLY TO CHARITABLE ACTIVITY
Maries Manor meets the second prong of the Franciscan Test because its property is dedicated unconditionally to charitable activity.Franciscan, 566 S.W.2d at 224.As used in this context, “charitable” means:“[a] gift, . . . 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. . . .”Salvation Army v. Hoehn, 188 S.W.2d 826, 830 (Mo. 1945) (en banc).
A. DEDICATED UNCONDITIONALLY TO CHARITY
Maries Manor meets the second prong of the Franciscan test because, as demonstrated above, Maries Manor’s nursing home operations are non-profit, and there are no other businesses operated on the site.Exhibit XX, Nos. 119-120.Maries Manor’s purposes and operations are charitable.Exhibits E & XX, Nos. 71-76.
The care provided by Maries Manor qualifies as “charitable” because (1) it helps relieve the elderly and others from disease, suffering or constraint, and (2) a substantial part of what Maries Manor provides is a “gift.”It is true that Maries Manor’s operations generate revenues by residents who can pay a private pay rate and with reimbursements through Medicaid or Medicare. Exhibit XX, Nos. 124, 130, 138, 143.This fact does not preclude a finding that Maries Manor’s activities are charitable.Ultimately, the very fact that no dividends or earnings are paid to stockholders constitutes a gift by making funds that otherwise would be payable to stockholders available to carry out the charitable purpose of the not-for-profit entity.
“Charity is not limited to the relief of the destitute,” and it is not the purpose of RSMo 137.100 to “withhold the financial assistance of a tax-exemption until such time as our elderly are totally incapable of providing for themselves.” Franciscan, 566 S.W.2d at 226.“The fact that subsidization of part of the cost of furnishing such housing is by the government rather than private charitable contributions does not dictate a different result.”Franciscan 566 S.W.2d at 226.
Although Medicare and Medicaid rates are set by the government, Maries Manor determines its private pay rates based on what it thinks a resident can afford, what is required to cover the basic cost of resident care and rates comparable in the market.Historically, Maries Manor’s rates have been lower than those at other facilities.Exhibit XX, No. 127.
Nevertheless, there is a substantial portion of Maries Manor’s operations that constitutes a gift in the classic sense.Maries Manor does not turn anyone away, nor does it have a financial requirement for admission.Exhibits TT & XX, Nos. 121-123, 162 – 163.Individuals who do not qualify for government assistance, but who otherwise cannot afford Maries Manor’s private pay rates, pay what they are able.Maries Manor makes up the rest through various means, including contribution from Eden Heritage Foundation.Tr. 13, line 11 – 14, line 9; Exhibits SS & XX, Nos. 164 – 173.
Maries Manor provides services to its patients at cost or less.If resident revenues covered all of the costs of providing their care, Maries Manor would not be operating at a loss.Exhibits S, T, U, V, XX, Nos.144 – 145; YY.Indeed, on a daily basis, Maries Manor’s Key Operating Statistics show that total expenses per day for fiscal years 2003, 2004 and 2005 were substantially higher than its daily rates or revenues per day.Exhibits OO, PP, QQ & XX, Nos. 146-154.
In addition, Maries Manor provides services over and above those services covered by its fees.Medicaid does not cover all of the services an indigent resident may need.When that occurs, Maries Manor provides them.For example Medicaid provides an allowance of $30 per month for personal needs and clothing.Unfortunately there is not always money left over for clothing. To meet this need, Maries Manor runs a clothing bank for which Maries Manor solicits clean and wearable used clothing or new clothing to assist patients who do not have the funds to buy clothing for themselves.Exhibit XX, Nos. 135 – 136.Maries Manor also provides services to Medicare patients that Medicare does not cover.Exhibit XX, Nos. 141-142.Furthermore, some Medicare/Medicaid patients require special equipment that is not covered by those rates, and which the resident cannot afford to pay for themselves.In those instances Maries Manor provides the equipment.Exhibits FF & XX, Nos. 157 – 161.Another example is food.For Medicaid reimbursement purposes, the federal government allows a maximum of $3.64 raw food costs per patient day.Nevertheless Maries Manor spends in excess of $6.60 per patient day for raw food costs.Maries Manor provides this “gift” in order to better serve its residents.Tr. 30 – 31.
Maries Manor meets the second prong of the Franciscan test because Maries Manor provides charity in the nature of a gift to assist the elderly and infirmed.The revenues generated by residents do not cover all of the services provided, and Maries Manor must look to grants, charitable contributions, and other assistance to make up the difference.Private pay patients who cannot pay the full rate are subsidized by Maries Manor and/or Eden Heritage Foundation.Even those who pay a full private pay rate receive valuable services their rates do not cover.Similarly, Medicare and Medicaid patients receive services those government reimbursements do not cover fully.Maries Manor is dedicated unconditionally to providing these services in Maries County.See Simmons Direct at No. 209.This dedication to charitable assistance to the elderly is deserving of tax exemption under the law.See, Citizens Memorial Health Care Foundation v. Johnson, Missouri State Tax Commission (2004).
MARIES MANOR’S DOMINANT USE IS FOR THE BENEFIT
OF AN INDEFINITE NUMBER OF PEOPLE AND PROVIDES A
BENEFIT TO SOCIETY.
Maries Manor meets the third prong of the Franciscan Test because the dominant use of Maries Manor’s property is for benefit of an indefinite number of people and it provides a benefit to society in addition to and as a result of its humanitarian activity.Franciscan, 566 S.W.2d at 224.
A. BENEFITING AN INDEFINITE NUMBER OF PEOPLE
Maries Manor does not restrict who may obtain its services.Maries Manor makes its services available to anyone who needs its help, regardless of race, creed or color.Furthermore, Maries Manor does not restrict its services only to those who can pay for them.Exhibit XX, Nos. 162 – 163, 190.Maries Manor’s scope of services is made clear in its Mission Statement: “All services and activities of Eden Heritage Foundation will be offered on an equal basis to all persons, regardless of race, creed, color, sex, or national origin.Operational surpluses will be used, to the extent possible, to provide services, at reduced cost, or no cost, to individuals who cannot afford or who are not eligible for Medicaid or Medicare coverage.” Exhibit I.Maries Manor subscribes to this Mission Statement and operates according to its terms.Exhibit XX, No. 23.
B. BENEFIT TO SOCIETY
Maries Manor provides a benefit to society beyond the immediate care given to residents.Maries Manor provides living accommodations, some of which are subsidized by government programs and with Maries Manor’s funds, and this is recognized as charitable.See, Franciscan, 566 S.W.2dat 225.In the absence of housing such as that provided by Maries Manor, the assets of Missouri’s elderly citizens “could have been depleted so quickly as to place them in public housing, or if not so placed, in substandard housing under conditions conducive to increasing the problems of government and society. . . .A retirement center . . .clearly serves an important social need.” Franciscan, 566 S.W.2d at 225.See, Rolla Apartments v. Commission 797 S.W.2d 781, 792 (Mo. App. 1990) (housing for the elderly and disabled persons “generally benefits society”).
Maries Manor also benefits society, and specifically Maries County residents, because it is the only skilled nursing facility located in Maries County, the county from which most of its residents come.There also is no public transportation available in Maries County, making access to facilities in other counties more difficult for Maries County residents.Exhibit XX, 182 – 185.Without Maries Manor, Maries County residents in need of skilled nursing care would have to go outside the county, which creates the potential of isolating them from their families and friends.Exhibit XX, Nos. 191-192.
As noted above, Maries Manor also benefits the community by providing services free of charge to elderly in the community who are not its residents.Those services include providing a substantial number of wellness checks, meals on wheels deliveries, and in-home follow-up visits to former residents.Exhibit XX, Nos. 191 – 202.These services are significant.From July 1, 2003, to June 30, 2004, Maries Manor provided 1,928 Meals on Wheels meals and 3,000 blood pressure checks.Exhibit Q at p. 23.From July 1, 2004, to June 30, 2005, Maries Manor provided 4,840 Meals on Wheels meals and 3,700 blood pressure checks.Exhibit R at p. 20.Maries Manor’s level of service for the Meals on Wheels and blood pressure checks programs is similar at the present time to what it has been in the past.Exhibit XX, Nos. 196-197, 200-201.These services benefit the community because, by looking after the needs of elderly citizens who are still living independently at home and by providing a little assistance to keep them living independently in their homes, Maries Manor helps prevent or at least delay those individuals from entering skilled nursing facilities, often times with government subsidies.Exhibit XX, No. 203.
Maries Manor also benefits the community by opening its facility for community celebrations and group meetings.These activities benefit the community because it helps keep the community connected to its elderly, and the elderly connected to their community.Exhibit XX, Nos. 204-205.In addition, Maries Manor makes available in Maries County adult day care and respite services for those who do not need Maries Manor services on a full-time basis, and Maries Manor coordinates with local agencies to provide hospice services.Maries Manor also makes its Eden Heritage Academy available to non-residents in the community.Exhibit XX, Nos. 204 – 207.
The evidence provided to the Commission demonstrates that Maries Manor does not turn away anyone it is equipped to serve.Missouri law makes clear that providing such services to the elderly and infirmed benefits society.As an extension of its nursing care, Maries Manor provides charitable services in the community to those who are not its residents.Furthermore, it is Maries Manor’s goal to provide services to the elderly and infirmed in a county that otherwise would not be served by a skilled nursing facility.Maries Manor meets the third prong of the Franciscan test.
The assessment of the subject property (real and personal) made by the Assessor and sustained by the Board of Equalization for Maries County for the subject tax day is SET ASIDE.
The county clerk is ordered to enter the subject property on the list of exempt property into the supplemental tax book for the county for the tax year 2006.
A party may file with the Commission an application for review of a hearing officer decision within thirty (30) days of the mailing of such decision.The application shall contain specific grounds upon which it is claimed the decision is erroneous. Failure to state specific facts or law upon which the appeal is based will result in summary denial.Section 138.432, RSMo 2000.
If an application for review of this decision is made to theCommission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission.If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of Maries 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.If any or all protested taxes have been disbursed pursuant to §139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.
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 26, 2007.
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 26th day of October, 2007, to:G. Stanton Masters, 1907 Swift, Suite 200, North Kansas City, MO 64116, Attorney for Complainant; Terry Daley Schwartze, 12247 Highway 63 South, Vienna, MO 65582,Vienna, MO 65582, Attorney for Respondent; Judy Logan, Assessor, P.O. Box 188, Vienna, MO 65582; Rhonda Brewer, P.O. Box 205, Vienna, MO 65582; Jayne Helton, Collector, P.O. Box 71, Vienna, MO 65582.