STATE TAX COMMISSION OF MISSOURI
| MEGA FOUNDATION, | ) | ||
| ) | |||
| Complainant, | ) | ||
| ) | |||
| v. | ) | Appeal No. | 16-70000 |
| ) | |||
| DIANA BLUNK, ASSESSOR | ) | ||
| MERCER COUNTY, MISSOURI, | ) | ||
| ) | |||
| Respondent. | ) |
ORDER
AFFIRMING DECISION OF THE HEARING OFFICER
UPON APPLICATION FOR REVIEW
HOLDING
On September 22, 2017, Senior Hearing Officer John Treu (Hearing Officer), entered his Decision and Order (Decision) affirming the assessment by the Diana Blunk, Assessor of Mercer County, Missouri (Respondent) and denying the request of Mega Foundation (Complainant) for exemption.
Complainant filed its Application for Review of the Decision. Respondent filed a response. Complainant replied.
We affirm the Decision and Order of the Hearing Officer. Segments of the Hearing Officer’s Decision have been incorporated into our Decision without further reference.
Complainant’s Points on Review
Complainant set forth 18 points for review[1]:
- The Hearing Officer erred by finding that Complainant failed to meet its burden of proof and establish exemption from ad valorem taxation;
- The Hearing Officer erred when stating that there is a rebuttable presumption of validity, good faith and correctness of assessment by the Mercer County Board of Equalization;
- The Hearing Officer erred in finding the Complainant is a not-for profit but not finding the property is actually and regularly used exclusively for a charitable purpose;
- The Hearing Officer erred in finding Respondent’s Exhibit 14 shows membership fees between $50 and $5,000;
- The Hearing Officer erred in finding that the Complainant offered no evidence of indigent or reduced rate policy those who can least afford the services;
- The Hearing Officer erred in finding the Complainant offered no evidence of any indigent policy or reduced rate for those who cannot afford the cost of books;
- The Hearing Officer erred in finding no evidence was offered as to how Complainant lessens the burdens of government;
- The Hearing Officer erred in finding that the subject property does not benefit society;
- The Hearing Officer erred in finding no evidence to show the property was used as an institution of learning, attended by students, or any course of study;
- The Hearing Officer did not err in finding that Complainant seeks to serve an exclusive circle of “gifted” individuals of high intelligence;
- The Hearing Officer erred in finding Respondent’s Exhibit 14 shows membership fees between $50 and $5,000;
- The Hearing Officer erred by not finding supporting documentary evidence of WDT of Langan;
- The Hearing Officer erred by finding that the building is empty and unused and further finding that the property is properly classified as commercial;
- The Hearing Officer erred in stating that Respondent testified she was denied access to the main building and making a negative inference from it;
- The Hearing Officer erred stating that the Complainant offered no financial or corporate records to support a tax exemption;
- The Hearing Office erred in placing weight on the failure of Complainant to present corporate minutes or tax documents to support its claim for exemption;
- The Hearing Officer erred in noting that the Respondent’s testimony regarding not seeing activity on the property; and
- The Hearing Office erred in finding the property is commercial because it is not residential or agricultural.
FINDINGS OF FACT
Subject property was valued and classified as commercial property by the Respondent. Complainant sought review by the Mercer County Board of Equalization (BOE). The BOE determined a true value in money (TVM) for the subject property of $106,791, assessed value of $34,173.
Complainant appealed to the State Tax Commission (STC) alleging exemption. Upon agreement of the parties, the appeal was submitted on exhibits.
Complainant submitted the following exhibits:
Written Direct Testimony (WDT) of Gina Langan. The WDT consists of two pages with eight questions and answers. Ms. Langan testified that she is a “retired University Lecturer.” She helped acquire the property in 2008. She testified that the property is used for Complainant’s activities and serves as the headquarters. She testified the purpose of the Foundation is “providing networking opportunities to members of the gifted community, …distributes books written and compiled by members, such as Discussions of Genius and Intelligence. The Mega Foundation hosts more than 1,000 web pages on topics in science and giftedness, as well as hosting member blogs and discussion lists.” Ms. Langan identified Exhibits B, C, and D. Finally, Ms. Langan testified that the property is clearly exempt, “in addition to being owned by a Missouri nonprofit corporation and used regularly and exclusively for nonprofit (education, charitable, and/or religious) purposes as its Headquarters, the Mega Foundation property in question is neither held nor used as investment, nor has it been used or slated for such use, by the Mega Foundation, its Officers, or any other entity. It has never been used for commercial purposes, either.”
Exhibit B – the Articles of Incorporation of a Nonprofit Corporation, State of Missouri fill in the blank form. The purpose listed is for “benevolent purposes include the creation of educational resources, workshops and retreats for intellectually gifted individuals.”
Exhibit C is one page Certificate of Incorporation Missouri Nonprofit of the State of Missouri.
Exhibit D is one page Internal Revenue Service letter dated September 9, 2005, stating that Mega Foundation is a Section 501(c)(3) organization.
Exhibit E (rebuttal Exhibit) are copies of envelopes addressed to Mega Foundation from US Bank, Rapid Removal Disposal, and Grundy Electric Cooperative. The Exhibit also includes a letter from U.S. Bank dated May 25, 2017, stating that Mega Foundation has an account.
Respondent filed the following Exhibits:
WDT of Respondent The WDT consists of four pages and 21 questions and answers. Respondent testified that she has been the Mercer County Assessor since 2013. The subject property is 3.4 acres with three improvements. One improvement is an older brick building. The other two improvements are outbuildings – a 40 x 80 steel building and a 14 x 16 shed. The Assessor has not viewed the interior of the older brick building. The outbuildings do not appear to have any use. Respondent testified that she has not seen financial records to show that they are a not-for-profit organization or show how they use their funds. Respondent testified that she did not see how “programs and resources that aid in the development of highly gifted individuals and their ideas” relieved the burdens of government.
Exhibit 1 – Property Record Card provides the determination of TVM by Respondent. It is seven pages and includes photographs.
Exhibit 2 – Deed to the Subject Property.
Exhibit 3 – Four Exterior photos of subject property taken on April 21, 2017.
Exhibit 4 – Interior photographs.
Exhibit 5 – Steel utility building photographs.
Exhibit 6 – Property photographs.
Exhibit 7 – Four correspondence. (1) Letter dated December 2, 2015 from attorney Drew Davis stating they are requesting exemption and that the Certification of Incorporation, Articles of Incorporation, IRS 501 (c)(3) letter and Department of Revenue letter stating they are exempt from income taxes. (2) Assessors reply that she questions if the use of the property qualifies it for an exemption. (3) Letter purporting to be from Attorney Drew Davis in response to the assessor. (4) Attorney Drew Davis response dated July 18, 2016 to Assessor stating that although he sent a letter in December 2015, he did not send an additional letter and is not responsible for some of the things stated in the letter. Attorney Davis indicated he suspected Gina Langan sent the letter purporting to be from him.
Exhibit 8 – Letter dated February 22, 2015 from Christopher Langan. Mr. Langan states that Mega Foundation is constructing two buildings in 2013-2014. One building will be used for audio and video production.
Exhibit 9 – Application to Mercer County Board of Equalization.
Exhibit 10 – Mega Foundation Articles of Incorporation.
Exhibit 11 – Mega Foundation Bylaws.
Exhibit 12 – Interrogatory Answers 5, 6, 13, 14, and 15 that the steel building is under construction and not being used.
Exhibit 13 – Document Request response 2, 8, 9 – 17 with attached Exhibits 5 and 6. The Exhibits state that the budget for 2015 included $1500 for propane, $1800 for electricity, $600 for water, $1200 for internet, $900 for lawn service, $1200 for repairs, $350 for office supplies, $2,250 for website, $3000 for property taxes, and $5600 for donations. The Exhibits state that the budget for 2016 included $1500 for propane, $1800 for electricity, $600 for water, $1200 for internet, $900 lawn service, $2300 repairs, $575 office supplies, $2750 for website, $3000 for property taxes, and $7100 for donations.
Exhibit 14 – Information from Mega Foundation Website. The webpage is home to Mega Foundation, CTMY Web (a network of websites developed to explore telelogic evolution through Chris Langan’s Cognitive Theoretic Model of the Universe), Mega Press (alternative publishing venue for extremely gifted individuals); Ultranet (a 4 sigma society of creative thinkers) and Mega International (a 5 sigma international think tank).
Exhibit 15 – Mega Foundation 2012, 990 income tax return.
CONCLUSIONS OF LAW
The Complainant seeks review of the Hearing Officer’s Decision finding the property was not exempt and that its proper classification was commercial.
Standard of Review
A party subject to a Decision and Order of a Hearing Officer with the State Tax Commission (STC) may file an application requesting the case be reviewed by the STC. Section 138.432 RSMo Cum. Supp. 2015; 12 CSR 30-3.080(4). The STC may then summarily allow or deny the request. Section 138.432; 12 CSR 30-3.080(5). The STC 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 STC. Section 138.432; 12 CSR 30-3.080(5)(A).
The STC, having thoroughly reviewed the record and having considered the Decision of the Hearing Officer and the Application for Review of Complainant, finds that a reasonable mind could have conscientiously reached the same result as the Hearing Officer based on a review of the entire record. Segments of the Hearing Officer’s Decision have been incorporated into our Decision without further reference.
DECISION
Presumption In Appeal
There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization. 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 Board’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).
Complainants’ Burden of Proof
The taxpayer in a Commission appeal still bears the burden of proof. The taxpayer is the moving party seeking affirmative relief. Therefore, the Complainant 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); 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). 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).
Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See, Cupples-Hesse, supra. 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).
Exemptions Not Favored and To Be Construed Strictly
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 STC, 560 S.W.2d 837, 844 (Mo. Banc 1987), State ex rel. Union Electric Co. v. Goldberg, 578 SW2d 921,923 (Mo. Banc 1979).
Charitable and Educational Exemptions
The legal test for a charitable or educational 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 or educational activity; and
(3) The primary and inherent use of the property is to serve as an institution of learning with a course of study designed to impart to the students who attend a knowledge of the things broadly covered within the field of education State v. Holekamp, 151 S.W.2d 685 (1941), or 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 STC, 566 S.W.2d 213, 224 (Mo Banc 1978); Twitty v. State Tax STC, 896 S.W.2d 680, 684 (Mo. App. S.D. 1995).
Owned and Operated on a Not-for-Profit Basis
The property must be owned and operated on a not-for-profit basis. The property “must be dedicated unconditionally 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 achievement of the charitable objectives of the project.” Franciscan Tertiary Province v. State Tax Commission, 566 S.W.2d 213, at 224 (Mo. banc 1978). This does not mean that the property or charity cannot operate “in the black.”
In the subject appeal, the financial information of Complainant was noted by the Hearing Officer; however, whether Complainant operates in the black is not dispositive in this appeal and therefore no further analysis is warranted. Complainant has presented exhibits that they are a 501(c)(3) organization.
Property’s Dedication to Charitable or Educational Purposes
In order for a property to be exempt from taxation for state, county or local purposes, primary and inherent use of the property must be to serve as an institution of learning with a course of study designed to impart to the students who attend a knowledge of the things broadly covered within the field of education. Holekamp. If it is not serving as an institution of learning, the property must be actually and regularly used exclusively for a charitable purpose, as charity is defined by Salvation Army v. Hoehn, 188 S.W.2d 826 (Mo. banc 1945). “Charity” is therein defined 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 of disease, suffering or constraint, by assisting them to establish themselves for life, or by erecting or maintaining the public buildings or works or otherwise lessening the burdens of government.” Salvation Army at 830.
Exemption rests on the use of the property not merely charitable character of the owner. The phrase “regularly used exclusively” has been interpreted to mean the primary inherent or dominate use of the property as opposed to a mere secondary and incidental use.
The evidence established that the Complainant provides networking opportunities for “members of the gifted community” and provides a resource on Complainant’s webpage for discussions and materials in science and “giftedness.” There was no evidence of the real property being used for any charitable or educational purpose. There was no testimony of classes or courses being conducted on the property other than a statement within Complainant’s Articles of Incorporation. There was no evidence that there were any activities occurring in the buildings or on the 3.4 acres which brings hearts under the influence of education or by relieving bodies of disease, suffering or constraint, or assisting individuals to establish themselves for life, or by erecting or maintaining the public buildings or works or otherwise lessening the burdens of government.
Benefit to an Indefinite Number of People or Society in General
The dominant use of the property must benefit an indefinite number of people. Franciscan Tertiary Province of Missouri v. State Tax STC, 566 S.W.2d 213, 224 (Mo. banc 1978); Twitty v. State Tax STC, 896 S.W.2d 680, 684 (Mo. App. S.D. 1995). Complainant argues that it provides “resources that aid in the development of highly gifted individuals and their ideas,” that they are not charging the membership fees as alleged by the Respondent, and that anyone may go onto their webpage and use the resources. Such evidence may establish that a computer is exempt, however, there is no evidence that real property, consisting of 3.4 acres and three improvements, is being used for an indefinite number of people in furtherance of educational or charitable goals.
Classification
Complainant failed to establish by substantial and persuasive evidence that the real property subject to this appeal is exempt. The property, therefore, is subject to ad valorem taxation based upon the classification of the property.
Real property in Missouri falls within one of three classes of property—residential, agricultural, or commercial/other. The “commercial” or “other” classification is defined as:
“Utility, industrial, commercial, railroad and other real property”, all real property used directly or indirectly, for any commercial, mining, industrial, manufacturing, trade, professional, business, or similar purpose, including all property centrally assessed by the state tax commission but shall not include floating docks, portions of which are separately owned and the remainder of which is designated for common ownership and in which no one person or business entity owns more than five individual units. All other real property not included in the property listed in subclasses (1) [Residential] and (2) [Agricultural] of section 4(b) of article X of the Missouri Constitution, as such property is defined in this section, shall be deemed to be included in the term “utility, industrial, commercial, railroad and other real property”. Section 137.016 RSMo.
Consequently, the “commercial” classification is a catch-all for any property that is not being used as agricultural or residential use.
Complainant contends that its property should be classified as agricultural. Section 137.016 RSMo defines agricultural property as:
“’Agricultural and horticultural property’, all real property used for agricultural purposes and devoted primarily to the raising and harvesting of crops; to the feeding, breeding and management of livestock which shall include breeding, showing, and boarding of horses; to dairying, or to any other combination thereof; and buildings and structures customarily associated with farming, agricultural, and horticultural uses. Agricultural and horticultural property shall also include land devoted to and qualifying for payments or other compensation under a soil conservation or agricultural assistance program under an agreement with an agency of the federal government. Agricultural and horticultural property shall further include land and improvements, exclusive of structures, on privately owned airports that qualify as reliever airports under the National Plan of Integrated Airports System, to receive federal airport improvement project funds through the Federal Aviation Administration. Real property classified as forest croplands shall not be agricultural or horticultural property so long as it is classified as forest croplands and shall be taxed in accordance with the laws enacted to implement Section 7 of Article X of the Missouri Constitution. Agricultural and horticultural property shall also include any sawmill or planing mill defined in the U.S. Department of Labor’s Standard Industrial Classification (SIC) Manual under Industry Group 242 with the SIC number 2421;”
The record is devoid of any findings that the property was devoted primarily to the raising and harvesting of crops or to the feeding, breeding and management of livestock.
Summary & Conclusion
The Hearing Officer found that the Complainant failed to present substantial and persuasive evidence to establish the necessary elements of exemption. Complainant presented no evidence as to the use of the property for an indefinite number of people in furtherance of educational or charitable goals or for raising crops or for livestock management.
STC finds that a reasonable mind could have conscientiously reached the same result as the Hearing Officer based on a review of the entire record. 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).
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 Mercer 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 this 23rd day of January, 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 23rd day of January, 2018, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.
Jacklyn Wood
Legal Coordinator
[1] Complainant set forth errors as well as points in which they did not find error with the Decision.
State Tax Commission of Missouri
| MEGA FOUNDATION, INC. | ) | |
| ) | ||
| Complainant(s), | ) | |
| ) | ||
| v. | ) | Appeal No. 16-70000 |
| ) | ||
| DIANA BLUNK, ASSESSOR, | ) | |
| MERCER CO., MISSOURI, | ) | |
| ) | ||
| Respondent. | ) |
DECISION AND ORDER
HOLDING
Decision of the Mercer County Board of Equalization (BOE) is AFFIRMED. Mega Foundation, Inc. (Complainant) failed to present substantial and persuasive evidence establishing the property is exempt under Article X, Section 6 of the Missouri Constitution.
ISSUE
Complainant appealed on the ground of exemption. Complainant failed to present substantial and persuasive evidence (evidence that induced belief in the trier of fact) that the subject property is exempt from taxation.
Complainant was represented by attorney Brandon Greer.
Diana Blunk, the Assessor of Mercer County (Respondent) was represented by attorney Patricia Hughes.
Case heard on the record and decided by Senior Hearing Officer John Treu (Hearing Officer) after briefing.
EVIDENCE
Complainant filed the following exhibits, which were admitted into the record:
| EXHIBIT | DESCRIPTION |
| A | Written Direct Testimony (WDT) of Gina Langan |
| B | Articles of Incorporation |
| C | Certificate of Incorporation |
| D | IRS Letter |
| Rebuttal E | Bank Records |
Respondent filed the following exhibits which were admitted into the record:
| EXHIBIT | DESCRIPTION |
| WDT | Diana Blunk |
| 1 | Property Record Card |
| 2 | Deed to Subject Property |
| 3 | Exterior Photos Taken 4/21/17 |
| 4 | No Exhibit Showing Interior ( Denied Access to Interior of Brick Building) |
| 5 | Steel Utility Building Interior Photos |
| 6 | Other Photos Taken at Field Review, March 2017 |
| 7 | Letter for Attorney Drew Davis and Related Correspondence |
| 8 | Letter from Christopher Langan |
| 9 | 2016 Application to Mercer County BOE
|
| 10 | Mega Foundations Articles of Incorporation |
| 11 | Mega Foundation Bylaws |
| 12 | Interrogatory Answers 5, 6, 13, 14 and 15 |
| 13 | Document Request Response 2, 8, 9-17 with Attached Exhibits 5 and 6 |
| 14 | Information from Mega Foundation Web Site |
| 15 | Mega Foundation 2012, 990 Income Tax Return |
The parties agreed to submit the appeal upon the record.
FINDINGS OF FACT
- Jurisdiction. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the County BOE. The appeal was submitted on the record by agreement of the parties.
- Identification of Subject Property. The subject property is located at 20835 Highway 136, Princeton, Mercer County, MO. The property is identified by map parcel number 11070260000007. (Exhibit 9)
- Description of Subject Property. Complainant is incorporated as a Not for Profit in Missouri and is exempt from federal income tax as a 501(c) (3) organization. The subject property consists of a 3.4 acre site with three buildings, an older brick building, a 40’ X 80’ steel utility building and a shed. (WDT Blunk)
- Purpose of Complainant. As set forth in the bylaws of Complainant, its purpose is “to support and conduct non-partisan research, education, and informational activities to increase public awareness of philosophical, ethical, and spiritual issues and works generated by members of the gifted community; to increase networking among gifted individuals; and to provide web resources for gifted individuals.” (Exhibit 11)
- Taxation of the Property. The evidence was not substantial and persuasive to establish the property qualifies as exempt under Article X, Section 6 of the Missouri Constitution.
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 BOE, 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 County 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 Board’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).
Issuance of Decision Absent Evidentiary Hearing
The Hearing Officer, after affording the parties reasonable opportunity for fair hearing, shall issue a decision and order affirming, modifying or reversing the determination of BOE, correcting any assessment which is unlawful, unfair, improper, arbitrary or capricious. Section 138.431.5 RSMo; 12 CSR 30-3.080 (2). Both parties agreed to submit this appeal upon the record. The filing of exhibits and WDT establishes the basis upon which opportunity for an evidentiary hearing can be held. The Complainant has the burden to present substantial and persuasive evidence. The Hearing Officer considered all the exhibits and WDT and then proceeded to ascertain if said exhibits and WDT met the standard of substantial and persuasive evidence to establish the market value of the property.
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).
Exemptions
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). The legal authority for property tax exemptions is located in Article X, Section 6, of the Missouri Constitution and at Section 137.100, RSMo. The exemptions include:
…all property, real and personal, not held for private or corporate profit and used exclusively for religious worship, for schools and colleges, for purposes purely charitable, or for agricultural and horticultural societies…. Article X, Section 6, of the Missouri Constitution.
Schools/Colleges Exemption
The legal test for a school/college exemption is whether:
- the primary and inherent use of the property is to serve as an institution of learning with a course of study designed to impart to the students who attend a knowledge of the things broadly covered within the field of education; and
- the property is owned and operated on a not-for-profit basis. State v. Holekamp, 151 S.W.2d 685 (1941).
Complainant’s Articles of Incorporation state its purpose to be “benevolent purposes include the creation of educational resources, workshops and retreat for intellectually gifted individuals.” (Exhibit A) No evidence was offered to show the property is 1) used as an institution of learning, 2) attended by students, or 3) any course of study designed to impart knowledge of “things broadly covered within the field of education.” Id.
Charitable Exemption
The legal test for a charitable exemption is whether:
(1) The property is dedicated unconditionally to the charitable activity;
- The property is owned and operated on a not for profit basis; and
- 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).
- Owned and Operated on a Not-for-Profit basis
The property must be owned and operated on a not-for-profit basis. The property “must be dedicated unconditionally 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 achievement of the charitable objectives of the project.” Franciscan Tertiary Province v. State Tax Commission, 566 S.W.2d 213, at 224 (Mo. banc 1978). This does not mean that the property or charity cannot operate “in the black.”
- Actual and Regular Use for Charitable Purpose
In order for a property to be exempt from taxation for state, county or local purposes, the property must be actually and regularly used exclusively for a charitable purpose, as “charity” is defined by Salvation Army v. Hoehn, 188 S.W.2d 826, 830 (Mo. banc 1945): “. . . 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 of disease, suffering or constraint, by assisting them to establish themselves for life, or by erecting or maintaining the public buildings or works or otherwise lessening the burdens of government.” Exemption rests on the use of the property, not merely the charitable character of the owner. The phrase “regularly used exclusively” has been interpreted to mean the primary inherent or dominate use of the property as opposed to a mere secondary and incidental use. See, Bethesda Barclay House v. Ciarleglio, 88 S.W.3d 85 (Mo. App. E.D. 2002); Home Builders Ass’n of Greater St. Louis v. St. Louis Co. BOE, 803 S.W.2d 636 (Mo. App. E.D. 1991); Pentecostal Church of God of America v. Hughlett, 601 S.W.2d 666 (Mo. App.S. D. 1980); Barnes Hospital v. Leggett, 589 S.W.2d 241 (Mo. 1979); Missouri United Methodist Retirement Homes v. State Tax Commission, 522 S.W.2d 745 (Mo. 1975).
Although Complainant is a not-for-profit organization, Complainant did not offer substantial and persuasive evidence to prove the property is actually and regularly used exclusively for a charitable purpose. Rather, Complainant offered as evidence its Articles of Incorporation as a Not for Profit, its Certificate of Incorporation as a Not for Profit, an IRS letter stating Complainant is exempt from federal income tax, and the WDT of Langan. The WDT set forth the general purpose of Complainant as a whole and stated that the subject property “has solely been used for Foundation activities and serves as the Foundation’s headquarters.”
As stated above, exemption rests on the use of the property, not merely the charitable character of the owner. None of the evidence presented met Complainant’s burden of proof to show actual use of the subject property to qualify Complainant for exemption for ad valorem tax purposes.
Dedicated Unconditionally to the Charitable Activity
The property must be used such that it is available to an indefinite group of people, rendered at cost or less, which brings their hearts under the influence of education or lessens the burden of government. “The public nature of a charity is diminished when it is systematically denied to those who need and can least afford the service.” Evangelical Retirement Homes of Greater St. Louis, Inc. v. State Tax Commission, 669 S.W.2d 548, 554 (Mo. banc 1984). Complainant did not offer evidence to meet this element of its burden of proof.
Respondent’s Exhibit 14 clearly shows Complainant charges membership fees between $50 and $5,000, for subscriptions and memberships. Complainant offered no evidence of any indigent policy or reduced rate policy for those that cannot afford a subscription or membership to show the ability of “those who need and can least afford the service” can be educated by Complainant. Id. Exhibit 14 also evidences that books are sold on Amazon and on Complainant’s web site. Complainant offered no evidence of any indigent policy or reduced rate policy for those that cannot afford the costs of the books or that such book costs are utilized to subsidize indigent students. Complainant did not offer evidence to meet this element of its burden of proof. No evidence was offered as to how Complainant lessens the burdens of government.
III. Benefit to Society
To fulfill the Franciscan test, the subject property must benefit society. Although Respondent put forth evidence that the subject property operates as a not for profit, Complainant put forth no evidence of how the subject property benefits society in general and not simply a select group of highly intelligent individuals. Complainant did not offer evidence to meet this element of its burden of proof.
Discussion Regarding Exemption
Complainant’s By-Laws state its purpose to be “to support and conduct non-partisan research, education, and informational activities to increase public awareness of philosophical, ethical, and spiritual issues and works generated by members of the gifted community; to increase networking among gifted individuals; and to provide web resources for gifted individuals.” Complainant’s Articles of Incorporation state its purpose to be “benevolent purposes include the creation of educational resources, workshops and retreat for intellectually gifted individuals.” However, no evidence was offered to show the property is 1) used as an institution of learning, 2) attended by students, or 3) any course of study designed to impart knowledge of “things broadly covered within the field of education.” State v. Holekamp, 151 S.W.2d 685 (1941). Regarding any charitable use, instead of showing that the services of Complainant serve an indefinite group of people, Complainant’s own exhibits clearly show that Complainant seeks to serve an exclusive circle of “gifted” individuals of high intelligence. Of equal import, Respondent’s Exhibit 14 clearly evidences Complainant charges membership fees between $50 and $5,000, for subscriptions and memberships with no evidence offered by Complainant of any indigent policy or reduced rate policy for those that cannot afford a subscription or memberships.
Complainant’s WDT of Langan states that “[i]n addition to providing networking opportunities to members of the gifted community, [Complainant] distributes books written and compiled by members, such as Discussions of Genius and Intelligence. [Complainant] hosts more than 1,000 web pages on topics in science and giftedness, as well as hosting member blogs and discussion lists.” However, Complainant offered no documentary evidence to actually show and support that such activities are actually undertaken. Complainant simply failed to offer sufficient supportive and substantial evidence to meet its burden to be granted exempt status. As stated above, 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).
Alternatively, Respondent’s WDT and exhibits show a 3.4 acre site with three buildings, an older brick building, a 40’ X 80’ steel utility building and a shed, with the 40’ X 80’ steel utility building being unused. Respondent’s Exhibit 5 (photographs) clearly show the 40’ X 80’ steel utility building is essentially an empty building. Respondent’s Exhibit 12 is Complainant’s Responses to Interrogatories. This exhibit includes Complainant’s own statement that “[i]t is not being used at present and is empty, except for some leftover insulation.”
The evidence also shows that Respondent was denied access to the older brick building, thus denying Respondent the ability to verify any exempt usage. (WDT Blunk) A negative inference can be drawn from such that the older brick building is not used for an exempt purpose. Complainant, through counsel, asserts in its Reply Brief that Complainant purportedly attempted to reschedule the inspection of the older brick building. No evidence was offered by either party to support this assertion. Arguments of Complainant’s counsel do not constitute evidence.
Moreover, Complainant offered no detailed bank statements/records, no financial records, no income/expense statements, and no corporate minutes or tax documents to support it claim for exemption. Complainant asserts various reasons for these not being offered into evidence. Complainant asserts in its Reply Brief that “[m]inutes of meetings are routinely taken and distributed to attendees [and that] [t]hey are considered intellectual property of the Foundation and not released.” Complainant also asserts in it Reply Brief that it did not “provide detailed bank records in connection with this matter due to time constraints and financial limitations (there was insufficient time to convene the Mega Foundation Board of Directors and obtain its approval and authorization for record retrieval and submission).” Notably, all of the requisite documents should have been readily available to Complainant and produced to Respondent, in that, the Hearing Officer ordered Complainant to produce of all of such documents to Respondent, by Order dated March 27, 2017. Complainant filed no request for extension to produce the requisite documents. Complainant proceeded at its own peril when choosing not to offer detailed bank statements/records, financial records, income/expense statements, corporate minutes or tax documents to support it claim for exemption. The documents, including, but not limited to the corporate minutes, may have served to assist Complainant in meeting its burden of proof.
The Hearing Officer notes that Respondent’s WDT states that Respondent has never seen any activity on the subject property despite driving by the property twice a day during the work week. This fact is not dispositive as to the question of exemption, but serves simply as and additional fact for the Hearing Officer to consider.
In addition to the foregoing, the Hearing Officer was not persuaded by Complainant’s evidence. The evidence did not induce belief in the Hearing Officer that Complainant conducts its operations in a manner consistent with an ad valorem exempt usage of the property. This is in addition to the fact that Complainant failed to meet its burden of proof as to multiple required elements to qualify for exemption. 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). Consequently, Complainant is denied exempt status for ad valorem tax purposes.
Classification
Complainant argues in its brief and reply brief that the property is misclassified asserting that no commercial activity occurs on the subject property and thus Respondent’s classification of the subject property as “other/commercial” is improper.
Pursuant to Section 137.016 RSMo., real property is classified as “[r]esidential property,” “[a]gricultural and horticultural property,” or “[u]tility, industrial, commercial, railroad and other real property.” “. Usage is determinative as to whether real property is “[r]esidential property” or “[a]gricultural and horticultural property.” If real property is not “[r]esidential property” and not “[a]gricultural and horticultural property,” it is “[u]tility, industrial, commercial, railroad and other real property.”
Section 137.016 (1) RSMo. defines “[r]esidential property” as
all real property improved by a structure which is used or intended to be used for residential living by human occupants, vacant land in connection with an airport, land used as a golf course, manufactured home parks, bed and breakfast inns in which the owner resides and uses as a primary residence with six or fewer rooms for rent, and time-share units as defined in section 407.600, except to the extent such units are actually rented and subject to sales tax under subdivision (6) of subsection 1 of section 144.020, but residential property shall not include other similar facilities used primarily for transient housing. For the purposes of this section, “transient housing” means all rooms available for rent or lease for which the receipts from the rent or lease of such rooms are subject to state sales tax pursuant to subdivision (6) of subsection 1 of section 144.020[.]
Section 137.016 (2) RSMo. defines “[a]gricultural and horticultural property” as
all real property used for agricultural purposes and devoted primarily to the raising and harvesting of crops; to the feeding, breeding and management of livestock which shall include breeding, showing, and boarding of horses; to dairying, or to any other combination thereof; and buildings and structures customarily associated with farming, agricultural, and horticultural uses. Agricultural and horticultural property shall also include land devoted to and qualifying for payments or other compensation under a soil conservation or agricultural assistance program under an agreement with an agency of the federal government. Agricultural and horticultural property shall further include land and improvements, exclusive of structures, on privately owned airports that qualify as reliever airports under the National Plan of Integrated Airports System, to receive federal airport improvement project funds through the Federal Aviation Administration. Real property classified as forest croplands shall not be agricultural or horticultural property so long as it is classified as forest croplands and shall be taxed in accordance with the laws enacted to implement Section 7 of Article X of the Missouri Constitution. Agricultural and horticultural property shall also include any sawmill or planing mill defined in the U.S. Department of Labor’s Standard Industrial Classification (SIC) Manual under Industry Group 242 with the SIC number 2421;
Complainant offered no substantial and persuasive evidence of agricultural or horticultural usage of the subject property.
Section 137.016 (3) defines “[u]tility, industrial, commercial, railroad and other real property” as
all real property used directly or indirectly for any commercial, mining, industrial, manufacturing, trade, professional, business, or similar purpose, including all property centrally assessed by the state tax commission but shall not include floating docks, portions of which are separately owned and the remainder of which is designated for common ownership and in which no one person or business entity owns more than five individual units. All other real property not included in the property listed in subclasses (1) and (2) of Section 4(b) of Article X of the Missouri Constitution, as such property is defined in this section, shall be deemed to be included in the term “utility, industrial, commercial, railroad and other real property”. (Underline added for emphasis)
By failing to establish a residential or agricultural use, Complainant did not provide substantial and persuasive evidence of that the subject property should be classified as “[r]esidential property” or “[a]gricultural and horticultural property.” Therefore, the subject property was properly classified as commercial.
ORDER
The assessed valuation for the subject property as determined by the BOE for Mercer County for the tax year 2016 is AFFIRMED.
Application for Review
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 for this Decision. 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. Section 138.432, RSMo
Disputed Taxes
The Collector of Mercer 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 22nd day of September, 2017.
STATE TAX COMMISSION OF MISSOURI
John Treu
Senior Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 22nd day of September, 2017, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.
Jacklyn Wood
Legal Coordinator