STATE TAX COMMISSION OF MISSOURI
| MERS MISSOURI GOODWILL INDUSTRIES, | )
) |
|
| ) | ||
| Complainant, | ) | |
| ) | ||
| v. | ) | Appeal No. 16-45500 |
| ) | ||
| MARION TIBBS, ASSESSOR, | ) | |
| CHRIS RICKMAN, ASSESSOR | ) | |
| BUTLER COUNTY, MISSOURI | ) | |
| Respondent. | ) |
ORDER
AFFIRMING HEARING OFFICER DECISION
UPON APPLICATION FOR REVIEW
HOLDING
On December 5, 2017, Senior Hearing Officer John Treu (Hearing Officer) entered his Decision and Order (Decision) finding the subject property was exempt from ad valorem taxation under Article X, Section 6 of the Missouri Constitution. Marion Tibbs and Chris Rickman, Assessors of Butler County[1] (Respondents) subsequently filed their Application for Review of Hearing Officer’s Decision and Order. Complainant thereafter filed their Opposition to the Application for Review. Respondent filed their Amended Reply to Complainant’s Response.
We affirm the Decision and Order of the Hearing Officer. Segments of the Hearing Officer’s Decision may have been incorporated into our Decision without further reference.
FINDINGS OF FACT
The subject property (Store) in this appeal is real property. It is approximately 13,125 square feet constructed in 2015. The Store sells both new and used merchandise and accepts donations. Complainant employs individuals with job barriers in the Store’s integrated work environment. Complainant serves individuals with disabilities, persons needing second chances for work due to past issues with criminal records, young people needing their first chance at being good workers, persons who are economically disadvantaged and other persons with barriers to employment.
The Store is an integrated work environment for disabled and disadvantaged employees. Integrated work environment refers to employment settings that surround persons with disabilities or other barriers to employment in typical workplace settings with persons who do not have such barriers to help them acclimate to real-world work environments. Individuals served, assessed, and trained in the Store work alongside a variety of coworkers and interact with a variety of customers, most of whom do not have a disability. Complainant teaches customer service by serving customers and modeling the behavior. Providing training in a setting that is as close to reality as possible increases skill retention and odds of utilization.
Store employees receive extra training, orientation, ongoing support and, as needed, job coaching and mentors. Training includes soft skills, such as punctuality, following instructions, accepting criticism and conflict resolution, and hard skills, such as maintaining the sales floor, opening and closing the Store, and operating the cash register. When employees make mistakes, counseling is provided to correct the behavior with the goal that the employee will become successful. There is no fixed amount of time a client will need the support of an integrated work environment to be a successful employee. Some employees never overcome their employment barriers and remain employed at the Store.
Store employees entry-level earnings are $8.75 per hour. Store managers initially earn $16 per hour and their wages can increase to $20 per hour. Bonuses are part of Complainant’s compensation for Store employees. The bonus structure serves as an incentive to drive performance. When the Store exceeds its revenue goal, expense goal or both, all employees automatically earn a bonus based on a specific calculation for each level of employee, i.e., manager, store manager, lead and remaining employees.
On average, there are about twenty Store employees. In 2015, 40% of Store employees had barriers. They worked 18,800.26 hours and earned $168,286.16 in wages. Complainant also paid $33,550.66 in benefits for Store employees with barriers in 2015. In 2016, 50% of Store employees had barriers. They worked 20,022.93 hours and earned $180,928.09 in wages. Complainant also paid $34,617.34 in benefits for Store employees with barriers in 2016.
The Store differs from commercial retailers in the following ways:
- Integrated work environment, tailored to charitable mission;
- Supportive work environment;
- Staff consists of up to 50% individuals with disabilities and disadvantages;
- 25% of staff are supervisors to allow for extra training and coaching;
- 80-90% of inventory is donated;
- Prices of all merchandise are deeply discounted; and
- Profit is incidental to the purpose of the Store.
In addition to the integrated work environment, the Store is used for other charitable activities, including:
- The Goodwill Career Center in Butler County uses the Store to perform job assessments and evaluations. Some Missouri Work Assistance (MWA) clients volunteer in the Store as a condition of their temporary assistance to receive cash assistance. The MWA program offers employment and training assistance to individuals receiving cash payments through Temporary Assistance to Needy Families (TANF). The program provides assistance with job leads, resume writing, interviewing skills, GED, on-the-job training, transportation, Vocational Education, and childcare.
- Court ordered community service hours are completed in the Store.
- Vouchers issued to individuals in need are redeemed in the Store.
The Store had a profit of $159,805.60 in 2015 and $92,767.13 in 2016. The monies from the sales in the stores, internal funding and contracts with state agencies fund the programs. Complainant’s administrative expenses agency-wide is 5.89% of revenue. Administrative expenses include all overhead, administrative salaries, fundraising expenses and related costs. Complainant spends $.94 of every $1 of revenue on programs.
Points on Review
Respondents alleged that the Hearing Officer’s Decision is erroneous, arbitrary, capricious, unreasonable, constitutes an abuse of discretion and is contrary to Missouri law in that:
- The facts in the subject appeal are distinguishable from Missouri Goodwill Industries v. Gruner, 210 S.W.2d 38 (S Ct 1948);
2. The Decision incorrectly applies Missouri law and goes against Franciscan Tertiary Province of Missouri, Inc, v. State Tax Commission, 566 SW2d 213 (S Ct 1978) in that:
a. The primary use of the property is for profit; and
b. The use of the property is not charitable.
CONCLUSIONS OF LAW
STC’s Ruling
For the reasons that follow, the STC finds Respondents’ arguments to be unpersuasive. The STC, having thoroughly reviewed the whole record and having considered the Hearing Officer’s Decision, the Application for Review of Respondents’, Complainant’s response opposing the Application for Review, and Respondents’ Reply, concludes that the Hearing Officer’s Decision was correct and proper.
Standard of Review
A party subject to a Decision and Order of a Hearing Officer with the STC may file an application requesting the case be reviewed. 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).
Missouri Goodwill Industries v. Gruner, City Collector
210 S.W.2d 38 (S.Ct. 1948)
On March 8, 1948, the Missouri Supreme Court found that the purposes of Missouri Goodwill Industries, “as expressed in its charter and exemplified by its operations, fall within a reasonable definition of pure charity.” at p. 41
Respondents argue that the current appeal is distinguishable from the 1948 case and rely on language from the Supreme Court case that “[e]ach case of this sort must be decided upon its own peculiar facts.” at p. 41 In the Supreme Court case from 1948, Complainant had a facility in the City of St. Louis. Complainant would collect clothing, books, and other items. Complainant would make repairs to the items. The items would be sold in Complainant’s retail stores. The employees collecting the materials and making the repairs were “physically or mentally handicapped persons who [were] unable to secure employment in regular industry.” The persons were trained and then helped to secure other employment unless the handicap was such that other employment was not possible.
In the 1948 case, the City Collector argued that Complainant’s property was used in business or commerce and that the operation was similar to other properties in commercial enterprise.
The Supreme Court found that Goodwill’s primary purpose for the property located in the City of St. Louis in 1948 was to assist the handicap to become “self-respecting and self-supporting.” at p. 40 “The rule of strict construction in the matter of exemption from taxation is not questioned, but ‘strict construction must be a reasonable construction.’” The Court opined that charitable must include more than “relief to the destitute.” The opportunity of employment of the handicap “denied them by the harsh competition of the business world… with the hope of employment in competitive industry after they are trained” constitutes charity. Although Complainant sold the product of its employees’ labor, the primary purpose was not to make a profit but to help and relief the burden of the State to support the handicap.
Respondents argue that the Complainant’s purpose in 1948 is distinguishable from their purpose today. In 1948, Complainant’s use of the property was for training disabled persons so that they could eventually gain employment outside of Complainant’s operations. Today, employees may stay, after training is completed, in employment of Complainant. Respondent contends that Complainant is more of an employer than a job trainer. Respondent also contends that 50-60% of the employees have no disability or barrier to employment and therefore their primary purpose is not for aiding the disabled and disadvantage. (Tr. 60, 71) Lastly, the Reponsdent argues that Complainant is expanding the term charitable in that they want it to include not only the disabled but also include the disadvantaged or those with other barriers to employment such as felony convictions, youth or economic issues.
Respondent further argues the primary purpose of the property today is profit. In 1948, Complainant sold second hand goods. Now the Complainant’s goods include new merchandise. Complainant now earns revenues of over one million dollars from sales and there was no evidence that the stores operated at a loss or break even basis.
Complainant contends that the exemption granted by the Supreme Court in 1948 is essentially the same as the exemption they are seeking today. In 1948, Complainant operated as a retail store for the purposes of job training. Today, Complainant operates a retail store for the purpose of job training. The only difference is that how training is provided has evolved since 1948. Society no longer segregates the disabled worker. Therefore, Complainant’s training includes those without disabilities to simulate a real-world environment. The real-world environment is a retail store; however, Complainant contends that any profit is secondary and used to further their training of those with barriers.
Although Complainant’s use of the Store has expanded to include job training for a wider expanse of job barriers, the purpose and primary use of the store remains charitable in that it continues to provide vocational training services.
Franciscan Tertiary Province of Missouri, Inc. v. State Tax Commission
566 S.W.2d 213 (S. Ct. 1978)
In 1978, the Missouri Supreme Court accepted for review an appeal involving an exemption based upon charitable use. The property was an apartment complex for the elderly. Franciscan Tertiary Province of Missouri, Inc (Franciscan) sought an exemption based upon charitable use. Franciscan was a not-for-profit corporation established for providing rental housing for the elderly and handicapped. The subject property was constructed by Franciscan and financed by the government under the Senior Citizens Housing Act. Included in the program was mortgage assistance and rent subsidy through the Department of Housing and Urban Development (HUD). The tenants of the apartment had to meet age, capacity and income requirements. The tenants would not be evicted if they were unable to pay rent or unable to obtain federal rent supplement. Franciscan also provided food, clothing and medical treatment of tenants based upon need.
Franciscan was denied a charitable exemption by the STC. The STC found that the tenants were “neither infirm nor indigent but were self-sustaining both from a physical and a financial standpoint.” The STC reasoned that it was not established that if the tenants did not receive such services they were likely to be a burden to society or government.
Franciscan appealed the case to the Missouri Supreme Court. The STC also sought clarification from the Court due to considerable litigation regarding retirement projects for the elderly. The Court reviewed many of the decisions for charitable exemption. The Court, in its opinion, stated that “[a]n analysis of the cases relied on to support those respective positions has led us to the conclusion that the cases considering a charitable exemption for housing for the elderly and those considering such an exemption with reference to property used for other purposes have interpreted the words ‘used exclusively … for purposes purely charitable’ differently and have established different requirements for granting an exemption under such language.” The Court went on to state that a review all the decisions involving many types of charitable exemptions, not just retirement homes, was necessary to establish a uniform interpretation of Section 137.100 RSMo and criteria for all property seeking an exemption.
The Court, in this appeal, established the criteria for charitable exemption. The requirements are:
- It must be owned and operated on a not-for-profit basis, dedicated unconditionally so that there will be no profit, presently or prospectively and any gain must be devoted to the attainment of the charitable objectives of the project;
- The property is actually and regularly used for a charitable purpose; and
- The dominate use of the property must be for the benefit of an indefinite number of people for the purpose of “bringing their hearts under the influence of education or religion, by relieving their bodies from disease, suffering or constraint, by assisting them to establish themselves for life, or by erecting or maintaining public buildings or works or otherwise lessening the burdens of government.”
The requirement as a not-for-profit does not mean that the endeavor must always operate at a deficit as long as any excess income is achieved incidentally and as long as the excess income is devoted to the charitable purpose. However, an exemption should not be granted if the endeavor’s purpose is gaining a profit, even if the profits are turned over to the organization for religious or charitable purposes.
Not-for-profit endeavors qualifying for exemption would include those activities, which improve the physical, mental and moral condition of the recipients and make it less likely that they will become burdens on society and make it more likely that they will become useful citizens. In other words, it is required that the benefit provided to the persons served by the endeavor directly or indirectly benefit society.
Respondents contend that the use of the property fails the requisites. First, the property is used on a for-profit basis and the profits are not used for the endeavor but are distributed to salaries and bonuses. Second, the primary purpose of the property is not for the training of the disabled for future employment. The primary purpose of the property is for commercial purpose, the retail sale of new and donated merchandise. Third, Complainant receives payment from government sources for the training it conducts and therefore no benefit is conferred upon the government or society.
Complainants contend that the use of the property qualifies it for a charitable exemption. First, the primary purpose of the property is the training of those with barriers to employment even if some are never able to achieve employment other than with Complainant. Second, the property is used on a not-for-profit basis and any profits made are used for the endeavor of training those with disabilities. Third, Complainant’s property and use of the property lessens the burden of government by reducing reliance on government assistance. The reduction includes access to health benefits, less reliance on social security, housing and food services. Payments received by government are limited by type of service, length of service, and how the services are provided. Further, the payments received by the government are minimal (1% of the Store’s expenses) and no government payments are received for job coaching at the subject property.
Summary & Conclusion
A review of the record in the present appeal provides ample support for the determinations made by the Hearing Officer. The Store is owned and operated on a not-for-profit basis. The Store is actually and regularly used exclusively for charitable purposes in that its primary purpose is for vocational training of those with employment barriers. The vocation training benefits society by lessening the burdens of government by increasing the number of employed individuals. A reasonable mind could have conscientiously reached the same result based on a full review of the entire record. The Commission finds no basis to support a determination that the Hearing Officer acted in an erroneous, arbitrary, capricious, or unreasonable manner, or that the Hearing Officer abused his discretion as the trier of fact and concluder of law in this appeal. Hermel, Inc. v. STC, 564 S.W.2d 888 (Mo. 1978); Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998); Holt v. Clarke, 965 S.W.2d 241 (Mo. App. W.D. 1998); Smith v. Morton, 890 S.W.2d 403 (Mo. App. E.D. 1995); Phelps v. Metropolitan St. Louis Sewer Dist., 598 S.W.2d 163 (Mo. App. E.D. 1980).
The Hearing Officer did not err in his determinations as challenged by Respondents
ORDER
The Decision of the Hearing Officer is AFFIRMED. Segments of the Decision and Order of the Hearing Officer, including the findings of fact and conclusions of law therein, have been incorporated without 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 Butler 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 April 24, 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 24th day of April, 2018, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.
[1] Marion Tibbs was the Butler County Assessor at the time of the assessment. Chris Rickman became the Butler County Assessor in 2017.
State Tax Commission of Missouri
| MERS MISSOURI GOODWILL INDUSTRIES | ) | ||
| ) | |||
| Complainants | ) | ||
| ) | |||
| v. | ) | Appeal No. | 16-45500 |
| ) | |||
| MARION TIBBS, ASSESSOR | ) | ||
| BUTLER COUNTY, MISSOURI, | ) | ||
| ) | |||
| Respondent | ) |
DECISION AND ORDER
HOLDING
Decision of the Butler County Board of Equalization (BOE) denying exemption is SET ASIDE. MERS Missouri Goodwill Industries (Complainant) presented substantial and persuasive evidence establishing the subject property is exempt under Article X, Section 6 of the Missouri Constitution.
ISSUE
Complainant appealed on the ground of exemption.
Complainant appeared by counsel Denyse Jones and Gary Feder.
Marion Tibbs, the former Assessor and Chris Rickman, the current Assessor of Butler County, Missouri (Respondent) appeared by Patricia Hughes.
Appeal heard and decided by Senior Hearing Officer John Treu (Hearing Officer).
EVIDENCE
Complainant filed the following exhibits, which were admitted into the record:
| EXHIBIT | DESCRIPTION |
| Written Direct Testimony (WDT) Janel Barber | |
| WDT David Kutchack (Kutchack) | |
| Rebuttal WDT Kutchack | |
| Supplemental WDT Kutchack | |
| A | Complaint for Review of Assessment |
| B | Kutchack Curriculum Vitae |
| C | MERS/Goodwill Industries Amended and Restated Bylaws |
| D | Exemption from Federal Income Tax |
| E | Exemption from Missouri Sales and Use Tax |
| F | 2014 CARF Accreditation |
| G | 2016 CARF Accreditation |
| H | Settlement Statement |
| I | Special Warranty Deed |
| J | Services at the Poplar Bluff Store |
| K | Butler County Employees of Complainant |
| L | Summary of Service Hours at the Poplar Bluff Store |
| M | Summary of Employee Hours at the Poplar Bluff Store |
| N | DVR and MWA Hours at the Poplar Bluff Store |
| O | Pricing Sheet |
| P | Poplar Bluff Income Statements |
| Q | 5 Year Historical Income Statements |
| R | Application for Exemption |
| S | Receipt of Payment |
| T | Letter Tendering Payment Under Protest |
| U | Placement Details for Individuals Served Between 1/1/2014 and 12/31/2015 |
| V | 2014 Goodwill Annual Report |
| W | 2015 Goodwill Annual Report |
| X | Brochures |
| Y | MERS Goodwill Program Descriptions |
| Z | 2016 CEO Compensation Study |
| A1 | Agency Executive Pay and Administrative Rates |
| B1 | Goodwill History |
| C1 | Poplar Bluff Lease Agreement |
| D1 | United Way of Greater St. Louis Quality Standards Brochure |
| E1 | Exemption for Bridgeton Goodwill |
| F1 | Exemption for Manchester Goodwill |
Respondent filed the following exhibits, which were admitted into the record, other than Exhibit 18, which was excluded:
| EXHIBIT | DESCRIPTION |
| WDT Marion Tibbs (Tibbs) | |
| Surrebuttal WDT Tibbs | |
| 1 | Property Record Card |
| 2 | Photo of Subject Property- Street View |
| 3 | Photo of Subject Property- Front View |
| 4 | Photo of Subject Property- Dock View |
| 5 | Photo of Neighboring Building |
| 6 | Three Year Income and Expense Statement |
| 7 | Invoices |
| 8 | Employee Reports |
| 9 | Program Report |
| 10 | No Exhibit |
| 11 | 2015 Income Tax 990 Return |
| 12 | Area Median Income |
| 13 | Income and Expense Statements |
| 14 | Real Estate List |
| 15 | Combined Financial Statements |
| 16 | Income Calculator |
| 17 | Article |
| 18 | EXCLUDED |
| 19 | Interrogatory Response |
FINDINGS OF FACT
- Jurisdiction. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission (STC).
- Complainant. Complainant is a not-for-profit, Internal Revenue Code 501(c) (3) exempt entity.
- Evidentiary Hearing. The Evidentiary Hearing was held on September 26, 2017, in the Truman State Office Building in Jefferson City, Missouri.
- Identification and Description of Subject Property and Assessment. The subject property in this appeal is real property. The subject property is located at 1335 North Westwood Boulevard, Poplar Bluff, Butler County, Missouri. The property is identified by Parcel/Locator number 08-08-33.0-004-012-001.130. The improvement on the property (Store) is approximately 13,125 square feet and was completed in 2015, as a single story structure with a flat roof, block construction with stucco style exterior, concrete floor, heating and air conditioning.
- Use and Operation of the Properties. The Store sells both new and used merchandise and accepts donations. Complainant’s mission has substantively remained the same since its inception in 1902. The mission was first articulated as providing a hand up, not a hand out. Complainant’s mission is currently articulated as changing lives through the power of work. Complainant fulfills this mission, in part, by employing individuals with job barriers in the Store’s integrated work environment. Complainant serves individuals with disabilities, persons needing second chances for work due to past issues with criminal records, young people needing their first chance at being good workers, persons who are economically disadvantaged and other persons with barriers to employment.
The primary use of the Store is as an integrated work environment for its disabled and disadvantaged employees. Integrated work environment refers to employment settings that surround persons with disabilities or other barriers to employment in typical workplace settings with persons who do not have such barriers to help them acclimate to real-world work environments. Individuals served, assessed, and trained in the Store work alongside a variety of coworkers and interact with a variety of customers, most of whom do not have a disability. Complainant not only provides services in an integrated setting, but also provides services in a real life situation. Complainant teaches customer service by serving customers and modeling the behavior. Providing training in a setting that is as close to reality as possible increases skill retention and odds of utilization.
Store employees receive extra training, orientation, ongoing support and, as needed, job coaching and mentors. Training includes soft skills, such as punctuality, following instructions, accepting criticism and conflict resolution, and hard skills, such as maintaining the sales floor, opening and closing the Store, and operating the cash register. When employees make mistakes, counseling is provided to correct the behavior with the goal that the employee will become successful. There is no fixed amount of time a client will need the support of an integrated work environment to be a successful employee. Some employees never overcome their employment barriers.
There are no hard requirements for the percentage of employees with barriers in an integrated community. If, however, the percentage exceeds 50%, the community becomes segregated, as opposed to integrated. On average, there are about twenty Store employees. In 2015, 40% of Store employees had barriers. They worked 18,800.26 hours and earned $168,286.16 in wages. Complainant also paid $33,550.66 in benefits for Store employees with barriers in 2015. In 2016, 50% of Store employees had barriers. They worked 20,022.93 hours and earned $180,928.09 in wages. Complainant also paid $34,617.34 in benefits for Store employees with barriers in 2016.
Store employees start off earning $8.75 per hour. Store managers start at about $16 per hour and can work up to $20 per hour. Bonuses are part of Complainant’s compensation for Store employees. The bonus structure serves as an incentive to drive performance. When the Store exceeds its revenue goal, expense goal or both, all employees automatically earn a bonus based on a specific calculation for each level of employee, i.e., manager, store manager, lead and remaining employees. The bonus is in the range of .25 to $1.25 per hour of additional income. Bonuses are paid on a monthly basis.
The Store differs from commercial retailers in the following ways:
- Integrated work environment, tailored to charitable mission;
- Supportive work environment;
- Staff consists of up to 50% individuals with disabilities and disadvantages;
- 25% of staff are supervisors to allow for extra training and coaching;
- 80-90% of inventory is donated;
- Prices of all merchandise are deeply discounted; and
- Profit is incidental to the purpose of the Store.
In addition to the integrated work environment, the Store is used for other charitable activities, including:
- The Goodwill Career Center in Butler County uses the Store to perform job assessments and evaluations. Some Missouri Work Assistance (MWA) clients volunteer in the Store as a condition of their temporary assistance to receive cash assistance. The MWA program offers employment and training assistance to individuals receiving cash payments through Temporary Assistance to Needy Families (TANF). The program provides assistance with job leads, resume writing, interviewing skills, GED, on-the-job training, transportation, Vocational Education, and child care.
- Court ordered community service hours are completed in the Store.
- Vouchers issued to individuals in need are redeemed in the Store.
In total, 18,828.26 service hours were performed in the Store in 2015 and 20,160.93 service hours in 2016. The Store had a profit of $159,805.60 in 2015 and $92,767.13 in 2016. The monies from the sales in the stores, internal funding and contracts with state agencies fund the programs. Complainant’s administrative expenses agency-wide is only 5.89% of revenue. Administrative expenses include all overhead, administrative salaries, fundraising expenses and related costs. Complainant spends $.94 of every $1 of revenue on programs.
- Taxation of the Properties. Respondent determined that the subject property was not exempt for tax year 2016. The BOE independently determined the subject property was not exempt for tax year 2016. Complainant’s evidence was substantial and persuasive to establish the subject property qualified as exempt under Article X, Section 6 of the Missouri Constitution for tax year 2016.
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.
Complainants’ Burden of Proof
The burden of proof lies squarely on Complainant. Complainant proposed that the subject property should be exempt from taxation on the ground that the parcel is used for charitable purposes. Complainant bears the burden of proof in a STC appeal. Complainant 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); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003).
Complainant must meet this burden by producing evidence which is substantial and persuasive. 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
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.
Charitable Exemption
The legal test for a charitable exemption is whether:
(1) The property is dedicated unconditionally to the charitable activity;
(2) The property is owned and operated on a not for profit basis; and
(3) The dominant use of the property is for the benefit of an indefinite number of people and directly or indirectly benefits society generally. Franciscan Tertiary Province of Missouri v. State Tax Commission, 566 S.W.2d 213, 224 (Mo Banc 1978); Twitty v. State Tax Commission, 896 S.W.2d 680, 684 (Mo. App. S.D. 1995).
I 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).
II 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).
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).
Discussion Regarding Exemption
The evidence submitted by Complainant was substantial and persuasive to induce belief in the Hearing Officer that the primary, inherent, or dominant use of the subject property met the standard for exemption. As set forth 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).
The subject property is dedicated unconditionally to the charitable activity, in that it brings their hearts under the influence of education or lessens the burden of government. It does so through work training services. David Kutchback (Kutchback) testified as to the services provided. Kutchback has been employed by Complainant since 1978. His educational background includes a B.S. in education. He has completed Special Educational programs with emphasis on Severe Handicaps. He has a Lifetime Teaching Certificate, Masters level training in Rehabilitation and Counseling Psychology. He is certified in Rehabilitation Counseling, Rehabilitation Specialist by the U.S. Department of Labor, and a Certified Insurance Rehabilitation Specialist.
Kutchback has worked in vocational rehabilitation for 39 years. He started as a placement counselor. He has served as Director of the Injured Workers Program and Head Trauma Rehabilitation Program. Since 1994, he has been responsible for creating and developing rehabilitation and employment programs for Complainant.
Complainant employs individuals with job barriers in the Store’s integrated work environment. Complainant serves the disabled and disadvantaged, including individuals with disabilities, persons needing second chances for work due to past issues with criminal records, young people needing their first chance at being good workers, persons that are economically disadvantaged and other persons with barriers to employment. Individuals receiving services are referred through the Missouri Division of Vocational Rehabilitation due to mental health issues, orthopedic disorders, vision impairment, hearing impairment or other issues. Individuals may also qualify for services if the Missouri Department of Social Services considers their household low income. Complainant does not turn away anyone seeking services. If Complainant does not have capacity to include someone in their program, they refer the individual to other employers. “We do not ask people to delay a chance for employment.” WDT of Kutchback p. 15
Complainant assists such employees by helping them acclimate to real-world work environments. Complainant provides training of soft skills and hard skills. To allow for extra training and coaching, 25% of staff are supervisors. Because the employees are actively monitored in the store, due to the integrated work environment, when mistakes are made, counseling is provided to correct the behavior with the goal that the employee will become successful. In 2015, 40% of Store employees had barriers. In 2016, 50% of Store employees had barriers.
In addition to the integrated work environment, the Store is used to perform job assessments and evaluations, for Court ordered community service hours, and vouchers are issued to individuals in need for redemption in the Store. Through the delivery of vocational rehabilitation services, Complainant improves the mental and moral condition of its employees, making it less likely they will become burdens on society and more likely that they will become useful citizens benefitting society in general.
Complainant measures the performance of the programs in three ways: (1) Employment outcomes in Vocational Rehabilitation services of clients place in employment and retaining employment beyond 90 days; (2) MWA outcomes are measured by participation in the program at the required level of a certain number of hours of activities per week and the number of families that become self-sufficient; and (3) The number of successful matches of clients in jobs that are a good fit and employer satisfaction.
The Hearing Officer is persuaded that Complainant uses the Store to serve the community. Complainant employs individuals in the Store who are unable to obtain or maintain employment elsewhere. In doing so, Goodwill is lessening its employees’ reliance on government assistance. Their employees have access to health benefits and are no longer dependent upon social security, government housing and food pantry services. The Hearing Officer is persuaded by Complainant’s assertion that Complainant turns tax users into taxpayers, thus relieving a burden on government.
By reasonably construing the evidentiary record, Complainant produced substantial and persuasive evidence that the property is dedicated unconditionally to charitable activity, to meet its burden of proof. Consequently, Complainant is granted exempt status for ad valorem tax purposes, as to the subject property for tax year 2016.
ORDER
The assessed valuation for the subject property for the tax year 2016 is SET ASIDE. Complainant is granted exempt status under Article X, Section 6 of the Missouri Constitution.
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 Butler 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 5th day of December, 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 emailed on December 5th, 2017 to: denyse.jones@huschblackwell.com; gary.feder@huschblackwell.com; trish.hughes@libertylawoffices.com;
Jacklyn Wood
Legal Coordinator