Missouri Military Academy v. Melissa Maupin, Assessor, Audrain County, Missouri

October 23rd, 2019

State Tax Commission of Missouri

MISSOURI MILITARY ACADEMY )    
  )    
              Complainant, )    
  )    
v. ) Appeal No. 18-41501 through 18-41506  
  )    
MELISSA MAUPIN, ASSESSOR, )    
AUDRAIN COUNTY, MISSOURI, )    
  )    
               Respondent. )    

 

DECISION AND ORDER

HOLDING

The assessment made by the Board of Equalization of Audrain County (BOE), Missouri, is AFFIRMED.  Complainant Missouri Military Academy (“Complainant”) did not present substantial and persuasive evidence establishing that the six properties which are the subject of these appeals (hereinafter “the subject properties”) were exempt from ad valorem taxation under Article X, Section 6 of the Missouri Constitution and Section 137.100, RSMo as of January 1, 2018.

Complainant appeared by counsel Marjorie Lewis.

Respondent appeared by counsel Travis Elliott.

Case heard and decided by Senior Hearing Officer John Treu (Hearing Officer).

ISSUE

The State Tax Commission (STC) takes this appeal to determine whether the subject properties are exempt pursuant to Article X, Section 6 of the Missouri Constitution and Section 137.100, RSMo. for tax year 2018.

The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.

FINDINGS OF FACT

  1. Complainant timely appealed to the STC.
  2. Evidentiary Hearing. The issue of tax-exempt status for the subject properties was presented at an evidentiary hearing on April 3, 2019, at the Audrain County Courthouse, Mexico, Missouri.
  3. Identification and Description of Subject Properties. There are six properties which are subject to this Appeal. The property description of each respective property is listed in Ex. No. F, described by the following parcel identification numbers and street addresses: 19-7-25-2-011-048.000 (215 N. Grand); 19-7-25-2-028-014.000 (1305 E. Liberty);19-7-25-2-020-028.000 (1219 E. Promenade);19-7-25-2-028-005.000 (1224 E. Promenade);19-7-25-2-028-002.000 (1314 E. Promenade);19-7-25-2-020-029.000 (1321 E. Promenade).  The subject properties consist of residential housing.
  4. Respondent initially valued the subject properties as follows, as of January 1, 2018, and denied exemption to the subject properties:
Appeal No. Description Property Address Appraised

Value

 

 Assessed

Value
18-41501 19-7-25-2-011-048.000

 

 

 

 

 215 N. Grand $87,840.00 $16,690.00
18-41502 19-7-25-2-028-014.000 1305 E. Liberty $35,710.00 $6,790.00
18-41503

 

 19-7-25-2-020-028.000 1219 E. Promenade $59,170.00 $11,240.00
18-41504 19-7-25-2-028-005.000 1224 E. Promenade $42,270.00 $8,030.00
18-41505 19-7-25-2-028-002.000 1314 E. Promenade $44,960.00 $8,540.00
18-41506 19-7-25-2-020-029.000 1321 E. Promenade $59,070.00 $11,220.00

 

  1. The BOE met on July 18, 2018. At the meeting, the BOE found the subject properties not to be to exempt.
  2. Stipulated Evidence. During the evidentiary hearing, the parties stipulated to the admission of the following exhibits:
Exhibit Description Ruling
A Pro Forma Decree of Incorporation; Articles of Incorporation Stipulated
B 501(c)(3) IRS Letter Stipulated
C Form 990 2017 Stipulated
E Aerials Stipulated
F Deeds Stipulated
J Letter from M. Maupin dated 12/22/2017 Stipulated
L Board of Equalization Decisions Stipulated
M Complaints for Review of Assessment Stipulated
N Offer Letters – Geraci; Grabowski; Lomas Stipulated
O Photographs

 

 Stipulated
P Rental Agreements Stipulated
R Tax Bills 2018 (Excluding Bates No. 288) Stipulated
X Property Record Cards Stipulated
Y MMA Questionnaire Stipulated

 

  1. Complainant’s Evidence. Complainant asserts that the subject property is exempt from ad valorem taxation because Complainant is a not-for-profit organization which owns and operates the property for an educational purpose. In addition to the stipulated documents, Complainant offered the following evidence to support its assertion:
Exhibit Description Ruling
H Property Listings Admitted
K Appeal to Board of Equalization Dated 7/9/2018 Admitted
Q Inliers Guidelines Admitted
S Protest Payments Letters and Attachments Admitted

 

  1. Summary of the Testimony. Complainant presented testimony which showed that Complainant is a non-profit 501(c)(3) military academy located in Mexico, Missouri. Pursuant to the testimony of Richard Geraci (“Geraci”) the school is an all-male boarding school composed of approximately 211 students. Three barracks exists. Only two of the barracks are utilized.  One is vacant.  On January 1, 2018, Complainant housed eight (8) employees inside the barracks in the main campus. (Geraci). Some of the school officials live off the main school campus in houses owned by Complainant in surrounding, residential neighborhoods. The six subject properties in question involve those residences located off the main school campus. School officials reside in five of these residences as part of their employment offer. (Ex. M). Most of those officials have rental agreements which provide for Complainant to terminate each respective lease upon the school official leaving his or her employment with the school. (Ex. P)

The testimony of the witnesses focused on the use of the six subject properties and whether each property was actually and regularly used exclusively for an educational purpose on January 1, 2018. Of the six subject properties – all of which located off the main school campus – five are occupied by employees and one is vacant. The occupancy of the property is shown by the following chart:

Appeal No. Description Property Address Occupants of Property 
18-41501 19-7-25-2-011-048.000

 

 

 

 

 215 N. Grand Rick Geraci

School President
18-41502 19-7-25-2-028-014.000 1305 E. Liberty Vacant
18-41503

 

 19-7-25-2-020-028.000 1219 E. Promenade Carmen Thill

Residential Faculty Officer
18-41504 19-7-25-2-028-005.000 1224 E. Promenade Andrew Lomas

Director of Music
18-41505 19-7-25-2-028-002.000 1314 E. Promenade David Mahurin

English Department Chair/

Instructor

 
18-41506 19-7-25-2-020-029.000 1321 E. Promenade Rick Grabowski

Adjunct Professor

 

The testimony was that the properties at 1219 E. Promenade, 1224 E. Promenade, 1314 E. Promenade, and 1321 E. Promenade are not used for school activities, events, or for any educational purpose.  The testimony was that the property at 215 N. Grand (President Geraci’s residence at all pertinent times) is not used for school activities, events, or for any educational purpose, but occasionally is utilized to host social events.  The evidence was undisputed the subject property located at 1305 E. Liberty (Parcel ID No. 19-7-25-2-028-014.000 is an empty lot which is not used for school activities, events, or for any educational purpose.  A house may eventually be built on the empty lot. (Ex. H).

The testimony was that Complainant has residential faculty officers who are employed in shifts from 3:00 p.m. to 11:00 p.m. and from 11:00 p.m. to 6:00 a.m., to monitor cadets.  There are 3 residential faculty officers on duty at a time, along with other staff members.  Each of the residential faculty officers is assigned to one of the three barracks.  Additionally the testimony was that at all times pertinent to the appeal, Complainant had from 6 to 8 employees living in the barracks, with 2 to 3 per barracks.  These employees, generally faculty, reside alone in apartments within the barracks which are two rooms joined together.  The testimony was that these employees are required to provide 24/7 emergency and inclement weather support.

The testimony of Rick Geraci and Rick Grabowski (“Grabowski”), who live in two of the subject properties, was that each have other homes, which are their permanent residences, in other locations, where their spouses live.  The testimony was that each may and has commuted on weekends and holidays to their primary residence.

  1. Tax- Exempt Status Not Established. Complainant’s evidence was not substantial and persuasive to establish that the six subject properties were tax-exempt as of the date of assessment on January 1, 2018. None of the six properties are used for school activities, events, or for any educational purpose.  That school officials living off campus occasionally respond to emergencies, that other than 2 are not required to live in the properties, and that none are on-call in the traditional sense, does not establish an educational purpose for tax-exempt status under Section 137.100, RSMo.

CONCLUSIONS OF LAW

Authority

The Commission has authority to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary, or capricious, including the application of any abatement.  The Hearing Officer shall issue a decision and order affirming, modifying or reversing the determination of the Board of Equalization, 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.

Basis of Assessment

The Constitution mandates that real property and tangible personal property be assessed at its value or such percentage of its value as may be fixed by law for each class and for each subclass.  Article X, Sections 4(a) and 4(b), Mo. Const. of 1945.  The constitutional mandate is to find the true value in money for the property under appeal.  By statute residential property at 19%; commercial property at 32%; and agricultural property at 12%.  Section 137.115.5 RSMo.

Presumption in Appeal

There is a presumption of validity, good faith and correctness of assessment by the BOE. Hermel, Inc. v. State Tax Comm’n, 564 S.W.2d 888, 895 (Mo. banc 1978); Chicago, Burlington & Quincy Ry. Co. v. State Tax Comm’n, 436 S.W.2d 650, 656 (Mo. 1968); May Department Stores Co. v. State Tax Comm’n, 308 S.W.2d 748, 759 (Mo. 1958).

Burden of Proof

Complainant has the burden to present substantial and persuasive evidence to rebut the presumption of correct assessment by the Board of Equalization. Hermel, Inc. v. State Tax Comm’n, 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).

Exemption Not Favored

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. State Tax Comm’n, 560 S.W.2d 837, 844 (Mo. banc 1977); CSCEA v. Nelson, 898 S.W.2d 547, 548 (Mo. banc 1995), citing Scientology).

Property Exempt from Taxation

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

(5) All property, real and personal, actually and regularly used exclusively for religious worship, schools and colleges, 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 religious, educational or charitable purposes.

 

Section 137.100(5), RSMo.

Investigation by Hearing Officer

In order to investigate appeals filed with the Commission, the Hearing Officer may inquire of the owner of the property or of any other party to the appeal regarding any matter or issue relevant to the valuation, subclassification, or assessment of the property.  Section 138.430.2 RSMo.  The Hearing Officer’s decision regarding the assessment or valuation of the property may be based solely upon his inquiry and any evidence presented by the parties or based solely upon evidence presented by the parties.  Id.

Weight to be Given Evidence

The Hearing Officer is not bound by any single formula, rule or method in determining true value in money and is free to consider all pertinent facts and estimates and give them such weight as reasonable they may be deemed entitled.  The relative weight to be accorded any relevant factor in a particular case is for the Hearing Officer to decide.  St. Louis Cty v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977); St. Louis County v. State Tax Comm’n, 515 S.W.2d 446, 450 (Mo. 1974); Chicago, Burlington & Quincy Railroad Company v. State Tax Comm’n, 436 S.W.2d 650 (Mo. 1968).

The Hearing Officer, as the trier of fact, may consider the testimony of an expert witness and give it as much weight and credit as deemed necessary when viewed in connection with all other circumstances.  Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. W.D. 1991). The Hearing Officer, as the trier of fact, is not bound by the opinions of experts but may believe all or none of the expert’s testimony or accept it in part or reject it in part.  Exchange Bank of Missouri v. Gerlt, 367 S.W.3d 132, 135-36 (Mo. App. W.D. 2012)

Complainant’s Burden of Proof

A presumption exists that the exemption status and assessed value fixed by the BOE is correct. Rinehart, 363 S.W.3d at 367; Cohen, 251 S.W.3d at 348; Hermel, Inc., 564 S.W.2d at 895. “Substantial and persuasive controverting evidence is required to rebut the presumption, with the burden of proof resting on the taxpayer.” Cohen, 251 S.W.3d at 348. Substantial evidence can be defined as such relevant evidence that a reasonable mind might accept as adequate to support a conclusion. Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959). Persuasive evidence is evidence that has sufficient weight and probative value to convince the trier of fact. Id. 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). See also, 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).

There is no presumption that the taxpayer’s opinion is correct. The taxpayer in an appeal 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.” Westwood Partnership, 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. W.D. 1991).

Exemptions

Taxation of property is the rule and exemption from taxation is the exception.  United Cerebral Palsy Ass’n of Greater Kansas City v. Ross, 789 S.W.2d 798, 799 (Mo. banc 1990).  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 S.W.2d 921, 923 (Mo. banc 1979).  A property owner who claims the exemption bears a substantial burden to prove that his property falls within the exempted class.  United Cerebral Palsy Ass’n of Greater Kansas City, 789 S.W.2d at 799.

Article X, Section 6 of the Missouri Constitution exempts from taxation all real and personal property of the state, counties, and other political subdivisions and nonprofit cemeteries.  The Constitution also provides that all real and personal property, 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 may be exempted from taxation by general law.  The legislature, by enactment of Section 137.100 RSMo., has exempted property not held for private or corporate profit and used exclusively for religious worship, for schools and colleges, for purposes purely charitable, and for agricultural and horticultural societies.

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).

 

Charitable Exemption

 

The legal test for a charitable exemption is whether:

  • 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).

 

In Franciscan Tertiary Province of Missouri v. State Tax Commission, 566 S.W.2d 213, 224 (Mo. banc 1978) the entire Missouri Supreme Court analyzed multiple types of situations for exemption.  However, the Court explicitly stated:

[t]he general nature of the owning organization other than that it is not-for-profit cannot be said to determine whether the use of the particular property is charitable or not and that the property must be owned and operated on a not-for-profit basis.  It 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. (emphasis added)

 

It is manifestly clear that by using the word “and” instead of “or” in the “owned and operated” terminology the court was stating very clearly that for the property to be exempt it has to both be “owned” and “operated” on a not-for-profit basis.

  1. Owned and Operated on a Not-for-Profit Basis

The property must be owned and operate 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 objective of the project.”  Franciscan Tertiary Province v. State Tax Comm’n, 566 S.W.2d 213, 244 (Mo. banc 1978).  This does not mean that the property or charity cannot operate “in the black.”

  1. 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 (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 religious, by relieving there 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 rest 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, and 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).

  • 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 heats 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).

  1. Benefit to Society

To fulfill the Franciscan test, the subject property must benefit society in general.  Complainant has the burden to put forth substantial and persuasive evidence of how the subject properties benefit society.

Discussion

Complainant’s evidence was neither substantial nor persuasive to support tax-exemption of the six subject properties as of January 1, 2018.  Complainant has not and cannot meet the charitable or educational purposes test because the facts do not establish the six subject properties were “actually and regularly used exclusively for . . . schools and colleges, or for purposes purely charitable.”

The testimony was that the properties at 1219 E. Promenade, 1224 E. Promenade, 1314 E. Promenade, and 1321 E. Promenade are not used for school activities, events, or for any educational purpose.  The testimony was that the property at 215 N. Grand (President Garaci’s residence at all pertinent times) is not used for school activities, events, or for any educational purpose, but occasionally is utilized to host social events.  The evidence was undisputed the subject property located at 1305 E. Liberty (Parcel ID No. 19-7-25-2-028-014.000 is an empty lot which is not used for school activities, events, or for any educational purpose.

None of the subject properties were utilized as an institution of learning.  No course of study designed to impart to the students who attend a knowledge of the things broadly covered within the field of education was taught at any of the subject properties.  The school/college exemption therefore does not apply.

In State ex rel. Spillers v. Johnston, 214 Mo. 656 (Mo. 1908), the Missouri Supreme Court held a building at Kemper Military Academy to be entitled to exemption.  In such case the building housed “110 cadet students, 10 faculty officers, 15 servants and defendant and his family, his wife, two sons and two daughters, some of whom were minors.”  Id.  Colonel Johnston, the owner and head of Kemper Military Academy lived in the school building.  He had the “primary duty of ideally developing the mind, manners, and morals of his pupils.”  The cadets and teachers had access to the apartments which were set apart for the family.  Mrs. Johnston was in charge of the Kemper home department.  One of the son’s was an officer and student at the school.  One of the daughters was the general assistant to her mother.  Id.  The Court found that Colonel Johnston and his family residing within the same building as the cadet, other officers and servants did not negate the buildings exclusive use for school purposes.

The present appeals are distinguishable from Spillars, in that, the subject properties are separate, apart, and distinct from the dormitories which house the students of Complainant.  The current appeals do not involve properties which have both educational and incidental uses, such as in Spillars.  In the present appeals students do not utilize the subject properties.

In Midwest Bible & Missionary Institute v. Sestric, 364 Mo 167 (Mo. 1953), the Missouri Supreme Court cited the Spillars decision with approval.  In such case three properties were in question.  All were owned by the Complainant and all were located within a half block of the main school building.  All three properties were found to be exempt.  Complainant’s mission in such case was to afford “education and training for men and women who desire to study and know the Bible for a life of service as ministers, preachers, missionaries or as other faithful Christian workers who are competent too proclaim and effectually to teach the Gospel of the Lord Jesus Christ.” Id.  The three properties were offered for residence “to deserving out of town students whose financial situation was such that without such help they could not attend [the school] and have [the] type of instruction and environment that [the school] offers….”  Id.  One of the three buildings housed the school laundry, the office of the Superintendent of Women, and parlors used by all students for conferences, meetings and student events.  The second of three properties housed four faculty members and their families, along with 18 students.  The operating head of the school also lived in the building.  All faculty participated in the supervision and care of the students and conferred with the students regarding curricular, religious, moral and other matters within the schools province.  The faculty quarters were used for student conferences, committee meetings and faculty meetings.  The third of three properties housed 14 students and the Dean of Men, which supervised and looked after the students’ curricular interests.  School related meetings and conferences were held in the property.  All three properties involved students and faculty living under the same roof, where “the more learned mature and experienced faculty members influence and mod the daily thinking and conduct and life of the youthful student.”  Id.  The Court found that such arrangement promoted the ends to be achieved by the schools program.

The present appeals are distinguishable from Midwest Bible, in that, the subject properties do not involve students and faculty living under the same roof.  Moreover, as stated above, the current appeals do not involve properties which have both educational and incidental uses, such as in Spillars and now as in Midwest Bible.  In the present appeals students do not utilize the subject properties.

Specifically, when asked on cross-examination about the six subject properties, Geraci testified as follows:

  1. I think you’ve already testified on direct examination that no school events are held at these five residences, that’s true?
  2. That’s true.
  3. Okay. And no one is entertaining parents, donors or other members of the community at large at these residences; is that correct?
  4. Not at the current time.
  5. And in 2018, they did not?
  6. No.
  7. I think you already testified that 1305 East Liberty is a vacant lot.
  8. Correct.
  9. And there is no residence on that lot?
  10. Correct.
  11. And therefore, there is no member of the faculty living on that lot?
  12. That’s correct.
  13. And that would have been true for all of 2018?
  14. Right.
  15. As of January 1, 2018, that was true?
  16. Correct.

(Tr. 54:19-25; 55:1-16).

Complainant argues the subject properties which housed school employees allowed them to better respond to emergencies.  The benefit of close proximity of an organizations location is many times beneficial to an organization.  However, such fact alone does not make such use charitable or for an educational purpose.  President Geraci admitted that during nighttime hours, an acceptable staff to student ratio was 1:40 or 1:50 and that Complainant maintained an acceptable staff to student ratio with the Residential Faculty Officers in addition to the 7-8 faculty and/or staff which live in the barracks.

Complainant always has at least ten to eleven faculty members on campus and in the barracks for routine security. (Tr. 72-74). Until lights are out at 10:00 p.m., there are various additional faculty members present and working on campus. (Tr. 79:12-24). Each barracks has residential faculty members who live in the barracks. (Tr. 72-74).  During nighttime hours, an additional seven (7) or eight (8) faculty members and/or staff, if not on leave or not ill, are present in the barracks to respond to immediate problems that may arise and to maintain the efficient operation of the school. (Tr. 15:2-10; 29:22-24; 72-74). Complainant also has security cameras, phone systems, and LED lights, and faculty members on campus to perform various security monitoring tasks during the nighttime hours. (Tr. 23:3-7; 29:14-19).

The close proximity of the employees residing in the subject properties was and is not required for the school’s operation. Other than two employees, the Vice-President for Academics, Operations and Planning (Geraci at all pertinent times), and the Commandant of Cadets (Grabowski) the faculty members are not even required to live at the properties. (Tr. 174: 1-5).  Moreover, the testimony showed these officials may be on vacation or out of town at any given time, and only faculty members who were available would be the ones to respond if an emergency did occur and they were called to return to campus. (Tr. 34:3-12). Certainly, this arrangement is not comparable to being “on-call” in a traditional sense, and the primary and inherent use of the subject properties is not 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 dominant use of these properties is not for the benefit of an indefinite number of people and does not directly or indirectly benefit society generally.

In his testimony, President Geraci acknowledged that one of the reasons for purchasing the properties was to hold for future endeavors, and not for any current charitable or educational use in 2018:

The other reason was, was to–to buy up that property as–to have a buffer to essentially grow the campus on the front campus, to–to own all of that property, to create a buffer so that we could further develop that property, look at potentially additional faculty housing, or just to–to keep some of it as green space.  Because of its proximity to–and the activities of the rest of the housing, if–if you look at our–our facilities and the housing that surround us, there’s–there’s kind of a disconnect.  Those–Those houses are, you know, very old.  And–And many are in, you know, serious need of maintenance, just from outward appearance.  And they don’t present the type of image that our school does.  We invested, you know, millions of dollars into our front campus, new headquarters building, new academic building.  And so what we’re trying to do is extend the appearance of that campus as certainly part of our marketing, but demonstrating the high standards that we hold overall.

 

(Tr. 25-26)

 

Many of the residences were provided to employees as part of their employment offer, allowing faculty members to live there for free or at a reduced rent. (Tr. 47, 132, 175). In fact, in 2017 only one such person paid rent, and he paid rent at 50% of market value. (Tr. 175-176).

Complainant relied on Bethesda General Hospital v. State Tax Commission, 396 S.W.2d 631, 633 (Mo.1965) to support its position that the subject properties are exempt. Bethesda General Hospital was a case which involved on-call doctors and other personnel who were on call 24 hours per day. The Missouri Supreme Court held these employees were key personnel, necessary for the efficient operation of the hospital, and found that the properties were used exclusively for a charitable purpose. Id.  These appeals are distinguishable from Bethesda General Hospital. School employees living off campus are not “on-call” in the way a physician or nurse necessary for the efficient operation of a hospital.  A significant distinction exists between the present appeals and situations in which patients routinely arrive to the emergency department of a hospital at all times throughout a 24-hour period in the ordinary course of operation and the hospital must be staffed and prepared to respond accordingly. The nature of an emergency room at a hospital, which deals with emergencies as a routine matter of course has close nexus to emergency personnel being able to respond quickly to health care emergencies.  As stated in Bethesda, close-proximity of key-personnel is necessary for the hospital to operate.

Here, close-proximity of personnel living in five of the six subject properties is not required for the efficient operation of the school.  Of course, if an emergency arose, a school administer might be needed to respond, if available. This fact would be the same for any management job no matter the job and no matter whether the person was residing near work or far. If available, managers in most jobs occasionally respond to emergencies at the workplace in their off hours – a fact which does not equate to the educational use of the real property for purposes of the tax-exempt status of the real property.  Complainant’s focus on the job functions of the employees instead of the use of the real property is misplaced.  Here, these employees were not required to respond to every problem that arose in nonworking hours, especially given the employees which already resided in the barracks on campus, as well as the security team which are on-duty during nighttime hours to respond to emergencies.  The present case is unlike the situation where a physician is waiting for the pager to buzz for her next surgery. There was no policy requiring Complainant’s officials to respond, and their response time was not required for the efficient operation of the school as in the case of on-call doctors and nurses. The off-campus housing is simply a benefit to the individual employee by providing convenient and affordable housing and allowing employees to live close to campus in school-owned residential houses as a job perk.

The facts here are more analogous to Missouri East Annual Conference of the United Methodist Church v. Morton, 1993 WL 365289 (Mo.St.Tax.Com.). In Morton, the Executive Director for the Complainant and an ordained minister, were responsible for overseeing all the mission and ministry programming for the Missouri East Conference. He was provided a residence. The residence included an office and he held activities related to the church such as committee meetings of the Conference and meeting with individuals on personnel matters. Id. The Complainant cited Bethesda, and the STC stated, “the facts of the present appeal do not come close to comparing to the situation of a hospital and the requirement of employees being on 24-hour call.”

A similar conclusion was reached in Tabernacle of Love Evangelistic Church v. Snider, 1995 WL 411462 (Mo. St. Tax. Com. 1995), where a residence was provided to the church minister. The STC simply stated, “A parsonage is clearly not ‘actually and regularly used. . . for purposes purely charitable.’ A parsonage is provided as a residence to a minister as part and parcel of his compensation for the services rendered by him to a church. A parsonage does not meet the Franciscan test for a charitable exempt property.” Id.

Like the decisions in Morton and Snider, the fact that the Complainant provides residential living close to campus does not equate to tax-exemption. And the fact that school officials living close to campus occasionally respond to emergencies does not change the analysis. The facts here are entirely distinguishable and do not come close to comparing to the situation of a hospital and the requirement of employees being on 24-hour call. Complainant’s evidence was not substantial and persuasive to establish the six subject properties were tax-exempt on January 1, 2018.

ORDER

            The TVM for the subject properties as determined by the BOE are 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, or emailed to Legal@stc.mo.gov, and a copy of said application must be sent to each person 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 Audrain County, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an Application for Review, unless said taxes have been disbursed pursuant to a court order under the provisions of Section 139.031.8 RSMo.

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

SO ORDERED October 16, 2019.

STATE TAX COMMISSION OF MISSOURI

John Treu

Senior Hearing Officer