MIZPAH ASSISTED LIVING SERVICES, )
v. ) Appeal Number 00-10151
PHILIP A. MUEHLHEAUSLER, )
ACTING ASSESSOR, )
ST. LOUIS COUNTY, MISSOURI, )
DECISION AND ORDER
Assessment by Assessor that subject property was not tax exempt was sustained by St. Louis County Board of Equalization. Commission finds subject property to be exempt under Section 137.100(5), assessment SET ASIDE.
Complainant appeared by Counsels, Bryon E. Francis and Meredith M. Todd, St. Louis, Missouri.
Respondent appeared by Counsel, Edward W. Corrigan, Associate County Counselor, St. Louis County, Missouri.
Case heard and decided by Chief Hearing Officer, W. B. Tichenor.
The Commission takes this appeal to determine whether the subject real and personal property is exempt from taxation for the tax year 2000.
Complainant appeals the decision of the St. Louis County Board of Equalization. Respondent assessed the subject real and personal property. This assessment was sustained by the Board of Equalization. Complainant contends that the subject property is exempt from taxation under the provisions of Section 137.100(5).
An evidentiary hearing was conducted on August 6, 2002, before W. B. Tichenor, Chief Hearing Officer, at the St. Louis County Government Center, Clayton, Missouri. On September 16, 2002, Attorneys for Complainant filed Complainant’s Brief. On October 16, 2002, Attorney for Respondent filed Respondent’s Brief. Attorneys for Complainant filed Complainant’s Reply Brief on November 6, 2002.
The Commission, having considered all of the competent evidence upon the whole record and the Briefs filed by the parties, enters the following Decision and Order.
FINDINGS OF FACTS
1. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the St. Louis County Board of Equalization.
2. The subject property consists of real and personal property located at 11325 St. Charles Rock Road, Bridgeton, Missouri, locator number 12M511354, at the facility otherwise known as Mizpah Manor (Property).
3. The Property is used for the sole purpose of providing residential assisted living for the elderly to the community, consistent with the purpose set forth in the Articles of Incorporation of Complainant (Mizpah). Said purpose including:
“To provide elderly and handicapped persons with housing facilities and living services specially designed to assist them in meeting their physical. Social, health, security and psychological needs; to furnish such goods and services as may be deemed by Corporation to be necessary and appropriate in providing assisted living assistance to such persons, and, at all times, to operate such facilities and to provide such services in a charitable, not-for-profit manner, consistent with Section 501(c)(3) of the Internal Revenue Code, or its successor Section.”
4. Mizpah is a not-for-profit corporation under the laws of the State of Missouri and a 501(c)(3) tax exempt entity under the Internal Revenue Code. Exhibits A & C.
5. The Property is owned and operated on a not-for-profit basis. It is actually and regularly used exclusively for its stated corporate charitable purpose. The dominate use of the Property benefits an indefinite number of people and directly and indirectly benefits society in general.
6. Complainant’s evidence was substantial and persuasive to rebut the presumption of correct assessment by the Respondent and Board of Equalization and establish the exempt status of the Property.
CONCLUSIONS OF LAW
The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious. Article X, Section 14, Missouri Constitution of 1945; Constitution of 1945; Sections 138.430, 138.460(2), RSMo.
Burden of Proof
Complainant has the burden to present substantial evidence to rebut the presumption of correct assessment by the Board of Equalization. Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 895 (Mo. banc 1978). In order to meet this burden in an appeal seeking exemption from taxation, the Complainant must meet the substantial burden to establish that the property falls within an exempted class under the provisions of Section 137.100. State ex rel. Council Apartments v. Leachman, 603 S.W.2d 930, 931 (Mo. 1980). It is well established that taxation is the rule and exemption from taxation is the exception. Exemption is not favored in the law. (See, Missouri Church of Scientology v. STC, 560 S.W.2d 837, 844 (Mo. banc 1977); CSCEA v. Nelson, 898 S.W.2d 547, 548 (Mo. banc 1995), citing Scientology). Complainant seeks exemption of its property from taxation pursuant to Section 137.100(5):
The following subjects are exempt from taxation for state, county or local purposes:
(5) All property, real and personal, actually and regularly used exclusively for … purposes purely charitable and not held for private or corporate profit, except that the exemption herein granted does not include real property not actually used or occupied for the purpose of the organization but held or used as investment even though the income or rentals received therefore is used wholly for — charitable purposes;
Franciscan Tertiary Test
In meeting its burden of proof that the subject property is used “exclusively for … purposes purely charitable, and not held for private or corporate profit….” Complainant must meet the three prong test set forth by the Missouri Supreme Court in Franciscan Tertiary Province v. STC, 566 S.W.2d 213, 223-224 (Mo. banc 1978). The court said:
The first prerequisite for property to be exempt as charitable under Section 137.100 is that it be owned and operated on a not-for-profit basis. It must be dedicated un-conditionally to the charitable activity in such a way that there will be no profit, presently or prospectively, to individuals or corporations. Any gain achieved in use of the building must be devoted to attainment of the charitable objectives of the project…. [A]n exemption will not be granted covering property which houses a business operated for the purpose of gaining a profit, even though it is turned over to a parent organization to be used for what are admittedly independently…charitable purposes.
The requirement that the property must be operated as a not-for-profit activity does not mean that it is impermissible for the project at times or even fairly regularly to operated in the black rather than on a deficit basis, provided, of course, that any such excess of income over expenses, is achieved incidentally to accomplishment of the dominantly charitable objective and is not a primary goal of the project, and provided further that all of such gain is devoted to the charitable objectives of the project.
Another prerequisite for charitable exemption is that the dominant use of the property must be for the benefit of an indefinite number of people, for the purpose, as expressed in Salvation Army, of “relieving their bodies of disease, suffering, or constraint…or by erecting or maintaining pubic buildings…lessening the burdens of government.” 188 S.W.2d at 830…. Thus it is required that there be the element of direct or indirect benefit to society in addition to and as a result of the benefit conferred on the persons directly served by the humanitarian activity.
Id. At 224.
The three tests to be met under Franciscan are:
1. Property must be owned and operated on a not-for-profit basis;
2. Property must be actually and regularly used exclusively for a charitable purpose; and
3. Property must be used for the benefit of an indefinite number of persons and for society in general, directly or indirectly.
In December 2000, Mizpah Assisted Living Services, Inc. (hereinafter “Mizpah”) appealed the final decision of the Board of Equalization of St. Louis County to this Commission with respect to the tax exempt status of both the real and personal property owned by Mizpah located at 11325 St. Charles Rock Road, Bridgeton, Missouri (the AProperty). The Board of Equalization determined that the Property was not exempt from ad valorem taxation. Mizpah timely appealed the decision of the Board of Equalization to this Commission on the grounds that the Property is exempt from ad valorem taxation pursuant to Section 137.100(5), RSMo 2000.
After the filing of Mizpah’s complaint in this case, Respondent served on Mizpah its first set of interrogatories. Mizpah filed its answers to these interrogatories on May 30, 2001. Respondent then served upon Mizpah requests to produce documents and the parties thereafter conducted depositions of certain witnesses. Following document discovery and depositions, Mizpah filed the written direct testimony of Edith Brady, Mary Alice Ryan, Jan Schmitt and Mark Christopher Buckley. Respondent filed the written direct testimony of Ruth Sansone and Michael J. Duncan. Mizpah objected to the testimony of Ms. Sansone and Mr. Duncan and to Exhibits 150 through 161 and 164 and 165. This Commission sustained such objections by order dated May 2, 2002, and ordered the testimony and exhibits stricken from the record.
Complainant’s exhibits are listed in Appendix A attached hereto and incorporated by reference.
Respondent’s exhibits are listed in Appendix B attached hereto and incorporated by reference.
(Editor’s note – because of the length of Appendix A and Appendix B, they are not reprinted here. For a copy of the Appendices, please contact the State Tax Commission).
By order dated March 18, 2002, the parties then each filed a pre-hearing brief and a proposed stipulation of uncontested facts and facts in dispute. The Commission then held an evidentiary hearing with respect to this matter on August 6, 2002, in St. Louis County, Missouri. At the conclusion of the hearing, the Chief Hearing Officer ordered the parties to file written post-hearing briefs.
The sole issue before the Commission is whether Mizpah’s Property is exempt from ad valorem taxation under Section 137.100(5), RSMo 2000.
STANDARD OF REVIEW AND BURDEN OF PROOF
The Commission has the jurisdiction to hear this appeal because Mizpah timely appealed to this Commission from the decision of the St. Louis County Board of Equalization.
In order to prevail, Mizpah has the burden of showing by substantial evidence that the Property is one of the exempt classes of property enumerated in Section 137.100, RSMo 2000. City of St. Louis v. State Tax Commission, 524 S.W.2d 839, 844 (Mo. banc 1975). Substantial evidence is that evidence which, “if true, has probative force upon the issues . . .; it is evidence of a character sufficiently substantial to warrant the trier of facts in finding from it the facts.” Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959) (citing Collins v. Division of Welfare, 270 S.W.2d 817, 820 (Mo. 1954)).
Section 137.100(5) provides that “all property, real and personal, actually and regularly used exclusively for . . . purposes purely charitable and not held for private or corporate profit” shall be exempt from taxation. The Supreme Court of Missouri has established a three prong test in Franciscan Tertiary Province of Missouri, Inc. v. State Tax Commission that owners of real and personal property must establish in order for their property to be exempt pursuant to the charitable exemption set forth in this statute. 566 S.W.2d 213, 224 (Mo. banc 1978).
First, the property must be owned and operated on a not-for-profit basis. Id. at 224. Second, the property must be actually and regularly used exclusively for a charitable purpose. Id. at 224. Third, the dominant use of the property must be for the benefit of an indefinite number of people and must directly or indirectly benefit society generally. Id. at 224.
The evidence presented by Mizpah throughout this appeal proves that Mizpah meets each of the foregoing elements established in Franciscan.
Owned and Operated on a Not-for-Profit Basis
The first element satisfied by Mizpah is that the Property is owned and operated on a not-for-profit basis. In Franciscan, the Supreme Court stated that the property in dispute “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.” Id. at 224. Mizpah has produced evidence that it is a not-for-profit corporation under both state law and federal law and that no part of the net earnings of Mizpah shall inure to the benefit of any private individual. Exhibits A & C. Any profits made by Mizpah are required to be devoted to Mizpah’s charitable purpose according to Mizpah’s charter and the Internal Revenue Code. Exhibit A; I.R.C. Section 501(c)(4)(B). In addition, Mizpah’s policy of providing continued care to its indigent residents provides that a portion of any profits made by Mizpah shall be devoted directly to subsidizing the rent of its indigent residents. Exhibit P.
Respondent has argued that because the property is managed by St. Andrews Management Services, Inc., a for-profit corporation (“STAMS”), the property is not operated on a not-for-profit basis. Respondent’s argument is incorrect. Many for-profit corporations profit from a facility that is operated on a not-for-profit basis. The test is not whether another entity profits from the not-for-profit but whether any revenues that are generated by the not-for-profit are “devoted to the charitable objectives of the project.” Id. at 224.
First, Mizpah is not profitable and has never made a profit. Exhibit KK. Second, Mizpah has never paid STAMS the management fee since the facility has been opened because Mizpah is not generating enough revenue to make the payment. Exhibit KK. Furthermore, in exchange for the fees to be paid to STAMS, STAMS provides basic services to Mizpah, such as personnel administration and accounting services, that all companies, including Mizpah, require in order to properly operate their businesses. Exhibit O. Moreover, according to the testimony of Mary Alice Ryan, the President and Chief Executive Officer of STAMS, this fee was established in order for STAMS to cover its expenses for providing the services to Mizpah. Tr. p. 21. The fee was not established to take the profits, if any, from Mizpah.
Actually and Regularly Used Exclusively for Charitable Purposes
The second element that Mizpah has satisfied is that the Property is actually and regularly used exclusively for purposes that are purely charitable. Franciscan, 566 S.W.2d 213, 224. The Supreme Court of Missouri has defined charity as “a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing the residents 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; as well as humanitarian activities, rendered at cost or less, which are intended to 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 they will become useful citizens.” Id. at 220 (citing Salvation Army v. Hoehn, 188 S.W.2d 826 (Mo. banc 1945)). The provision of housing to the elderly by not-for-profits “rises to a charitable purpose and tax exempt status if the same is available to both rich and poor.” Cape Retirement Community, Inc. v. Kuehle, 798 S.W.2d 201, 203 (Mo. App. E.D. 1990) (citing Evangelical Retirement Homes of Greater St. Louis, Inc. v. State Tax Commission, 669 S.W.2d 548, 554 (Mo. 1984)).
Mizpah owns and operates a licensed residential assisted living facility for the elderly that consists of thirty 463 square foot studio apartments. Exhibits M & L. Mizpah provides assisted living space, as well as social and educational activities to both the rich and poor. Mizpah has never denied access to anyone based upon the inability to pay its rent. Exhibit II. It is true that of the thirty rooms that are available to rent, Mizpah has only provided rental assistance for two of its residents in the tax year 2001. Exhibit FF. However, a facility may accept payment from those individuals that are able to pay, provided that they extend admission “to the usual and ordinary number of indigent patients applying for admission.” Community Memorial Hospital v. City of Moberly, 422 S.W.2d 290, 295 (Mo. 1967). Furthermore, in addition to the two residents that Mizpah provided rental assistance to in the year 2001, Mizpah agreed to extend rental assistance to a third resident. Exhibit CC.
The Dominant Use of the Property is for the Benefit of an Indefinite Number of People
The third and final element, which Mizpah has satisfied, is that the dominant use of the Property is for the benefit of an indefinite number of people, regardless of race, color, national origin, handicap, sex, age, or religious affiliation. Franciscan, 566 S.W.2d 213, 224. To explain the meaning of the third element, the Supreme Court stated that “it is required that there be the element of direct or indirect benefit to society in addition to and as result of the benefit conferred on the persons directly served by the humanitarian activity.” Id.
Mizpah provides an indirect benefit to society by lessening the burden on government. Mizpah provides rental assistance to elderly individuals who would no longer be able to reside at Mizpah, but for the financial assistance provided by Mizpah. Although these residents are not destitute and may be able to find facilities other than Mizpah in which to reside, the assistance provided by Mizpah reduces the likelihood that these individuals will need to receive public assistance in the future.
In Franciscan, the Supreme Court, in granting the exemption, noted that the residents “assets were so limited that, absent availability of low cost quarters…their assets could have been depleted quickly so as to place them in public housing or, if not so placed, in substandard housing under conditions conducive to increasing the problems of government and society.” Id. at 225.
The following is a list of the income and assets of the individuals that were granted assistance: (i) H.E. was granted assistance in January 2001 and at such time had a monthly income of approximately $930 per month and assets around approximately $74,000; (ii) D.S. was granted assistance on July 24, 2001 and around September 2000 had a monthly income of approximately $1,200 per month and assets of $19,000; and (iii) R.W. was granted assistance in November 2001 and as of April 2000 had a monthly income of approximately $1,200 per month and assets of approximately $50,000. Exhibits Q, S, T, Y BB, Cc & DD.
Without the assistance that Mizpah has provided, each of these individuals would have to find an assisted living facility at which to reside other than Mizpah. With the level of income and assets of these individuals, each individual may be able to find an assisted living facility in which each could reside without public assistance for a period of time. However, the living conditions would most likely be substandard. The rates that Mizpah charges to most of its residents are market rates for an assisted living facility in that area of St. Louis County. Exhibits 60 & 61. In exchange for the payment of rent, residents are provided with a small studio apartment, three meals a day and other basic necessities that are typically provided by an assisted living facility. Exhibit II. If any one of the residents that was granted assistance by Mizpah had to find an assisted living facility at which to reside in St. Louis County, the facility that each of these individuals could afford would probably be in a substandard condition.
On the other hand, even if each of these individuals was able to find a facility in which to reside that was not substandard and that did not require the receipt of any public assistance, each individual would likely have to use his or her assets to pay a portion of the rent at such facility. The assets of these individuals are so limited that their assets would likely be depleted at such a rate that each would probably have to receive some type of public assistance in the future, thus increasing the burden on government and society.
Respondent has argued in its pre-hearing brief that Mizpah should be denied an exemption because Mizpah’s standard application requests financial information and this evidences Mizpah was screening individuals for their ability to pay. This argument is correct in that it does evidence that Mizpah was screening applicant’s for their ability to pay. However, the screening was to ensure that if an individual could pay that he or she would pay and that if an individual was not able to pay that he or she was told about Mizpah’s policy to provide individuals with financial assistance. Tr. p. 60; Exhibit LL.
Respondent cites Cape Retirement v. Kuehle in support of its argument that Mizpah is not exempt from ad valorem taxation because Mizpah requests financial information. 798 S.W.2d 201 (Mo. App. E.D. 1990). The facts in this case are different than those in Cape Retirement. In Cape Retirement, the court denied the facility’s exemption because residents were not admitted to the facility without the payment of a “one-time life occupancy and membership fee,” and because the application procedure utilized in Cape Retirement was structured so that the facility could determine if the resident could pay this fee. Id. at 220. Mizpah does not require a resident to pay an initial endowment prior to entering the facility, and as stated previously, does not request an individual’s financial information as a way to exclude the poor from entering the facility. Tr. p. 82.; Tr. p. 60.
Furthermore, the fact that Mizpah did not provide any rental assistance in the year 2000 should not preclude Mizpah from being exempt from ad valorem taxation. In Abbot Ambulance, Inc. v. Leggett, the construction of a facility that was to be used for charitable purposes in the future was found to be tax exempt from ad valorem taxation. 926 S.W.2d 92 (Mo. App. E.D. 1996). A similar argument can be made with respect to Mizpah. The construction and use of Mizpah in the year 2000 was in furtherance of Mizpah’s charitable purpose. Mizpah has always had a policy of providing financial assistance to the elderly since its inception. Exhibit II. The only reason Mizpah did not provide any assistance in the year 2000 was because it did not receive any requests for assistance. Exhibit II. Mizpah is not to be denied exemption simply because it did not receive any requests for financial assistance in the year 2000.
Furthermore, courts have found that entities may be exempt from taxation even though they did not provide financial assistance in some years. Callaway Community Hospital v. Craighead, 759 S.W.2d 253, 256 (Mo. App. W.D. 1988) (citing Community Memorial Hospital v. City of Moberly, 422 S.W.2d 290, 295 (Mo.1967)). This provides further support that Mizpah should not be denied an exemption from ad valorem taxation because it did not provide financial assistance in the year 2000.
RESPONDENT’S ARGUMENTS NOT PERSUASIVE
In his brief, Respondent has argued that Mizpah has failed to meet its burden to demonstrate that the subject property:
(1) is actually and regularly used exclusively for purposes purely charitable;
(2) is owned and operated on a not-for-profit basis; and
(3) the dominant use of the Property directly or indirectly benefits society generally.
Respondent’s arguments that Mizpah does not meet these requirements are without merit. Moreover, Respondent’s arguments are based upon a misconstruction of the evidence presented to the Commission and/or a misapplication of the applicable case law in Missouri with respect to charitable exemptions.
The Property is actually and regularly used exclusively for purposes purely charitable.
In his brief, Respondent ignores several fundamental arguments raised by Mizpah which are dispositive of the first element for exemption. First, it has been clearly established by the Missouri Court of Appeals that the provision of housing to the elderly by not-for-profits “rises to a charitable purpose and tax exempt status if the same is available to both rich and poor.” Cape Retirement Community, Inc. v. Kuehle, 798 S.W.2d 201, 203 (Mo. App. E.D. 1990) (citing Evangelical Retirement Homes of Greater St. Louis, Inc. v. State Tax Commission, 669 S.W.2d 548, 554 (Mo. 1984)). Respondent argues that Mizpah failed to prove that Mizpah serves both the rich and poor at its facility. However, Mizpah introduced the following evidence that the Property is available to both the rich and poor:
(1) Mizpah has never denied a resident’s application because of the inability of an individual to pay the rental rates established by Mizpah;
(2) Mizpah has a policy to provide financial assistance to its indigent residents; and
(3) pursuant to its policy, Mizpah has granted rental assistance to three residents with limited income and assets since its inception. Exhibits P, Q, S, T, Y, BB, CC, DD and II.
Respondent also argues that the individuals to whom Mizpah has granted rental assistance are not destitute or poor. It is true that these individuals are not destitute or poor in that they have a modicum of income and assets. However, these individuals meet the test established by the Supreme Court in that their “assets [are] so limited that, absent availability of low cost quarters…their assets could have been depleted quickly so as to place them in public housing or, if not so placed, in substandard housing under conditions conducive to increasing the problems of government and society.” Franciscan Tertiary Province of Missouri, Inc. v. State Tax Commission, 566 S.W.2d 213, 225 (Mo. banc 1978).
Respondent further argues that because Mizpah’s rental rates are driven by the market, Mizpah is not charitable. The test established by Missouri case law is clear that a facility may accept payment from those individuals that are able to pay provided that they extend admission “to the usual and ordinary number of indigent patients applying for admission.” Community Memorial Hospital v. City of Moberly, 422 S.W.2d 290, 295 (Mo. 1967). There is no preclusion under Missouri law that a facility is prevented from marketing to those individuals that can pay provided that they do not prevent those individuals that cannot pay from being admitted to the facility. Mizpah clearly meets this test.
This leads to Respondent’s next argument that Mizpah is not actually and regularly used for purposes purely charitable because Mizpah’s admission process requires potential residents to disclose their financial information. Respondent argues that this process is meant to screen potential residents and to prevent admission to those that are unable to pay Mizpah’s rental rates. Respondent’s argument is without merit. The evidence is to the contrary. Mizpah requests financial information prior to admission to determine whether a potential resident is entitled to charitable assistance. Tr. p. 60. Certainly, charging a wealthy individual a reduced rental rate would not be charitable. Ms. Edith Brady testified without contradiction that the purpose of the request was to determine who must pay the full rental rate and not so that the poor could be excluded from admission to Mizpah. Tr. p. 60. How would a facility be able to learn of a potential resident’s financial need without requesting financial information. In order to determine that need, financial information must be disclosed.
In addition, Respondent cites to a recent State Tax Commission case to support its contention that Mizpah should be denied a charitable exemption; however, this case is distinguishable from the Mizpah case. RLDS Church, d/b/a White Oak Living Center v. Robert Boley, Director of Assessment, Jackson County, Missouri, STC Appeal Numbers 99-30060 and 99-30061. In White Oak, the facility denied admission to some residents due to an inability to pay its rental rates. Also, the facility in White Oak failed to produce information regarding two of the three individuals to whom the facility had granted rental assistance. Accordingly, the Commission found that it could not determine whether this assistance benefited society. As previously determined and unlike the facility in White Oak, Mizpah has never denied admission to anyone due to an inability to pay, and Mizpah has produced information regarding the income and assets of each of its subsidized residents.
Accordingly, as previously determined, Mizpah has satisfied its burden of proof that the Property is actually and regularly used exclusively for purposes purely charitable.
The Property is Owned and Operated on a Not-for-Profit Basis.
Respondent asserts that Mizpah has failed to prove that the Property is owned and operated on a not-for-profit basis.
Respondent first contends that the use of the Property is similar to the sale of merchandise involved in Sunday School Board of the Southern Baptist Convention v. Mitchell, and thus, is not owned and operated on a not-for-profit basis. In Sunday School Board of the Southern Baptist Convention however, the court denied an exemption because all merchandise at the bookstore was sold at market rates except that churches were allowed a twenty percent discount. 658 S.W.2d 1, 6 (Mo. banc 1983). The court found that this did not rise to the level of charity because no one was provided merchandise at or below cost. Id.
However, the Mizpah situation is distinguishable because it has provided rooms at or below cost to at least three individuals. Exhibits Q, S, T, Y, BB, CC & DD. Mizpah’s financial statements show expenses of $715,738.00 and $796,010.00 for the years 2000 and 2001, respectively. Exhibits 26a & 40. In order to break-even, Mizpah must charge each resident approximately $2,200.00 per month assuming rentals are at full capacity. The evidence presented shows that Mizpah has rented rooms to individuals well below this breakeven rate or Mizpah’s cost of renting its rooms. Exhibits Q, S, T, Y, BB, CC & DD.
In addition, Respondent argues that Mizpah is not operated on a not-for-profit basis because it pays a management fee to St. Andrews Management Services (STAMS). Respondent’s argument ignores reality and misstates and misconstrues the facts of the record. Mizpah pays this fee to STAMS in exchange for services, such as personnel administration and accounting services, that all companies, including Mizpah, require in order to properly operate their businesses. Exhibit O. If Mizpah did not pay this fee to STAMS, Mizpah would have to hire the personnel to perform these functions or would have to hire another management company to perform these functions. Tr. p. 14. The nature of Mizpah’s business requires these services. Furthermore, Ms. Mary Alice Ryan has testified that the fee charged to Mizpah was established in order for STAMS to cover its expenses for providing these services to Mizpah and not to make a profit. Tr. p. 21.
Respondent also argues in his brief that Mizpah has paid this management fee to STAMS. However, the testimony of Mr. Christopher Buckley is clear that Mizpah has never paid this fee. Tr. p. 39. Moreover, Mr. Buckley testified that the financial statements for Mizpah are prepared on an accrual basis and not a cash basis, and that anything to the contrary in the tax or financial records were in error. Tr. p. 38. Mizpah has not paid the fee, because it has not generated sufficient income to be able to pay the fee.
Mizpah has clearly demonstrated that it meets the second element required to obtain a charitable exemption.
The Dominant Use of the Property Directly or Indirectly Benefits Society Generally.
Respondent finally suggests that the dominant use of the Property does not directly or indirectly benefit society.
Respondent contends that the rental assistance that Mizpah has granted, if any, is de minimis, and that the amount of any charity dispensed by Mizpah is unknown. These statements ignore the evidence before the Commission. Mizpah has been operating at a loss since its inception and despite this fact has reduced the rental rates from $2,400.00 per month for the following three individuals as follows: D.S.- reduced to $1,200.00 per month; R.W.- reduced to $1,300.00 per month; and H.E.- reduced to $1,500.00 per month. Exhibits BB, CC & DD. In addition, as stated above, the cost of maintaining an individual at the property is approximately $2,200 per month, well above the rate at which Mizpah set the rental rates for these three residents.
Respondent further contends that of the three individuals that were granted rental assistance, two of the residents were forced to leave the facility because “presumably” these individuals could not afford the subsidized rental rates. The evidence presented does not support Respondent’s “presumption.” Ms. Brady testified that one resident moved out for family reasons and the second resident’s reason for moving was never mentioned. Tr. p. 77 and p. 78. Respondent’s argument on this point is based upon a misconstruction of the facts.
Furthermore, there is no foundation in the law to support Respondent’s argument that Mizpah should be denied a charitable exemption because it charges its subsidized residents amounts greater than their incomes. “While all needy people are low-income; not all low-income people are needy.” White Oak, p. 6. Accordingly, Mizpah reviews both the income and assets of its residents in setting their rates. Exhibit II. If a resident has assets that are sufficient to pay a portion of the rent, Mizpah will charge a rate over that resident’s income. The purpose of Mizpah’s charity is to provide charity to residents that have such limited assets that “absent availability of low cost quarters…their assets [would be] depleted quickly so as to place them in public housing or, if not so placed, in substandard housing under conditions conducive to increasing the problems of government and society.” Franciscan, 566 S.W.2d at 225.
Finally, the fact that Mizpah did not provide any rental assistance to its residents in the year 2000 is not a factor which is sufficient to deny Mizpah’s request for charitable exemption. Mizpah has always had a policy of providing financial assistance to the elderly since its inception. It did not provide assistance in the year 2000 because it did not receive any requests. Exhibit II. The first request Mizpah received for assistance was in January 2001, at which time, Mizpah granted the assistance. Exhibit BB. In Abbot Ambulance, Inc. v. Leggett, the court stated that “activities in preparation for the rendition of charitable services are either charitable uses or they are not; the imminence of the rendition of charitable services is immaterial.” 926 S.W.2d 92, 96 (Mo.App.E.D. 1996). Mizpah has produced evidence that it has provided charitable services. The fact that it was not able to provide assistance in 2000 is not the controlling factor in making a determination on Mizpah’s request for exemption, because as the court stated in Abbott “the imminence of the rendition of charitable services is immaterial.” Id.
For all of the reasons set forth above, Mizpah is exempt from the ad valorem taxes levied by St. Louis County, Missouri. The denial of Mizpah’s appeal by the St. Louis County Board of Equalization is set aside and the Property is found to be exempt from ad valorem taxes.
The assessment of the subject property made by the Assessor and sustained by the Board of Equalization for St. Louis County for the subject tax day is SET ASIDE.
The assessor is ordered to enter the subject property on the list of exempt property into the supplemental tax book for the county for the tax year 2000.
A party may file with the Commission an application for review of this decision within thirty (30) days of the mailing of such decision. The application shall contain specific grounds upon which it is claimed the decision is erroneous. Failure to state specific facts or law upon which the appeal is based will result in summary denial. Section 138.432, RSMo 1994.
If an application for review of this decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission. If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of St. Louis County, as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal. If any or all protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.
Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed. Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.
SO ORDERED December 10, 2002.
STATE TAX COMMISSION OF MISSOURI
Chief Hearing Officer
AFFIRMING HEARING OFFICER DECISION
UPON APPLICATION FOR REVIEW
On December 10, 2002, Chief Hearing Officer W. B. Tichenor entered his Decision and Order (Decision) setting aside the assessment by the St. Louis County Assessor which had been sustained by the St. Louis County Board of Equalization and the St. Louis County Council and finding the subject property to be tax exempt under Missouri statutory and case law.
Respondent timely filed his Application for Review of the Decision (January 9, 2003). Complainant timely filed its Response in Opposition to the Application for Review (February 12, 2003). Both parties had briefed the issue of exemption in post hearing briefs, which were considered by the Hearing Officer in rendering his Decision.
The Hearing Officer as the trier of fact may consider the evidence on the record and give it as much weight and credit as he may deem it entitled to when viewed in connection with all other circumstances. St. Louis County v. Boatmen’s Trust Co., 857 S.W.2d 453, 457 (Mo. App. E.D. 1993); Vincent by Vincent v. Johnson, 833 S.W.2d 859, 865 (Mo. 1992); Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. banc 1981).
A review of the record in the present appeal provides support for the determinations made by the Hearing Officer. There is competent and substantial evidence to establish a sufficient foundation for the Decision of the Hearing Officer. A reasonable mind could have conscientiously reached the same result based on a review of the entire record. The Commission finds no basis to support a determination that the Hearing Officer acted in an arbitrary or capricious manner or 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 appropriately applied the relevant statutory and case law concerning exemption from taxation in this case. He did not err in his determinations as challenged by Complainant.
The Commission upon review of the record and Decision in this appeal, finds no grounds upon which the Decision of the Hearing Officer should be reversed or modified. Accordingly, the Decision is affirmed.
Judicial review of this Order may be had in the manner provided in Sections 138.470 and 536.100 to 536.140, RSMo within thirty days of the date of the mailing of this Order.
SO ORDERED March 19, 2003.
STATE TAX COMMISSION OF MISSOURI
Sam D. Leake, Chairman
Bruce E. Davis, Commissioner
Jennifer Tidwell, Commissioner