State Tax Commission of Missouri
|NORTHWEST HEALTH SERVICES, INC.||)|
|v.||)||Appeal Nos.||16-60500 through 16-60503|
|LADONNA JONES, ASSESSOR||)|
|HOLT COUNTY, MISSOURI,||)|
DECISION AND ORDER
At the beginning of the Evidentiary Hearing on these appeals, Northwest Health Services, Inc. (Complainant), counsel for Complainant dismissed appeals 16-60500 and 16-60502. Consequently, pursuant to this Decision, appeals 16-60500 and 16-60502 are DISMISSED.
Decisions of the Holt County Board of Equalization (BOE) regarding appeals 16-60501 and 16-60503 are AFFIRMED. Complainant failed to present substantial and persuasive evidence establishing the property is exempt under Article X, Section 6 of the Missouri Constitution.
Complainant appeared by John Lentell.
Ladonna Jones, Assessor of Holt County, Missouri (Respondent) appeared by Robert Shepherd.
Appeal heard and decided by Senior Hearing Officer John Treu (Hearing Officer).
Complainant appealed on the grounds of exemption regarding real property and personal property.
Complainant filed the following Written Direct Testimony (WDT) and Exhibits:
|WDT||Lauri Poe, Dir. of Prop. Tax for BKD, LLP (works with clients such as Complainant.)|
|A||Holt County Application for Property Tax Exemption|
|B||IRS Letter Granting Complainant 501(c)(3) Status|
|C||Articles of Incorporation and Amended Articles of Incorporation|
|D||Amended and Restated Bylaws|
|E||Document Prepared by Witness Lauri Poe|
|F||Income and Expense Statement of Complainant|
The WDT and Exhibits were admitted into the evidentiary record.
As set forth in the WDT of Lauri Poe, Lauri Poe is the Director of Property Tax for BKD, LLP, which works with clients such as Complainant. BKD, LLP was retained by Complainant to provide accounting services to Complainant and to review their ad valorem tax situation. At the evidentiary hearing a correction was made to the WDT of Poe to remove a statement that “I toured the properties.”
The WDT of Poe states that Article I, Paragraph D of the Bylaws of Complainant “specifically states that services are to be provided regardless of financial or cultural barrier.” The Amended and Restated Bylaws of Complainant has no paragraph D. However, Article I of such states “[t]he mission of [Complainant] is to improve the health status of our patients by providing comprehensive quality primary health care services to people in the communities we serve regardless of language, financial or cultural barriers, or other impediments to obtaining health care.”
Respondent filed her WDT. Respondent’s WDT stated that due to Complainant’s failure to provide documentation regarding its non-profit status, she could not conclusively determine that the subject properties were used solely for charitable purposes. Her WDT also stated that the Secretary of State website indicates that Dr. Samantha Sutton, DDS, LLC, a provider to Complainant, is a for-profit entity
FINDINGS OF FACT
- Jurisdiction. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the County BOE.
- Identification of Subject Property. The subject real property and personal property are located at 1303 State Street, Mound City, Missouri, Holt County. The real property is identified by map parcel number 09-9-31-03-13-01.000 and the personal property is identified by account number 2-2877. (Complainants for Review of Assessment)
- Complainant. Complainant is a not-for-profit, 501(c)(3) entity. (Ex. B). It operates medical clinics in various locations, including Mound City, Missouri. (Complainant’s Bylaws)
- Taxation of the Property. The evidence was not substantial and persuasive to establish the property qualifies as exempt under Article X, Section 6 of the Missouri Constitution on January 1, 2016.
CONCLUSIONS OF LAW AND DECISION
The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious. 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.
Presumption In Appeal
There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization. Hermel, Inc. v. STC, 564 S.W.2d 888, 895 (Mo. banc 1978); Chicago, Burlington & Quincy Railroad Co. v. STC, 436 S.W.2d 650, 656 (Mo. 1968); May Department Stores Co. v. STC, 308 S.W.2d 748, 759 (Mo. 1958). This presumption is a rebuttable rather than a conclusive presumption. The presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish that the Board’s valuation is erroneous and what the fair market value should have been placed on the property. Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).
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.
The legal test for a charitable exemption is whether:
(1) The property is dedicated unconditionally to the charitable activity;
- The property is owned and operated on a not for profit basis; and
- The dominant use of the property is for the benefit of an indefinite number of people and directly or indirectly benefits society generally. Franciscan Tertiary Province of Missouri v. State Tax Commission, 566 S.W.2d 213, 224 (Mo Banc 1978); Twitty v. State Tax Commission, 896 S.W.2d 680, 684 (Mo. App. S.D. 1995).
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). This does not mean that the property or charity cannot operate “in the black.”
Complainant owns the subject properties as a not-for-profit entity; however, Complainant failed to present evidence establishing it operates on a not-for-profit basis. In the present appeals, Poe was unable to answer how the medical provider (Dr. Samantha Sutton) is compensated. Respondent presented evidence indicating that Sutton, LLC is a for profit entity. In Tri-State Osteopathic Hospital Association v. Blakeley, 898 S.W.2d 693 (Mo. App. S.D. 1995), the Court found a contract provision that a physician be paid a percent of net profit was not consistent with the requirement to be “dedicated unconditionally to charitable activities so that there will be no profit, at least prospectively, to individuals or corporations as required under the Franciscan interpretation,” as the profit sharing provision indicated a prospective profit motivation. Consequently, Complainant has not proven this element.
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); Missouri United Methodist Retirement Homes v. State Tax Commission, 522 S.W.2d 745 (Mo. 1975).
In the present appeals, Poe was unable to answer what percentage of patients that go to Complainant for medical needs pay market rates (versus those who pay nothing, a reduced rate, etc.). Although Complainant offered its Articles of Incorporation, its Amended Articles of Incorporation and its Amended and Restated Bylaws, such do not prove actual usage, but instead only set forth intention and purpose. Complainant has the burden of proving through substantial and persuasive evidence the actual use of the property. Complainant did not put forth such evidence.
The WDT of Poe largely constitutes hearsay. She is not an employee of Complainant. Instead, she is an employee of BKD, LLP. BKD, LLP is an accounting firm which Complainant retained. Poe has not personally toured the property and she did not testify that she has personally viewed the day-to-day operations of Complainant. Poe also did not testify about how Complainant advertises or whether patients are ever turned away due to inability to pay. Her WDT is based upon Complainant’s Articles of Incorporation, its Amended Articles of Incorporation, its Amended and Restated Bylaws and it Internal Revenue Code Section 501(c)(3) status. Thus, her WDT goes not to the actual use of the property in issue, but to the “charitable” character of the Complainant. As set forth above, this is not the standard.
Dedicated Unconditionally to the Charitable Activity
The property must be used such that it is available to an indefinite group of people, rendered at cost or less, which brings their hearts under the influence of education or lessens the burden of government. “The public nature of a charity is diminished when it is systematically denied to those who need and can least afford the service.” Evangelical Retirement Homes of Greater St. Louis, Inc. v. State Tax Commission, 669 S.W.2d 548, 554 (Mo. banc 1984).
Complainant did not offer evidence not constituting hearsay to meet this element of its burden of proof. Complainant put forth no evidence based upon personal knowledge that patients can receive free or discounted medical care, offerings and services. The WDT of Poe stated that Complainant is a Federally Qualified Health Center, which requires the offering of services to all persons regardless of the person’s ability to pay. This however, is hearsay. Complainant did not offer any documentary evidence of this qualification, how often such status is evaluated and/or audited, etc. Consequently, the Hearing Officer would have to participate in speculation, conjecture and surmise to determine that Complainant does not merely incidentally provide free and/or reduced rate medical care and services.
III. Benefit to Society
To fulfill the Franciscan test, the subject property must benefit society. Respondent put forth evidence that the subject property operates as a not for profit and that Complainant benefits society in general. However, again, Complainant did not put forth tangible evidence proving that they provide free or below cost services to any who need such services, irrespective of their ability to pay (see analysis above).
Complainant failed to meet its burden of proof to present substantial and persuasive evidence to qualify for exemption. Complainant’s failure to prove any single element is sufficient for denial of exemption. See, Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003); Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. 1991). Consequently, Complainant is denied exempt status for ad valorem tax purposes.
The assessed valuation for the subject property as determined by the Board of Equalization for Holt County for the subject tax year is AFFIRMED.
Application for Review
A party may file with the Commission an application for review of this decision within thirty days of the mailing date set forth in the Certificate of Service for this Decision. The application shall contain specific facts or law as grounds upon which it is claimed the decision is erroneous. Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service. Failure to state specific facts or law upon which the application for review is based will result in summary denial. Section 138.432, RSMo
The Collector of Holt 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 24th day of August, 2017.
STATE TAX COMMISSION OF MISSOURI
Senior Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 24th day of August, 2017, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.