OZARK STEAM ENGINE ASSOC., )
v. ) Appeals Number 02-33001 & 02-33002
JEAN TWITTY, ASSESSOR, )
GREENE COUNTY, MISSOURI, )
DECISION AND ORDER
Complainant appeals the non-exempt status of its property for tax year 2002.
On March 25, 2003, an evidentiary hearing was held before the Tax Commission hearing officer, Luann Johnson, at the Greene County Courthouse in Springfield, Missouri. Complainant was represented by Evelyn Mangan, Esq. Respondent was represented by Glenn Green, Esq.
The issue in this case is whether thirty-three (33) acres, used to house and exhibit steam powered farm equipment, is exempt from taxation because it is used for a charitable purpose, to wit, educating the public concerning historical agricultural practices.
Each tax exemption case is peculiarly one which must be decided upon its own facts. It is the public policy of the state that property actually and regularly used exclusively for charitable purposes shall be exempt from taxation, and taxing authorities are not to be permitted to defeat that policy by unreasonable or unrealistic application of the “strict construction” rule. Missouri United Methodist Retirement Homes v. State Tax Commission, 522 S.W.2d 745, 751 (Mo. banc 1975). However, taxation is the rule and claims of exemption from taxation are not favored. A property owner that claims entitlement to exemption from taxation bears a substantial burden of proof on all issues. Sunday School Board of the Southern Baptist Convention v. Mitchell, 658 S.W.2d 1 (1983). Complainant has failed to meet its burden of proof supporting its claim of entitlement to a tax exemption.
FINDINGS OF FACT
1. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the Greene County Board of Equalization.
2. On November 14, 1962, Ozark Steam Engine Association, Inc. was formed as a general not for profit corporation under the laws of the State of Missouri (Exhibit A). The purpose of the corporation, as stated in the amended articles filed January 6, 2000, is:
“The corporation is organized exclusively for charitable, educational, religious or scientific purposes within the meaning of section 501(c)(3) of the Internal Revenue Code and is organized in furtherance thereof to promote cooperation in all matters of interest to the individuals who are deeply interested to preserve the old-time steam engines which did so much in the pioneering effort of generations both past and present; to develop an increased civic interest; to create and maintain good clean and wholesome entertainment and education to all participants; to compile and distribute information to its members for their benefit; to aid and protect its members and to do all things that are properly within the scope of such an association for the welfare of its members and its Community and State” (Exhibit B).
3. In the event of dissolution of the corporation, no part of the assets of the corporation can be distributed to, nor inure to the benefit of, any individual. Transfer of the assets or the proceeds of the sale of assets can only be made to organizations created and operated for nonprofit purposes (Exhibit B).
4. The corporation was granted IRS tax exempt status in December, 1999 (Exhibit D).
5. On the tax day, the corporation had approximately 90 members. Each member pays dues of $10 per year. Monthly membership meetings are held. Monthly meetings are not open to the public.
6. The corporation owns agricultural real property having a market value of $35,000 allocated as follows: Parcel No. 17-10-300-021 has a market value of $33,000 (assessed value $3,960). Parcel No. 17-10-400-022 has a market value of $2,000 (assessed value $240). The corporation owns $30,000 to $40,000 of antique farm equipment which it parks on the above mentioned parcels. The market value of the real property is not in dispute.
7. Once a year, for three or four days in September, the corporation holds a “Steam-O-Rama” where it opens its doors to the general public and holds demonstrations of steam powered farming practices, a flea market and a craft sale.
Outside groups and individuals may bring gas and steamed powered equipment to exhibit at the Steam-O-Rama. There is no charge to equipment exhibitors or their family members. There is a charge for flea market exhibitors.
There is a gate fee of $5 per person. However, children under 12 are admitted free; there is a senior citizen discount; and school, scouts and other groups are admitted free. Approximately 15 percent of all admissions were free in 2002. There is no limit on the number of groups which can obtain free admission.
On Thursday evening a cookout and entertainment is provided for members only. The arts and crafts portion of the Steam-O-Rama is where “our ladies” sell crafts they have made for their own profit.
8. In April each year Complainant allows the Gas Engine Club to use its grounds free of charge for a swap meet. No evidence was presented concerning the possible not-for-profit status of the Gas Engine Club or the use of the funds generated from said swap meet.
9. In June of each year Complainant allows the Girl Scouts to use the property free of charge for camp outs.
10. Complainant maintains an RV park on the grounds. The RV park has no electricity. There is no charge for the use of the RV park, but it is only open during the Steam-O-Rama.
11. Complainant has no educational committee and publishes no educational material. Public educational functions are limited to on site demonstrations of equipment and any information that the equipment operator verbalizes as individuals pass by the demonstration during Steam-O-Rama. Private educational functions and historical discussions occur at membership meetings.
CONCLUSIONS OF LAW
Burden of Proof
Although a taxing statute is construed strictly against the state, an exemption statute is strictly construed against the one claiming the exemption. State ex rel. Union Electric Co. v. Goldberg, 578 S.W.2d 921, 923 (Mo. banc 1979).
In order to prevail, Complainant must demonstrate by substantial and persuasive evidence, that it is entitled to an exemption.
Substantial evidence is that evidence which, if true, has probative force upon the issues, i.e., evidence favoring facts which are such that reasonable men may differ as to whether it established them, and from which the Commission can reasonably decide an appeal on the factual issues. Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).
Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact. The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief. Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).
Properties which can be exempted from taxation are set out within our Constitution and the statutes enacted to enforce that Constitution, to wit:
“. . .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, . . .may be exempt from taxation by general law but any such law may provide for approximate restitution to the respective political subdivisions of revenues lost by reason of the exemption. All laws exempting from taxation property other than the property enumerated in this article, shall be void. Article X, Section 6, Mo. Const. of 1945.
In support of this Constitutional provision, the Legislature has enacted Section 137.110, RSMo, which provides in relevant part:
The following property shall be exempt from taxation:
(5) All property, real and personal, actually and regularly used exclusively for religious worship, for schools and colleges, or 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 therefrom is used wholly for religious, education or charitable purposes; Section 137.110, RSMo.
Case Law on Charitable Use
In order for a property to be exempt from taxation for state, county or local purposes, the following tests must be met:
1. The property must be actually and regularly used exclusively for a charitable purpose, as charity is defined by Salvation Army v. Hoehn, 188 S.W.2d 826 (Mo. banc 1945). “Charity” is therein defined as “. . .a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing their hearts under the influence of education or religion, by relieving their bodies of disease, suffering or constraint, by assisting them to establish themselves for life, or by erecting or maintaining the public buildings or works or otherwise lessening the burdens of government.” Salvation Army at 830.
2. 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).
3. The dominant use of the property must be for the benefit of an indefinite number of persons and must directly or indirectly benefit society generally. “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”. Franciscan at 224. See also, Barnes Hospital v. Leggett, 589 S.W.2d 241 (Mo. banc 1979).
The test to be applied for determination of a charitable use that would bring this property within the parameter of the statute has three prongs, each of which must be satisfied by the evidence offered by the Complainant.
The first prong of the test is that the subject property must be actually and regularly used exclusively for a charitable [educational] purpose. In this regard, the subject property fails to meet the exemption test. The actual and regular use of the property is for the storage of vintage farm equipment. The maintenance and restoration of vintage farm equipment is a noble and worthwhile endeavor however, in and of itself, this purpose does not qualify for a tax exemption. To qualify for an exemption, there must be a dominant use which meets the definition of a gift as that term is used in Salvation Army. Complainant asserts that the qualifying gift is education. However, the facts demonstrate that very little education actually occurs on the property. For three or four days a year the property is open to the public and demonstrations occur occasionally. While the property is open to the public, there are also non-educational activities occurring such as swap meets, flea markets, craft sales and social functions. It is not possible to find that these social and non-educational functions are “very limited” or “inconsequential” nor is it possible to find that educational activities are the dominant use of the property.
These facts are distinguishable from the facts in The Engineers Club of St. Louis v. State Tax Commission, 524 SW 2d 839 (1975) where the Engineers Club used its property to conduct public meetings and educational seminars throughout the entire year; worked with schools of engineering in the State of Missouri to review curricula and explore new teaching avenues; had an outreach program to high schools, secondary schools and junior engineers; maintained a public affairs committee that sponsored public meetings on various public issues relating to engineering; and where the Engineers Club’s stated purpose included advancing the field of engineering, making technical and scientific information available to the general public, and aiding in the solution of public questions involving engineering and scientific problems. The court found the Club’s educational activities to be “extensive” including actively participating in civic planning issues such as mass transit, airport planning, water quality, concrete design and solid waste disposal. The court further found that any social activities were “very limited” and “inconsequential.”
Complainant has failed to establish a dominate educational use for the subject property which would qualify said property for a tax exemption.
The second prong of the test requires that the property be both owned and operated on a not-for-profit basis. There is no dispute that Complainant is a not-for-profit corporation. However, an IRS letter is only on part of the test. There is a reasonable question as to whether or not the property is actually operated on a not-for-profit basis. While it is probably true that Complainant is not receiving a significant profit from the use of the property, the fact remains that other individuals operating a swap meet and craft booths are using the property to make a profit for themselves. Complainant can argue that the profit it makes from the use of the property is incidental to its corporate purpose however it can not make the same argument for the individuals who are selling their wares from Complainant’s property.
The final test which must be passed if the property is to be exempt is that the dominant use must be for the benefit of an indefinite number of persons and provide a direct or indirect benefit to society in general. Complainant has not yet demonstrated that the dominant use of the real property actual provides such a benefit to society.
The non-exempt status the subject property, as determined by the Assessor and approved by the Board of Equalization, is AFFIRMED.
A party may file with the Commission an application for review of a hearing officer decision within thirty (30) days of the mailing of such decision. The application shall contain specific detailed 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.
If an application for review of a hearing officer 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 Greene 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 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 May 6, 2003.
STATE TAX COMMISSION OF MISSOURI