Refuge of Grace Academy v. Johnson (Cedar)

June 25th, 2013

State Tax Commission of Missouri 

REFUGE OF GRACE ACADEMY,)

Complainant,)

v.          )                        Appeal No.12-49500

PAUL E. JOHNSON, ASSESSOR,)

CEDAR COUNTY, MISSOURI,)

Respondent.)

 

AMENDED AND RESTATED DECISION AND ORDER 

HOLDING 

Assessor’s assessment reduced by the Cedar County Board of Equalization.Hearing Officer finds subject property to be exempt under Section 137.100(5) assessment is SET ASIDE, property to be placed on the list of exempt property in the supplemental tax book for Cedar County for the tax years of 2011 and 2012.

Complainant represented by Counsel, K. Patrick Douglas, Douglas, Haun & Heidemann, Bolivar, Missouri.

Respondent represented Pro Se.

Case submitted on documents and decided by Senior Hearing Officer, W. B. Tichenor.

ISSUE

Complainant appeals the decision of the Cedar County Board of Equalization on the ground of exemption from taxation.The Commission takes this appeal to determine whether the subject property is exempt from ad valorem taxation under Section 137.100(5), RSMo for the tax years2011 and 2012.

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

FINDING OF FACTS

1.Jurisdiction.Jurisdiction over this appeal is proper.Complainant timely appealed to the State Tax Commission from the decision of the Cedar County Board of Equalization.

2.Submission on Documents.By Order dated 4/24/13, Respondent was given until and including May 9, 2013, to inform the Hearing Officer in writing if he wished to exercise his right to cross-examine Complainant’s witness or if Respondent consented to submission of the case on Complainant’s Exhibits and waive the right to evidentiary hearing.Respondent was further notified that failure to make response as order would be deemed to be Respondent’s consent to submission of the case on Complainant’s exhibits and waiver of evidentiary hearing.Respondent made no response as ordered.Case is submitted on Complainant’s Exhibits and evidentiary hearing is deemed to have been waived.

3.Identification of Subject Property.[1]The subject property is identified by map parcel number 10-22-03-000-000-002.01.It is located at 10866 E. Hwy. 32, Stockton, Missouri.

4.Description of Subject Property.[2]The subject property consists of 9.2 acres, improved by a 9,140 square foot boarding school with supporting amenities.

5.Assessment.[3]

a.The Assessor assessed the subject property as follows:

TYPE

BUILDING

LAND

APPRAISED

ASSESSED

Residential

$433,750

$4,400

$438,150

$83,250

Agricultural

$17,870

$8,200

$26,070

$3,130

Commercial

0

0

0

0

Total

$451,620

$12,600

$464,220

$86,380

 

b.The Board of Equalization assessed the subject property as follows:

TYPE

BUILDING

LAND

APPRAISED

ASSESSED

Residential

$1,390

0

$1,390

$260

Agricultural

$17,870

$1,320

$19,190

$2,300

Commercial

0

0

0

0

Total

$19,260

$1,320

$20,580

$2,560

 

6.Complainant’s Evidence.Complainant offered into evidence the following:

EXHIBIT

DESCRIPTION

A

IRS – 501 (c), (3) Letter dated 7/15/2011

B

Articles of Incorporation – General Not-For-Profit Corporation, dated 10/27/09[4]

C

By-Laws – Refuge of Grace Academy, Adopted 10/26/09

D

Complainant’s Statement of Non-Discrimination and other governing documents

E

Warranty Deed, dated 1/27/10, recorded 1/28/10 – Book 2010, Page 178 – Cedar Co.

F

Appraisal – Subject Property, dated 7/31/09

G & H

Google earth aerial photographs of subject property

I

Survey – Subject Property, dated 5/27/08

J

Property Record Card – Subject, dated 7/19/12

K

Property Record Card – Subject, dated 9/28/12

L

Written Direct Testimony – Percy L. Martin, President of Complainant

 

No objections were made to Exhibits A through L, they are received into evidence.

7.Purpose, Character and Use.The following specific Findings of Fact are made relative to the general purpose and character of Complainant (Academy) and the use made of the subject property:

a.Complainant’s Legal Status.[5]Complainant is incorporated under the laws of the state of Missouri as a General Not-For-Profit (Nonprofit) Corporation.Incorporation as a nonprofit corporation does not automatically qualify the Academy’s property as exempt for ad valorem tax purposes.

b.Corporation Purpose.The Complainant was formed gor charitable, educational and religious purposes and more particularly for the purpose of operating a boarding school for girls to provide both educational and religious, Christian based instruction, to instill morality, and to teach appropriate conduct consistent with Christian teachings.The Complainant’s stated corporate purpose does not automatically qualify the Academy’s property as exempt for ad valorem tax purposes.

c.501 (c) (3) Status.[6]Complainant has been granted exemption from Federal income tax under section 501 (c) (3) of the Internal Revenue Code by letter dtd 10/27/10.Being a 501 (c) (3) entity does not automatically qualify the Academy’s property as exempt for ad valorem tax purposes.

d.Ownership of Subject Property.[7]The subject property is owned by Complainant.Ownership of the property under appeal by Complainant, as a nonprofit entity, is one of the requirements for the property to be granted tax exempt status, but does not automatically qualify the Academy’s property as exempt for ad valorem tax purposes.

e.Operation of Academy.[8]The subject property is operated as a boarding school for troubled girls.The property is utilized to help repair and rebuild a relationship between young females who have “gone off” on the wrong path and have relationship conflicts with their families.The Academy provides age appropriate education up to a college preparatory program designed to prepare students for a chosen vocation in life.The existing facility can house 20 girls.Future plans are to increase the capacity to 60 persons.

f.Operation of Subject Property on a Nonprofit Basis.[9]Complainant is restricted by its Articles of Incorporation (Articles) to function on a nonprofit basis.Nonprofit operation under the Articles, encompasses the following two elements: (1) upon dissolution and remaining assets must be distributed to organizations operated for charitable, educational or religious purposes in accordance with Section 501 (c) (30 of the Internal Revenue Code; and (2) no part of the net earnings can enure to the benefit of or distributed to directors, officers, other private persons, except for payment of reasonable compensation for services rendered.The operation of the subject property under appeal on a nonprofit basis is one of the requirements for the Academy’s property to be granted tax exempt status, but does not automatically qualify the property as exempt for ad valorem tax purposes.

g.Use of Subject Property[10].The subject property is used to carry out the Academy’s purpose of operation of a Christian boarding school for girls.It is actually and regularly used exclusively for this purpose.No part of the Academy property is used as an investment or for any private purpose or for corporate profit.

h.Benefit Provided by Use of Subject Property.[11]The use of the Academy property brings the girls it ministers to under the influence of both education and religion and assists them to establish themselves for life.

i.Non-Discrimination Policy.[12]Complainant admits students of any race, color, and national or ethnic origin to all the rights, privileges, programs, and activities generally accorded or made available to students at the school.The Academy does not discriminate on the basis of race, color, national, and ethnic origin in administration of its educational policies, admission policies, scholarships, loans, athletics, or administered programs.

j.Benefit to Persons and Society.[13]The number of girls that can be ministered to by the Academy is limited only to the extent of the physical capacity of the boarding school residence.Society is directly and indirectly benefited by the Academy’s ministry to the girls who it accepts at the boarding school, in that troubled girls are provided an environment in which they can be cared for, educated, reunited with families and prepared for additional education or vocational training.

8.Presumption of Correct Assessment Rebutted.Complainant’s evidence was substantial and persuasive to rebut the presumption of correct assessment by the Board and establish the subject property to be exempt from ad valorem taxes under section 137.100 (5) RSMo.See, Presumption In Appeal, Burden of Proof, Section 137.100 RSMo, Franciscan Tertiary Test, & Complainant Proves Exemption, infra.

9.Respondent’s Evidence.Respondent had no burden of proof in the case, and did not file any exhibits.

10.No Rebuttal Evidence.There was no evidence laid on the record that would provide any rational basis to rebut any of the factors and elements found in FINDING OF FACT 7.

11.Amendment and Restatement of Decision and Order.The Decision and Order dtd 6/25/13 is amended and restated to include tax year 2011.See, Motion to Amend Decision, infra.

CONCLUSIONS OF LAW

Jurisdiction

The Commission has jurisdiction to hear this appeal and correct any assessment shown to be unlawful, unfair, arbitrary or capricious.[14]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.[15]Assessing a property the use of which qualifies it for exemption from ad valorem taxation would be an unlawful assessment requiring correcting.

Presumption In Appeal

There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization.[16]This presumption is a rebuttable rather than a conclusive presumption.It places the burden of going forward with some substantial evidence on the taxpayer – Complainant.When some substantial evidence is produced by the Complainant, “however slight”, the presumption disappears and the Hearing Officer, as trier of facts, receives the issue free of the presumption.[17]The presumption is not evidence of value.

In an exemption appeal, the presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish the actual and regular use of the property under appeal qualifies for exemption from ad valorem taxation, thereby establishing that the Board’s assessment was erroneous.[18]Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.[19]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.[20]As has heretofore been set forth in the FINDINGS OF FACT and will be further developed and discussed below, Complainant has presented substantial and persuasive evidence to rebut the presumption of correct assessment by the Board.[21] 

Burden of Proof

Complainant has the burden to present substantial evidence to rebut the presumption of correct assessment by the Board of Equalization.[22]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.[23] It is well established that taxation is the rule and exemption from taxation is the exception. Exemption is not favored in the law.[24]The Hearing Officer concludes based upon the Findings heretofore made that Complainant has satisfied the substantial burden to establish exemption.

Section 137.100(5), RSMo

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 localpurposes: . . .

 

(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, educational or charitable purposes;”

 

Actually and Regularly Used Exclusively

The statutory requirement for the actual and regularly use to be exclusively for an exempt purpose has been addressed by various court decisions.Specifically, the phrase “used exclusively” in Section 137.100(5) refers to the primary and inherent use of a given property, as against mere secondary and incidental use.[25]The history and consistency of the courts on this point provide no basis for the Hearing Officer to conclude or apply any other meaning for this phrase to the present appeal.In the absence of the primary and inherent use of Complainant’s properties being for an exempt purpose the claim for exemption from ad valorem taxation must be denied.The evidence for the primary and inherent use of Complainant’s property for an exempt purpose rises to the level of clear and convincing.The Academy property is actually and regularly used exclusively as Christian boarding school for troubled girls.There is no other use of the property. Complainant is not holding the property in order to gain any profit.It is not an investment for Complainant.It is plainly and simply being used as a religious, educational and charitable endeavor by the Academy.Under the plain language of the statute the property must be granted exemption from ad valorem property taxation.See, FINDING OF FACT 7, supra.

Franciscan Tertiary Test

In meeting its burden of proof that the subject property is “actually and regularly used exclusively” for religious, educational and charitable purposes 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.[26]The court said:

The first prerequisite for property to be exempt as charitable under §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 “bringing their hearts under the influence of education or religion, by relieving their bodies from disease, suffering, or constraint by assisting them to establish themselves for life, . . . .” 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.[27]

 

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. 

Complainant has satisfied each of the Franciscan tests.See, FINDING OF FACT 7, supra.

Complainant Proves Exemption

The subject property is owned and operated on a not-for-profit basis.The ownership of the properties by a non-for-profit corporation is without question.Complainant operates the property on a not-for-profit basis.The only use of the property is as a Christian boarding school, which constitutes a charitable purpose.

The religious, educational and charitable benefits which accrue to students at the Academy are limited only to the extent that there are only a certain number of girls who may reside at the facility at any one time.The class of girls which may be served and benefited in years to come is an open and hence, the persons who will benefit in a religious, educational and charitable manner from the use of the subject property is indefinite.

It is both directly and indirectly beneficial to society that institutions such as the subject exist.The imparting of religious and educational instruction, as conducted by the Academy, promotes good citizenship.Accordingly, the use of the subject property as has been established

benefits the citizens of Cedar county, the State of Missouri and the United States of America.

See, FINDING OF FACT 7, supra.

Motion to Amend Decision

On July 16, 2013, Counsel for Complainant informed the Hearing Officer that the appeal that was commenced in 2012 was addressing the 2011 real estate taxes and requested that the Decision issued on 6/25/13 be corrected to so address the exemption for 2011.On 7/16/13, Order Upon Filing of Motion to Amend was issued.Respondent was given until and including August 16, 2013 to show cause why said Motion to Amend should not be granted.Complainant was given until September 6, 2013 to file its Reply and to inform the Hearing Officer whether the 2011 taxes were in fact paid under protest.

Respondent did not file any Response to the Order and show cause why Complainant’s Motion to Amend should not be granted.On 9/11/13, Counsel for Complainant informed the Hearing Officer that the 2011 taxes had not in fact been paid, so there was no issue of the Collector having to make a refund.Likewise, the 2012 taxes were not paid.Complainant’s Motion to extend the exemption for the tax year 2011 is granted.

ORDER

The assessment of the subject property made by the Board of Equalization for Cedar County for the subject tax day is SET ASIDE.[28]

The county clerk is ordered to enter the subject property on the list of exempt property into the supplemental tax book for Cedar County for the tax years 2011 and 2012.

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.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 appeal is based will result in summary denial. [29]

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 September 12, 2013.

STATE TAX COMMISSION OF MISSOURI

W. B. Tichenor

Senior Hearing Officer

 

 

 

 

DECISION AND ORDER

HOLDING 

Assessor’s assessment reduced by the Cedar County Board of Equalization.Hearing Officer finds subject property to be exempt under Section 137.100(5) assessment is SET ASIDE, property to be placed on the list of exempt property in the supplemental tax book for Cedar County for the tax year of 2012.

Complainant represented by Counsel, K. Patrick Douglas, Doulas, Haun & Heidemann, Bolivar, Missouri.

Respondent represented Pro Se.

Case submitted on documents and decided by Senior Hearing Officer, W. B. Tichenor.

ISSUE

Complainant appeals the decision of the Cedar County Board of Equalization on the ground of exemption from taxation.The Commission takes this appeal to determine whether the subject property is exempt from ad valorem taxation under Section 137.100(5), RSMo for the tax year 2012.

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

FINDING OF FACTS

1.Jurisdiction.Jurisdiction over this appeal is proper.Complainant timely appealed to the State Tax Commission from the decision of the Cedar County Board of Equalization.

2.Submission on Documents.By Order dated 4/24/13, Respondent was given until and including May 9, 2013, to inform the Hearing Officer in writing if he wished to exercise his right to cross-examine Complainant’s witness or if Respondent consented to submission of the case on Complainant’s Exhibits and waive the right to evidentiary hearing.Respondent was further notified that failure to make response as order would be deemed to be Respondent’s consent to submission of the case on Complainant’s exhibits and waiver of evidentiary hearing.Respondent made no response as ordered.Case is submitted on Complainant’s Exhibits and evidentiary hearing is deemed to have been waived.

3.Identification of Subject Property.[30]The subject property is identified by map parcel number 10-22-03-000-000-002.01.It is located at 10866 E. Hwy. 32, Stockton, Missouri.

4.Description of Subject Property.[31]The subject property consists of 9.2 acres, improved by a 9,140 square foot boarding school with supporting amenities.

5.Assessment.[32]

a.The Assessor assessed the subject property as follows:

TYPE

BUILDING

LAND

APPRAISED

ASSESSED

Residential

$433,750

$4,400

$438,150

$83,250

Agricultural

$17,870

$8,200

$26,070

$3,130

Commercial

0

0

0

0

Total

$451,620

$12,600

$464,220

$86,380

 

b.The Board of Equalization assessed the subject property as follows:

TYPE

BUILDING

LAND

APPRAISED

ASSESSED

Residential

$1,390

0

$1,390

$260

Agricultural

$17,870

$1,320

$19,190

$2,300

Commercial

0

0

0

0

Total

$19,260

$1,320

$20,580

$2,560

 

6.Complainant’s Evidence.Complainant offered into evidence the following:

EXHIBIT

DESCRIPTION

A

IRS – 501 (c), (3) Letter dated 7/15/2011

B

Articles of Incorporation – General Not-For-Profit Corporation, dated 10/27/09[33]

C

By-Laws – Refuge of Grace Academy, Adopted 10/26/09

D

Complainant’s Statement of Non-Discrimination and other governing documents

E

Warranty Deed, dated 1/27/10, recorded 1/28/10 – Book 2010, Page 178 – Cedar Co.

F

Appraisal – Subject Property, dated 7/31/09

G & H

Google earth aerial photographs of subject property

I

Survey – Subject Property, dated 5/27/08

J

Property Record Card – Subject, dated 7/19/12

K

Property Record Card – Subject, dated 9/28/12

L

Written Direct Testimony – Percy L. Martin, President of Complainant

 

No objections were made to Exhibits A through L, they are received into evidence.

7.Purpose, Character and Use.The following specific Findings of Fact are made relative to the general purpose and character of Complainant (Academy) and the use made of the subject property:

a.Complainant’s Legal Status.[34]Complainant is incorporated under the laws of the state of Missouri as a General Not-For-Profit (Nonprofit) Corporation.Incorporation as a nonprofit corporation does not automatically qualify the Academy’s property as exempt for ad valorem tax purposes.

b.Corporation Purpose.The Complainant was formed gor charitable, educational and religious purposes and more particularly for the purpose of operating a boarding school for girls to provide both educational and religious, Christian based instruction, to instill morality, and to teach appropriate conduct consistent with Christian teachings.The Complainant’s stated corporate purpose does not automatically qualify the Academy’s property as exempt for ad valorem tax purposes.

c.501 (c) (3) Status.[35]Complainant has been granted exemption from Federal income tax under section 501 (c) (3) of the Internal Revenue Code by letter dtd 10/27/10.Being a 501 (c) (3) entity does not automatically qualify the Academy’s property as exempt for ad valorem tax purposes.

d.Ownership of Subject Property.[36]The subject property is owned by Complainant.Ownership of the property under appeal by Complainant, as a nonprofit entity, is one of the requirements for the property to be granted tax exempt status, but does not automatically qualify the Academy’s property as exempt for ad valorem tax purposes.

e.Operation of Academy.[37]The subject property is operated as a boarding school for troubled girls.The property is utilized to help repair and rebuild a relationship between young females who have “gone off” on the wrong path and have relationship conflicts with their families.The Academy provides age appropriate education up to a college preparatory program designed to prepare students for a chosen vocation in life.The existing facility can house 20 girls.Future plans are to increase the capacity to 60 persons.

f.Operation of Subject Property on a Nonprofit Basis.[38]Complainant is restricted by its Articles of Incorporation (Articles) to function on a nonprofit basis.Nonprofit operation under the Articles, encompasses the following two elements: (1) upon dissolution and remaining assets must be distributed to organizations operated for charitable, educational or religious purposes in accordance with Section 501 (c) (30 of the Internal Revenue Code; and (2) no part of the net earnings can enure to the benefit of or distributed to directors, officers, other private persons, except for payment of reasonable compensation for services rendered.The operation of the subject property under appeal on a nonprofit basis is one of the requirements for the Academy’s property to be granted tax exempt status, but does not automatically qualify the property as exempt for ad valorem tax purposes.

g.Use of Subject Property[39].The subject property is used to carry out the Academy’s purpose of operation of a Christian boarding school for girls.It is actually and regularly used exclusively for this purpose.No part of the Academy property is used as an investment or for any private purpose or for corporate profit.

h.Benefit Provided by Use of Subject Property.[40]The use of the Academy property brings the girls it ministers to under the influence of both education and religion and assists them to establish themselves for life.

i.Non-Discrimination Policy.[41]Complainant admits students of any race, color, and national or ethnic origin to all the rights, privileges, programs, and activities generally accorded or made available to students at the school.The Academy does not discriminate on the basis of race, color, national, and ethnic origin in administration of its educational policies, admission policies, scholarships, loans, athletics, or administered programs.

j.Benefit to Persons and Society.[42]The number of girls that can be ministered to by the Academy is limited only to the extent of the physical capacity of the boarding school residence.Society is directly and indirectly benefited by the Academy’s ministry to the girls who it accepts at the boarding school, in that troubled girls are provided an environment in which they can be cared for, educated, reunited with families and prepared for additional education or vocational training.

8.Presumption of Correct Assessment Rebutted.Complainant’s evidence was substantial and persuasive to rebut the presumption of correct assessment by the Board and establish the subject property to be exempt from ad valorem taxes under section 137.100 (5) RSMo.See, Presumption In Appeal, Burden of Proof, Section 137.100 RSMo, Franciscan Tertiary Test, & Complainant Proves Exemption, infra.

9.Respondent’s Evidence.Respondent had no burden of proof in the case, and did not file any exhibits.

10.No Rebuttal Evidence.There was no evidence laid on the record that would provide any rational basis to rebut any of the factors and elements found in FINDING OF FACT 7.

CONCLUSIONS OF LAW

Jurisdiction

The Commission has jurisdiction to hear this appeal and correct any assessment shown to be unlawful, unfair, arbitrary or capricious.[43]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.[44]Assessing a property the use of which qualifies it for exemption from ad valorem taxation would be an unlawful assessment requiring correcting.

Presumption In Appeal

There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization.[45]This presumption is a rebuttable rather than a conclusive presumption.It places the burden of going forward with some substantial evidence on the taxpayer – Complainant.When some substantial evidence is produced by the Complainant, “however slight”, the presumption disappears and the Hearing Officer, as trier of facts, receives the issue free of the presumption.[46]The presumption is not evidence of value.

In an exemption appeal, the presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish the actual and regular use of the property under appeal qualifies for exemption from ad valorem taxation, thereby establishing that the Board’s assessment was erroneous.[47]Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.[48]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.[49]As has heretofore been set forth in the FINDINGS OF FACT and will be further developed and discussed below, Complainant has presented substantial and persuasive evidence to rebut the presumption of correct assessment by the Board.[50]

Burden of Proof

Complainant has the burden to present substantial evidence to rebut the presumption of correct assessment by the Board of Equalization.[51]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.[52] It is well established that taxation is the rule and exemption from taxation is the exception.Exemption is not favored in the law.[53]The Hearing Officer concludes based upon the Findings heretofore made that Complainant has satisfied the substantial burden to establish exemption.

Section 137.100(5), RSMo

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 localpurposes: . . .

 

(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, educational or charitable purposes;”

 

Actually and Regularly Used Exclusively

The statutory requirement for the actual and regularly use to be exclusively for an exempt purpose has been addressed by various court decisions.Specifically, the phrase “used exclusively” in Section 137.100(5) refers to the primary and inherent use of a given property, as against mere secondary and incidental use.[54]The history and consistency of the courts on this point provide no basis for the Hearing Officer to conclude or apply any other meaning for this phrase to the present appeal.In the absence of the primary and inherent use of Complainant’s properties being for an exempt purpose the claim for exemption from ad valorem taxation must be denied.The evidence for the primary and inherent use of Complainant’s property for an exempt purpose rises to the level of clear and convincing.The Academy property is actually and regularly used exclusively as Christian boarding school for troubled girls.There is no other use of the property. Complainant is not holding the property in order to gain any profit.It is not an investment for Complainant.It is plainly and simply being used as a religious, educational and charitable endeavor by the Academy.Under the plain language of the statute the property must be granted exemption from ad valorem property taxation.See, FINDING OF FACT 7, supra.

Franciscan Tertiary Test

In meeting its burden of proof that the subject property is “actually and regularly used exclusively” for religious, educational and charitable purposes 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.[55]The court said:

The first prerequisite for property to be exempt as charitable under §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 “bringing their hearts under the influence of education or religion, by relieving their bodies from disease, suffering, or constraint by assisting them to establish themselves for life, . . . .” 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.[56]

 

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. 

Complainant has satisfied each of the Franciscan tests.See, FINDING OF FACT 7, supra.

Complainant Proves Exemption

The subject property is owned and operated on a not-for-profit basis.The ownership of the properties by a non-for-profit corporation is without question.Complainant operates the property on a not-for-profit basis.The only use of the property is as a Christian boarding school, which constitutes a charitable purpose.

The religious, educational and charitable benefits which accrue to students at the Academy are limited only to the extent that there are only a certain number of girls who may reside at the facility at any one time.The class of girls which may be served and benefited in years to come is an open and hence, the persons who will benefit in a religious, educational and charitable manner from the use of the subject property is indefinite.

It is both directly and indirectly beneficial to society that institutions such as the subject exist.The imparting of religious and educational instruction, as conducted by the Academy, promotes good citizenship.Accordingly, the use of the subject property as has been established benefits the citizens of Cedar county, the State of Missouri and the United States of America. See, FINDING OF FACT 7, supra.

ORDER

The assessment of the subject property made by the Board of Equalization for Cedar County for the subject tax day is SET ASIDE.[57]

The county clerk is ordered to enter the subject property on the list of exempt property into the supplemental tax book for Cedar County for the tax year 2012.

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.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 appeal is based will result in summary denial. [58]

The Collector of Cedar 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 June 25, 2013.

STATE TAX COMMISSION OF MISSOURI

W. B. Tichenor

Senior Hearing Officer

 

 


[1] Complaint for Review of Assessment; BOE Decision Letter; Exhibits J & K 

[2] Exhibits F, G, H, I, J, K, L – Q & A 30, 34, 35 & 38 

[3] Exhibits J & K 

[4] Filed with the Complaint for Review of Assessment was a copy of the Certificate of Incorporation of the Complainant, dated 10/27/2009 

[5] Exhibit B; Exhibit L – Q & A 8, 14 – 19; Copy of Certificate of Incorporation, dtd 10/27/09 attached to Complaint for Review of Assessment.Although no Certificate of Good Standing was filed as an exhibit, Hearing Officer takes official notice of the records of the office of the Secretary of State of the state of Missouri, which shows that Complainant was in good standing as of 1/1/12 and as of the date of this Decision. 

[6] Exhibit A; Exhibit L – Q & A 9 – 13 

[7] Exhibits E, I; Exhibit L – Q & A 29 – 37 

[8] Exhibit D – Part IV (attachment to Application for 501 (c) (3) recognition); Exhibit L – Q & A 24 – 28 

[9] Exhibit B 

[10] Exhibit L – Q & A 39 – 48 

[11] Exhibit L – Q & A 24, 40, 42 – 46 

[12] Exhibit D – Statement of Non-Discrimination 

[13] Exhibit D; Exhibit L – Q & A 24, 40, 42 – 46 

[14] Article X, Section 14, Missouri Constitution of 1945; Sections 138.430, 138.460(2), RSMo.

[15] Article X, Section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo. 

[16] 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) 

[17] United Missouri Bank of Kansas City v. March, 650 S.W.2d 678, 680-81 (Mo. App. 1983), citing to State ex rel. Christian v. Lawry, 405 S.W.2d 729, 730 (Mo. App. 1966) and cases therein cited. 

[18] Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959) 

[19] See, Cupples-Hesse, supra.

Substantial and persuasive evidence is not an extremely high standard of evidentiary proof.It is the lowest of the three standards for evidence (substantial & persuasive, clear and convincing, and beyond a reasonable doubt).It requires a small amount of evidence to cross the threshold to rebut the presumption of correct assessment by the Board.The definitions, relevant to substantial evidence, do not support a position that substantial and persuasive evidence is an extremely or very high standard.

“Substantial evidence: Evidence that a reasonable mind would accept as adequate to support a conclusion; evidence beyond a scintilla.”Black’s Law Dictionary, Seventh Edition, p. 580.

The word scintilla is defined as “1. a spark,2. a particle; the least trace.” Webster’s New World Dictionary, Second College Edition.Black’s definition at 1347 is “A spark or trace <the standard is that there must be more than a scintilla of evidence>.”There must be more than a spark or trace for evidence to have attained the standard of substantial.Once there is something more than a spark or trace the evidence has reached the level of substantial.Substantial evidence and the term preponderance of the evidence are essentially the same.“Preponderance of the evidence.The greater weight of the evidence; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”Black’s at 1201.Substantial evidence is that a reasonable mind would accept as adequate to support the conclusion.Preponderance is sufficient to incline a fair and impartial mind to one side of the issue rather than the other, i.e. support the proposed conclusion. 

[20] Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975). 

[21] To the extent that any reviewing court, might conclude there to be the existence of a presumption that the Assessor correctly assessed the property under appeal, the evidence on this record likewise constitutes substantial and persuasive evidence to rebut any such presumption. 

[22] Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 895 (Mo. banc 1978). 

[23] State ex rel. Council Apartments v. Leachman, 603 S.W.2d 930, 931 (Mo. 1980). 

[24](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). 

[25] See, Bethesda Barclay House v. Ciarleglio, 88 S.W.3d 85 (Mo. App. E.D., 2002); Central States Christian Endeavors Ass’n v. Nelson, 898 S.W.2d 547 (Mo. 1995); Pentecostal Church of God of America v. Hughlett, 601 S.W.2d 666 (Mo. App. S.D., 1980); Midwest Bible & Missionary Institute v. Sestric, 260 S.W.2d 25 (Mo. 1953); Salvation Army v. Hoehn, 188 S.W.2d 826, Mo. 1945) 

[26] 566 S.W.2d 213, 223-224 (Mo. banc 1978). 

[27] Id., at 224.

[28] To the extent that any reviewing court, might conclude there to be the existence of a presumption that the Assessor correctly assessed the property under appeal, the evidence on this record likewise constitutes substantial and persuasive evidence to rebut any such presumption. Accordingly, the assessment made by the Assessor is, likewise, also SET ASIDE.

 

[29] Section 138.432, RSMo. 

[30] Complaint for Review of Assessment; BOE Decision Letter; Exhibits J & K 

[31] Exhibits F, G, H, I, J, K, L – Q & A 30, 34, 35 & 38 

[32] Exhibits J & K 

[33] Filed with the Complaint for Review of Assessment was a copy of the Certificate of Incorporation of the Complainant, dated 10/27/2009 

[34] Exhibit B; Exhibit L – Q & A 8, 14 – 19; Copy of Certificate of Incorporation, dtd 10/27/09 attached to Complaint for Review of Assessment.Although no Certificate of Good Standing was filed as an exhibit, Hearing Officer takes official notice of the records of the office of the Secretary of State of the state of Missouri, which shows that Complainant was in good standing as of 1/1/12 and as of the date of this Decision. 

[35] Exhibit A; Exhibit L – Q & A 9 – 13 

[36] Exhibits E, I; Exhibit L – Q & A 29 – 37 

[37] Exhibit D – Part IV (attachment to Application for 501 (c) (3) recognition); Exhibit L – Q & A 24 – 28 

[38] Exhibit B 

[39] Exhibit L – Q & A 39 – 48 

[40] Exhibit L – Q & A 24, 40, 42 – 46 

[41] Exhibit D – Statement of Non-Discrimination 

[42] Exhibit D; Exhibit L – Q & A 24, 40, 42 – 46 

[43] Article X, Section 14, Missouri Constitution of 1945; Sections 138.430, 138.460(2), RSMo.

[44] Article X, Section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo. 

[45] 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) 

[46] United Missouri Bank of Kansas City v. March, 650 S.W.2d 678, 680-81 (Mo. App. 1983), citing to State ex rel. Christian v. Lawry, 405 S.W.2d 729, 730 (Mo. App. 1966) and cases therein cited. 

[47] Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959) 

[48] See, Cupples-Hesse, supra.

Substantial and persuasive evidence is not an extremely high standard of evidentiary proof.It is the lowest of the three standards for evidence (substantial & persuasive, clear and convincing, and beyond a reasonable doubt).It requires a small amount of evidence to cross the threshold to rebut the presumption of correct assessment by the Board.The definitions, relevant to substantial evidence, do not support a position that substantial and persuasive evidence is an extremely or very high standard.

“Substantial evidence: Evidence that a reasonable mind would accept as adequate to support a conclusion; evidence beyond a scintilla.”Black’s Law Dictionary, Seventh Edition, p. 580.

The word scintilla is defined as “1. a spark,2. a particle; the least trace.” Webster’s New World Dictionary, Second College Edition.Black’s definition at 1347 is “A spark or trace <the standard is that there must be more than a scintilla of evidence>.”There must be more than a spark or trace for evidence to have attained the standard of substantial.Once there is something more than a spark or trace the evidence has reached the level of substantial.Substantial evidence and the term preponderance of the evidence are essentially the same.“Preponderance of the evidence.The greater weight of the evidence; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”Black’s at 1201.Substantial evidence is that a reasonable mind would accept as adequate to support the conclusion.Preponderance is sufficient to incline a fair and impartial mind to one side of the issue rather than the other, i.e. support the proposed conclusion. 

[49] Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975). 

[50] To the extent that any reviewing court, might conclude there to be the existence of a presumption that the Assessor correctly assessed the property under appeal, the evidence on this record likewise constitutes substantial and persuasive evidence to rebut any such presumption. 

[51] Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 895 (Mo. banc 1978). 

[52] State ex rel. Council Apartments v. Leachman, 603 S.W.2d 930, 931 (Mo. 1980). 

[53](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). 

[54] See, Bethesda Barclay House v. Ciarleglio, 88 S.W.3d 85 (Mo. App. E.D., 2002); Central States Christian Endeavors Ass’n v. Nelson, 898 S.W.2d 547 (Mo. 1995); Pentecostal Church of God of America v. Hughlett, 601 S.W.2d 666 (Mo. App. S.D., 1980); Midwest Bible & Missionary Institute v. Sestric, 260 S.W.2d 25 (Mo. 1953); Salvation Army v. Hoehn, 188 S.W.2d 826, Mo. 1945) 

[55] 566 S.W.2d 213, 223-224 (Mo. banc 1978). 

[56] Id., at 224.

[57] To the extent that any reviewing court, might conclude there to be the existence of a presumption that the Assessor correctly assessed the property under appeal, the evidence on this record likewise constitutes substantial and persuasive evidence to rebut any such presumption. Accordingly, the assessment made by the Assessor is, likewise, also SET ASIDE. 

[58] Section 138.432, RSMo.