STATE TAX COMMISSION OF MISSOURI
|ROLLA ALUMNI CHAPTER OF||)||Appeal No. 20-78002|
|BETA SIGMA PSI,||)||Parcel No. 1-09-1.0-02-0030-002-001.803|
|BILL STOLTZ, ASSESSOR,||)|
|PHELPS COUNTY, MISSOURI,||)|
DECISION AND ORDER
Rolla Alumni Chapter of Beta Sigma Psi (Complainant) appeals the Phelps County Board of Equalization’s (BOE) decision finding the subject residential property is not partially exempt from ad valorem taxation and that its true value in money (TVM) was $1,331,480 as of January 1, 2020. Complainant asserts the subject property is partially exempt from ad valorem taxation and that based on the overall TVM assigned by Respondent, the TVM of the taxable portion was $791,033 as of January 1, 2020. Complainant did not produce substantial and persuasive evidence showing the subject property is partially exempt. The BOE decision is AFFIRMED.
The evidentiary hearing was conducted via WebEx and telephone on June 2, 2021. Complainant was represented by counsel Steven Akre. Respondent appeared pro se via telephone. Complainant filed a post-hearing brief on July 2, 2021.
FINDINGS OF FACT
- The Subject Property. The subject residential property is a fraternity house located at 2 Fraternity Drive in Rolla, Missouri. The fraternity house has three stories and a basement totaling 24,847 square feet of gross building area. Of this total, 7,157 square feet are devoted to “support” areas for mechanical equipment, laundry rooms, restrooms, storage areas, and hallways. The remaining 17,690 square feet consists of living quarters, meeting rooms, a 429 square-foot library and multiple study rooms on all three floors. (Ex. E) The library and study areas total 7,180 square feet. The property was renovated in 2019 to include the library and study rooms.
- Assessment and Valuation. Respondent issued a notice of change of assessment informing Complainant that as of January 1, 2020, the TVM of the subject property increased from $530,600 to $1,331,486. Complainant appealed Respondent’s 2020 assessment and claimed the study rooms and library qualify for a charitable exemption. (Ex. 1, 2) The BOE sustained Respondent’s assessment.
- Complainant’s Evidence. Complainant submitted Exhibits A through K. All exhibits were admitted into evidence and are summarized as follows:
|Ex. A||Circuit court order filed in 1962 and establishing the Rolla Alumni Chapter of Beta Sigma Psi pursuant to Chapter 352 of the Missouri Revised Statutes entitled “Religious and Charitable Associations.”|
|Ex. B||“Certificate of Fact” from the Missouri Secretary of State confirming Complainant is a “Benevolent” organization in good standing.|
|Ex. C||Complainant’s 2020 federal income tax return showing Complainant is exempt from federal income tax pursuant to 26 U.S.C. section 501(c)(3).|
|Ex. D||Respondent’s 2020 Notice of Change of Assessment for the subject property increasing the 2020 TVM to $1,331,430 from the 2019 TVM of $530,600.|
|Ex. E||Lease dated 1966 by which the Curators of the University of Missouri lease the subject property to Complainant.|
|Ex. F||Group exemption letter issued by the IRS in 2018 to the Society of Beta Sigma Psi National Fraternity and identifying the Rolla ETA Chapter as a subordinate to which the exemption applies.|
|Ex. G||Architectural drawing of renovations and itemization of space utilization concluding that 40.59% of the occupied area of renovated fraternity house is devoted to educational space.|
|Ex. H||March 17, 2017, letter from the Associate Vice Chancellor of the University stating the subject property’s group study areas and library supplement similar facilities provided by the University for students generally and help “alleviate current use of the University’s existing facilities by providing an alternative source for chapter members and their guests.”|
|Ex. I||BOE decision affirming Respondent’s assessment.|
|Ex. J||Grant Report stating that as of May 31, 2020, the educational areas have not been used for non-educational purposes and have been used for “individual and group study as intended.”|
|Ex. K||Grant Report stating that as of November 30, 2020, the educational areas have not been used for non-educational purposes and that remote learning instituted due the COVID-19 pandemic “highlighted the benefit and usefulness of the Educational Purpose areas[.]”|
Complainant’s evidence establishes Complainant is a not-for-profit organization and that the library and study areas are used by fraternity members and their invitees for educational purposes.
Complainant’s proposed value of $791,033 is based on the fact that 40.59% of the 17,667 square feet of occupied area is devoted to the library and study area ($1,331,480 x [1 – 0.4059] = $791,033). Complainant’s proposed value excludes 7,157 square feet of area used for mechanical equipment, restrooms, stairways, hallways, and storage. There is no evidence these areas have no value and should be excluded. Dividing the subject property’s entire square footage (24,847) by the area devoted to library and study areas shows the library and study areas comprise only 28.9% of the fraternity house’s total area.
- Respondent’s Evidence. Respondent submitted Exhibits 1 through 11. All exhibits were admitted into evidence and are summarized as follows:
|Ex. 1||Complainant’s Property Appeal Assessment Form.|
|Ex. 2||Complainant’s Application for Exemption for Tax Year 2020.|
|Ex. 3||STC Assessor’s Manual.|
|Ex. 4||BOE Minutes.|
|Ex. 5||Revised Scheduling Order issued by STC.|
|Ex. 6||Complainant’s Certification to Prosecute Appeal.|
|Ex. 7||Information Provided By Complainant, consisting of an appeal form and copies of case law and constitutional and statutory provisions regarding exemptions.|
|Ex. 8||Respondent’s Property Record Card for the subject property.|
|Ex. 9||Mo. Const. Article I, section 6.|
|Ex. 10||Section 137.098.|
|Ex. 11||Section 137.100.|
CONCLUSIONS OF LAW
- Assessment and Valuation. Residential real property is assessed at 19% of its TVM as of January 1 of each odd-numbered year. Section 137.115.5(1)(a).
Section 137.115.1 provides the assessed value in the odd-numbered year applies in the following even-numbered year, “except for new construction and property improvements which shall be valued as though they had been completed as of January first of the preceding odd-numbered year.” An “improvement consists of any change to the physical characteristics of the property, whether that change is one that causes an increase or a reduction in value.” 12 CSR 30-3.001(3). The addition of the library and study areas is an “improvement” authorizing the STC to remedy an erroneous even-year assessment.
- Complainant’s Burden of Proof. “Tax exemptions are construed strictly against the taxpayer, and any doubt must be resolved in favor of application of the tax.” SEBA, LLC v. Dir. of Revenue, 611 S.W.3d 303, 313–14 (Mo. banc 2020). Exemptions are “allowed only upon clear and unequivocal proof, and any doubts are resolved against the party claiming it.” Id. (internal quotation omitted).
- Charitable Exemption. Article X, section 6 of the Missouri Constitution provides “all property, real and personal, not held for private or corporate profit and used exclusively . . . for purposes purely charitable . . . may be exempted from taxation by general law.”
Section 137.101(1) provides:
The activities of nationally affiliated fraternal, benevolent, or service organizations which promote good citizenship, humanitarian activities, or improve the physical, mental, and moral condition of an indefinite number of people are purposes purely charitable within the meaning of Subsection 1 of Section 6 of Article X of the Constitution and local assessing authorities may exempt such portion of the real and personal property of such organizations as the assessing authority may determine is utilized in purposes purely charitable from the assessment, levy, and collection of taxes.
(Emphasis added). Section 137.101.1 “requires the assessor to determine which portions of the property are used for purely charitable purposes and which portions of the property are used for private economic purposes.” Loc. Union No. 124, Int’l Bhd. of Elec. Workers v. Pendergast, 891 S.W.2d 417, 418 (Mo. banc 1995). Because a partial exemption is at issue, “there is a question of the valuation to be assigned to each part of the property by the assessor.” Id. It follows that a taxpayer must – as Complainant has here – appeal the assessment to the BOE. Id. The BOE’s valuation is presumptively correct. See Rinehart v. Laclede Gas Co., 607 S.W.3d 220, 228 (Mo. App. W.D. 2020) (holding the STC is “obligated to give the Board’s valuation a presumption of validity”). The taxpayer must rebut this presumption with substantial and persuasive evidence showing the valuation is erroneous. Tibbs v. Poplar Bluff Assocs. I, L.P., 599 S.W.3d 1, 7 (Mo. App. S.D. 2020).
To obtain a partial exemption, the taxpayer must show the property: (1) is “actually and regularly used exclusively for purposes purely charitable” per the definition of “charity” set forth in Salvation Army v. Hoehn, 188 S.W.2d 826, 830 (Mo. banc 1945); (2) is “owned and operated on a not-for-profit basis;” and (3) that “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.” Barnes Hosp. v. Leggett, 589 S.W.2d 241, 244 (Mo. 1979) (citing Franciscan Tertiary Province of Missouri. Inc. v. State Tax Comm’n, 566 S.W.2d 213 (Mo. banc 1978)).
Actual, Regular, and Exclusive Use for Charitable Purposes
Education is a charitable purpose. City of St. Louis, 524 S.W.2d at 845. Providing “places and facilities of study” is a charitable educational purpose. YMCA of St. Louis & St. Louis Cty. v. Sestric, 242 S.W.2d 497, 506 (Mo. 1951).
Complainant must also show the library and study areas are actually, regularly, and exclusively used for the educational purposes. Property is “used exclusively” for a charitable purpose when that purpose is “the primary and inherent use as over against a mere secondary and incidental use.” Cent. States Christian Endeavors Ass’n v. Nelson, 898 S.W.2d 547, 549 (Mo. banc 1995). A secondary or incidental non-educational use does not preclude finding the property is used exclusively for charitable purposes if it “does not interrupt the exclusive occupation” of the property for an exempt purpose and “dovetails into or rounds out that purpose[.]” Id.
Complainant’s Exhibits G, H, J, and K show Complainant renovated the subject property to add the library and study areas. The grant reports in Complainant’s Exhibits J and K assert the library and study areas were used exclusively for educational purposes. There is no evidence rebutting these assertions.
Respondent asserted the library and study areas are not used exclusively for education because Complainant admitted social activities occur in the library and study areas. Even if social activities occur in the library and study areas, it is common knowledge that group study entails some social interaction. There is no evidence the library and study areas are used extensively for social activities unrelated to education. On this record, any socialization in the library and study areas “dovetails into or rounds out” the educational purpose. Cent. States Christian Endeavors Ass’n, 898 S.W.2d at 549. Complainant’s evidence establishes the library and study areas are actually, regularly, and exclusively used for educational purposes.
The Subject Property is Owned and Operated on a Not-for-Profit Basis
Exhibits A, B, C, and F demonstrate Complainant is a non-profit organization and that the subject property is operated on a not-for-profit basis. Respondent does not assert Complainant owns or operates the subject property for profit.
Dominant Use for the Benefit of an Indefinite Number of People
While Complainant satisfied the first two prerequisites for an exemption claim, Complainant’s exemption claim fails on the third and final element: the necessity of producing clear and unequivocal evidence that “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.” Leggett, 589 S.W.2d at 244.
The requirement of showing a benefit to “an indefinite number of people” is satisfied when there is a “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, 566 S.W.2d at 224. The requirement of showing a benefit to “an indefinite number of persons … is otherwise characterized as a requirement that the humanitarian service be public.” Evangelical Ret. Homes of Greater St. Louis, Inc. v. State Tax Comm’n, 669 S.W.2d 548, 554 (Mo. banc 1984) (internal quotation omitted). A benefit may be “public” if it is not available to all and, instead, is directed at groups with specific needs or interests. Id. Thus,
[a] charity may restrict its admissions to a class of humanity, and still be public; it may be for the blind, the mute, those suffering under special diseases, for the aged, for infants, for women, for men, for different callings or trades by which humanity earns its bread, and as long as the classification is determined by some distinction which involuntarily affects or may affect any of the whole people, although only a small number may be directly benefited, it is public.
Salvation Army v. Hoehn, 188 S.W.2d 826, 830 (Mo. banc 1945) (quoting In re Rahn’s Est., 291 S.W. 120, 128 (Mo.1926)).
The record shows the educational benefits of the library and study room are available only to fraternity members and their invitees. Complainant asserts the fact that fraternity members use the library and study rooms establishes a “benefit to an indefinite number of people” because fraternity membership changes over time. While it is true that the fraternity’s future membership is mathematically indefinite, Complainant’s burden of proving a benefit to an indefinite number of people entails a showing that the alleged educational service is “public.” Evangelical Ret. Homes, 669 S.W.2d at 554. To the extent facilities are available only to members, a property is not used exclusively for purposes purely charitable. Frisco Emp. Hosp. Ass’n v. State Tax Comm’n, 381 S.W.2d 772, 779 (Mo. 1964). Consequently, standing alone, the fact that present and future fraternity members may use the library and study rooms does not establish that Complainant is providing a benefit characterized as “public.”
The fact that fraternity members may invite non-members to use the library and study rooms does not save Complainant’s exemption claim. There is no substantial and persuasive evidence regarding the existence or frequency of such invitations and, therefore, no evidence of whether or to what extent the library and study area are actually used by non-member students. Consequently, Complainant has not shown that the dominant use of the library and study rooms benefits an indefinite number of people and can be “characterized as … public” so as to qualify for a charitable exemption. Evangelical Ret. Homes, 669 S.W.2d at 554.
Complainant nonetheless asserts the facts of this case are similar to City of St. Louis, in which the Court held a private club was entitled to a charitable exemption. In City of St. Louis, the Supreme Court held the Engineers Club of St. Louis was entitled to a charitable exemption for a building housing the Club’s activities. The Club’s membership was open to any engineer or architect, those engaged in allied occupations, and those “whose interest is in one or more of these fields.” Id. at 841. The Club used the building for weekly meetings involving a variety of topics. Id. at 841–42. These meetings were open to members and nonmembers alike. The Club distributed meeting notices to numerous organizations and the news media, and thereby extended invitations to the general public. The Club also provided educational support to engineering students. Id. at 842. The Court held these facts showed the Club’s activities were predominantly educational and designed to benefit the public and society in general. The Club’s building thus qualified for a charitable exemption. Id. at 846.
While every exemption case is decided on its own facts, United Cerebral Palsy Ass’n of Greater Kansas City v. Ross, 789 S.W.2d 798, 800 (Mo. banc 1990), the record in this case is substantially less compelling than the record in City of St. Louis. Unlike the public invitations extended in City of St. Louis, there is no evidence Complainant’s library and study areas were open to anyone other than fraternity members or their invitees. Unlike City of St. Louis, there is no evidence fraternity members provided organized educational programming or public, educational discussions. Finally, unlike City of St. Louis, there is no evidence of whether or how often invitees utilize the library and study areas. These material factual distinctions demonstrate the fraternity’s library and study areas are, on this record, decidedly less “public” than the public educational outreach shown in City of St. Louis.
CONCLUSION AND ORDER
Complainant did not produce substantial and persuasive evidence showing the subject property is partially exempt from taxation. The BOE’s decision is affirmed. The taxable TVM of the subject property on January 1, 2020, was $1,331,480.
Application for Review
A party may file with the STC an application for review of this decision within 30 days of the mailing date set forth in the certificate of service for this decision. The application “shall contain specific detailed grounds upon which it is claimed the decision is erroneous.” Section 138.432. The application must be in writing, and may be mailed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, or emailed to Legal@stc.mo.gov. A copy of the application must be sent to each person listed below in the certificate of service.
Failure to state specific facts or law upon which the application for review is based will result in summary denial. Section 138.432.
The Collector of Phelps County, and 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 the disputed taxes have been disbursed pursuant to a court order under the provisions of section 139.031.
SO ORDERED September 10, 2021.
Eric S. Peterson
Senior Hearing Officer
State Tax Commission
Certificate of Service
I hereby certify that a copy of the foregoing has been electronically mailed and/or sent by U.S. Mail on September 10, 2021, to: Complainant(s) and/or Counsel for Complainant(s), the County Assessor and/or Counsel for Respondent and County Collector.
Contact Information for State Tax Commission:
Missouri State Tax Commission
421 East Dunklin Street
P.O. Box 146
Jefferson City, MO 65102-0146
 Complainant timely filed a complaint for review of assessment. The State Tax Commission (STC) has authority to hear and decide Complainant’s appeal. Mo. Const. art. X, sec. 14; Section 138.430.1, RSMo 2000. All statutory citations are to RSMo 2000, as amended.
 See also Am. Polled Hereford Ass’n v. City of Kansas City, 626 S.W.2d 237, 240 (Mo. banc 1982)(noting the taxpayer bears the burden of establishing a property tax exemption “by unequivocal proof that such release is required by the terms of the statute….”); City of St. Louis v. State Tax Comm’n, 524 S.W.2d 839, 845 (Mo. banc 1975)(noting the taxpayer claiming a charitable exemption must make “a clear and convincing showing that the specific activity in question does fall within an accepted category found in the definition”).
 In addition to the specific provisions of Section 137.101, Section 137.100(5) generally exempts from taxation:
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 therefrom is used wholly for religious, educational or charitable purposes[.]
 Leggett overruled City of St. Louis to the extent it is premised on the pre-Leggett precedent holding that Section 137.100(5) did not authorize partial exemptions. In all other respects, City of St. Louis remains good law and has been relied on in post-Leggett cases. See Affiliated Med. Transp., Inc. v. State Tax Comm’n of Missouri, 755 S.W.2d 646, 651 (Mo. App. E.D. 1988); Home Builders Ass’n of Greater St. Louis v. St. Louis Cty. Bd. of Equalization, 803 S.W.2d 636, 640 (Mo. App. E.D. 1991).