State Tax Commission of Missouri
v.) Appeal Number 07-10000
PHILIP MUEHLHEAUSLER, ASSESSOR,)
ST. LOUIS COUNTY, MISSOURI,)
DECISION AND ORDER
Assessment by Assessor that subject property was not tax exempt was sustained by the St. Louis County Board of Equalization.Commission finds subject personal property to be exempt under Section 137.100(5).
Complainant appeared by Counsel, W. Bevis Schock, Clayton, Missouri
Respondent appeared by Associate County Counselor, Paula J. Lemerman.
Case heard by Senior Hearing Officer W. B. Tichenor
Decision and Order rendered by the Commission.
The Commission takes this appeal to determine whether the subject property is exempt from taxation for the tax year 2007 under Article X, Section 6 Missouri Constitution and Section 137.100(5), RSMo.
Complainant appeals the decision of the St. Louis County Board of Equalization.Respondent assessed the Complainant’s personal property.This assessment was sustained by the Board of Equalization.Complainant contends that its personal property is exempt from taxation under the provisions of Section 137.100(5).An evidentiary hearing was conducted on April 10, 2008, before Senior Hearing Officer W. B. Tichenor at the St. Louis County Government Center, Clayton, Missouri.The Transcript of the hearing was received the Commission on May 6, 2008.
The Hearing Officer, having considered all of the competent evidence upon the whole record prepared his proposed Decision and Order for review by the Commission.The Commission upon review of the record adopts the Hearing Officer’s proposed Decision and Order as the Decision and Order of the Commission.
Complainant offered into evidence Exhibits A through H5 (Written Direct Testimony of Jason Hannasch, Vice-President of Show-Me Institute).Respondent objected to certain answers in Exhibit H5.The objections were ruled on in the Hearing Officer’s Order dated March 12, 2008.Exhibits A through H5 were received into evidence subject to those portions of Mr. Hannasch’s written direct testimony which were stricken by the Hearing Officer’s Order.Exhibits A through H5 are identified in the listing contained in the Order of 3/12/08, which is incorporated by reference in this Decision as if set out in full.
Mr. Hannasch testified at hearing.
Respondent offered into evidence the following Exhibits:
Packet of Documents consisting of the following:
Letter to Complainant from St. Louis County Board of Equalization,
3/13/07 (1 page)
Petition for Exemption of Personal Property before St. Louis County Board of Equalization, 9/11/06 (4 pages)
Memorandum to Muehlheausler from Karen Leahy, 11/6/06 (1 page)
Letter to Complainant from Board of Equalization, 2/21/07 (1 page)
Complainant’s Transaction by Account Ledger, 10/31/06 (1 page)
Complainant’s Statement of Financial Activities, 1/05 – 12/05 (1 page)
Complainant’s Statement of Financial Position, 12/31/05 (1 page)
IRS 501( c)(3) letter to Complainant, 3/21/05 (1 page)
State of Missouri Sales and Use Tax Exemption Letter, 8/15/05 (1 page)
Untitled Document on Complainant’s sources and uses of funds, gross income attributed to charitable purposes, salaries and duties of directors, officers, and employees (2 pages)
Complainant’s Organizational Meeting Minutes, 12/9/04 (3 pages)
Copy of article from the West End Word, Vo. 36, No. 43, 10/31 – 11/6/07 (5 pages)
Exhibits 1 and 2 were received into evidence.
Commission Exhibit 1 – listing of office furniture and equipment at the Show-Me Institute offices filed with the Complaint for Review of Assessment, was received into evidence with the written corrections made by Mr. Hannasch at hearing to show the property which was not being contested in this appeal.
FINDINGS OF FACT
1.Jurisdiction over this appeal is proper.Complainant timely appealed to the State Tax Commission from the decision of the St. Louis County Board of Equalization.
2.The property under appeal is personal property located at Suite 2150, 7777 Bonhomme, Clayton, Missouri.It is identified as Assessor’s Account No. B00162595.The property consists of office furniture and equipment as listed and detailed in Commission Exhibit 1.The total acquisition costs for the property listed in Commission Exhibit 1 is $50,188.90.Certain items of property with a total acquisition cost of $7,708.00 are not being claimed by Complainant as exempt property.This property is owned by Rex Sinquefield, who has an office at the location.Therefore, the total acquisition cost of the property which is the subject of this appeal is $42,480.90.All property was acquired in a period from 7/20/05 through 12/21/05. Commission Exhibit 1; Tr. 16:10 – 18:23.
3.The Show-Me Institute (Institute) is a Missouri Nonprofit Corporation that operates as a “classic state think tank.”
a.It is organized exclusively for charitable, educational, religious purposes within the meaning of Section 501(c) (3) of the Internal Revenue Code.The specific purposes of the corporation are to discover and promote public policies that enhance economic growth and opportunities for all residents of Missouri and for all other legal powers permitted a Nonprofit Corporation.
b.No part of the net earnings of the corporation shall inure to the benefit of, or be distributable to, its members, directors, officers, or other private persons except that the corporation shall be authorized and empowered to pay reasonable compensation for services rendered.
c.No substantial part of the activities of the corporation shall be the carrying on of propaganda or otherwise attempting to influence legislation and the corporation shall not participate in or intervene (including the publishing or distributing of statements) in any political campaign on behalf of any candidate for public office.
d.Notwithstanding any other provisions of its articles, the corporation shall not carry on any other activities not permitted to be carried on (a) by a corporation exempt from Federal Income Tax under Section 501 (c) (3) of the Internal Revenue Code of 1954 (or the corresponding provision of any future United States Internal Revenue Law) or (b) by a corporation, contributions to which are deductible under Section 170(c) (2) of the Internal Revenue Code of 1954 (or the corresponding provision of any future United States Internal Revenue Law).
e.Upon the dissolution of the corporation, the Board of Directors shall, after paying or making provisions for the payment of all of the liabilities of the corporation, dispose of all the assets of the corporation exclusively for the purposes of the corporation in such a manner, or to such organization or organizations organized and operated exclusively for charitable, education, religious or scientific purposes as shall at the time qualify as an exempt organization or organizations under Section 501 (c) (3) of the Internal Revenue Code of 1954 (or the corresponding provision of any future United States Internal Revenue Law), as the Board of Directors shall determine.
Exhibits A & B.
4.A “think tank” is a research institute or organization employed to solve complex problems or predict or plan future developments, as in military, political, or social areas.Dictionary.com, based on Random House Unabridged Dictionary.
5.The Institute seeks to educate citizens, government officials, and business and community leaders on a variety of issues.The educational work of the Institute is conducted through the publication and distribution of Policy Briefings, Policy Studies, Website Articles, Quarterly Newsletters, Informative Luncheons, News Releases, Op-Ed Articles, Case Studies, Issue Papers and Conferences.Briefings, Studies and Articles are prepared by individuals with a particular expertise on given public, economic, and government policies and issues.See, Exhibits J through H4.
6.The Institute is not a school, college or university.It does not seek exemption on this basis.
7.Complainant’s evidence was substantial and persuasive to rebut the presumption of correct assessment by the Respondent and Board of Equalization and establish the exempt status of the personal property under appeal.
CONCLUSIONS OF LAW
The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious.Article X, Section 14, Missouri Constitution of 1945; Constitution of 1945; Sections 138.430, 138.460(2), RSMo.The assessment of a property for ad valorem taxation that is used for an exempt purpose under the constitutional and statutory provisions of Missouri law is an unlawful assessment.
Constitutional and Statutory Exemption Provisions
Article X, Section 6 of the Missouri Constitution allows for the legislature to exempt from taxation real property “not held for private or corporate profit and used exclusively for .. purposes purely charitable.”Section 137.100(5) exempt from taxation real property “actually and regularly used exclusively … for purposes purely charitable and not held for private or corporate profit.”As is discussed below, the evidence establishes that the use of the property under appeal satisfies the statutory mandate.
Complainant’s Burden of Proof
Complainant has the burden to present substantial evidence to rebut the presumption of correct assessment by the Board of Equalization.Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 895 (Mo. banc 1978).In order to meet this burden in an appeal seeking exemption from taxation, the Complainant must meet the substantial burden to establish that the property falls within an exempted class under the provisions of Section 137.100. State ex rel. Council Apartments v. Leachman, 603 S.W.2d 930, 931 (Mo. 1980).It is well established that taxation is the rule and exemption from taxation is the exception.Exemption is not favored in the law.(See, Missouri Church of Scientology v. STC, 560 S.W.2d 837, 844 (Mo. banc 1977); CSCEA v. Nelson, 898 S.W.2d 547, 548 (Mo. banc 1995), citing Scientology).Complainant seeks exemption of its property from taxation pursuant to Section 137.100(5) quoted above. As is detailed below, Complainant’s burden of proof has been met in the present case.
Franciscan Tertiary Test
The standard which a taxpayer must meet as a burden of proof on the elements of the Franciscan Test is to present substantial and persuasive evidence.In meeting its burden of proof that the subject property is used “exclusively for … purposes purely charitable, and not held for private or corporate profit….”Complainant must meet the three prong test set forth by the Missouri Supreme Court in Franciscan Tertiary Province v. STC, 566 S.W.2d 213, 223-224 (Mo. banc 1978). The court said:
“The first prerequisite for property to be exempt as charitable under §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 thepurpose, as expressed in Salvation Army, of “relieving their bodies of disease, suffering, or constraint…or by erecting or maintaining pubic buildings…lessening the burdens of government.” 188 S.W.2d at 830…. Thus it is required that there be the element of direct or indirect benefit to society in addition to and as a result of the benefit conferred on the persons directly served by the humanitarian activity.”
Id. At 224.
The three tests to be met under Franciscan are generally stated as follows:
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.
Owned and Operated – Test I
The subject office furniture and equipment is owned on a not for profit basis.The Show-Me Institute generates no profit.No dividends are paid out to shareholders.The Institute does not generally charge for its educational services.It may charge for copies of studies and some expenses associated with its other activities.However, any such charges would only be a recovery of costs and not a generation of a profit.The Institute is supported by contributions, gifts, grants from the public. Exhibit G.The primary purpose and objective of the Institute is not to generate income or a profit.
Used Exclusively – Test II
The Institute operates to accomplish its corporate educational purpose to “discover and promote public policies that enhance economic growth and opportunities for all residents of Missouri.”The office furniture and equipment that is under appeal is used exclusively for the accomplishment of that purpose.The primary and inherent use of Complainant’s property is in support of its stated purpose.
A charitable use is defined under Missouri case law, applicable to the present appeal, is a gift to bring the hearts of individuals under the influence of education.Salvation Army v. Hoehn, et al, 188 S.W.2d 826, 830 (Mo. 1945).The development of articles, policy papers, briefing statements and conducting seminars and conferences on various issues of public policy are all educational in nature. The charitable or non-profit activities of the institute are, therefore, educational. The fact that it is not a school, college or university is not controlling.An educational use comes within an accepted category found in the Salvation Army definition.See, City of St. Louis v. State Tax Commission, 524 S.W.2d 839, 835 (Mo. 1975).
Benefit Indefinite Number of Persons and Society in General – Test III
The final test which must be met is that the educational activity of Complainant and thereby use of the personal property which supports the Institute’s activity must benefit an indefinite number of persons and society in general.The dissemination of the various articles, papers and briefings produced by the Institute are without restriction as to who may receive them.Through the use of the Institute’s website the distribution of its educational material is essentially unlimited.The conferences which have bee sponsored by the Complainant have been publicized and open to the public.
The information developed and published by the Institute provides points of view on various public policy issues touching on economic growth and opportunities.Individual citizens and society in general benefits from the sharing of information on issues of interest and concern in the marketplace of ideas.Knowledgeable discussion and debate on matters of public concern can only take place when citizens are well informed.The fact that some might view the information (briefings, policy papers, articles, etc.) produced by the Show-Me Institute as providing a limited perspective of only a certain political ideology does not alter the fact that Complainant’s activity educates the citizenry.
Complainant’s personal property is owned and used exclusively for an education purpose which provides a benefit to individuals and to society in general.Therefore, it is exempt from ad valorem taxation under Section 137.100(5), RSMo.
The assessment of the subject property made by the Assessor and sustained by the Board of Equalization for St. Louis County for the subject tax day is SET ASIDE.
The Assessor is ordered to enter the subject property ($42,480 – acquisition cost- 2005) on the list of exempt property into the supplemental tax book for the county for the tax year 2006.The following items are subject to taxation:
Office Furnishings – Paintings
Judicial review of this Order may be had in the manner provided in Sections 138.432 and 536.100 to 536.140, RSMo within thirty days of the date of the mailing of this Order.
The Collector of St. Louis County shall continue to hold the disputed taxes pending an Order from the Commission as to whether a Petition for Judicial Review of the Order has been filed.
SO ORDERED June 10, 2008.
STATE TAX COMMISSION OF MISSOURI
Bruce E. Davis, Chairman
Jennifer Tidwell, Commissioner
Charles Nordwald, Commissioner
Certificate of Service
I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 10thday of June, 2008, to:W. Bevis Schock, 7777 Bonhomme Avenue, Suite 1300, St. Louis, MO 63105, Attorney for Complainant; Paula Lemerman, Associate County Counselor, County Government Center, 41 South Central Avenue, Clayton, MO 63105, Attorney for Respondent; Philip Muehlheausler, Assessor, County Government Center, 41 South Central Avenue, Clayton, MO 63105; John Friganza, Collector, County Government Center, 41 South Central Avenue, Clayton, MO 63105.
Barbara Heller, Legal Coordinator