St Louis Aquacenter Inc. v. Freddie Dunlap, Assessor St Louis City

May 27th, 2015

State Tax Commission of Missouri

Complainant, )  
v. ) Appeal Number 13-20003
Respondent. )  





On May 27, 2015, Hearing Officer Maureen Monaghan issued her order affirming the value placed upon the subject property by the St. Louis City Board of Equalization finding the appealed property was not tax exempt. Complainant appealed.

Standard Upon Review

A party subject to a Decision and Order of a Hearing Officer with the State Tax Commission may file an application requesting the case be reviewed by the Commission. The Commission may then summarily allow or deny their request. The Commission may affirm, modify, reverse or set aside the decision. The Commission may take any additional evidence and conduct further hearings.



            Complainant appealed alleging that its existence as a not-for-profit organization entitled it to an exemption on the portion of a commercial building it leases in St. Louis City.


            It is undisputed that the property leased by Complainant is owned by a for-profit entity. The law, as set out by the Hearing Officer, clearly establishes that property cannot be exempt if it is not “dedicated unconditionally to the charitable activity in such a way that there will be no profit, presently or prospectively, to individuals or corporations”.   At any point in time, the current owner of the property can sell the property for a profit. By its very nature, the property is held for private or corporate profit. The provisions of Section 137.100(5) RSMo. specifically preclude exempt status to properties held for private or corporate profit.


The Decision and Order of the Hearing Officer, including the findings of fact and conclusions of law therein, is AFFIRMED and incorporated by reference, as if set out in full, in this final decision of the Commission.

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 mailing date set forth in the Certificate of Service for this Order.

If judicial review of this decision is made, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the courts unless disbursed pursuant to Section 139.031.8, RSMo.

If no judicial review is made within thirty days, this decision and order is deemed final and the Collector of the City of St. Louis, 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.


SO ORDERED this 22nd day of September, 2015.




Bruce E. Davis, Chairman


Randy Holman, Commissioner


Victor Callahan, Commissioner


Certificate of Service

I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 22nd day of September, 2015, to:


Adam Doerr, Attorney for Complainant;

Rory O’Sullivan, Attorney for Respondent;

Freddie Dunlap, Assessor;

Darlene Green, Clerk;

Gregory Daly, Collector;



Jacklyn Wood

Legal Coordinator

State Tax Commission of Missouri


Complainant, )
v. ) Appeal Number 13-20003
Respondent. )






Decision of the St. Louis City Board of Equalization sustaining the assessment made by the Assessor is AFFIRMED

Complainant appeared by Counsel Adam Doerr.

Respondent appeared by Associate City Counselor, Rory O’Sullivan.

Case heard and decided by Hearing Officer Maureen Monaghan.


The Commission takes this appeal to determine whether the subject property is exempt from taxation under Section 137.100(5), RSMo for the tax year 2013.  The Hearing Officer, having considered all of the competent evidence upon the whole record enters the following Decision and Order.


  1. Jurisdiction. Jurisdiction over this appeal is proper.  Complainant timely appealed to the State Tax Commission from the decision of the St. Louis City Board of Equalization.
  2. Evidentiary Hearing. The Evidentiary Hearing was held on February 24, 2015 at St. Louis City Hall, St. Louis, Missouri.
  3. Identification of Subject Property. The subject property is identified by map parcel number 0526-00-0040-0.  It is further identified as 701 N. 15th Street, St. Louis, Missouri.
  4. Description of Subject Property. The subject property is 99,893 square feet of property classified as commercial.  It is known as the International Building Condominium.  It is owned by International Building Company, LLC.  Complainant, St. Louis Aquacenter aka World Aquarium, occupies 12,250 square feet on the second floor of the building. Aquacenter subleases the property from another tenant of International Building Condominium.  The Complainant is seeking a determination of ad valorem taxation on that square footage only.
  5. Assessment. The assessment for the entire building in 2013 was $601,300.
  6. Complainant’s Evidence.
  7. Articles of Incorporation – The Complainant was incorporated in 1971 as a general not for profit in the State of Missouri.  The Articles of Incorporation state that its purpose is charitable, educational and scientific within the meaning of section 501(c)(3) of the Internal Revenue Code and shall operate a facility for display of marine life, for the education of the public concerning natural history and ecology and for research concerning marine life and ecology.  The articles also provide that upon dissolution of the corporation, the assets shall be distributed to a like 501(c)(3) organization.
  8. St. Louis County Council Recommendation dated July 27, 2000 – The St. Louis Board of Equalization recommendation, and such recommendation was accepted by the Council, to find the property belonging to St. Louis Aquacenter, Inc exempt from ad valorem taxation. The property subject referenced in Exhibit B was owned and operated by St. Louis Aquacenter.  It was identified as locator number 21K640203.  The property referenced in Exhibit B is not subject to this appeal.
  9. Letter dated February 5, 2004 from the Internal Revenue Service to St. Louis Aquacenter recognizing the organization as a 501(c)(3) organization.
  10. Sublease Agreement dated March 5, 2004.

(1) City Museum I, LLC, is identified as the lessee of 105,000 square feet from International Building Co., LLC (landlord).

(2)  St. Louis Aquacenter subleases 12, 5000 square feet from the lessee, City Museum.

(3) The terms of the sublease include:

(a) Improvements to be completed by the Museum prior to the Complainant moving into the leased space; (Paragraph 4)

(b) In lieu of rent, the parties provided that the lessee would collect admission fees and a sharing pricing structure was set forth.  The pricing structure sets forth that admission to the aquarium was $5, if purchased with admission to the lessee’s property.  The admission was $6.00 for school group for the aquarium only with all money going to the aquarium for up to 25,000 visitors.  After 25,000 visitors, the lessee received $1.00 per admission of the $6 admission fee.  (Paragraph 6)  The Aquarium may elect to make payment of $6 per visitor under 50,000 if they fail to attract 50,000 paying admissions.  (Paragraph 26)  If the Aquarium defaults, they shall pay $300,000 (one year’s rent of 50,000 visitors at $6 per visitor) to the lessee as well as all utilities, taxes or fees. (Paragraph 27)

(c)  The Complainant agreed to maintain the property, in particular agreed to keep the property clean without objectionable odors.  If the Complainant failed to maintain the standard, the lessee could cure the defects and hold the sublessee responsible for their costs. (Paragraph 7)

(d)  The Complainant is responsible for their utilities costs. (Paragraph 11)

(e)  The Complainant agreed to maintain the premises, utilities, fixtures and exhibits.  If they failed to do so, the lessee had authority to remedy the defect and Complainant was responsible for repayment.  (Paragraph 13)

(f)  The Complainant is permitted signage with the landlord’s and lessee’s consent.  (Paragraph 15)

(g)  The lessee must approve design and appearance of the Complainant’s areas as well as signage.  (Paragraph 18)

(h)  Complainant is required to maintain liability insurance and name the lessee as an insured.  (Paragraph 21)

(i) Complainant is prohibited from subletting or assigning without permission of lessee or landlord.  (Paragraph 23)

(j)  Complainant shall pay its proportionate share of all taxes, assessments and fees.  The taxes would include real estate taxes and CID assessments.  (Paragraph 24)

  1. Written Direct Testimony of Leonard Sonnenschein – He is the president of the St. Louis Aquacenter, Inc.  He testified that the complainant educates society about the importance of water, conservation, aquatic life and environment.  It offers tours, day camps and other programs.  They donate free tours to approximately 1000 charities, schools and other non-profits each year.
  2. Respondent’s Evidence.

Exhibit 1:

  1. Narrative Report – Explanation by Linda Straughter as to the process of exemption request and her reasons for recommending denial of the request to the Assessor.
  2. Sublease Agreement – same as Exhibit D
  3. Certificate of Incorporation as a Not-For-Profit
  4. Registration of Fictitious Name
  5. IRS letter dated 2/5/2004 acknowledging the 501(c)(3) status
  6. Exemption from Missouri Sales Tax
  7. Form 990 – 2009 thru 2011
  8. World Aquarium Webpage
  9. Limited Liability Company information of City Museum, LLC
  10. Limited Liability Certificate of Organization of International Building.

Exhibit 11.  Written Direct Testimony of Linda Straughter.

  1. Objections and Rebuttal Exhibits.  Complainant filed objections to Respondent’s Exhibits, including the testimony of Linda Straughter – Questions and Answers to 6, 8, 9, and 25.  The City filed a response.  Hearing Officer overruled their objections in an order dated February 6, 2015.  Hearing Officer ruled that any testimony or exhibit that constitutes a legal conclusion or invades the province of the Hearing Officer would not be given any consideration.




The Commission has jurisdiction to hear this appeal and correct any assessment shown to be unlawful, unfair, arbitrary or capricious. Article X, Section 14, Missouri Constitution of 1945; Sections 138.430, 138.460(2), RSMo


City moved to dismiss alleging the Complainant did not have standing as Complainant is not the owner of the subject property.  The City cited Section 138.430 which states that the owner of real property has the right to appeal.  The motion was denied.  In First National Bank of Wellston v. Charles Schneider, Assessor and Parkway School District, STC Appeal No. 1976-1068 (1980), a bank was a lessee of property in St. Louis County and therefore acquired a leasehold interest.  The lessee was found to have standing.  See Frontier Airlines, Inc v. State Tax Commission, 528 S.W.2d 943 (1975), Iron County v. State Tax Commission, 437 S.W.2d 665. The possessory rights in real property conferred upon a lessee are “rights and privileges” within the meaning of that phrase as used in provision of this section and therefore are “real property” and subject to ad valorem taxation. Op.Atty.Gen. No. 96, Wheeler, 9-19-53. As property taxes are “passed through” to the tenant whether included in the rent or through a direct expense to be paid by the tenant, the tenant has an interest in the assessment.

Burden of Proof

In this appeal, the Complainant (tenant) is not seeking to address the valuation of the entire property or even a portion of the property.  The Complainant seeks to claim that the owner’s, International Building Condominium, property is exempt from taxation.  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. 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 a portion of property belonging to International Building Condominium from taxation pursuant to Section 137.100(5):

The following subjects are exempt from taxation for state, county or local purposes:



(5) 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 therefore is used wholly for — charitable purposes;


 Franciscan Tertiary Test

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 the  purpose, 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.


The three tests to be met under Franciscan are:

  1. Property must be owned and operated on a not-for-profit basis;


  1. Property must be actually and regularly used exclusively for a charitable purpose; and


  1. Property must be used for the benefit of an indefinite number of persons and for society in general, directly or indirectly.


                             Subject Property Does Not Qualify Under Franciscan Test

Subject Property is not Owned and Operated on a Not-for-profit basis

The ownership of the subject property by a for-profit corporation is without question.  The owner of the property, International Building Company, leases the property to the City Museum who in turn leases it to the Complainant.  Section 137.100 RSMo requires that the property not be held for private or corporate profit.  Although the Court in Franscican spent little time addressing the ownership of the property and instead focused the opinion on the use of the property, the Court clearly stated that the property must be owned on a not for profit basis.

“The general nature of the owning organization other than that it is not-for-profit cannot be said to determine whether the use of the particular property is charitable or not.” (emphasis added)


In United Cerebral Palsy Association of Greater Kansas City v. Ross, 789 S.W.2d 798 (Mo.1990), the Missouri Supreme Court allowed an exemption of leased property. However, in that case, two not-for-profit corporations—unrelated except for the lease arrangement—used parts of the property and the court still allowed the exemption. The court concluded:

We find no requirement in Section 137.100(5) that the exclusive and purely charitable use of the property for which an exemption is granted is limited to circumstances in which the property is used entirely by the charitable owner. Instead, the requirements of the statute are met if the property’s use is purely charitable, irrespective of the number of charities using the property, and no private or corporate profit is intended.


The courts have held that in order for the property to be operated on a not-for-profit basis, it 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.  It is reasoned that organization as a not-for-profit entity with the State of Missouri is the only type of ownership that can insure presently and prospectively, a not-for-profit use.  As even when the owner’s intentions are altruistic and the rent charged is nominal, the individual ownership by its nature allows the possibility of “profit, presently or prospectively.”

Property is Not Used Exclusively for a Charitable Purpose

The property is owned by the International Building Company.  The International Building Company leases the building to others.  Leases generate income for property owners.  The use of the property cannot be considered charitable and it cannot be said that the use is exclusively charitable.

“But, on the contrary, when the owner leases his land to the public for a public use, or to a quasi public body for a charitable or religious use, and applies the rents derived from the land to his own personal advantage, he contributes nothing to the public or to charity, he loses nothing by the use, he is not a benefactor to anyone, but he stands before the law in exactly the same light as anyone else who leases his land for any other purpose, and uses the rents for his own advantage, and therefore he is not entitled to any special consideration at the hands of the law or the government, and his property is not exempt. There would be just exactly as much, and no more or less, reason for holding that the property of one who sold provisions or supplies to a charitable institution, which were used to support the lives of the inmates thereof, was exempt from taxation.” Hammer v. Macgurn, 86 SW 138, (1905)


The Complainant cites Rollings v. Shipman, 341 SW3d 777 (Mo Ct. App 2011) as supporting the concept that a lessee may claim an exemption. The Rollings case is distinguishable as the property in that case was placed in a trust for purchase by a school district. The original owners relinquished their ownership interest in the property by conveying the property to the Trust. “Therefore, the original owner no longer had dominion or control over a thing, the title to which is in another.” Similar circumstances were part of the City of St. Louis v. Bauman case, 153 SW2d 31.

Complainant does not have dominion or control over the property. Complainant is restricted on when and how he can use the property. Complainant is restricted as to modifications or use of the property. Therefore, Complainant cannot be considered the owner of the property.

The property fails to meet the tests set forth in Franscican in that the property is owned by a for-profit, both presently and prospectively, and used to generate for that for-profit entity. The Complainant failed to meet their burden of substantial and persuasive evidence that the property falls within an exempted class.


The assessment of the subject property made by the Assessor and sustained by the Board of Equalization for City of St. Louis for the subject tax day is SUSTAINED.

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. Section 138.432, RSMo.


The Collector of the City of St. Louis, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an Application for Review, unless said taxes have been disbursed pursuant to a court order under the provisions of Section 139.031.8, RSMo.

Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed.  Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.

SO ORDERED this 27th day of May, 2015.



Maureen Monaghan

Hearing Officer

Certificate of Service


I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 27th day of May, 2015, to:


Adam Doerr, Attorney for Complainant;

Rory O’Sullivan, Attorney for Respondent;

Freddie Dunlap, Assessor;

Darlene Green, Clerk;

Gregory Daly, Collector;



Jacklyn Wood

Legal Coordinator


Contact Information for State Tax Commission:

Missouri State Tax Commission

301 W. High Street, Room 840

P.O. Box 146

Jefferson City, MO 65102-0146


573-751-1341 Fax