STONECROFT, INC., )
v. ) Appeal Numbers 01-89503 & 01-89504
JAMES STRAHAN, ASSESSOR, )
TANEY COUNTY, MISSOURI, )
DECISION AND ORDER
Complainant appeals the non-exempt status of two parcels. Complainant owns two other parcels. One parcel has been previously exempted. Taxation of the remaining parcel has not been challenged. Respondent does not dispute that Complainant is a not-for-profit organization.
By agreement of the parties, an evidentiary hearing was waived and the dispute was submitted to the Tax Commission on briefs. Complainant was represented by Richard L. Schnake, Esq. Respondent was represented by William McCullah, Esq. Pursuant to Section 138.431.4, RSMo, these appeals have been transferred to hearing officer Luann Johnson for decision.
The issue in this case is whether the provision of religious retreat facilities, which also include staff housing and recreational facilities and which are, from time to time, rented to other similarly minded religious organizations, qualifies for an exemption.
The subject parcels are exempt from taxation.
Each tax exemption case is peculiarly one which must be decided upon its own facts. It is the public policy of the state that property actually and regularly used exclusively for charitable purposes shall be exempt from taxation, and taxing authorities are not to be permitted to defeat that policy by unreasonable or unrealistic application of the “strict construction” rule. Missouri United Methodist Retirement Homes v. State Tax Commission, 522 S.W.2d 745, 751 (Mo. banc 1975).
Section 137.110, RSMo provides exemptions for: “All property, real and personal, actually and regularly used exclusively for religious worship, for schools and colleges, or for purposes purely charitable and not held for private or corporate profit, except that the exemption herein granted does not include real property not actually used or occupied for the purpose of the organization but held or used as investment even though the income or rentals received therefrom is used wholly for religious, education or charitable purposes.”
Property used for religious activity is exempt from ad valorem taxation. A not-for-profit religious corporation providing housing for staff to facilitate the provision of services to like minded believers is engaged in a religious activity. The provision of recreational facilities, in conjunction with the provision of religious training and instruction, is incidental to the primary charitable use of the property but also dovetails into the primary use of the property.
FINDINGS OF FACT
1. Jurisdiction over these appeals is proper. Complainant timely appealed to the State Tax Commission from the decisions of the Taney County Board of Equalization.
2. Complainant is a not-for-profit corporation under the laws of the State of Oregon. (Ex. B). The State of Missouri recognizes Complainant as exempt from sales and use taxes under Section 144.030.2(19), RSMo.
3. The purpose of the corporation is:
“To own, operate and maintain homes for missionaries and other religious workers and to assist in all the ways in advancing the cause of Christ, and to acquire, own, sell, mortgage and dispose of real estate buildings, equipment and other facilities and property, real and personal, anywhere, in a direct or indirect relationship to these Bylaws.”
“To conduct and carry on the work of the Corporation not-for-profit but exclusively to promote, develop and carry on religious and charitable activities consistent with its religious purpose and in such manner that no part of its income or property shall inure to the private benefit of any donor, member, director, officer or individual having a personal or private interest in the activities of the Corporation, nor shall it in any way, directly or indirectly, engage in political activity or carrying on of propaganda, or substantially engage in activities to influence legislation.”
4. In the event of dissolution of the corporation:
“The property of this Corporation is hereby irrevocably dedicated to religious and charitable purposes. In the event of the liquidation, dissolution or winding up of the Corporation, whether voluntary, involuntary or by operation of law the Board of Directors, with the prior written unanimous consent of the Corporate Members, shall, after paying or making provisions for the payments of liabilities of the Corporation, dispose of all of the assets of the Corporation exclusively for the purposes of the
Corporation in such manner, or to such organization or organizations, as the Board of Directors shall determine,
1. that have a basis of faith and purposes not inconsistent with this Corporation’s,
2. that are organized and operated exclusively for religious and charitable purposes, and
3. that 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 Revenue Law).
Any such assets not so disposed of shall be disposed of by the Court of Common Pleas of the county in which the principal office of the Corporation is then located, exclusively for such purposes or to such organizations, as said Court shall determine, which are organized and operated exclusively for such purpose.” (Ex. C).
5. The corporation was granted IRS tax exempt status in February, 1955. (Ex. D).
6. Complainant owns the following parcels:
Assessor’s Parcel No. 17-9-31-0-0-18.0, the “Central Parcel” containing six buildings comprising offices, a main auditorium, meeting rooms, dining room, snack shop, guest rooms, recreational facilities, staff quarters, the start and end of a hiking trail, playground, fishing pond, auxiliary well, well house, and wastewater treatment plant. This parcel has already been found exempt from taxation.
Assessor’s Parcel No. 17-9-31-0-0-20.0, the “Eastern Parcel.” a 27 acre parcel improved with a ‘hideaway building’ used for conferences, a parking lot, a recreational vehicle park with eleven spaces used by guests and volunteer staff, tennis courts, basketball court, volleyball court, horseshoe courts, another picnic pavilion, maintenance/storage buildings (two mobile homes, six modular homes, and a large house containing three apartment units). This parcel is located across Old Highway 65 from Stonecroft’s conference center. This parcel is under appeal.
Assessor’s Parcel No. 20-3-6-0-0-20.0, the “Southern Parcel,” a parcel containing approximately 20 acres of undeveloped land located down Old Highway 65 approximately a quarter mile south of the Central Parcel. Stonecroft has made no claim for exemption for this parcel.
Assessor’s Parcel No. 18-7-36-0-0-24.0, the “Western Parcel,” a 38.5 acre parcel directly west of the Central Parcel. Portions of this parcel cross State Highway P. The only improvement on the Western Parcel is a pavilion with picnic tables located halfway down the hiking trail. This parcel is under appeal.
7. Consistent with it corporate purpose, Complainant uses the Taney County property to operate a conference center and retreat for individuals and groups who share similar principles of faith.
8. Complainant organizes a number of week-long Christ-centered conferences each year, with staff providing ministry, bible study and music. The purpose of these conferences is to “encourage, strengthen, and renew individuals’ personal relationships with Jesus Christ through worship, prayer, bible study and Christian fellowship.” During the summer, Complainant conducts a youth program that provides “a structured learning time, ministry time, for youth.”
9. Complainant also leases the facilities to other Christian organizations, who share the same tenets of faith, for meeting and retreat purposes. Between 6,000 and 8,000 people use Complainant’s retreat each year.
The retreat has 72 guest rooms and eleven RV spaces. Complainant also has a few homes and some apartments in an old house on the conference center property. Complainant’s guest rooms are not equipped with televisions or telephones because “Our expectation is that guests come to the conference center to attend conference center activities and meetings in the particular type of setting we offer.. . .telephones and television in guest rooms would (not) further the purposes of the conference center or Stonecroft Ministries, Inc., but would only detract from the conference center atmosphere.” (Ramey #126).
10. Use of the conference is limited to people attending conferences organized by Complainant or outside Christian groups. Tourists and transient guests are not allowed.
11. Outside groups using the facility are charged for meals and guest rooms but are not charged for use of meeting space and audio/visual equipment. Individuals attending conferences arranged by Complainant are required to pay a registration fee. Individuals attending conferences sponsored by other Christian groups do not pay a registration fee.
12. Complainant maintains a staff of 20 to 30 permanent staff members. These staff members are paid less than $7.00 per hour. All staff members must examine and agree with Complainant’s statement of faith; must be confident of their personal relationship with Jesus Christ; and must be willing to share their personal testimony.
Because of the nature of the facility and its provision of services to guests, staffing must be maintained around the clock. Approximately 18 staff members live in housing on site and are charged rent for their dwelling units. The rent charges help defray the costs of providing the housing and food and are not designed to profit Stonecroft.
In addition, between 220 and 250 individuals volunteer to help staff the conference center every year. Volunteer staff members are provided free housing and meals.
13. The parcels under appeal are designed as the “Western Parcel” and the “Eastern Parcel.”
A. The Western Parcel is primarily wooded and contains a hiking trail and a pavilion consisting of a covered structure with some picnic tables.
B. The Eastern Parcel has facilities for meetings, guest and staff lodging, parking, recreation, maintenance, and storage. The meeting facility is described as the “hideaway building.” A large parking lot of the Eastern Parcel serves both the Eastern and Central (conference center) parcels. Maintenance and storage buildings, a tractor barn, the main well and well house and a 20,000 gallon water tank are on the Eastern Parcel.
The Eastern Parcel contains the tennis, basketball, volleyball, and horseshoe courts and a picnic pavilion. A luncheon cookout and an evening bonfire occur each week at the picnic pavilion.
The Eastern Parcel also contains two mobile homes, six modular homes, a large house containing three apartments, and the 11 space RV park. Guests and volunteers use the RV park for short term stays. Staff members use the mobile homes, modular homes and the house.
14. The conference center and affiliated properties do not make a profit. Shortfalls in operating costs are covered by the parent corporation.
The Western Parcel
This parcel is used for youth group activities, bible studies, relaxation, worship, prayer or reflection. Complainant argues that the Western Parcel supports its stated charitable purpose of “advancing the cause of Christ.” Respondent argues that this primarily undeveloped parcel has the potential to be sold, developed, leased, rented, or held as an investment for profit and, therefore, is not entitled to an exemption.
The Eastern Parcel
Complainant argues that the Eastern Parcel supports its stated charitable purpose “To own, operate and maintain homes for missionaries and other religious workers” and “advancing the cause of Christ.” Complainant argues that all of its staff are missionaries. Respondent contends that, to the extent that this parcel is used for staff housing, it is not “dedicated unconditionally to a charitable objective,” attempting to distinguish Central States Christian Endeavors Ass’n v. Nelson, 898 S.W.2d 547 (Mo. banc 1995) on the grounds that Complainant’s staff were not required to live on the premises and that those staff members who do live on the premises pay market rent for their dwelling units. Further, since Complainant had failed to provide a breakdown of the percentage of the parcel that was used for conference purposes and the percentage of the parcel that was used for staff housing, Complainant had failed to meet its burden of proof and the entire parcel should be taxable.
CONCLUSIONS OF LAW
Burden of Proof
Although a taxing statute is construed strictly against the state, an exemption statute is strictly construed against the one claiming the exemption. State ex rel. Union Electric Co. v. Goldberg, 578 S.W.2d 921, 923 (Mo. banc 1979).
In order to prevail, Complainant must demonstrate by substantial and persuasive evidence, that it is entitled to an exemption.
Substantial evidence is that evidence which, if true, has probative force upon the issues, i.e., evidence favoring facts which are such that reasonable men may differ as to whether it established them, and from which the Commission can reasonably decide an appeal on the factual issues. Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).
Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact. The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief. Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).
Properties which can be exempted from taxation are set out within our Constitution and the statutes enacted to enforce that Constitution, to wit:
“. . .all property, real and personal, not held for private or corporate profit and used exclusively for religious worship, for schools and colleges, for purposes purely charitable, . . .may be exempt from taxation by general law but any such law may provide for approximate restitution to the respective political subdivisions of revenues lost by reason of the exemption. All laws exempting from taxation property other than the property enumerated in this article, shall be void. Article X, Section 6, Mo. Const. of 1945.
In support of this Constitutional provision, the Legislature has enacted Section 137.110, RSMo, which provides in relevant part:
The following property shall be exempt from taxation:
(5) All property, real and personal, actually and regularly used exclusively for religious worship, for schools and colleges, or for purposes purely charitable and not held for private or corporate profit, except that the exemption herein granted does not include real property not actually used or occupied for the purpose of the organization but held or used as investment even though the income or rentals received therefrom is used wholly for religious, education or charitable purposes; Section 137.110, RSMo 1994.
Case Law on Charitable Use
In order for a property to be exempt from taxation for state, county or local purposes, the following tests must be met:
1. The property must be actually and regularly used exclusively for a charitable purpose, as charity is defined by Salvation Army v. Hoehn, 188 S.W.2d 826 (Mo. banc 1945). “Charity” is therein defined as “. . .a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing their hearts under the influence of education or religion, by relieving their bodies of disease, suffering or constraint, by assisting them to establish themselves for life, or by erecting or maintaining the public buildings or works or otherwise lessening the burdens of government.” Salvation Army at 830.
2. The property must be owned and operated on a not-for-profit basis. The property “must be dedicated unconditionally to the charitable activity in such a way that there will be no profit, presently or prospectively, to individuals or corporations. Any gain achieved in use of the building must be devoted to achievement of the charitable objectives of the project.” Franciscan Tertiary Province v. State Tax Commission, 566 S.W.2d 213, at 224 (Mo. banc 1978).
3. The dominant use of the property must be for the benefit of an indefinite number of persons and must directly or indirectly benefit society generally. “It is required that there be the element of direct or indirect benefit to society in addition to and as a result of the benefit conferred on the persons directly served by the humanitarian activity.” Franciscan at 224. See also, Barnes Hospital v. Leggett, 589 S.W.2d 241 (Mo. banc 1979).
In Missouri law, “used exclusively” has reference “to the primary and inherent use as over against a mere secondary and incidental use.” If the incidental use, in this case renting (housing), does not interrupt the exclusive occupation of the (premises) for religious worship, but dovetails into or rounds out that purpose, then it can be said that the property has an exclusive use which authorizes the exemption. Central States Christian Endeavors Ass’n v. Nelson, 898 S.W.2d 547, 549 (Mo. banc 1995).
Unimproved parcels owned and used by religious organizations for fellowship meetings and recreational purposes are tax exempt. First Baptist Church of Raytown v. Boley, STC Appeal No. 92-32881, 1993 STC Proceedings and Decisions 402, citing St. Louis Council Boy Scouts of America v. Burgess, 240 S.W.2d 684 (1951).
As to the Eastern Parcel
The Eastern Parcel is a 27 acre parcel improved with a ‘hideaway building’ used for conferences, a parking lot, a recreational vehicle park with eleven spaces used by guests and volunteer staff, tennis courts, basketball court, volleyball court, horseshoe courts, another picnic pavilion, maintenance/storage buildings (two mobile homes, six modular homes, and a large house containing three apartment units).
Respondent argues that this parcel is not exempt because it contains housing for guests and staff; that staff pay rent; and that, therefore, this parcel has a “for profit” use. We disagree. The conference center has 72 guest rooms and hosts 6,000 to 8,000 guests each year. In addition to providing meals and lodging, conference center staff conduct seminars, bible and music ministries, and assist other groups in conducting seminars. The fact that staff may chose to rent a dwelling unit on conference property does not turn the property into a “for profit” endeavor. Renting accommodations to staff members is incidental to the primary use of providing religious based programs and ministries, in keeping with Complainant’s corporate purpose.
In addition, the Eastern Parcel also houses maintenance facilities, the parking lot that serves the Eastern and Central parcels and RV space for guests. These functions clearly support the dominant purpose of the corporation.
As to the Western Parcel
The Western Parcel is a 38.5 acre parcel directly west of the Central Parcel. Portions of this parcel cross State Highway P. The only improvement on the Western Parcel is a pavilion with picnic tables located halfway down the hiking trail.
As discussed in St. Louis Council Boy Scouts of America v. Burgess, 240 S.W.2d 684 (1951), a parcel does not have to be improved in order to have a qualifying charitable use. In St. Louis Council of Boy Scouts, the Complainant asserted, and the Supreme Court agreed, that unimproved parcels can foster the charitable purpose of the owning organization. In this instance, the subject parcel contains only minimal improvements. However, those improvements provide space for youth group activities, bible studies, relaxation, worship, prayer or reflection, all consistent with the corporate charitable purpose.
The non-exempt status of the subject properties for tax year 2001, as determined by the Assessor and approved by the Board of Equalization, is SET ASIDE. The Clerk is HEREBY ORDERED to show this parcel as exempt for tax years 2001 and 2002.
A party may file with the Commission an application for review of a hearing officer decision within thirty (30) days of the mailing of such decision. The application shall contain specific detailed grounds upon which it is claimed the decision is erroneous. Failure to state specific facts or law upon which the appeal is based will result in summary denial.
If an application for review of a hearing officer decision is made to the Commission, any protested taxes presently in an escrow account in accordance with these appeals shall be held pending the final decision of the Commission. If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of Taney County as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in these appeals. If any protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.
Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed. Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.
SO ORDERED January 8, 2003.
STATE TAX COMMISSION OF MISSOURI