Summit Community Church v. Shipman (St. Charles)

State Tax Commission of Missouri

SUMMIT COMMUNITY CHURCH,	)
	)
Complainant,	)
	)
v.	)	Appeal Number 12-32505
	)
SCOTT SHIPMAN, ASSESSOR,	)
ST. CHARLES COUNTY, MISSOURI,	)
	)
Respondent.	)

ORDER

AFFIRMING HEARING OFFICER DECISION

UPON APPLICATION FOR REVIEW

On October 1, 2013, Senior Hearing Officer W. B. Tichenor entered his Decision and Order (Decision) setting aside the assessment by the St. Charles County Board of Equalization and granting Complainant’s claim of exemption for taxation under section 137.100 (5) RSMo.

Respondent filed his Application for Review of the Decision.Complainant filed its Response.

DECISION

Respondent raised four points on appeal:

1.The Decision is unauthorized by law and is not supported by substantial evidence because a portion of the subject property is not actually and regularly used exclusively for religious worship.

2.The Decision is arbitrary, capricious because it misapplies the Central States 1 case and fails to consider the controlling Missouri Test for Exemption, the Franciscan 2 Analysis.

3.The Decision is arbitrary, capricious because it fails to focus on the subject property and instead considers the tax parcel as a whole.

4.The Decision is unsupported by substantial evidence, for the reason it is against the overwhelming weight of the evidence.

For the reasons hereinafter developed, the Commission is not persuaded by any of the arguments advanced.The matter in great part hinges on what was actually uncontested and that is the Identification and Description of the Subject Property. 3 Respondent’s brief admits that the facts are not at issue; it is only the application of the law to the facts with which issue is taken.Respondent does not assert as error the Hearing Officer’s identification or description of the property.

The property under appeal is the parcel identified by map parcel number 22-056B-S028-00-0001.3 and Assessor’s account number 199272A000, located at 101 East Terra Lane, O’Fallon, Missouri. 4 Respondent does not assert that the Hearing Officer erred in his identification of the parcel under appeal.Respondent did not claim reversible error on the part of the Hearing Officer in his description of the subject property, consisting of 4.747 acres (206,779 square feet) improved by two buildings and adjacent parking lots. 5 Indeed the Application for Review admits that the property at 101 East Terra Lane, O’Fallon, Missouri “consists of 206,779 square feet improved by two buildings and adjacent parking lots (citing to the Decision, page 2 – page is where Findings of Facts 3 and 4 appear in the Decision).Respondent seeks to cut out part of the parking area representing less than 6 percent of the Complainant’s total property and treat it as the subject property.The fact that the Assessor and Board had exempted 4.467 acres with the improvements and the overwhelming majority of the parking area and only assessed .28 of an acre does not render the Church’s property to be treated as two separate parcels.

Turning now to the arguments advanced by Respondent, the Commission finds that none of the points individually or collectively warrant overturning the Decision.

Use of Portion of Property

Respondent’s first line of attack is that a portion of the property is not actually and regularly used exclusively for religious worship.The Hearing Officer addressed in extensive fashion what the phrase “actually and regularly used exclusively” means in the various court decisions on the subject.He specifically addressed Respondent’s claim at hearing that he must only look at the 18 parking space area that the Assessor claimed should not be exempt.The Commission finds the analysis and reasoning put forth in the Decision to be in accordance with the applicable case law and supported by substantial evidence.The Hearing Officer did not err in this regard in his application of the law to the undisputed facts at hand.

Application of Central States & Franciscan

Respondent next asserts that the Hearing Officer misapplied the law developed from Central States and failed to consider the test for exemption under the Franciscan case.The Commission does not agree.The Decision contains a well reasoned section addressing both Central States and Franciscan.

Central States

Respondent’s argument runs entirely counter to the Central States holding, since in that case approximately half (the upper floor of the campus house) of the property was what was at issue.The Court, as cited by the Hearing Officer, stated:“The earlier holdings that incidental uses serving to promote the primary purpose of religious worship do not disqualify the property from being entitled to exemption are reaffirmed.”

The Commission concludes that the extensive discussion and analysis of the applicability of the Central States case to the present facts was on point.The Hearing Officer did not err in his reasoning and application, but properly applied the overarching principle establish by the Central States Court to the case at hand.

Franciscan

As to the claim that the Hearing Officer failed to consider the Franciscan test, the argument simply ignores the actual language of the Decision.The Hearing Officer clearly considered and recognized that the Missouri Supreme Court had not seen the need to engage in any Franciscan analysis in Central States.Accordingly, the Hearing Officer elected to not “burden the Decision with a detailed review of the Franciscan test.”The Hearing Officer did conclude that the “application of the test would not provide the basis for concluding that Complainant’s property is not exempt in its entirety.”6

Respondent’s claim that the subject property fails all three prongs of the Franciscan Test is not persuasive.Respondent’s arguments are a misapplication of the test.

The subject property 7 is owned by a not-for profit entity and is operated on a not-for-profit basis since the evidence is undisputed that Complainant receives no payment under the easement granting limited parking privileges to a for-profit entity.Accordingly, the first prong of Franciscan is met.Complainant’s property as addressed in detail in the Decision 8  meets the case law interpretation of being actually and regularly used exclusively for religious purposes, therefore the second prong of the test is satisfied.Finally, the property meets the used for the benefit of an indefinite number of persons and for society in general, directly or indirectly prong of Franciscan.It is clearly and unequivocally recognized by statute and case law that the use of property for worship services, children’s ministry, church offices, church meetings, and other activities consistent with and incidental to the work, mission and ministry of a religious entity constitutes a benefit to an indefinite number of persons and to society in general both directly and indirectly.

Failure to Focus on Part of Complainant’s Property

Respondent’s third claim that the Hearing Officer erred because he considered the entire subject parcel and failed to focus on only 12,114 square feet (5.8%) 9 of Complainant’s property is not persuasive.The Commission recognizes that from the Assessor’s point of view only the area of parking spaces shared in its use by the Church and the adjacent business should be analyzed and considered.The Commissions disagrees and concludes that the Hearing Officer correctly viewed the entirety of the Church’s property and its use.

The part of Complainant’s parking lot that is burdened by the Cross Access Easement 10  is shared space between the Church and the business (Metro Lighting).During its business hours Monday through Saturday, customers of Metro Lighting and not attendees of the Church are entitled to use the 18 parking spaces.During all evening hours, non business hours on Saturdays and all day and evening on Sundays the parking spaces are part of Complainant’s parking lot for use by members and attendees of the Church.

It is important to note that Complainant did not create this shared space situation.Accordingly, it cannot be found that it was the Church’s primary intent and purpose to utilize a portion of its property for certain parts of weekdays and Saturdays for parking by persons other than Church members and attendees.In other words, the partial use by the neighboring business, that is the beneficiary of the easement on the shared space, is simply a very small incidental and secondary use 11 to the overall and controlling exempt use of Complainant’s 4.747 total acres.

Respondent’s reliance on Barnes Hospital v. Leggett 12 on this point is not persuasive to the Commission.In the first instance, the Commission does not view the facts of the present case to square with the facts presented in Barnes.The holding of the court was indeed that where a “building, or tract, is used in part for charitable purposes and in part for non-charitable purposes” that in effect a mixed use or split use assessment could be made.That is part used for the charitable purpose could be found exempt and the part used for non-charitable purposes would not be exempt.In Barnes there were portions of the building in question that were simply leased to doctors for their private practice, there was no shared space element as in the present appeal.In other words, the hospital did not have the right to use the office space after the doctor’s work hours or on weekend when the doctors where not conducting their private medical practices.

This is clearly not the case with the Church’s property.The 18 parking lot space is not used only for the benefit of the adjoining business.Unlike the doctor’s offices in Barnes, the parking spaces are limited as to the time when they can be used by the holder of the easement rights.At all other times, the space is part and parcel of Complainant’s parking area and as such is being used for a religious purpose when accessed and used for parking by the Church’s members and attendees.Although the actual operating or business hours of Metro Lighting was not established in the record, even if it is assumed that the business is open fifty hours a week, then the shared parking area is only being used by the business for less than 30% 13 of the entire time in a week.At all other times, the shared space is available to use by the Church.

The final point which renders the Barnes decision not controlling in this instance is that the Court in Central States elected to not assess the approximately half of the subject house that was being rented out as sleeping rooms.Instead, the Court granted the exemption to the entire property.The decision of the Hearing Officer to refrain from considering the partial use during a day or week of less than 6% of the subject property and instead to view the Complainant’s property as a whole is not in conflict with the exact approach taken by the Central States Court.The Court specifically did not just focus on the upstairs portion of the campus house.If it had, then following Respondent’s line of reasoning, that would have been determined to have been not exempt.However, the opinion of the court clearly, just as the Hearing Officer in the present appeal, viewed the use of the entire property in determining that Barnes was not to be applied to arrive at a split assessment.Therefore, the Hearing Officer did not err in his approach to this aspect of the case.

Against Weight of Evidence

Respondent finally argues that the Decision is against the overwhelming weight of the evidence.The Commission does not agree.There is no real factual dispute involved in the case.There is no allegation of error on the part of the Hearing Officer with regard to any given finding of fact set forth in the Decision.Indeed Respondent admitted in his Application, “The facts of this case are not wholly at issue.”In the absence of a specific allegation of error by the Hearing Officer with regard to a specific finding of fact, the Commission can only conclude that, in point of fact, no facts in the case are at issue.The evidence established, without contradiction, the facts as concluded by the Hearing Officer.The weight to substantiate each of the facts in the case was both substantial and persuasive.

The case simply does not turn upon the weight of the evidence.The Respondent only took issue with “the application of the law to the facts.”The Commission is in agreement.The case is a simple matter of the application of the law.From all of the foregoing, the Commission concludes a proper application of the law by the Hearing Officer.

Summary and Conclusion

A review of the record in the present appeal provides support for the determinations made by the Hearing Officer.There is competent and substantial evidence to establish a sufficient foundation for the Decision of the Hearing Officer.A reasonable mind could have conscientiously reached the same result based on a review of the entire record. The Commission finds no basis to support a determination that the Hearing Officer acted in an arbitrary or capricious manner or abused his discretion as the trier of fact and concluder of law in this appeal.14 

The Hearing Officer did not err in his determinations as challenged by Complainant.

ORDER

The Commission upon review of the record and Decision in this appeal, finds no grounds upon which the Decision of the Hearing Officer should be reversed or modified.Accordingly, the Decision is affirmed, exemption is granted.The Decision and Order of the hearing officer, including the findings of fact and conclusions of law therein, is 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 St. Charles 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 this appeal.

SO ORDERED April 28th, 2014.

STATE TAX COMMISSION OF MISSOURI

_____________________________________

Bruce E. Davis, Chairman

_____________________________________

Randy B. Holman, Commissioner

_____________________________________

Victor Callahan, Commissioner

DECISION AND ORDER

 

HOLDING

Decision of the St. Charles County Board of Equalization sustaining the assessment made by the Assessor is SET ASIDE.Complainant presented substantial and persuasive evidence to rebut the presumption of correct assessment by the Board of Equalization and establish exempt status of the property under appeal under Section 137.100(5), RSMo.

Complainant appeared by Counsel, James A. Beckemeier, The Beckemeier Law Firm, St. Louis, Missouri.

Respondent appeared by Associate County Counselor, Amanda Jennings.

Case heard and decided by Senior Hearing Officer, W. B. Tichenor.

ISSUE

Complainant appeals the decision of the St. Charles County Board of Equalization, sustaining the Assessor assessment of the property under appeal as commercial property.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 2012.The Hearing Officer, having considered all of the competent evidence upon the whole record enters the following Decision and Order.

FINDINGS OF FACTS

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

2.Evidentiary Hearing.The Evidentiary Hearing was held on July 18, 2013, at the St. Charles County Administration Building, St. Charles, Missouri.The transcript of hearing was received by the Commission on August 16, 2013.Counsel for Complainant informed the Hearing Officer on August 20, 2013, that Complainant declined to brief the case.

3.Identification of Subject Property.The subject property is identified by map parcel number 22-056B-S028-00-0001.3 and Assessor’s Account Number 199272A000.It is further identified as 101 East Terra Lane, O’Fallon, Missouri.15

4.Description of Subject Property.The subject property consists of a 4.747 acres (206,779 square feet) improved by two buildings and adjacent parking lots.16 The area of parking lot subject to the Cross Access Easement (See, FINDING OF FACT 8, infra) consists of eighteen parking spaces and the parking lot area necessary to provide access to the parking spaces (Metro Parking).17 Complainant purchased the subject property on December 30, 2011.18

5.Assessment.The Assessor valued 12,114 square feet 19 (.28 of an acre) of the subject property at $49,408, an assessed commercial value of $15,814.The remaining 4.467 acres, with its improvements, were determined to be exempt being used as Church 20 property. The Board of Equalization sustained the assessment. 21

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

No objections were filed to Exhibits A through E, they were received into evidence.Mr. Wall testified at hearing.22

7.Respondent’s Evidence.Respondent offered into evidence the following exhibits:

No objections were filed to Exhibits 1 through 9.At hearing, Exhibit 10 was offered as a rebuttal exhibit.By Order dated 2/13/13, the deadline for filing rebuttal exhibits was 5/22/13.Objection was made to Exhibit 10.Objection was sustained and the exhibit was excluded.See, Exclusion of Exhibit 10, infra.Mr. Brown testified at hearing.23

8.Cross Access Easement and Entrance Monument Easement.The subject property is burdened by a Cross Access Easement and benefited by an Entrance Monument Easement. 24 On June 8, 2004, an Easement Agreement was recorded.This Agreement encompasses two easements, a Cross Access Easement (CAE) and an Entrance Monument Easement (EME).The CAE established a perpetual easement for the use and access to eighteen parking spaces on the subject property for Metro Lighting and its successors in interest for business parking.The EME established an easement for the erection of a pole sign on the Metro Lighting Property, which allows Complainant to use the bottom one-third of the sign area for reasonably acceptable advertising.Complainant does not receive any compensation for the use and access to the eighteen parking spaces, nor does it pay any compensation for its use of the sign. 25

9.Use of Subject Property.The subject property is used by Complainant as its facility and campus.The property is used for worship services, children’s ministry, church offices, church meetings and other activities consistent with and incidental to the work, mission and ministry of the Summit Community Church.The Metro Parking area is used under the CAE for parking for Metro’s customers during the business hours of Metro, Mondays through Saturdays.During non-business hours, the area is available to Complainant for parking by its members and non-members attending services and activities on the subject property.26

10.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 Metro Parking area assessed as commercial property to be exempt, as is the remaining portion of Complainant’s property.See, Burden of Proof, 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.27

Exclusion of Exhibit 10

Counsel for Complainant’s objection to receiving Exhibit 10 into evidence rested upon two grounds.The first ground was that it had not been timely filed and exchanged as a rebuttal exhibit.The second ground was that it did not rebut any evidence presented by Complainant of use of the Metro Parking spaces by members of Complainant or persons attending services at the Church’s facility.The objection was sustained on both grounds.

The exhibit was properly a part of what could have been and should have been offered as part of Respondent’s case in chief, if it wished to establish an exclusive use of the parking spaces by Metro customers only.More importantly, the photograph was not filed by the deadline for submission of rebuttal exhibits.Furthermore, the sign, reading – Metro Customers Parking Only – does not rebut the testimony of Mr. Wall that during non-business hours on evenings and Sundays the Metro Parking spaces are available to and used by persons attending church services and activities.

Burden of Proof

Complainant has the burden to present substantial and persuasive evidence to rebut the presumption of correct assessment by the Board of Equalization.28 In order to meet this burden in an appeal seeking exemption from taxation, the Complainant must meet the burden to establish that the property falls within an exempted class under the provisions of Section 137.100. 29 It is well established that taxation is the rule and exemption from taxation is the exception.Exemption is not favored in the law.30Complainant seeks exemption of its property 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 religious worship, . . . 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;

Complainant’s burden of proof has been met in the present case.

Actually and Regularly Used Exclusively

The statutory requirement for the actual and regular 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 over against mere secondary and incidental use.31The 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.

Respondent appears to advance the position that the Hearing Officer must only look at a specific 13,000 + square foot area of the subject property under the CAE, and ascertain that it is not actually and regularly used exclusively for Complainant’s exempt religious purpose.It likewise appears to the Hearing Officer that Respondent would wish to apply the phrase “actually and regularly used exclusively” in the strictest of senses.The Hearing Officer does not concur in such a position.Just as the case law makes clear that “used exclusively” does not encompass a “mere secondary and incidental use,” it is equally clear that a reasonable construction of the statute must be applied. 32 Accordingly, reasonable construction requires considering the Complainant’s property as a whole and not carving out a small portion and applying a strict scrutiny

Actually and regularly used exclusively must be applied in the sense and under the holdings of the court decisions previously cited.In this particular case, it has already been established that 93.5% 33 of the Church’s property is exempt from ad valorem taxation because it is religiously exempt.In the absence of the primary and inherent use of Complainant’s property being for an exempt purpose the claim for exemption from ad valorem taxation would have to be denied.However, the primary and inherent use of the subject property is for a religiously exempt purpose.The fact that the property is burdened by the CAE does not defeat the exemption claim of Complainant for the portion of the property under the easement.The fact that the Church is required during Metro’s business hours to cede its use of the eighteen parking spaces for the use of Metro customers is not sufficient to deny exempt status to this limited – de minimis 34 – portion of the Complainant’s property.

The Metro Parking area is otherwise available to and used by the Church on Sundays for regular worship services and evenings through the rest of the week when other activities are taking place.Complainant is not holding the Metro Parking area in order to gain any profit. It is not being used as an investment for Complainant to receive funds for the work and ministry of the Church.Under the plain language of the statute the entirety of Complainant’s property qualifies for exemption from ad valorem property taxation.

Central States Christian Endeavors Association Case 35

The Supreme Court of Missouri has addressed a very similar exemption issue in the Central States case in 1995.In that case Central States Christian Endeavors Association (CSCEA), owned and maintained a Christian campus house across the street from Northwest Missouri State University in Maryville (Northwest).The campus house was a converted two-story residence.It contained a large lounge, meeting room, kitchen, computer room, minister’s office, bathroom and three bedrooms.During the school year various Bible study and other events related to CSCEA’s ministry were conducted on its property.The three bedrooms were rented to students of Northwest.The issue presented in the case as set forth in the Court’s Decision was “. . .whether the property is ‘used exclusively’ for” its religious purpose. 36 In deciding that issue, the Court held:

“If the incidental use, in this case renting rooms to students, does not interrupt the exclusive occupation of the building 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.”37

The Court went on to observe:

“Merely because more hours of the week are devoted to eating, resting, studying, fellowship, administration and counseling services than to purely religious worship does not disqualify a property from being exclusively used for religious worship.If the test were merely one of counting hours of use, many religious organizations holding only one or two worship services per week but having a full-time staff for administration or counseling and the holding of regular fellowships or meals would be disqualified from the religious exemption for their facilities. The earlier holdings that incidental uses serving to promote the primary purpose of religious worship do not disqualify the property from being entitled to exemption are reaffirmed.”

Applying the Court’s holding and rational to the present case, the Hearing Officer concludes that the incidental use of the eighteen parking spaces during part of each week by a commercial establishment and use during the remainder of each week by the Church does not

interrupt the exclusive occupation of the subject property for religious worship, but dovetails into or rounds out the religious purpose and use of the subject property.

Franciscan Tertiary Test

The Hearing Officer notes that the Supreme Court in deciding the Central States case did not cite to or make any analysis under the Franciscan Tertiary Province v. STC 38  case.The Hearing Officer concludes that the Court understood that no such analysis was required to decide the issue of “used exclusively.”Likewise in this case, the Hearing Officer sees no need to further burden the Decision with a detailed review of the Franciscan test.Suffice it to say, that such review and application of the test would not provide the basis for concluding that Complainant’s property is not exempt in its entirety.

Summary and Conclusion

Consistent with Section 137.100(5), applicable case law, the holding in Central States and the Franciscan test, Complainant’s property is exempt from ad valorem taxation.

ORDER

The assessment of the subject property made by the Assessor and sustained by the Board of Equalization for St. Charles County for the subject tax day is SET ASIDE.

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

SO ORDERED October 1, 2013.

STATE TAX COMMISSION OF MISSOURI

_________________________________

W. B. Tichenor

Senior Hearing Officer