Lead Opinion
{¶ 1} This is аn appeal from a decision of the Board of Tax Appeals (“BTA”), which reversed the tax commissioner’s denial of a charitable-use exemption to property owned by appellee, Innkeeper Ministries, Inc., and ordered that the exemption be granted. The property is extensive and contains two large residential buildings along with various recreational amenities. Innkeeper’s mission is to invite religious leaders to stay at the property at no charge and enjoy the amenities, as wеll as free meals, as a type of spiritual retreat.
{¶ 2} The tax commissioner has appealed, setting forth five propositions of law. Among other things, the tax commissioner contends that the use of the property as a residence by a caretaker couple and the lack of quantitive evidence of its use in connection with appellee’s ministry defeats the claim for exemption. We agree, and we therefore reverse on those grounds. Because we conclude that these рoints are dispositive of the appeal, we do not reach the tax commissioner’s other arguments.
Factual Background
The organization
{¶ 3} Innkeeper Ministries, Inc., is an Ohio nonprofit with 24 U.S.C. 501(c)(3) federal tax status. Robert Hartenstein is secretary/treasurer, Hartenstein’s son is president, and Don Kline is a member-at-large of the board.
The property at issue
{¶ 4} The property consists of 71.066 acres improved with two main buildings, the Chesed Inn and the Eagle’s Wing Manor. The Chesed Inn has seven bedrooms, the Manor an unspecified number; both buildings are used to accommodate guests.
{¶ 5} A swimming pool, basketbаll court, fishing ponds, and a “prayer walk” through the wooded property are included. The properties were donated to the ministry in four increments from 2002 through 2006. In December 2007, the parcels were combined into a single tract for tax purposes.
{¶ 6} Robert and Janet Hartenstein, the caretakers, reside permanently in part of the Chesed Inn. Two other relatives have lived there for lengthy periods as well.
{¶ 7} Innkeeper takes its mission from the parable of the Good Samaritan, Luke 10:29-37, in which a Samaritan takes рity on a wounded traveler, binds his wounds, and takes him to an inn, paying the innkeeper to look after him. Innkeeper makes its amenities available free of charge to any full-time pastor, paraehurch leader, Christian school educator, or missionary, and their spouses as a retreat and place of “Sabbath rest” restorative to the spirit. In addition to the recreational amenities already discussed, there is also a cabin converted into a chapel.
{¶ 8} Robert Hartenstein offers counseling in the form of listening to guests’ spiritual concerns and helping them to discern God’s will; he has no formal training, and there are no formal sessions. The Hartensteins cook meals for all guests and take care of the premises; they accept their lodging there in lieu of monetary compensation. No charge is made for the services, but unsolicited donations are accepted.
{¶ 9} The Hartensteins advertise the services offered at the property and make them available generally on a yeаr-round basis. But they have not succeeded in filling all the rooms at any one time. The record contains testimonial letters in support of the understanding that worship occurs on the premises.
{¶ 10} Although testimony and documentation addressed the mission and the hospitality offered at the property, the record does not contain financial statements or documentation of the numbers of persons served. The only mention of a number occurred when Mr. Hartenstein was asked, “Do you know how many have come seeking that type of need since the inception of the ministry?” Hartenstein replied, “We quit counseling [sic] at 11,000.” In context, it is not clear whether this number refers to the number of guests who stayed or the number of persons who inquired about the services. In any event, no supporting documentation was submitted.
Proceedings before the tax commissioner
{¶ 11} Innkeeper filed the exemption application in 2008, seeking exemption for that year. The application cites three statutes as grounds for exemption: R.C. 5709.07(A), 5709.12(B), and 5709.121(A).
{¶ 12} The tax commissioner issued his determination on August 9, 2010, considering and denying еxemption under R.C. 5709.07(A)(2), which exempts houses used exclusively for public worship; R.C. 5709.07(A)(3), which exempts church-owned property used primarily for church retreats and camps; and R.C.
{¶ 13} As for R.C. 5709.07(A)(2), the commissioner found that the property was not used to “facilitate public worship in a principal, primary and essential way.” Instead, the property offered only an indirect support of worship that did not qualify the property to be viewed as “used exclusively for public worship.” As for R.C. 5709.07(A)(3), the commissioner found that the property did not qualify as a church retreat because it was not owned by a church and it was not used for church retreats but for “sabbaticals” for pastors and church leaders.
{¶ 14} As for charitable use, the commissioner cited the charity standard from two cases, Highland Park Owners, Inc. v. Tracy,
Proceedings before the BTA
{¶ 15} Innkeeper appealed to the BTA. At the hearing before the BTA held on March 25, 2013, Innkeeper presented the testimony of Robert Hartenstein, the applicant for the exemption, a principal of Innkeeper, and permanent on-site resident on the property. In its brief at the BTA, Innkeeper abandoned its claims under R.C. 5709.07 and focused exclusively on obtaining an exemption for charitable use.
{¶ 16} The BTA issued its decision on February 28, 2014. The BTA first found that “Innkeeper’s year round use of the subject property, in providing a place of respite for the physical and spiritual renewal of Christian leaders, without charge, [is] sufficiently charitable in nature to fall within the definition of charity set forth in Planned Parenthood [
{¶ 17} Next, the BTA stated that “as a charitable institution, Innkeeper must qualify for exemption pursuant to the provisions of R.C. 5709.121(A)(2).” 2014 Ohio Tax LEXIS 1305, at 7. Quoting Cincinnati Community Kollel v. Testa,
The Residential Use of The Property and the Lack of Quantitative Evidence of Charitable Use Militate Against Exemption
1. Ohio law provides a specific exemption for church retreats, but Innkeeper does not qualify
{¶ 18} Earlier in these proceedings, the tax commissioner carefully considered and denied exemption under R.C. 5709.07(A)(3), which exempts “[r]eal property owned and operated by a church that is used primarily for church retreats or church camping, and that is not used as a permanent residence.” Innkeeper’s property at issue does not qualify under the plain terms of (A)(3) both because it is not owned by a church and because it is subject to substantial residential use by the Hartensteins. Indeed, at the hearing, Robert Hartenstein stated, “[W]e are not a church.”
{¶ 19} Innkeeper’s claim and the BTA’s decision reflect a reading of the exemption for charitable use, R.C. 5709.12(B) and 5709.121, that is so expansive that it in effect grants an exemption for a residential property opened to guests with the goal of providing a spiritual retreat. The fact that an exemption exists for such retreats but only when owned by churches suggests that recognizing a charitable-use exemption here should be approached with caution. See Church of God in N. Ohio, Inc. v. Levin,
2. Personal and permanent residential use militates against a finding of charitable use
{¶ 20} The record demonstrates that the Hartensteins permanently reside on the property at issue. The tax commissioner correctly points out that “ ‘[r]esi-dence in a dwelling with a family must necessarily be a private use of the premises,’ ” and “ ‘[wjhere the exercise of such private rights constitutes the primary use of the property, [that] property is no longer used exclusively for charitable purposes.’ ” First Baptist Church of Milford v. Wilkins,
{¶ 21} In opposition, Innkeeper faults the tax commissioner’s reliance on First Baptist Church of Milford on the grounds that the exemption claim in that case was advanced solely under R.C. 5709.12(B) directly, without recourse to R.C. 5709.121. Under the expanded definition of “exclusive charitable use” provided by R.C. 5709.121, Innkeeper cоntends, residential use does not defeat exemption so long as such use qualifies as purely incidental to the charitable purposes of the property owner. See R.C. 5709.121(A)(2); Cincinnati Nature Ctr. Assn. v. Bd. of Tax Appeals,
{¶ 22} The flaw in Innkeeper’s argument, and in the BTA’s decision, is that Innkeeper cannot qualify as a “charitable institution” in this case unless its use of the property at issue, which is its only activity, can itself qualify as charitable. “The determination whether a property owner qualifies as a charitable institution under R.C. 5709.121 requires examination of the ‘core activity’ of the institution' and determining whether that activity qualifies as charitable for property-tax purposes.” Rural Health Collaborative of S. Ohio, Inc. v. Testa,
{¶ 23} In Cincinnati Nature Ctr., the institution maintained a conservation center and working farm encompassing some 750 acres, and it educated thousands of students and teachers annually about ecоlogy and the natural environment. Two houses on the property were used as residences by two naturalists who were full-time employees of the institution and as such were on call 24 hours a day to prevent damage to the property. Under the circumstances of that case, it was clear both that the institution through its activities could qualify as charitable and that the provision of housing was merely incidental to the overriding charitable purposes.
{¶ 24} In Cincinnati Community Kollel,
{¶ 25} Again we emphasize that Innkeeper cannot bootstrap itself into charitable status merely by claiming exemption under R.C. 5709.121 as well as under R.C. 5709.12(B) directly.
3. Given the residential use of the 'property, the BTA erred by failing to require proof of the primacy of charitable hospitality
{¶ 26} Like exemption applicants generally, Innkeeper bore the onus of showing that “the language of the statute ‘clearly expresses] the exemption’ in relation to the facts of the claim.” Anderson/Maltbie Partnership v. Levin,
{¶ 27} The BTA erred as a matter of law by failing to require the discharge of that burden of proof. Quite simply, any family can create a corporate entity and title the family residence to the corporation. But to entitle the property to exemption, an applicant must negate the inference that personal residence constitutes the primary use. The record here shows ownership by a 501(c)(3) entity, but that entity is controlled by the Hartensteins. Moreover, the accommodation of guests at no cost in a spacious residence cannot by itself turn the residence into a charity.
{¶ 28} The record in this case falls well short of supporting the exemption claim because it does not quantify the hospitality extended by the Hartensteins. The record is silent on certain salient points. Whilе there is evidence that Innkeeper advertised for guests in accordance with its spiritual mission, we are not informed how many answered that call, how many were accommodated, and
Conclusion
{¶ 29} For the foregoing reasons, we reverse the decision of the BTA.
Decision reversed.
Dissenting Opinion
dissenting.
{¶ 30} Respectfully, I dissent.
{¶ 31} R.C. 5709.12(B) states that “[rjeal and tangible personal property belonging to institutions that is used exclusively for charitable purposes shall be exempt from taxation * * *.” And pursuant to R.C. 5709.121(A)(2), real property belonging to a charitable institution “shall be considered as used exclusively for charitable or public purposes by such institutiоn” if it is “made available under the direction or control of such institution * * * for use in furtherance of or incidental to its charitable, educational, or public purposes and not with the view to profit.” We have stated that “[s]o long as an institution is operated without any view to profit and exclusively for a charitable purpose, it is a charitable institution.” Herb Soc. of Am., Inc. v. Tracy,
{¶ 32} Although the General Assembly has not defined what activities constitute “charitable purposes” for purposes of R.C. Chapter 5709, we explained in Bethesda Healthcare, Inc. v. Wilkins,
“In the absence of a legislative definition, ‘charity,’ in the legal sense, is the attempt in good faith, spiritually, physically, intellectually, socially and economically to advance and benefit mankind in general, or those in need of advancement and benefit in particular, without regard to their ability to supply that need from other sources, and without hope or expectation, if not with positive abnegation, of gain or profit by the donor or by the instrumentality of the charity.”
{¶ 33} Applying that definition, we have recognized that advancing religion is a charitable purpose. See, e.g., True Christianity Evangelism v. Zaino,
{¶ 34} In Rabbinical College, we considered the predecessor statute to R.C. 5709.12(B) — Section 5353 of the General Code — which stated: “Real and tangible personal property belonging to institutions used exclusively for charitable purposes, shall be exempt from taxation.” 121 Ohio Laws 241, 242. We observed that the statute reflected a change from the prior law, because “the words ‘institutions of purely public charity’ have now been replaced by the words ‘institutions used exclusively for charitable purposes,’ ” and we concluded that “it is no longer necessary that an institution used exclusively for thе lawful advancement of education and of religion be open generally to the public in order to have tax exemption of property owned and used by it exclusively for lawful educational or religious purposes.” (Emphasis added.) Rabbinical College at 378.
{¶ 35} We therefore rejected the proposition that the charitable use exemption did not apply to an institution’s property that was “ ‘operated for those of the Jewish faith and race’ and was not ‘open to the public.’ ” Id. at 378. Thus, Ohio does not mandate thаt property be open generally to the public in order to be exempt from taxation. This has been the law in Ohio for more than six decades.
{¶ 36} More recently, in Herb Soc. of Am.,
{¶ 37} Notwithstanding long-standing precedent from this court, the majority conсludes that the core activities of Innkeeper Ministries, Inc., are not charitable because its property is not open to the public generally. This analysis, however, is not only inconsistent with the General Assembly’s decision to broaden the charitable use exemption beyond “public charities” to include both “charitable institutions” and property “used exclusively for charitable purposes,” but also is contrary to the distinction we previously acknowledged in Herb Soc. of Am. and Rabbinical College. The change in statutory language reflects the lеgislative intent that a charitable organization is not required to be open to the public in general but rather can seek to benefit discrete groups in particular based on a specific need for charity.
{¶ 39} The majority reasons that residential use of property is necessarily a private, noncharitable use. This view, however, overlooks the fact that there are residential uses of property that are unquestionably charitable. For instance, homeless shelters and battered women shelters such as those run by the Friends of the Homeless in Columbus and the City Mission in Cleveland have received charitable exemptions notwithstanding the residential use of the property. Offering an individual a safe place to stay is an attempt to advance and benefit those in need of advancement and benefit and therefore is charity as defined by our decision in Bethesda Healthcare,
{¶ 40} Thus, reliance on cases involving subsidized low-cost housing or residences provided for the personal use of еmployees and their families is misplaced. Those cases are factually distinguishable, because those receiving a subsidy or housing as a benefit of employment are in effect paying a share of the rent for the private use of the property, and the exclusive use of the property is not charitable. See W. Res. Academy v. Bd. of Tax Appeals,
{¶ 41} The accommodations for Innkeeper Ministries’ guests are provided at no cost — thereby meeting one part of the test for charity that we articulated in Bethesda Healthcare, i.e., that the service is provided without expectation of gain or profit, and the residential use of the property is charitable.
{¶ 42} Moreover, in this case, the BTA noted that the сharitable mission of Innkeeper Ministries is to advance religion by offering a place of “Sabbath rest” for the physical and spiritual renewal of church leaders through personal worship, prayer, meditation, reflection, and Bible study at no cost to guests and participants. BTA No. 2010-2803, 2014 Ohio Tax LEXIS 1305, *4-5 (Feb. 28, 2014). The BTA credited Innkeeper Ministries’ belief that “ ‘Sabbath rest is most effectively achieved in a reclusive atmosphere such as that provided by Innkeep
{¶ 43} The majority confuses the core use of the property — the mission to advance religion by offering a place for Sabbath rest — with its incidental use аs a residence for the caretakers, the Hartensteins. Providing a place for Sabbath rest necessarily includes giving the guests a place to rest and sleep, which is the primary use of the property, and therefore, having the Hartensteins reside on site serves Innkeeper’s core purposes, because they cook meals for all guests, provide counseling, maintain the premises, and donate their time and energy to ensure that residents can achieve physical and spiritual renewal. More than 11,000 people have come to Innkeeper Ministries seeking Sabbath rest; the mission is a 24 hour a day, seven day a week ministry to ensure the opportunity for rest and spiritual renewal of the guests, and the Hartensteins’ residence on the premises is incidental to that mission.
{¶ 44} In my view, this issue is enlightened by Cincinnati Nature Ctr. Assn. v. Bd. of Tax Appeals,
{¶ 45} Our easelaw has recognized that property is “used exclusively” for charitable purposes if the “primary use” is charitable. Girl Scouts-Great Trail Council,
{¶ 46} Although the majority recognizes that the property includes guest roоms, a chapel, and a prayer walk and does not dispute that the property serves spiritual objectives without a view to profit, it nonetheless substitutes its judgment for that of the BTA, disregarding the BTA’s factual finding that “providing a place of respite for the physical and spiritual renewal of Christian leaders * * * fall[s] within the definition of charity.” 2014 Ohio Tax LEXIS 1305, at *6-7. And in doing so, it also trivializes the value of Sabbath rest by suggesting that the property is in essence a place of recreation because recreational facilities are available for guests. In fact, Innkeeper Ministries provides not only recreation, but also spiritual opportunities for its guests. This is in keeping with our explanation of charity in Bethesda Healthcare,
{¶ 47} Pursuant to R.C. 5717.04, our role in reviewing the BTA is to determine whether its decisions are reasonable and lawful. As we acknowledged in Health-South Corp. v. Levin,
Kennedy and French, JJ., concur in the foregoing opinion.