Case Information
*1 The Attorney General of Texas December 29, 1980
MARK WHITE
Attorney General
Honorable William R. Moore Opinion No. w-288 Tom Green County Attorney
Courthoua Ret ConsUtuUonality of San Arrgelo, Texas 76901 &a&able tax exemption statute kecth Ltl8 the Property Tax Code) end related questions Dear Mr. Moore:
You lmvi raised question concern* the applicability of section 1118 of the Property Tax Code to facilities of a non-profit corporation, Baptist Memorials Geriatric Center, include a geriatric hospital, a retirement village, and a hotel,
8ectlon ll.18 of the Property Tax Code, which became effective Jsnuary l, 1380, establishes new criteria for determining whether.pmperty owners are eligible for charitable tax exemptions. Acts 1979, 68th Leg., ch., 844 at 2217. Includedkre criteria.based a% (l) organizational purposes; (2) mcde of operation; and (3) dedication of assets. Prop. Tax Code s11l8 (c)(l), (c)(2), (c)(3). Property owned by an organixatlon can qualify an exemption only if the. organixatlon meets these criteria. Prop. Tax Code SlLl8@.
: Specifklly, you ask
(l) la section lL18 ~conatltuttonal?
.A’. (2) CM the retirement village be eparated from the rest the facilities for purposes of determining ad valorem tax status?
(3) What part, if any, of the center Is exempt from ad valorem taxes?
We first’ address the constitutional issue. Article VIU, section 2(a) of the Constitution Texas provides, in pertinent part: . . .ITl he legislature MY, bp general laws, exempt from taxation. . . . all buildings used exclusively and owned by. . . institutions of purely public charity; and all laws exempting property from taxation other than n. c
Honorable William R. Moore - Page TWO w-288)
the property mentioned in this Section shall be null and void.
- (Emphasis addedX The legislature may not allow charitable tax exemptioN for property not owned by institutions of “purely public charity. n Dick&n v. Woodmen of the World Life 7~.
260 S.W. 2d 315 (Tex. Civ. App. - San Antonio 1955, writ rePd.1. However, section lL16 does not employ the familiar phrase “institutions of purely public to describe organizations whose property is eligible tax exemption, its charit? failure to do so is not fatal. The “ourelv oublic charity” constItutiona limitation is a part of section 111% implication; t&-express St&tory constitute additional limitetiohs. See City of Amarillo v. Amarillo Lodge No. 731, A.P. & A.M., 26 69 (Tez972). where the suoreme court. in NsumiN that 488 S.W. constitutional limitation was by implication a Nrt of the statute there involved, fo&d the statute unconstitutional as applied rather than unconstitutional on its face.
The law is well-settled that the CoNUtution of Texas allows the legislature to exempt property of charitable from taxation in Cezcases, but does not compel it. See Tex. Con% art VIII, S2(a). In our opinion, the definition of “charitable um)a) functions” fiction clearly serves not to enlarge the meaning of “purely public charity,” but to deny tax exemptions to property owned by institutions purely public charity that are not ~organized the charitable functions defined. Where section lL18 has the effect of denvim? tax exemotions to omani~tio~ that might otherwise have been properly allowed-tiem, it wib be enforced See Hilltop Village, Inc. v. Kerrville lnd School District, 426 S.W. 2d 943 (Tex. 1968). Where it 1s used to bestow tax exemptioN on property that does not meet the “purely public charity” test, it will be held unconstitutional as applied. City of Amarillo v. Amarillo Lodge, supra We thus conclude that section lL16 is constitutional on its face.
In Hilltop Village, the court noted the activity of providing facilities to meet special residential requirements of the aged might qualily an institution for tax exemption as one of purely public charity, but only where it also qualified under the statutory definition of such institutions for tax exemption purpose Because the controlling statute then (former article 7150, section 7, V.T.C.S.) restricted exemptions to property of JnstitutioN dispeNir@ aid “without regard to the poverty or riches of the recipient,” e requirement the claimant failed to meet, the exemption was denied. 426 S.W. 2d at 948. See also City Waco v. Texas Retired Teacher Residence if the property the center G t;rtion. 464 S.W. mex, l97l). Accordingly, accorded a charitable exemption, it must first be exempt under section 1118.
Because we conclude this corporation does not qualify as e “charitable organization” under section ll.18, we need not further consider whether it is an institution of wpurely public charity” under the constitution. “Charitable must be “organized exclusively to perform. . . one or otgtt~-~izatio~~ Prop. Tax Code s1L16(c)O). (Emphasis
more of the Distedl functiow.” added). Although the additional requirement they be engaged exclusively in perfdrming such functiorm is qualified to extent that the incidental performance of non-chantable functions will not result in loss of exemption, there is no similar *3 Honorable WIlliem R. Moore - Page Three (MC 288) exception to the requirement that a charitable organization be “organized exclusively to perform [such functions] .” (Emphasis edded).
The statutory requiement of exclusivity cannot be ignored. In Setterlee v. Gulf Coast Waste Disposal Authority, 576 S.W. 2d 773 (Tex. 1978), the supreme court considered a statutory tax exemption of all property “belonging exclusively” to the state or a political subdivision. In denying an exemption because property was not exclusively (though substantially) owned by a public entity, the court equated the word “exclusively” with the terms “only” and “to the exclusion of all others” The statutory condition of exclusivity was strictly contrued against the claimant. 5’76 SW. 2d et 177.
Based on the facts supplied us, the Baptist Memorials Geriatric Center is clearly not a charitable organization within the restricted meaning of section lL18. According to its corporate charter (article 2), which is not significantly modified or supplemented by bylaw provisions, the objectives and purposes of the Center are:
. . . to engage in religious, missionary, benevolent, eleemosy- nary and scientific undertakings which may be authorized by the Baptist General Convention of Texas, or the Executive Board thereof.
It is readily apparent the declared corporate purposes of the Center are much broader than the statutorily defined charitable functions that eligible charitable to perform. Section lI.l8(c) does not include institutions must be organized exclusively religious functions or scientific in its statutory list of “charitable functions.” Although the corporate charter may be amended to cure the problem in subsequent years, the tax status of the corporation for this year is determined by its qualifications on January 1, 1980. Prop. Tax Code fIlL42. Accordingly, no part of the property owned by the corporation is tax-exempt under section lL18, nor under any other provision we have found.
We have not overlooked City of McAllen v. Evangelical Lutheran Good Samaritan
530 SW. 2d 806 (Tex. 1975), wherein the supreme court, in considering a claim F or e tax exemption under former article 7150, section 7, stated that although are entitled to an exemption of only that property which is used the institution exclusively purely public charity, it does not follow:
that every use of the property must be gratuitous. . . . Nor does it follow that all religious or other benevolent activities must be excluded in the operation of the hospital or home. It is no fatal defect to join charitable and religious purposes; exemption will not be withdrawn so long as the charitable requirements ere met. (Emphasis added).
530 S.W. 2d at 810-1L The key is emphasized language “so long as are met.” Former article ‘7150, section 7, V.T.C.S., did not require
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Honorable William R. Moore - Page Four the institution claiming sn exemption be organized certain charitable exduSiVdy purposes and no other. The present statute &es.
Fora charitable exemption to apply, both the constitutional and statutory requirements must be met. Under section ll.18 the Property Tax Code, are not met by an institution organized to perform any functions other then those charitable the statute sets out. In view of our conclusions, separate consideration of the retirement village property is unnecessary.
SUMMARY Section Il.18 of the Property Tax Code governing tax exemptions is constitutionat To be eligible for the exemption, property must be owned by an institution of purely public charity is organized exclusively certain charitable functions defined by the statute. The Baptist Memorials Geriatric Center &es not satisfy test; accordingly, its property is not eligible for a tax exemption.
22%
Attorney General of Texas JOHN W. FAINTER, JR.
First Assistant Attorney General
RICHARD E. GRAY III
Executive Assistant Attorney General
Prepared by Jon Bible and Bruce Youngblood
Assistant Attorneys General
APPROVED:
OPINION COMMITTEE
Susan L. Garrison, Acting Chairman
Jon Bible
Rick Gilpin
C. Robert Heath
Myra McDaniel
Bruce Y oungblood
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