Alte Salems Kirche, Inc. v. State Bd. of Tax Com'rs

• Decision Date: 01 May 1998
• Docket Number: No. 49T10-9507-TA-00060,49T10-9507-TA-00060
• Citation: 694 N.E.2d 810
• Parties: ALTE SALEMS KIRCHE, INC., Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent.
• Court: Indiana Tax Court

Page 810

694 N.E.2d 810

ALTE SALEMS KIRCHE, INC., Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent.

No. 49T10-9507-TA-00060.

Tax Court of Indiana.

May 1, 1998.

Mark A. Scherer, Indianapolis, for petitioner.

Jeffrey A. Modisett, Attorney General, Ted J. Holaday, Deputy Attorney General, Indianapolis, for respondent.

FISHER, Judge.

Alte Salems Kirche, Inc. (Alte Salem) appeals a final determination of the State Board of Tax Commissioners (State Board) denying it an exemption from property taxation for the 1990 tax year.

BACKGROUND AND PROCEDURAL HISTORY

Alte Salem is a non-denominational church located in a remote section of Posey County. In 1974, Alte Salem was incorporated as an Indiana not-for-profit organization. In this original tax appeal, Alte Salem seeks a property tax exemption for improvements and personal property consisting of the church building, a barn, and a mobile home. Collectively, this property has an assessed value of $4,670. The land, upon which the improvements and personal property lie, is not owned by Alte Salem. Alte Salem leases the land from Ms. Pauline L. Burgdorf, a director of Alte Salem. ¹

The church building looks like a typical church. It has a steeple, a bell, an altar, pews, stained glass windows, and a piano. The barn is used for storage. The mobile home is rented out to various people. The money received from the mobile home rent goes toward the maintenance of the church. According to Ms. Burgdorf, renting out the mobile home serves to prevent vandalism of the church building and makes it easier to procure insurance because it maintains a presence on the property.

Alte Salem loses money almost every year. Ms. Burgdorf often uses her own funds to make up for the shortfalls. Although the record is unclear on this point, it appears that Alte Salem received a property tax exemption from the date of its incorporation until 1983. In 1983, Alte Salem lost its exempt status.

On May 10, 1990, Alte Salem applied for a property tax exemption pursuant to IND.CODE ANN. § 6-1.1-10-16 (West 1989) (amended 1993, 1995 & 1997). On August 14, 1990, the Posey County Board of Review (BOR) denied Alte Salem's application, and Alte Salem appealed this decision to the State Board of Tax Commissioners. The State Board held a hearing on September 4, 1991, and on May 5, 1995, the State Board issued a final determination sustaining the BOR's decision. On June 22, 1995, Alte Salem filed this original tax appeal. The parties tried this cause on April 16, 1996. Oral argument followed on November 11, 1996.

ANALYSIS AND OPINION

Standard of Review

This Court gives great deference to the State Board when it acts within the scope of its authority. Accordingly, this Court will only reverse a final determination of the State Board when it is unsupported by substantial evidence, is arbitrary or capricious, constitutes an abuse of discretion, or exceeds statutory authority. See Sangralea Boys Fund, Inc. v. State Bd. of Tax Comm'rs, 686 N.E.2d 954, 956 (Ind.Tax Ct.1997), review denied.

Discussion

Alte Salem contends that the improvements and personal property are exempt from property taxes because they are used for religious, charitable, and educational purposes. Under section 6-1.1-10-16(a), "all or part of a building is exempt from property taxation if it is owned, occupied, and used by a person for educational, literary, scientific, religious, or charitable purposes." In Sangralea Boys Fund, 686 N.E.2d at 959, this Court construed that statutory provision to mean that property will be exempt from property tax when it is owned for an exempt purpose, when it is used for an exempt purpose, and when it is occupied for an exempt purpose. Although exemptions are strictly construed in favor of taxation and against tax exemption, see id. at 956, the listed exempt purposes are to be construed broadly and in accordance with their constitutional meaning. See LeSea Broad. Corp. v. State Bd. of Tax Comm'rs, 525 N.E.2d 637, 639 (Ind.Tax Ct.1988); Indianapolis Elks Bldg. Corp. v. State Bd. of Tax Comm'rs, 145 Ind.App. 522, 251 N.E.2d 673, 680 (1969); State Bd. of Tax Comm'rs v. Methodist Home for the Aged In its final determination, the State Board stated, "Alte Salems Kirche, Inc. does not function as a church or religious society and has offered no substantive evidence to qualify for exemption as religious...." (Ex. C at 10). Under this Court's limited standard of review, this Court gives great deference to the factual findings of the State Board. See Sangralea Boys Fund, 686 N.E.2d at 959. This Court may not reverse a final determination of the State Board simply because it disagrees with how the State Board found the facts, and it is improper for this Court to substitute its judgment for that of the State Board.

143 Ind.App. 419, 241 N.E.2d 84, 87 (1968) (en banc); IND. CONST. art. X, § 1(a).

At trial, Alte Salem presented the testimony of one of its directors, Ms. Burgdorf. Ms. Burgdorf testified at length concerning the history and the activities conducted at Alte Salem. Mr. Dennis Neuhoff, the State Board hearing officer, admitted that Ms. Burgdorf's testimony was consistent with the evidence she presented at the State Board hearing. ² (Trial Tr. at 65). Accordingly, this Court may consider that evidence. See IND.CODE ANN. § 33-3-5-14 (West 1996); State Bd. of Tax Comm'rs v. Gatling Gun Club, Inc., 420 N.E.2d 1324, 1328 (Ind.Ct.App.1981).

Ms. Burgdorf recounted the story of a small, non-denominational church. Originally, the church building served as a church for a local congregation of which Ms. Burgdorf was a member. When the congregation wished to build a new church, Ms. Burgdorf and others purchased the church building, which was built in the 1800s, and moved it to its present location. ³ Ms. Burgdorf and others incorporated Alte Salem shortly after the move.

According to Ms. Burgdorf, the purpose of Alte Salem was to provide a place where people could attend to their spiritual needs. Alte Salem was never supposed to be a "regular" church with a congregation and a minister. Rather, it was supposed to be a place where anyone, regardless of their adherence to the beliefs of any particular denomination, could come to pray and worship. To that end, the church building remained unlocked, and many individual worshipers have used the church building. (Trial Tr. at 22-23).

Although one of the main purposes of Alte Salem was that individuals could use the church to attend to their own spiritual needs, the church building was often used by other churches for meetings and worship services. (Trial Tr. at 25-26). Other church organizations used the church building for Bible studies. No particular church ever used Alte Salem regularly for worship services. This was in keeping with the non-denominational nature of Alte Salem's mission. Other organizations, such as environmental groups, used Alte Salem for meetings. The Girl Scouts also had meetings there and were allowed to use the property so that individual girl scouts could achieve their outdoor merit badges. Ms. Burgdorf testified that all these activities happened in 1990 or prior to that year and that the usage of the church remained The evidence presented paints a picture of a small country church operating on a shoestring budget struggling to survive. However, in its final determination, the State Board concluded that the property was only used "approximately four times a year" for parties, picnics and reunions, and that there was no substantive evidence presented to support the exemption claim. This ignores Ms. Burgdorf's testimony about the individual worshippers using the church building, other churches and groups using the church building, as well as her own use of the church building.

the same throughout its existence. (Trial Tr. at 29).

Perhaps realizing the tenuousness of its position, the State Board argues that this Court must limit its consideration of the evidence to only those events that took place in 1990. ⁴ According to the State Board, much of Ms. Burgdorf's testimony was not relevant to the determination of Alte Salem's exempt status because it was not specifically tied to the 1990 tax year. Therefore, the State Board hearing officer had very little probative evidence from which to make his findings. The evidence that related specifically to the 1990 tax year only demonstrated that the property was used three or four times and that at least two of those events were recreational. As a result, Alte Salem could not establish that the predominant use of the property was for exempt purposes. See IND.CODE ANN. § 6-1.1-10-36.3 (West 1989). It is readily apparent that the State Board's position that Alte Salem produced no substantive evidence to support its exemption claim hinges on acceptance of the State Board's contention that only events taking place during 1990 were relevant.

The State Board's position is contrary to law. Evidence of events occurring in other tax years should be considered if relevant to a fact existing during the tax year. See Governours Square Apartments v. State Bd. of Tax Comm'rs, 528 N.E.2d 864, 866 (Ind.Tax Ct.1988) (citing Youngstown Sheet & Tube Co. v. Mahoning County Bd. of Revision, 66 Ohio St.2d 398, 422 N.E.2d 846 (1981)). This is particularly true in cases where property is claimed to be exempt under section 6-1.1-10-16. In these cases, the central question is the purpose for which the property is being used. Events occurring outside of the tax year at issue may shed a great deal of light on the purpose for which the property is used during that tax year. Ms. Burgdorf's testimony was relevant to the 1990 tax year, and it constituted substantive evidence in support of Alte Salem's exemption claim.

The State Board also argues that the fact that the church building is left unlocked and held open to anyone with little or no supervision means that it is impossible to determine that the property...