Appeal of Sunny Ridge Manor, Inc., 14552

• Decision Date: 20 January 1984
• Docket Number: No. 14552,14552
• Parties: In the Matter of the Appeal of SUNNY RIDGE MANOR, INC., from the Board of Equalization of Canyon County for the Year 1980. CANYON COUNTY, IDAHO ASSESSOR, Appellant, v. SUNNY RIDGE MANOR, INC., Respondent.
• Court: Idaho Supreme Court

Page 813

675 P.2d 813

106 Idaho 98

In the Matter of the Appeal of SUNNY RIDGE MANOR, INC., from the Board of Equalization of Canyon County for the Year 1980 CANYON COUNTY, IDAHO ASSESSOR, Appellant, v. SUNNY RIDGE MANOR, INC., Respondent.

No. 14552.

Supreme Court of Idaho.

Jan. 20, 1984.

Richard L. Harris, Canyon County Pros. Atty. and William Morrow, Deputy Canyon County Pros. Atty., Caldwell, for appellant.

Philip A. Peterson, Nampa, for respondent.

HUNTLEY, Justice.

We are asked to decide, as a matter of law, whether an old-age retirement center which charges fees to its residents sufficient to cover its operating expenses and all of the services it offers is a "charitable corporation" within the intendment of I.C. § 63-105C. That section exempts from taxation the "[p]roperty belonging to any fraternal, benevolent, or charitable corporation or society ...."

Respondent Sunny Ridge Manor, Inc. (Sunny Ridge), owner of the property for which a tax exemption is sought, is a nonprofit Idaho corporation organized to operate a retirement center. The center includes residential units, cooking areas and dining room, recreational facilities, craft and shop areas, a library, a convenience store, a barber and beauty shop, and a thirty-bed intermediate health care facility. Sunny Ridge began operation in 1980. The first residents purchased a "lifetime residency contract" for a one-time payment of $18,000 (a "founder's fee which would be refunded to the resident's estate upon death). In addition, each resident pays a monthly charge of $385.00 ($653.00 for a couple); the founder's fee has increased to $25,000.00 of which only $10,000.00 is refundable.

Proceeds from the entry fees are applied to the cost of construction of the center's facilities. The monthly fees cover the cost of operation. Although Sunny Ridge has incurred periodic losses, its monthly fees have sufficiently sustained its operating fund, and its operating expenses have been paid exclusively out of those fees. The center has never operated at a profit.

The "life-care" contracts which residents receive when they buy in to the retirement center provide that if the resident is physically able to be cared for by the center, he can remain there for the rest of his life. The medical care provided comes at no additional cost. Potential residents are advised that it is Sunny Ridge's policy that once admitted to the center, they will never be terminated for financial reasons.

To qualify for residency a person must be fifty-five or older, ambulatory, able to take care of himself, and free from any communicable or obnoxious disease. The "ambulatory" requirement has been interpreted to permit persons confined to wheelchairs to qualify.

The corporate directors of Sunny Ridge serve without compensation, and employees are paid reasonable salaries, comparable to those of employees of like facilities in the region. The convenience store and barber/beauty shop both operate at a small profit.

Sunny Ridge contends that as a nonprofit corporation which provides care and support to elderly persons, it comes within the meaning of "charitable corporation" in I.C. § 63-105C. Sunny Ridge urges an interpretation of "charitable" which is not restricted to the traditional notion of financial relief for the poor, but which would encompass a wide variety of services--social, recreational, cultural, psychological, religious and others--and which would recognize that the needs of the elderly are more complex than simple financial aid can address. With this interpretation we heartily agree. To be classed as charitable, an organization need not provide monetary aid to the needy; it may provide any of a number of services of public benefit. The word "charitable," in a legal sense, includes every gift for general public use, whether it be for educational, religious, physical or social benefit. See, Santa Catalina Island Conservancy v. Los Angeles County, 126 Cal.App.3d 221, 178 Cal.Rptr. 708, 716 (1981); Mayo Foundation v. Comm'r of Revenue, 306 Minn. 25, 236 N.W.2d 767, 771 (1975); People ex rel. Redfern v. Hopewell Farms, 9 Ill.App.3d 16, 291 N.E.2d 288, 290 (1972); Central Bd. on Care of Jewish Aged, Inc. v. Henson, 120 Ga.App. 627, 171 S.E.2d 747, 749 (1969); Taylor v. Hoag, 273 Pa. 194, 116 A. 826 (1922). Cf. North Idaho Jurisdiction of Episcopal Churches, Inc. v. Kootenai County, 94 Idaho 644, 650, 496 P.2d 105, 111 (1972) (nonprofit recreational facility held to be tax exempt under collective purview of charitable, religious and educational exemption states: I.C. § 63-105B, 105C and 105L).

Even though we agree with respondent Sunny Ridge that its services are of great benefit to its elderly residents and socially useful to promote other than their financial well being, and even though we consider Sunny Ridge's efforts, as a nonprofit corporation, praiseworthy, these considerations are not alone determinative of its charitable status under I.C. § 63-105C. A number of factors must be considered: (1) the stated purposes of its undertaking, (2) whether its functions are charitable (in the sense just discussed), (3) whether it is supported by donations, (4) whether the recipients of its services are required to pay for the assistance they receive, (5) whether there is general public benefit, (6) whether the income received produces a profit, (7) to whom the assets would go upon dissolution of the corporation, and (8) whether the "charity" provided is based on need. See Rio Vista Non-Profit Housing Corp. v. Ramsey County, 277 N.W.2d 187, 190 (Minn.1979). Determination of an institution's charitable status is necessarily an individual matter, to be decided on a case-by-case basis. There may be factors listed above which have no application to particular cases, and factors not listed which would need to be considered. The term "charity" "is really a matter of description rather than of precise definition and therefore a case involving a determination of that which is charitable must be decided upon its own particular facts or circumstances." Lutheran Home, Inc. v. Board of County Commissioners, 211 Kan. 270, 505 P.2d 1118, 1123 (1973).

We are mindful, however, of the rule which dictates that statutes granting tax exemptions be strictly construed against the taxpayer and in favor of the state. Xerox Corp. v. Ada County Assessor, 101 Idaho 138, 141, 609 P.2d 1129, 1132 (1980); Kwik Vend Inc. v. Koontz, 94 Idaho 166, 168, 483 P.2d 928, 930 (1971). Exemptions are never presumed; nor can a statute granting tax exemption be extended by judicial construction so as to create an exemption not specifically authorized. Sunset Memorial Gardens v. Idaho State Tax Comm'n, 80 Idaho 206, 219, 327 P.2d 766, 774 (1958).

We turn now to the record in the instant case. It is undisputed that the stated purposes for which Sunny Ridge is organized are charitable, as that term is used in a general, non-legal sense. Sunnyridge's articles of incorporation contain language which, if confirmed in actual practice, would meet even the strictest of legal definitions of "charitable":

"To establish a fund and solicit contributions thereto from individuals, institutions, government, churches and the business community for the purpose of providing moneys for the payment of and support of any resident of the residential facility who shall become without funds to pay his or her support. Further, to disburse moneys from said fund or from other reserves to a needy resident or on a needed charitable basis ...."

If such a fund were established, it would affect several of the factors listed above, including: that of a charitable function, support of the facility by donations, assistance provided without payment, and presence of some general public benefit. However, the record shows that no such fund was ever established, and as this court stated in Bistline v. Bassett, 47 Idaho 66, 272 P. 696 (1928), "[t]o ascertain whether the property of a corporation falls within an exemption statute ... [the corporation] must not only be judged by its declared objects, but also by what use is actually made of [it]." Id. at 71, 272 P. at 697-8 (citations omitted).

We have discussed the contention of Sunny Ridge that "charity" in a legal sense contemplates more than "almsgiving to the poor," and recognized the validity of that assertion in light of the overwhelming weight of modern authority. See, Fredericka Home For the Aged v. San Diego County, 35 Cal.2d 789, 221 P.2d 68 (1950); Bader Realty & Investment Co. v. St. Louis Housing Authority, 358 Mo. 747, 217 S.W.2d 489 (1949); 37 A.L.R.3d 1191, 1197. Sunny Ridge's activities--the uses to which its property is devoted--which are designed to fulfill its residents' needs for recreation, society, culture, security, etc. are, if other factors are present, "charitable" within the scope of I.C. § 63-105C.

Although Sunny Ridge has received donations totaling in excess of $400,000.00, the record shows that of that amount $175,000.00 came from its own residents in the form of relinquishment of the refundable portion of their entrance fees. The balance is the estimated value of a portion of timber land donated to the center, which has generated no proceeds. None of the donations has been applied to the assistance fund described in the articles of incorporation.

One of the factors most frequently looked at by courts in determining if a retirement center is a charitable corporation is the amount of fees required of the residents. A number of jurisdictions have held that the traditional requirement of cost-free assistance no longer applies. An institution may still qualify for a tax exemption even if fees are taken from residents to help cover operating expenses. See, e.g., Michigan Baptist Homes & Development Co. v. Ann Arbor, 396 Mich. 660, 242 N.W.2d 749 (1976); Belle Harbor Home of Sages, Inc. v. Tishelman, 100 Misc.2d 911, 420 N.Y.S.2d 343 (1979), aff'd, 81 A.D.2d 886, 441...