Bethphage Community Services, Inc. v. County Bd. of Phelps County

• Decision Date: 14 February 1986
• Docket Number: No. 84-817,84-817
• Citation: 381 N.W.2d 166,221 Neb. 886
• Parties: BETHPHAGE COMMUNITY SERVICES, INC., a Nebraska Nonprofit Corporation, Appellee, v. COUNTY BOARD OF PHELPS COUNTY, Nebraska, et al., Appellants.
• Court: Nebraska Supreme Court

Page 166

381 N.W.2d 166

221 Neb. 886

BETHPHAGE COMMUNITY SERVICES, INC., a Nebraska Nonprofit Corporation, Appellee, v. COUNTY BOARD OF PHELPS COUNTY, Nebraska, et al., Appellants.

No. 84-817.

Supreme Court of Nebraska.

Feb. 14, 1986.

Syllabus by the Court

1. Taxation: Appeal and Error. In its appellate review of a question whether property is exempt from taxation pursuant to Neb.Rev.Stat. § 77-202(1)(c) (Reissue 1981), the Supreme Court determines tax exemption in an equitable trial of factual questions de novo on the record, subject to the rule that where credible evidence is in conflict on material issues of fact, the Supreme Court will consider the fact that the trial court observed the witnesses and accepted one version of the facts over another.

2. Taxation. Property owned by an educational organization and used exclusively for educational purposes is exempt from taxation pursuant to Neb.Rev.Stat. § 77-202(1)(c) (Reissue 1981).

Lawayne L. Feit of Mattson, Ricketts, Davies, Stewart, Calkins & Duxbury, Lincoln, for appellants.

Susan L. Bowman and Richard P. Nelson of Peterson Nelson Johanns Morris & Holdeman, Lincoln, for appellee.

KRIVOSHA, C.J., BOSLAUGH, HASTINGS, CAPORALE, and SHANAHAN, JJ., and COLWELL, District Judge, Retired.

SHANAHAN, Justice.

The county board of Phelps County, the county board as the board of equalization for Phelps County, and Beulah Gerdes, county assessor of Phelps County (County), appeal the decision of the district court for Phelps County which held that three group homes of Bethphage Community Services, Inc. (Bethphage), were exempt from property taxation in 1983. We affirm.

Applicable in this appeal are the Nebraska Constitution and the specific statute authorizing exemption of property from taxation. "The Legislature by general law may exempt ... property owned and used exclusively for educational, religious, charitable, or cemetery purposes, when such property is not owned or used for financial gain or profit to either the owner or user." Neb.Const. art. VIII, § 2. "The following property shall be exempt from taxes: ... (c) Property owned by educational, religious, charitable, or cemetery organizations and used exclusively for educational, religious, charitable, or cemetery purposes, when such property is not owned or used for financial gain or profit to either the owner or user." Neb.Rev.Stat. § 77-202(1)(c) (Reissue 1981).

In its appellate review of a question whether property is exempt from taxation pursuant to § 77-202(1)(c), the Supreme Court determines tax exemption in an equitable trial of factual questions de novo on the record, subject to the rule that where credible evidence is in conflict on material issues of fact, the Supreme Court will consider the fact that the trial court observed the witnesses and accepted one version of the facts over another. See Matzke v. Board of Equalization, 167 Neb. 875, 95 N.W.2d 61 (1959).

Bethphage was formed as a Nebraska nonprofit corporation in 1982 to provide group homes for developmentally disabled persons as close to their natural homes and community setting as possible and thereby afford an alternative to placing such persons in institutions. Bethphage also operated a "sheltered workshop" where occupational training was taught to the disabled so that they might become "competitively employed" or otherwise take their place in a "normal work situation." The county board granted a tax exemption for the workshop. "Developmentally disabled" persons include those with "mental retardation" or certain disabling conditions such as epilepsy or cerebral palsy. According to the standards contained in its "Policy and Procedural Manual," Bethphage characterizes a "developmental disability" as a severe, chronic disability of a person which is attributable to mental or physical impairment, or combination of such impairments, manifested before age 22, likely to continue indefinitely, and which results in a substantial function limitation in three or more of the following major life activities: self-care, receptive and expressive language, learning, mobility, self-direction, capacity for independent living, and economic self-sufficiency.

Bethphage's group homes are licensed by the State of Nebraska and are subject to regulation by the state's Office of Mental Retardation. Although Bethphage derives some revenue from certain charges to residents of the group homes, Bethphage receives funds through the Office of Mental Retardation. Bethphage does not distribute any part of its income to its members, directors, officers, or private individuals, does not accumulate profits for distribution, and is exempt from federal income taxation. See Neb.Rev.Stat. §§ 21-1901 et seq. (Reissue 1983) (Nebraska Nonprofit Corporation Act).

Residents of the group homes receive occupational training at the sheltered workshop. When they are not at the workshop, residents of the homes, through encouragement from supervisors, correlate the day's occupational training with proper social behavior. According to a Bethphage representative, the disabled persons "placed competitively in employment situations in the community lose their work or lose their job, not because they cannot do the work, but generally because of a socially inappropriate behavior." Residents of the group home receive instruction on how to deal with prospective situations outside the workshop involving insensitive remarks or deliberate derision by fellow workers at the expense of a disabled person. At the homes, records are kept reflecting a resident's adjustment to social situations, ability to communicate, and awareness of environment, as well as fundamental and general hygiene and maintenance, in order that good personal and social habits might be developed. Correlation between social behavior and occupational training or job skill is designed to produce "normalization" in the daily life of a disabled person. Only persons who can learn and benefit from such a program may reside in the group homes.

Bethphage applied to the Phelps County assessor for a property tax exemption for 1983 concerning its three group homes. See Neb.Rev.Stat. § 77-202.01 (Reissue 1981). After the assessor denied the requested tax exemption on September 6, 1983, Bethphage requested a hearing before the Phelps County Board of Equalization, see Neb.Rev.Stat. § 77-202.02 (Reissue 1981), which, on September 27, also denied tax exemption for the group homes. As a result of Bethphage's appeal, the district court, after a trial de novo, see Neb.Rev. Stat. § 77-202.04 (Reissue 1981), held that the group homes were used exclusively for educational and charitable purposes, were not used for financial gain or profit, and were, therefore, exempt from property taxation for the year 1983.

The County claims the district...