Better Living Services, Inc. v. Bolivar County

• Decision Date: 16 October 1991
• Docket Number: No. 90-CA-0509,90-CA-0509
• Citation: 587 So.2d 914
• Parties: BETTER LIVING SERVICES, INC. v. BOLIVAR COUNTY, Mississippi and the City of Cleveland, Mississippi.
• Court: Mississippi Supreme Court

Page 914

587 So.2d 914

BETTER LIVING SERVICES, INC. v. BOLIVAR COUNTY, Mississippi and the City of Cleveland,

Mississippi.

No. 90-CA-0509.

Supreme Court of Mississippi.

Oct. 16, 1991.

Shane F. Langston, Langston & Frazer, Jackson, for appellant.

Benjamin E. Griffith, Griffith & Griffith, Cleveland, for appellees.

Before HAWKINS, P.J., and SULLIVAN and BANKS, JJ.

SULLIVAN, Justice, for the Court:

Better Living Services, Inc., a non-profit corporation chartered in Tennessee, sought an exemption from county and city ad valorem taxes for its "Section 8 Apartments" in Cleveland, Mississippi. Better Living took the position that it operated within the definition of "charitable society" under Miss.Code Ann. Sec. 27-31-1(d) (Supp.1990). The Bolivar County Board of Supervisors and the City of Cleveland denied the request for an exemption. Better Living appealed to the Circuit Court of Bolivar County, Mississippi, which granted summary judgment for both taxing authorities, therefore, denying Better Living of its tax exemption.

On appeal Better Living raises three issues:

(1) That the circuit court erred in determining as a matter of law that the apartment complex was not tax exempted property within the meaning of "charitable society" of Miss.Code Ann. Sec. 27-31-1(d) (1972);

(2) That the court erred in denying taxpayer due process of law in violation of Sec. 14, Article 3 of the Mississippi Constitution and the 14th Amendment of the United States Constitution; and

(3) That the court erred in granting summary judgment on taxpayer's claim of discrimination.

Better Living built its South Central Village Apartments, a 60 unit complex, in Cleveland, Mississippi, in 1983 with public funds and began operating in 1984. It claims exemption from both county and city ad valorem taxes for the tax years 1987, 1988, and 1989 because:

(1) It is organized as a non-profit corporation under Sec. 501(c)(3) of the Internal Revenue Code;

(2) It operates under Sec. 202 of the National Housing Act of 1959 [12 U.S.C. Sec. 1701q (1980) ] and Sec. 8 of the United States Housing Act of 1937 [42 U.S.C. Sec. 1437f (1978) ];

(3) It provides housing for the destitute, elderly, handicapped and disabled;

(4) Its tenants are all over 62 years of age and receive substantial rent subsidies from the federal government; and (5) All income from the complex is devoted exclusively to the operation of the apartment for the benefit of its destitute and disabled tenants.

Both Bolivar County and the City of Cleveland filed a motion for summary judgment and stated:

There is no genuine issue as to any material fact as to plaintiff's claim that it is a "charitable society," and that the defendants are entitled to a judgment as a matter of law; that the plaintiff is not entitled to an exemption from ad valorem taxes under Miss.Code Ann. Sec. 27-31-1(d) (Supp.1980).

The circuit judge found the following material facts uncontradicted:

(1) Better Living Services, Inc. is a Tennessee nonprofit corporation doing business in Mississippi where it owns and operates a 60 unit apartment complex named South Central Village Apartments in Cleveland, Bolivar County, Mississippi;

(2) Taxpayer received during 1987, 1988 and 1989 fair market rent from all tenants;

(3) Taxpayer uses rent revenues to pay mortgage payments (balance on the mortgage as of December 31, 1987, was $1,586,126.00);

(4) Taxpayer's monthly payment to the deed of trust beneficiary (HUD) includes the amount of the taxes and assessments due on the premises;

(5) Taxpayer imposes health requirements, limitations and restrictions on tenant applicants;

(6) Taxpayer used a financial screening process to ferret out those potential tenants who qualified for government rent subsidies;

(7) Taxpayer's total profit before depreciation in 1987 was $52,276.00;

(8) Only $484.00 in expenses for "elderly and congregate services" was reported by taxpayer in 1987;

(9) Total revenues in 1987 was $328,500.00;

(10) Taxpayer's operational budget supplied by HUD included taxes and special assessment levies;

(11) Taxpayer did not furnish or provide a nursing home or facility for the aged or infirm unable to provide independent care for themselves at their own expense;

(12) During 1987, 1988 and 1989 all residents paid rent either with personal funds and/or federal subsidies; and

(13) Taxpayer furnished low income housing to elderly, handicapped and disabled persons who can care for themselves or who can provide someone to care for them.

The circuit court concluded:

[T]hat there is no genuine issue of material fact herein and being of the further opinion that the defendants, Bolivar County, Mississippi and the City of Cleveland, Mississippi, are entitled to a judgment as a matter of law, holds that the plaintiff, Better Living Services, Inc., is not a charitable society entitled to an exemption from ad valorem taxes under the provisions of Sec. 27-31-1(d) Miss.Code 1972.

Miss.Code Ann. Sec. 27-31-1(d) (1972) provides in pertinent part:

The following shall be exempt from taxation:

. . . . .

(d) All property, real or personal, belonging to any religious society, or ecclesiastical body, or any congregation thereof, or to any charitable society, or to any historical or patriotic association or society, or to any garden or pilgrimage club or association and used exclusively for such society or association and not for profit.... All property, real or personal, owned and occupied by a fraternal and benevolent organization, when used by such organization, and from which no rentals or other profits accrue to the organization, but any part rented or from which revenue is received shall be taxed.

The taxpayer argues that its operation of low income housing comes within the statutory definition of "charitable society." The taxpayer, through its management company, had at the time of the hearing before the Bolivar County Board similar tax exempt requests pending in the State of Tennessee and was actually receiving tax exempt status in the State of Kentucky on other similar projects. The taxpayer also listed 29 "materially similar" apartment complexes within the State of Mississippi that were receiving tax exempt status.

Two decisions of this Court in the 1920's support denial of tax exempt status. In Gunter v. City of Jackson, 130 Miss. 637, 94 So. 844, 845-46 (1923), we said:

The net revenue, however, from the book store [Baptist Book Store in the City of Jackson] is used by the Baptist Churches in the state through the State Baptist Convention to maintain and support their principal church activities, including home missions.

* * * * * *

If the contention of the church in this case be right, then any religious society may go out into the marts of trade and commerce--in big business or little business--tax free, in competition with individuals, partnerships and corporations, who are now burdened with something like an average tax charge of 5 per cent.

* * * * * *

We conclude therefore that it is only property and the revenues therefrom which are primarily and immediately devoted to the purposes set out in the statute which are exempted from taxes; that if such property and the revenues therefrom are primarily invested in trade or any other business for profit they are liable to taxes, even though the ultimate net income be devoted to the objects referred to in the statute.

In Smith v. Myatt, 146 Miss. 388, 111 So. 590 (1927), land owned by Kings Daughters Hospital in Hattiesburg, a charitable organization conducted without profit, was assessed taxes and sold at tax sale. We concluded:

The same conditions are required by the statute for exemption of property owned by charitable institutions as are required for the exemption of property owned by religious institutions. It must be used exclusively for the purpose of the charitable institution.... If that were such a use [talking about the use of the land], as the statute contemplates, then Kings Daughters could engage in the purchase and sale of land for profit, provided they used the profit for charitable purposes. We are of the opinion that the land involved was not exempt from taxation while owned by Kings Daughters, ...

In both of these early cases this Court pierced the veil of the religious institution or charitable society and looked at the use being made of the property upon which tax exemption was sought. In both cases, the tax exempt organization had entered into a proprietary function in competition with private enterprise. The same can be said of Better Living's operation of its Sec. 8 apartments in Cleveland.

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