Beyond Hous. v. Dir. of Revenue, SC99051

CourtUnited States State Supreme Court of Missouri
Writing for the CourtPatricia Breckenridge, Judge
PartiesBEYOND HOUSING, INC. and PAGEDALE TOWN CENTER II, Respondents, v. DIRECTOR OF REVENUE, Appellant.
Docket NumberSC99051
Decision Date13 September 2022

BEYOND HOUSING, INC. and PAGEDALE TOWN CENTER II, Respondents,
v.

DIRECTOR OF REVENUE, Appellant.

No. SC99051

Supreme Court of Missouri, En Banc

September 13, 2022


PETITION FOR REVIEW OF A DECISION OF THE ADMINISTRATIVE HEARING COMMISSION The Honorable Sreenivasa Rao Dandamudi, Commissioner

Patricia Breckenridge, Judge

The director of the department of revenue appeals the decision of the administrative hearing commission ("AHC") finding Beyond Housing, Inc., and Pagedale Town Center II, LLC, ("PTC II") qualify for sales and use tax exemptions as charitable organizations pursuant to section 144.030.2(19).[1] The director claims the AHC erred in determining Beyond Housing and PTC II can now qualify as a charitable organization when Beyond Housing was previously granted civic exemptions because the statutory categories of charitable and civic exemptions are mutually exclusive classifications. The director claims the AHC also erred in determining Beyond Housing and PTC II qualify for sales and use

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tax exemptions because its development of the fourth phase of its Pagedale Town Center, what it calls "Phase IV," is not a charitable activity as it benefits the general welfare of the community rather than low-income residents.

This Court finds the AHC did not err in finding Beyond Housing and PTC II qualify for the charitable exemption because the definitions of charitable and civic organizations in section 144.030.2 do not create mutually exclusive categories of exemptions and the organizations' primary purpose in developing Phase IV is to benefit persons with low incomes in a specific area, which is a charitable activity. The AHC's determination that Beyond Housing and PTC II qualify for sales and use tax exemptions as charities is supported by competent and substantial evidence upon the whole record and authorized by law. Therefore, the AHC's decision is affirmed.

Factual and Procedural Background[2]

Beyond Housing is a Missouri not-for-profit corporation originally organized for the purpose of encouraging cooperative efforts to combat community deterioration and to secure decent, safe and sanitary housing, community facilities, and other related facilities and services conducive to the progress and general welfare in designated areas of operation. Since its founding, however, Beyond Housing has expanded its mission to provide a wide range of services to meet the needs of persons living within its area of operation.[3]

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Beyond Housing primarily operates in an area within the Normandy school district in north St. Louis County known as the 24:1 Designated Area (the "24:1 area" or the "area"), so called because the area was originally composed of 24 small municipalities. Residents of the 24:1 communities are predominantly low-income African-Americans who are exposed to higher rates of crime, poverty, chronic unemployment and underemployment, and a lack of educational services.[4] To ameliorate these adverse effects of poverty, Beyond Housing works to improve the quality of life for persons living in the 24:1 area by providing them with services and developing projects not otherwise available to them. Its decisions as to the services it provides and the projects it develops are based on the needs expressed by persons in the area.

One need of persons living in the 24:1 area is for affordable housing and housing services. Accordingly, to serve area residents, a limited partnership Beyond Housing created owns 513 low-rent housing units, including two senior residences with 95 units. Persons living within the 24:1 area, including those who do not rent from Beyond Housing, can obtain rental assistance and utility payment assistance through the organization, which is made possible by philanthropic donations and government grants. Further, eligible families in the 24:1 area and the greater St. Louis area can obtain from Beyond Housing assistance with down payments and closing costs, financial advising services, and home repair loans.

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Persons living in the 24:1 area also need health services. Because they had no primary or urgent care options, Beyond Housing worked to bring to the 24:1 area Affinia Healthcare and BJC Behavioral Health, both of which are non-profit health care organizations. But for Beyond Housing's efforts, neither organization would serve the area. Beyond Housing itself also directly provides health-related services to area residents. It employs two health workers who focus on asthma and diabetes - conditions disproportionately affecting persons in the area. The health workers identify individuals who suffer from asthma or diabetes and connect them with affordable health services.

In keeping with its holistic approach to improving the quality of life for persons living in the area, Beyond Housing also has worked to provide affordable and healthy food options. Prior to Beyond Housing's intervention, the persons living in the area had no access to affordable and healthy food, and the area was known as a "food desert." To provide access to food, Beyond Housing developed a commercial structure that is now leased to Save-A-Lot. The grocery store directly benefits low-income residents with more than 50 percent of its sales made through the federal supplemental food assistance program.

The services Beyond Housing provides to residents of the 24:1 area go beyond housing and health-related services. Because adults and children living in the 24:1 area need educational and social services, Beyond Housing operates the Pagedale Family Support Center, which is open every day and functions as a hub for neighborhood activities, training programs, and other services. At the center, residents have access to a monthly food pantry, a computer lab, job referrals, an after-school program, a summer program, and a sports league. The Normandy School District collaborates with Beyond Housing to

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transport its students to the center, where Beyond Housing offers children assistance with their homework, hot meals, mentoring, counseling, and family support. Additionally, through its Family Liaisons Program, Beyond Housing staffs 13 individuals in Normandy Public Schools who work to connect families with resources, services, and information concerning educational opportunities. And, every year, Beyond Housing administers a back-to-school drive that provides more than 3,000 children with school supplies.

Beyond Housing also developed a four-screen cinema to provide persons living in the 24:1 area with family entertainment options and job opportunities and to generate tax revenue. Through Beyond Housing's Viking Advantage Program, Normandy high school students work at the local theater, and Beyond Housing matches savings the students set aside to finance college education. So far, the program has had more than 350 participants and 75 college graduates. A dozen of these students have earned advanced degrees. Similarly, Beyond Housing connects residents of the 24:1 area with employment opportunities by collaborating with the City of Wellston to provide job training.

Beyond Housing has also benefitted the residents of the area by demolishing blighted buildings and replacing them with public parks; repairing and improving streets and sidewalks where children walk to school; creating bike paths, tree lines, and benches; and rebuilding roads, parks, and sewer systems.

Beyond Housing is currently undertaking Phase IV of its Pagedale Town Center development. To develop Phase IV, Beyond Housing created PTC II, a single-member Missouri not-for-profit, limited liability company wholly owned by Beyond Housing. Phase IV includes the construction of a 20,000-square-foot, two-story structure. The first

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floor will be occupied by locally owned restaurant ventures, including a healthy vegan restaurant, a smoothie restaurant, and a traditional American restaurant, as well as a women's clothing store, an African jewelry and accessories store, and a fitness center.

The second floor will be partially occupied by a community kitchen for neighborhood and local-business use that will provide job training for area residents in culinary arts and act as a feeder for employment in one of the restaurants on the first floor. A Beyond Housing affiliate will operate the community kitchen, which, alone, will occupy roughly a quarter of the rentable space in Phase IV. In addition to the community kitchen, the second floor will have expanded offices for BJC Behavioral Health's provision of behavioral health care and Affinia Healthcare's provision of primary health care. Finally, the second floor also includes office space for an entrepreneurial education and training program for minority women artists as well as office space for a workforce development program. Seventy-five percent of the building is leased to nine African-American owned small businesses, and 71 percent is leased to women-owned businesses.

Since the 1990s, Beyond Housing has applied for and received sales and use tax exemptions as a civic organization, and, in 2014, the department of revenue granted Beyond Housing a perpetual exemption as a civic organization. In the process of developing Phase IV in 2019, however, both Beyond Housing and PTC II applied for sales and use tax exemptions as charitable organizations to permit their contractors to qualify for a sales tax exemption pursuant to section 144.062.1(2) for materials purchased to construct

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Phase IV.[5] Unlike Beyond Housing, PTC II has not previously applied for a sales and use tax exemption.

The director denied the organizations' applications for sales and use tax exemptions, finding Beyond Housing failed to meet its burden of establishing it is a charitable organization and PTC II did not qualify as a charitable organization. Beyond Housing and PTC II appealed to the AHC, pursuant to section 621.050.1, and their appeals were consolidated. Although the letter...

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