Book Agents of Methodist Episcopal Church, South v. State Bd. of Equalization

• Decision Date: 17 June 1974
• Parties: BOOK AGENTS OF the METHODIST EPISCOPAL CHURCH, SOUTH and the Board of Publication of the Methodist Church, Petitioners, v. The STATE BOARD OF EQUALIZATION of the State of Tennessee et al., Respondents. The SUNDAY SCHOOL BOARD OF the SOUTHERN BAPTIST CONVENTION, Petitioner, v. The STATE BOARD OF EQUALIZATION, etc., et al., Respondents. Clifford ALLEN, Tax Assessor, and the Metropolitan Government of Nashville and Davidson County, Tennessee, Petitioners, v. The STATE BOARD OF EQUALIZATION of the State of Tennessee, Respondent.
• Court: Tennessee Supreme Court

Page 514

513 S.W.2d 514

BOOK AGENTS OF the METHODIST EPISCOPAL CHURCH, SOUTH and the

Board of Publication of the Methodist Church, Petitioners, v. The STATE BOARD OF EQUALIZATION of the State of Tennessee et

al., Respondents.

The SUNDAY SCHOOL BOARD OF the SOUTHERN BAPTIST CONVENTION, Petitioner, v. The STATE BOARD OF EQUALIZATION, etc., et al., Respondents.

Clifford ALLEN, Tax Assessor, and the Metropolitan

Government of Nashville and Davidson County, Tennessee, Petitioners, v. The STATE BOARD OF EQUALIZATION of the State of Tennessee, Respondent.

Supreme Court of Tennessee.

June 17, 1974.

William J. Harbison, Joseph G. Cummings, Nashville, for petitioners; Trabue, Minick, Sturdivant & Harbison, Nashville, of counsel.

Boult, Cummings, Conners & Berry, Nashville, for Book Agents of the Methodist Episcopal Church, South and The Board of Publication of the Methodist Church.

James I. Vance Berry, Val Sanford, Nashville, Gullett, Steele, Sanford, Robinson & Merritt, Nashville, Boult, Cummings, Conners & Berry, Nashville, for The Sunday School Board of the Southern Baptist Convention.

Milton H. Sitton, Director of Law, Metropolitan Government, Carmack Cochran, Special Counsel, Nashville, for The Metropolitan Government of Nashville and Davidson County, Tennessee, and Clifford Allen, Tax Assessor, of counsel.

David M. Pack, Atty. Gen., Milton P. Rice, Deputy Atty. Gen., William L. Barry Asst. Atty. Gen., Nashville, for The State Board of Equalization of the State of Tennessee.

OPINION

DYER, Chief Justice.

These cases involve petitions for the writ of certiorari to the Court of Appeals, Middle Section, at Nashville, to review the decisions of that court concerning the assessment of certain real and personal property for taxation and the claims of the property owners that the property is exempt from taxation under T.C.A. § 67--502(2).

These matters were originally four cases filed in Chancery Court with the taxing authorities and the corporate property owners seeking judicial review of the determination of the State Board of Equalization. The chancellor consolidated the matters into two cases, one with regard to the Baptist property owner and another regarding the Methodist property owners. Pursuant to a motion asking joint consideration to the two cases, this Court has heard arguments in the cases together and all the assignments of error and supporting briefs are considered in this opinion.

Book Agents of the Methodist Episcopal Church, South, is a Tennessee non-profit, general welfare corporation and will be referred to herein as 'Book Agents.' Board of Publication of the Methodist Episcopal Church is a non-profit, general welfare, Illinois corporation and will be referred to herein as 'Methodist Board of Publication.'

Sunday School Board of the Southern Baptist Convention is a Tennessee general welfare corporation and will be referred to herein as the 'Baptist Sunday School Board.'

The Metropolitan Board of Equalization will be referred to as the 'Metropolitan Board.' The Board of Equalization of the State of Tennessee will be referred to herein as 'State Board.' The Metropolitan Government of Nashville and Davidson County will be referred to herein as 'Metro.' Clifford Allen, Metropolitan Tax Assessor for the Metropolitan Government of Nashville and Davidson County will be referred to herein as the 'Assessor.'

The corporation, 'Book Agents,' is the record owner of certain real estate located on Demonbreum Street which was assessed for taxation at a value of $1,593,700.00. Book Agents is also the record owner of personal property assessed for taxation at a value of $3,014,500.00. The corporation 'Methodist Board of Publication' is the record owner of real property assessed for taxation at a value of $81,200.00.

The real property includes one building housing a printing plant, bindery and storage area and an office building containing a basement and five floors used for offices of the Methodist Publishing House (the trade name under which Book Agents and the Methodist Board of Publication operate) and Methodist Church agencies as well as a library and cafeteria. Personalty includes inventory, office equipment, and printing equipment.

The corporation, Baptist Sunday School Board, is the record owner of real estate known as the Frost Building, the Administration Building (Tower and North Wing), the Operations Building, and the West Wing. The Assessor placed the value of the real estate at $4,406,000.00 (not including certain real estate upon which the Sunday School Board admits to be taxable or is already taxed). Personalty was assessed for taxation at a value of $1,216,200.00.

The Baptist Sunday School Board contests the taxation of only a portion of the property including (1) the 20% Of the Frost Building used for training programs; (2) the 80% Of the Administration Building used for offices of the Baptist Sunday School Board; (3) the portion of the Operations Building used as a warehouse for storage and distribution of products of the Baptist Sunday School Board; and (4) the 82% Of the West Wing used for a library clinic, and offices. Personalty includes inventory and office equipment.

The assessments were sustained by the Metropolitan Board of Equalization and on appeal to the State Board, the three corporations claimed that all the properties should be held exempt and Book Agents also asserted that its personalty assessment was excessive. The State Board modified the Metropolitan Board's finding, and held in separate, but identical opinions that all property used in printing operations was taxable. Further, the Board held that 'properties, that portion of properties or that pro-rated use of a property used for publication of non-religious materials or used for administrative activities not directly related to a religious purpose' were subject to assessment.

Petitions for writs of certiorari and supersedeas were then filed in Chancery Court by the taxing authorities and the property owners. Under stipulations that the final disposition of the case would be controlling in regard to taxes for the years 1969 and 1970, the chancellor heard separately the petitions regarding the property owned by the Methodist and Baptist corporations. In separate opinions, the chancellor determined that property used for administrative activities not directly related to a religious purpose was taxable. Also, the portion of property or the pro-rated use of the property used for publishing or printing non-religious secular materials was held taxable. In assessing the portion subject to taxation, the chancellor instructed that an apportionment of value should be used to allow exemption for the religious portion by comparing the dollar volume of secular work with the entire dollar volume of business done by the respective publishing concerns.

The taxing authorities, as well as the property owners, sought review by the Court of Appeals. After separate arguments, separate opinions were announced determining that the causes were to be remanded and taxation proceed in accordance with the guidelines announced. All property was held taxable except those specific, designated items or areas exclusively used for the respective purposes of (1) 'promoting religious belief and worship in accordance with the doctrine and practice of The United Methodist Church' or (2) a Sunday school undertaking of the Southern Baptist Convention or 'to propagate, advance, and spread the Gospel and religious faith which the Southern Baptist Convention is engaged in advancing and promulgating.'

The Methodist Publishing House was established and located in Nashville in 1854 and Book Agents was made a chartered general welfare corporation by the Tennessee General Assembly in Chapter 136, Public Acts of 1855. The Methodist Board of Publication was chartered as an Illinois non-profit corporation in 1952.

It is not necessary at this point to present a detailed discussion of the corporate relationships and purposes of the Methodist petitioners. Rather, it is sufficient for present purposes to say that the purposes of the United Methodist Church encompass a broad range of activities intended to acquaint persons with Methodist doctrine and the Christian faith. Within those purposes are publishing activities delegated to the Methodist Publishing House using the corporate resources of Book Agents and the Methodist Board of Publication, whose respective specific purposes are outlined in the corporate charters and the Book of Discipline.

The Book of Discipline provides that income from the publishing houses shall be appropriated for the 'benefit of retired or disabled preachers, their wives, widows and children or other beneficiaries of the ministerial pension systems.' This appropriation is made 'after providing adequate reserves for the efficient operation of the business and allowing for reasonable growth and expansion.' The Methodist Publishing House has a net worth of $33,000,000.00 and has maintained a cash reserve since 1966.

The Methodist Publishing House activities consist of publishing, printing and distribution. Publishing operations include Sunday School curricula, published under the name Graded Press. Other publishing is done under the name Abingdon Press and includes denominational, non-sectarian religious, and general literature. Manufacturing is done under the name, Parthenon Press. Cokesbury is the retail division and distribution of books and other supplies is by mail and at retail stores. Printing is done for Methodist agencies although other printers may compete for such business and a limited amount of printing is done for other customers.

The Baptist Sunday School Board is an agency of the Southern Baptist Convention and was incorporated as a Tennessee general welfare corporation in 1921. To the Sunday School Board was delegated the denomination's efforts to publish and distribute religious literature and to assist local...