City of Nashville v. State Bd. of Equalization

• Decision Date: 07 September 1962
• Citation: 14 McCanless 587,360 S.W.2d 458,210 Tenn. 587
• Parties: , 210 Tenn. 587 CITY OF NASHVILLE v. STATE BOARD OF EQUALIZATION et al.
• Court: Tennessee Supreme Court

Page 458

360 S.W.2d 458

14 McCanless 587, 210 Tenn. 587

CITY OF NASHVILLE v. STATE BOARD OF EQUALIZATION et al.

Supreme Court of Tennessee.

Sept. 7, 1962.

Rehearing Denied Oct. 4, 1962.

Robert H. Jennings, Jr., City Atty., Frank S. King, Jr., Special Counsel, Nashville, for plaintiff.

George F. McCanless, Atty. Gen., Milton P. Rice, David M. Pack, Asst. Attys. Gen., Nashville, Tenn., for State Bd. of Equalization.

Reber Boult, Edwin F. Hunt and Val Sanford, Nashville, for Baptist Sunday School Bd.

FELTS, Justice.

The Sunday School Board (the Board) of the Southern Baptist Convention owns a large amount of real estate in the City of Nashville. The City assessed this real estate for ad valorem taxation under Tennessee Code Annotated (T.C.A.) § 67-501, which requires that 'all properth,' except such as is declared to be exempt, 'shall be assessed for taxation for state, county and municipal purposes.'

The Board protested the assessments and claims its properties are exempt from taxation under T.C.A. § 67-502(2) (quoted pp. 14, 16, infra), which exempts the real estate of a 'religious, charitable, scientific or educational institution,' when occupied and used by such institution 'exclusively for carrying out thereupon one (1) or more of the purposes' for which it 'was created'; but any part of its property not so exclusively used for such purpose shall be taxed to the extent of its value.

The Board's claim of exemption was upheld by the State Board of Equalization. Asserting this holding was illegal and in excess of the State Board's jurisdiction, the City filed a petition for certiorari in the Chancery Court. That Court dismissed the petition and sustained the State Board's holding. The Court of Appeals affirmed the Chancellor's decree. Because of the importance of the question involved, we granted certiorari and the case has been heard here.

There is no dispute as to the facts, the only evidence being that adduced by the Board. The Board is a 'religious institution'. It was organized in 1921 as a non-profit, general welfare corporation under the laws of Tennessee. Its corporate name is 'The Sunday School Board of the Southern Baptist Convention'. The purposes for which it was created and exists, as stated in its charter, are:

'the establishment, support, and maintenance of any Sunday School undertaking on the part of said Southern Baptist Convention, and to print or purchase and disseminate, by gift or sale, religious literature for the purpose of the propagation of the Gospel and the advancement and spread of the religious faith which said Southern Baptist Convention is engaged in advancing or promulgating.'

The Board's headquarters or situs is in Nashville. It operates a publishing house and a bookstore here and bookstores elsewhere. Its principal activities are the publication and sale of religious materials or literature and books to the members of the churches and to the churches in the Southern Baptist Convention throughout the South; and it also carries on service programs for church conventions and for the training of people for the work of the Baptist churches.

From its operations the Board receives a gross income of nearly $2,000,000.00 per month, it employs some 900 employes, and its net assets on July 31, 1960, were $28,703,920.00. Among its 'fixed assets' listed are: 'Land and land improvements $2,318,908' and 'Buildings and improvements $14,871,021' (balance sheet, Ex. 2, Dr. Sullivan). The Board owns 16 parcels of real estate in the City of Nashville.

The City in 1960 assessed this real estate for taxation at a total assessment of $5,083,600.00. Four of these parcels, assessed at a total of $287,400.00, were not occupied by the Board but were leased by it to other persons for purposes of their own businesses, such as a parking lot, filling station, etc. It is conceded that these parcels are not exempt but are to be taxed ad valorem for state, county, and city purposes.

As to all of the other parcels, assessed at a total of $4,796,200.00, the Board protested these assessments and claimed these properties are exempt. It appears that upon the hearing before the State Board, the City conceded that these properties were being occupied and so used by the Board as to be exempt, except certain parts of them which were being used by the Board for the purposes of operating a restaurant or cafeteria, a snack bar, and parking lots for parking or storing automobiles.

Upon one of these parcels the Board has a large building, its 'Administration Building'. Part of this building is used by the Board for the restaurant or cafeteria for its employes. The floor space of the part so used is 2610 square feet, that of the whole building being 133,336 square feet. The City had assessed this building as a whole at $1,116,300.00, but conceding all of it to be exempt except this 2610 square feet, the City asked the State Board to value it at $21,800.00.

Upon another of these parcels the Board has another large building, its 'Operations Building.' It uses part of this building for the operation of a snack bar--a place with machines which dispense hot soups, coffee, eat-a-snacks, etc., upon deposit of coins. The total area of this building (not counting its roof used for parking automobiles) is 321,650 square feet, and that of the part used for the snack bar is 4176 square feet. The City asked the State Board to value this part at $28,000.00.

The Board owns five other parcels which it uses as parking lots for automobiles of its employees. The total area of these five lots is 128,000 square feet and accommodates some 300 automobiles. The Board also uses the roof of its Operations Building for parking of automobiles of its employees, this space accommodating 365 automobiles. It issues parking permits to its employees, and has an employee at each lot to supervise the parking and to keep other persons from parking there.

Before the State Board, the City contended that these parts of the Board's properties, used by it for the parking lots, restaurant, and snack bar, were not being used for any of its charter purposes, but for other and different purposes, and so were not exempt, but should be separately taxed to the extent of their value, which the City asked the Board to fix at $704,000.00.

The State Board held that these parts of the properties so used for other purposes (parking lots, cafeteria, and snack bar) were exempt from taxation: that they were being used 'either purely and exclusively for religious purposes or for purposes so close thereto as to come within the exemption provided by the statute' (italics ours).

The Chancellor concluded that 'the operation of these units' were 'fringe benefits for the employees,' which tended to promote the efficient operation of the Board, resting his conclusion upon these facts found by him:

'The Court takes judicial knowledge that many big concerns provide non-profit cafeterias for convenience of their employees. The 'coffee break at the snack bar' is also a well established fact in business.

'The furnishing of parking space, cafeterias and snack bars are in a sense 'fringe benefits' for the employees, all of which makes for more satisfied, efficient, and permanent employees.'

The Court of Appeals took the same view. It held our present exemption Act (ch. 47, 1935, now T.C.A. § 67-502(2)) made no change in the pre-existing acts (of 1883, 1889, 1899, 1907), but its 'relevant language was substantially the same' as those acts, and its interpretation was controlled by our cases interpreting those former acts, giving them a liberal construction in favor of the exemption.

And so construing this Act, the Court held that even though these parts of the Board's properties were being used for the other purposes stated, they were nonetheless to be regarded as being used exclusively for religious purposes, and exempt from taxation, because their use for such other purposes was incidental to their primary use for religious purposes (citing State ex rel. v. Waggoner, 162 Tenn. 172, 35 S.W.2d 389).

This holding was erroneous, the City insists. It argues that this act displaced the former acts, narrowed the scope of tax exemption, and the cases construing those acts are not relevant in interpreting this act; that the Board's use of its properties for the other purposes stated (parking lots, restaurant, and snack bar) is a use not for a religious purpose, but for business purposes, and its claim of exemption for the properties so used can not be maintained under this act.

In debating these questions, learned counsel have discussed this act, together with its constitutional background, the former acts and and our cases under them, the public policy of the State, and the relevant rules of statutory construction. So, a consideration of these matters seems appropriate to an understanding and decision of the questions in this case.

It is a fundamental rule that all property shall be taxed and bear its just share of the cost of government, and no property shall escape this common burden, unless it has been duly exempted by organic or statute law; and that one claiming such exemption has the burden of showing his right to it. 2 Cooley on Taxation (4th Ed.) sec. 672; 51 Am.Jur., Taxation, sec. 524; American Bemberg Corp. v. Elizabethton, 180 Tenn. 373, 378, 175 S.W.2d 535; American Nat. B. & T. Co. of Chatta. v. McFarland, 209 Tenn. 263, 352 S.W.2d 441, 443, 444.

'Taxes are the life blood of civil government. The right of taxation is an attribute of sovereignty. It is inherent in the state, and essential to the perpetuity of its institutions; consequently he who claims exemption must justify his claim by the clearest grant of organic or statute law.' Knoxville & O. R. Co. v. Harris, 99 Tenn. 684, 693, 43 S.W. 115, 53 L.R.A. 921.

'It is the policy of the state, and but justice between its citizens, that all property shall be taxed, and that no property shall escape this...