Congregation B'Nai Jeshurun v. Board of Review of City of Des Moines

• Decision Date: 18 February 1981
• Docket Number: No. 64302,64302
• Citation: 301 N.W.2d 755
• Parties: CONGREGATION B'NAI JESHURUN, Appellee, v. BOARD OF REVIEW OF the CITY OF DES MOINES, Iowa, Appellant.
• Court: Iowa Supreme Court

Page 755

301 N.W.2d 755

CONGREGATION B'NAI JESHURUN, Appellee, v. BOARD OF REVIEW OF the CITY OF DES MOINES, Iowa, Appellant.

No. 64302.

Supreme Court of Iowa.

Feb. 18, 1981.

Allan A. Herrick and William R. Clark, Jr., of Herrick, Langdon & Langdon, Des Moines, for appellant.

Robert E. Mannheimer and Barbara G. Barrett of Dickinson, Throckmorton, Parker, Mannheimer & Raife, Des Moines, for appellee.

Considered by LeGRAND, P. J., and UHLENHOPP, HARRIS, McCORMICK, and ALLBEE, JJ.

UHLENHOPP, Justice.

This appeal involves statutory construction regarding claimed property tax exemption of housing provided to nonecclesiastical personnel by a religious institution. See 71 Am.Jur.2d State and Local Taxation § 378 (1973); 85 C.J.S. Taxation § 921 (1954); Annots., 55 A.L.R.3d 356, 485 (1974); cf. 33 Am.Jur.2d Federal Taxation §§ 3281 (exclusion of income by employee), 3305 (deduction of expense by employer) (1981) (similar problem relating to income tax). The statute in question is section 427.1(9), The Code 1979:

The following classes of property shall not be taxed:

9. Property of religious, literary, and charitable societies. All grounds and buildings used or under construction by ... religious institutions and societies solely for their appropriate objects, ... not leased or otherwise used under construction with a view to pecuniary profit.

We have concluded that the question of exemption in this case ultimately turns on the rule of construction which courts apply to tax exemption statutes. This court stated in Trustees of Griswold College v. State, 46 Iowa 275, 278 (1877):

It is conceded in argument that taxation is the rule and exemption the exception, and that statutes providing for exemption should be strictly construed, so that no property shall be exempt excepting that which is clearly and fairly within the express terms of the law.

This court stated similarly in a case which involved a home owned by a church for its director of Christian education and minister of music, "The current trend throughout the country as shown by recent decisions is to curb and restrict exemptions such as we have here." Trinity Lutheran Church v. Browner, 255 Iowa 197, 201, 121 N.W.2d 131, 133 (1963). More recently we stated, "The burden is upon one claiming tax exemption to show the property falls within the exemption statute." Southside Church of Christ v. Des Moines Board of Review, 243 N.W.2d 650, 651 (Iowa 1976).

Plaintiff Congregation B'Nai Jeshurun, a religious institution or society, owns a Temple in Des Moines, Iowa. Several years ago it purchased a lot improved with a family dwelling and garage. This property adjoins the Temple grounds.

At first the Congregation rented the dwelling to tenants for $300 per month; the Temple custodian had his own home elsewhere, as the Temple facilities were not suitable for habitation. Later the Congregation required the custodian to live in the dwelling in order to be available in emergencies and on occasions when required to spend evenings at the Temple. Thereafter successive Temple custodians lived in the dwelling with their families. Originally the value of the dwelling to the custodian was agreed to be $200 per month, which was deducted from his wages. Subsequently the figure was reduced to $150 per month. The Congregation also paid $100 per month of utility expense.

This arrangement had advantages. The Temple had experienced vandalism, and the presence of a custodian increased security. His presence also made use of the Temple easier; he was there to admit individuals and groups and to lock and unlock doors. Emergencies were also easier to handle with the custodian at hand. In addition, the Congregation used the garage on the residential property to store Temple equipment. In sum, the use made of the dwelling property was helpful to Temple functions.

The Des Moines city assessor held that although the dwelling was occupied by a custodian, the residence property was nonetheless subject to property taxation as before. The board of review affirmed. On appeals the district court reversed the board's decision and the court of appeals affirmed the district court judgment. We granted further review.

I. The several states have various constitutional or statutory authorizations and restraints on tax exemptions of property of religious institutions. Our statute is quite tightly drawn. It contains three requirements. First, the property must be "used ... by ... religious institutions and societies." We may assume for purposes of decision that this religious institution "uses" the dwelling by housing its Temple custodian there and storing its equipment in the garage. The second requirement, however, narrows the kind of use which qualifies property for exemption: the use by religious institutions and societies must be "solely for their appropriate objects." (Emphasis added.) Third, the property must not be used or leased "with a view to pecuniary profit." As with the first requirement, we may assume arguendo that the third requirement is met.

Our problem is with the second requirement. The property must be used for the religious institution's "objects," and "solely" for those objects. Under a strict reading, this would practically confine the exemption to religious edifices themselves, used only for preaching, teaching, and practicing religion. On the other hand, under an expansive interpretation the second requirement might be enlarged to the housing of rabbis, priests, ministers, assistant rabbis, priests, and ministers, choir directors, organists, administrative directors, custodians, and other personnel who help make the institution function.

II. This court has grappled with the second requirement more than once, not always achieving unanimity. Griswold involved two homes on a denominational college campus, one occupied by a bishop who was the college president and, of course, ordained, and the other occupied by one of the professors. By a vote of three-to-two the court held the homes exempt, one home under the religious and the other under the educational exemptions. Addressing the State's argument that the use of the homes was secular, the court stated:

If it be the correct construction of the statute that the building solely used for literary exercises and instruction, and the church edifice solely used for public worship and the land actually necessary for their use are only exempt, this argument would be sound. But the actual necessities of the institutions is not the rule prescribed by the statute. If it were, the building owned by the college and used as a boarding house for students, and possibly as the residence of the keeper of it, would not be exempt, because the keeping of a boarding house is a secular use and it is not necessary that the students should board in a building owned by the college corporation, and the part used as residence rooms by the keeper is his residence the same as the keeper of any other boarding house. So, if a room in the church edifice should be used as the study or office of the officiating clergyman, the whole building would be taxable, because the use of a part of it for an office or study would be a secular use. It will surely not be claimed that the boarding house and church edifice would be taxable under such circumstances. The true inquiry should be not what is actually necessary, but what is proper and appropriate to effectuate the objects of the institutions.

46 Iowa at 281-82. The writer of the dissenting opinion concluded his opinion thus:

I am strongly impressed with the thought, however, that the majority of the court, while referring to and conceding the rule to be that exemption from taxation constitutes the exception, and that the legislative intent must be clear before it can be allowed to prevail, have practically ignored such rule in the present case.

Id. at 285.

If a parsonage is to come within the second requirement, then the court had very close facts in the Trinity Lutheran case. The director of Christian education and minister of music, Mr. Koester, had practically all the training, attributes, and functions of the pastor except that he was not ordained and he did not preach. The court stated:

Mr. Koester and his family occupy as their home a residence owned by the church. He meets with congregational members and clergy in his home and maintains an office on the premises. There is nothing in the record to distinguish this residence from any parsonage, manse, rectory, or parish house owned by any church for the use of its pastor.

255 Iowa at 200, 121 N.W.2d at 133. Dividing five-to-four, the court held that Griswold and stare decisis required the residence of Mr. Koester to be held exempt. The court stated, "In 1877 under an almost identical statutory provision this court considered a situation so similar as to make the pronouncements controlling." Id. at 201, 121 N.W.2d at 134. The dissenting opinion concluded:

If the Griswold case is to be reaffirmed, I would limit it strictly to one dwelling for the principal pastor of the church; I would not extend it to assistant pastors, teaching ministers, or other full-time employees of the church. The modern trend of authority and the increasingly heavy load of taxation upon non-exempt properties demand that we do...