Crim v. Phipps

• Decision Date: 19 June 1992
• Citation: 601 So.2d 474
• Parties: Charles H. CRIM, as Tax Assessor of Jefferson County, and O.Z. Hall, as Tax Collector of Jefferson County v. Ann PHIPPS, as Executrix of the Estate of Roy E. Phipps, Deceased. 1901475.
• Court: Alabama Supreme Court

Page 474

601 So.2d 474

Charles H. CRIM, as Tax Assessor of Jefferson County, and O.Z. Hall, as Tax Collector of Jefferson County v. Ann PHIPPS, as Executrix of the Estate of Roy E. Phipps, Deceased.

1901475.

Supreme Court of Alabama.

June 19, 1992.

Jeffrey M. Sewell and Charles S. Wagner, Asst. County Attys., Birmingham, for appellant.

Mark W. Bond and Bradford W. Botes of Bond & Botes, P.C., Birmingham, for appellee.

Robert E. Paden of Paden & Paden, Bessemer, for amicus curiae the City of Bessemer, Ala.

PER CURIAM.

Jefferson County's tax assessor and tax collector appeal from a summary judgment declaring certain real property, leased to and used by the Alabama Department of Human Resources ("DHR"), exempt from ad valorem taxes. The summary judgment also ordered the Jefferson County tax collector to refund the ad valorem taxes that had been paid on the real property during the previous two years and prohibited future ad valorem tax assessment and collection on the property while it is used for charitable purposes. According to the trial court's judgment, the real property is exempt from ad valorem taxes because it is used exclusively for charitable purposes. On this appeal, the only question is whether DHR's use of the property qualifies for the tax exemptions found in Ala. Const. Art. IV, § 91; Ala. Const. Amend. No. 373(k); and Ala.Code 1975, § 40-9-1(1).

The only facts established in the record are that DHR had leased an office building and an adjoining parking area from Roy Phipps, ¹ and that DHR uses this property for processing applications for, and distributing, welfare benefits. No evidence was presented regarding the amount of the rent or the rental value of the property.

Article IV, § 91, of the Alabama Constitution states: "The legislature shall not tax ... lots in incorporated cities and towns ... with the buildings thereon, when same are used exclusively for religious worship, for schools, or for purposes purely charitable." Id. (emphasis added). Amendment No. 373(k) states: "The following property shall be exempt from all ad valorem taxation: the real and personal property of the state, counties and municipalities and property devoted exclusively to religious, education or charitable purposes." Id. (emphasis added). This exemption from ad valorem taxes is repeated in Ala.Code 1975, § 40-9-1(1).

Phipps relies on State v. Kinder-Care Learning Centers, Inc., 418 So.2d 859 (Ala.1982); State v. Bridges, 246 Ala. 486, 21 So.2d 316 (1945); State v. Alabama Educational Foundation, 231 Ala. 11, 163 So. 527 (1935); State v. Church of the Advent, 208 Ala. 632, 95 So. 3 (1923); and Anniston City Land Co. v. State, 160 Ala. 253, 48 So. 659 (1909), for the argument that the use of the property rather than its ownership determines whether it is exempt from ad valorem taxation. We find all of these cases except Anniston City Land Co. distinguishable.

In Kinder-Care, supra, the Court held that Kinder-Care's use of its property for day care centers was not exclusively an educational use so as to qualify for tax exemption. Kinder-Care apparently owned the property, and the opinion makes no distinction between the use and the ownership of the property. Bridges involved a building of which the ground floor was used for commercial purposes and the second and third floors were leased to a business college. The owner applied for an "educational use" exemption, but the Court held that the building could not be divided into taxable and tax-exempt portions, at least where one owner owned the entire building. Alabama Education Foundation involved a statute by which the legislature had given a broader educational exemption than that provided by the Constitution, but this Court found no violation of the Constitution thereby. Church of the Advent involved property owned by a church and leased to an individual who used the property as a boarding house. The Court held that the property was not used for religious purposes and that it was immaterial how the church used the rent derived from the lease.

The above four cases cite Anniston City Land Co. for the proposition that use, not ownership, determines tax exemption. However, they all are decided on other grounds. Anniston City Land Co. is on point to the question at issue, however. The Anniston City Land Company owned two parcels of property that it leased to others for use as schools. The Court reversed a judgment that the property was taxable, holding:

"[I]t is manifest that section 91 of the Constitution makes use of the property, irrespective of ownership, the test of the right of exemption from taxation, and that, under the Constitution, in order to be exempt, it is only necessary that the property ... shall be used directly and exclusively for schools."

160 Ala. at 259-60, 48 So. at 661. ²

Tax exemptions are to be strictly construed against the exemption and in favor of the tax. Kinder-Care, supra, 418 So.2d at 861. The tax exemption is not available "unless the intention to exempt such person or property clearly appears in some statute or constitutional provision." Id., quoting Anniston City Land Co., supra, 160 Ala. at 256, 48 So. at 660.

Courts in other jurisdictions have held that a lease for profit by the owner to a charitable entity is not a "charitable use" of the property. In a case decided shortly before Anniston Land Co., the Supreme Court of Missouri interpreted a constitutional tax exemption for property "used exclusively for religious worship, for schools, or for purposes purely charitable," i.e., a provision virtually identical to § 91 of our constitution. The owner leased the property to the public schools, just as the Anniston City Land Company did with one of its parcels. The Supreme Court of Missouri came to the conclusion opposite that reached by this Court in Anniston City Land Co., however:

"The ownership or title to the property is not the determining factor. For if the property is owned by a religious, charitable or school organization, and is leased or rented for use for any purpose than such as the Constitution contemplates, the land is not exempt. So, if the private owner of the land allows his land to be used for such purposes, and charges no rent and derives no personal benefit from the land, the land is exempt from taxation, because the land is then devoted exclusively to such a use.... For in such case the owner contributes the use of his land to a public or quasi-public use, or to such a use as the Constitution contemplates, and derives no gain or profit for himself, and, therefore, the State does not exact a tax from his land with one hand while accepting a contribution of the use of his land with the other hand.

"But on the contrary, when the owner leases his land to the public for a public use, or to a quasi-public body for a charitable or religious use, and applies the rents derived from the land to his own personal advantage, he contributes nothing to the public or to charity, he loses nothing by the use, he is not a benefactor to any one, but he stands before the law in exactly the same light as any one else who leases his land for any other purpose, and uses the rents for his own advantage, and, therefore, he is not entitled to any special consideration at the hands of the law or the government, and his property is not exempt.

"There would be just exactly as much, and no more or less reason, for holding that the property of one who sold provisions or supplies to a charitable institution which were used to support the lives of the inmates thereof, was exempt from taxation. In both cases he would get and appropriate to his own use the proceeds or products of his property, just the same as if it had been rented or sold to a private citizen or to a business concern, and in neither instance would the State or...