Dunn v. Solomon Found.
| Decision Date | 28 April 2023 |
| Docket Number | 2022-CA-0399-MR |
| Parties | BILL DUNN, MCCRACKEN COUNTY PROPERTY VALUATION ADMINISTRATOR APPELLANT v. SOLOMON FOUNDATION AND KENTUCKY DEPARTMENT OF REVENUE APPELLEES AND DEPARTMENT OF REVENUE AND BILL DUNN, MCCRACKEN COUNTY PROPERTY VALUATION ADMINISTRATOR APPELLANTS v. SOLOMON FOUNDATION, INC. APPELLEE |
| Court | Kentucky Court of Appeals |
This is an appeal of a judicial review of a decision by the Kentucky Board of Tax Appeals ("KBTA"). The ultimate question is whether the tax exemption contained in Section 170 of the Kentucky Constitution for property owned and occupied by institutions of religion requires a property to be both owned and occupied by one institution. Having determined the circuit court correctly applied the law to this question, we affirm.
The Solomon Foundation ("TSF") is a non-profit entity organized under Colorado law. It has two member churches, one in Texas and one in Arizona. Its exclusive purpose is to advance Restoration Movement Christian Churches. TSF raises funds by various methods with these funds used to assist in financing individual churches.
The IRS[1] has classified TSF under several of its governing statutes. TSF is considered a "church extension fund" as well as an "integrated auxiliary of a church." The IRS even categorizes TSF as a "public charity."
TSF owns the property at 1200 Jefferson Street in Paducah. This property had been used for many years as a church by other occupants. TSF leased this property to The Crossing Church which then subleased it to the current occupants, the Restoration Church and a ministry called Healing Projects. The lease documents require use consistent with the goals of TSF.
TSF sought an exemption from property tax[2] for the property at 1200 Jefferson Street. The McCracken County Property Valuation Administrator ("PVA") denied the exemption as did the local board of assessments appeals. The KBTA reviewed the matter with substantial evidence submitted to it. The KBTA decided TSF was not a purely public charity under Section 170 but was an institution of religion. Even though TSF was an institution of religion, the KBTA decided TSF still was not entitled to the exemption because the TSF did not both own and occupy the property at 1200 Jefferson Street.
TSF filed a petition for judicial review in the McCracken Circuit Court. That court properly limited its review to the record before the KBTA. The circuit court agreed with the KBTA's determination of TSF as an institution of religion but disagreed with the legal conclusion that TSF itself must both own and occupy the property to receive the exemption. Accordingly, the circuit court reversed the KBTA. Both PVA and the Kentucky Department of Revenue ("Revenue") filed appeals to this Court.
Our review as well as that of the circuit court in its review of an administrative decision is limited by KRS[3] 13B.150. Review is confined to the record before the KBTA. KRS 13B.140(3). N. Kentucky Mental Health-Mental Retardation Regional Board, Inc. v. Commonwealth, Cabinet for Health and Family Servs., 538 S.W.3d 298, 301 (Ky. App. 2017). We and the circuit court must accept the findings of fact made by the KBTA if they are supported by any substantial evidence in its record. As to legal conclusions, we review them de novo. Arterburn v. First Cmty. Bank, 299 S.W.3d 595, 598 (Ky. App. 2009).
There has been some debate by the parties as to whether the determination of phrases like "institutions of religion" is a mixed question of law and fact. If so, the de novo review still applies because it is still ultimately a question of law. When the question is mixed, we have "greater latitude" in evaluating the evidentiary support for the factual component. Id. Regardless, when the legal question is one of constitutional interpretation, the review is de novo. Kentucky CATV Ass'n, Inc. v. City of Florence, 520 S.W.3d 355, 359 (Ky. 2017).
KRS 13B.150(2) permits specified outcomes for a judicial review. The circuit court may affirm or reverse, in whole or in part, and remand for further proceedings. The statute permits reversal when the KBTA decision is contrary to the constitution or otherwise inconsistent with the law. KRS 13B.150(2)(a).
We must first review the procedural issue raised by how arguments were advanced by PVA and Revenue. Separate from the ultimate question of whether the tax exemption requires both ownership and occupation by one entity is the status of TSF as an institution of religion. The KBTA determined TSF was an institution of religion but denied the tax exemption because the KBTA concluded the exemption required TSF to both own and occupy the single church property at issue. TSF owned the property but did not occupy it.
Having been denied the exemption, TSF was "aggrieved" by the KBTA decision. TSF then had the right to file this action in the McCracken Circuit Court pursuant to KRS 49.250. Neither PVA nor Revenue was aggrieved by the KBTA decision. They suffered no harm in this specific case from the result of the KBTA decision, because they won the overall argument about the tax exemption. See Brown v. Barkley, 628 S.W.2d 616, 619-20 (Ky. 1982). See also Revenue Cabinet, Commonwealth of Ky. v. CSC Oil Co., Inc., 851 S.W.2d 497, 503 (Ky. App. 1993).
PVA and Revenue disagreed with the KBTA about a particular factual or legal conclusion reached within the decision. This does not make PVA or Revenue an aggrieved party to seek judicial review of a case it won before the KBTA. To hold otherwise would encourage the seeking of advisory opinions to apply to future disputes. Kentucky courts may not issue advisory opinions. See Nordike v. Nordike, 231 S.W.3d 733, 739 (Ky. 2007).
In a situation where PVA or Revenue had won part of the case and lost part of it, such as some property was determined to be exempt and other property not exempt, then they, like TSF, would have been aggrieved parties and then would be required to file a petition for judicial review within thirty days of the KBTA decision. KRS 13B.140(1); Commonwealth ex rel. Luckett v. Louisville and Nashville R.R. Co., 479 S.W.2d 15, 17 (Ky. 1972).
This case involves only one petition filed by TSF, the only aggrieved party, in the McCracken Circuit Court. As we shall see, PVA's and Revenue's lack of status as an aggrieved party does not prevent them from asserting arguments about the KBTA decision in this case once TSF filed for review.
Unfortunately, the verb appeal and the noun appeal are often used interchangeably. TSF did appeal (verb) to the circuit court, but this does not transform the proceeding into an appeal (noun), which may have any number of specific and different procedural rules applicable to it. We make this point to emphasize this case involves a judicial review of an administrative decision. The petition filed in the McCracken Circuit Court, regardless of being referred to as an appeal, is a complaint commencing a civil action governed by the Rules of Civil Procedure ("CR").
Under CR 1(2), the civil rules control the judicial review filed in the circuit court unless some provision of the statutes authorizing the proceeding is inconsistent with the civil rules. The civil rules apply as soon as the "appeal" is perfected - when summonses are issued to commence the circuit court action. See Cabinet for Human Res. v. Holbrook, 672 S.W.2d 672, 675 (Ky. App. 1984). There are no inconsistent provisions in the governing statutes which prevent the application of the general rules of pleading to present claims to the circuit court.
Under the civil rules, it was incumbent on PVA to file an answer to TSF's petition. KRS 13B.160; CR 7.01; Carnahan v. Yocom, 526 S.W.2d 301 (Ky. 1975).
An answer serves to outline the issues about which the parties disagree as well as admit those matters not disputed. PVA did not file an answer.
The electronic record indicates the filing of an "Answer" in this case, but the actual record contradicts this. What is referred to as an answer is the record of the administrative proceedings filed by the KBTA as required by KRS 13B.140(3). When PVA can only respond to the petition or complaint filed by TSF, as in this case, it has a right to argue alternate grounds to sustain the decision under review, such as TSF was not an institution of religion. See Brown, supra.
To avoid any unnecessary angst, we hasten to add any procedural failing in this regard does not prevent consideration of the issues raised by PVA and Revenue in the circumstances of this case. There was no motion for default judgment, which is not favored under Kentucky law, the courts preferring to address cases on their merits. See Dressler v. Barlow, 729 S.W.2d 464 (Ky. App. 1987). The parties fully argued and reargued the issues before the circuit court, which decided the merits of the case. After the circuit court made its initial decision but before the submission of a motion to alter, amend, or vacate, Revenue sought to intervene and was permitted to do so pursuant to CR 24.
Revenue and PVA are on the same page with respect to TSF as an institution of religion. The issues have been well...
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