Evangelical Lutheran Good Samaritan Soc. v. Buffalo County Bd. of Equalization, 86-976

• Decision Date: 14 October 1988
• Docket Number: No. 86-976,86-976
• Citation: 430 N.W.2d 502,230 Neb. 135
• Parties: EV. LUTHERAN GOOD SAMARITAN SOCIETY, doing business as St. Luke's Good Samaritan Village, Appellee, v. BUFFALO COUNTY BOARD OF EQUALIZATION et al., Appellants.
• Court: Nebraska Supreme Court

Page 502

430 N.W.2d 502

230 Neb. 135

EV. LUTHERAN GOOD SAMARITAN SOCIETY, doing business as St. Luke's Good Samaritan Village, Appellee, v. BUFFALO COUNTY BOARD OF EQUALIZATION et al., Appellants.

No. 86-976.

Supreme Court of Nebraska.

Oct. 14, 1988.

Syllabus by the Court

1. Taxation: Charities: Words and Phrases. A charitable organization shall mean an organization operated exclusively for the purpose of the mental, social, or physical benefit of the public or an indefinite number of persons.

2. Taxation: Presumptions. The power and right of the state to tax property are presumed, and therefore tax-exemption provisions are strictly construed, and their operation will not be extended by construction.

3. Taxation: Words and Phrases. It is the use of the property as distinguished from the use of the income from the property that determines whether it is exempt from taxation. "Exclusively" means the primary or dominant use of the property, not an incidental use of the property.

4. Taxation: Charities. Property which is owned and used primarily for the purpose of furnishing low-rent housing is not entitled to exemption from taxation as property which is owned and used exclusively for charitable purposes.

John L. Jelkin of Duncan, Duncan & Jelkin, Franklin, for appellant Buffalo County Bd. of Equalization.

Kenneth F. George of State, Yeagley & George, Kearney, and Eugene T. Hackler and Robert C. Londerholm of Hackler, Londerholm, Corder, Martin & Hackler, Olathe, Kan., for appellee.

BOSLAUGH, CAPORALE, and GRANT, JJ., and BUCKLEY, District Judge, and COLWELL, District Judge, Retired.

COLWELL, District Judge, Retired.

Defendants appeal a district court order granting charitable property tax exemption status to plaintiff and its eight apartment buildings near Kearney, Nebraska, pursuant to Neb.Rev.Stat. § 77-202(1)(c) (Supp.1985).

Plaintiff is a North Dakota corporation having a 63-year history of ministering to the aged in 26 states. Plaintiff's operation in Kearney is known as St. Luke's Good Samaritan Village (Village), which includes a 60-bed intermediate care facility (nursing home), 31 independent living apartments in 8 separate buildings located near the nursing home, a preschool, and 23 acres of farmland. Plaintiff describes the nursing home and the apartments as integrated-care facilities. This appeal relates only to the apartments, since plaintiff's other facilities continue to enjoy tax-exempt status.

Each apartment building is a two-story frame building, formerly an army barrack, moved to its present location and improved for apartment living. Each building unit has four apartments, two on the first floor and two on the second floor, except one unit has three apartments and an activities area. There is less demand for second floor apartments since access is by a stairway.

Plaintiff's Kearney facilities are managed by one administrator; generally, they have separate budgets, staff, book accounts, and administrative policies, except in those instances where staff cooperation and overlapping services provide efficient operation.

Prospective apartment tenants make an oral application to rent an apartment with plaintiff's administrator and its staff care team, who decide from the interview whether the applicant is physically and mentally capable of caring for himself or herself in an apartment. Applicants must be 55 years of age or older; however, some tenants have younger persons living with them and sometimes younger Village employees rent and occupy vacant apartments.

The monthly rental charge for the units was established by the administrator after considering comparable local rental charges and projecting future expenses, and then fixing the rental at a near break-even figure. In the event a profit is experienced, those funds are used for capital improvements and operations. At trial time, April 1986, the monthly rentals were lower level units, $220 (except three newly decorated units at $240), and upper level units, $215. Special services available to all tenants were included in the rental charge, including handibus, garden preparation, emergency call light, activity room, snow removal, lawn care, newsletter, weekly nursing calls, and preference for receiving health services at the nearby nursing home. Each renter pays for his or her own electricity for heating, cooling, and general use. Upon acceptance, each tenant must sign a written lease for a term certain, requiring, in addition to usual rental terms, that the tenant will vacate the apartment if the rent is not paid when due or when the tenant is no longer able to physically or mentally care for himself or herself. There have been no evictions for either cause. Sometimes the apartments are advertised in local media and are described as "supportive living environment for people 55 years of age and older." The apartments showed a loss of $2,713.32 in 1984 and a loss of $3,571.42 in 1985, after all expenses and depreciation had been deducted. An expense item for the current year of $6,966.50 for attorney fees to prepare this exemption appeal was charged to the apartments. A part-time nurse visits the apartments once a week to provide limited health care services such as blood pressure testing and checking medication. Plaintiff is not affiliated with any church or religious denomination, and it does not claim a religious exemption. Of the tenants, only two or three regularly attend nursing home church services and activities. None of the tenants took the available meals at the nursing home costing $2 each.

Dr. James A. Thorsen, chairman of the gerontology program at the University of Nebraska, a program related to the social and psychological aspects of aging, testified on behalf of plaintiff. He gave his opinion that it is beneficial for a person to live in a sheltered environment particularly for frail and elderly people, such as that provided by the Village apartments as integrated with nursing home facilities, in order to be free from fear and anxiety, to have special services available at affordable prices, and to minimize possible transfer trauma in the event of involuntary removal from the apartment complex. There was no evidence that any prospective tenant, absent the availability of the apartment complex, would have had to experience substandard living conditions.

Prior to 1985, plaintiff had enjoyed tax-exempt status for all of its Kearney facilities located on a 35.19-acre tract under its exemption application describing the property as "Religious Non-Profit Long term care Facility." At a hearing on April 9, 1985, the Buffalo County Board of Equalization denied plaintiff's application to continue that exempt status for its eight apartment buildings. Plaintiff appealed that order to the district court, claiming that the apartments qualified for exemption under § 77-202(1)(c). After a full hearing in the district court, the trial judge made findings of fact and law, including: "The Petitioner is a charitable organization and is operated exclusively for the purpose of mental, social or physical benefit of the public." "The nature of the service is similar to the service provided in long term care but not as intensive and it is integrated into the general care center." "[T]he apartment units ... constitute a reasonable and extension of the intermediate care facility and that when operated in connection with the care facility are for a charitable purpose as its dominant and primary use." The court order reversed the action of the board of equalization and granted to plaintiff tax-exempt status for the apartments for the tax years of 1985 and 1986.

Defendants assign five errors made by the trial judge in (1) finding that plaintiff had met its burden of proof, (2) failing to apply the "primary test" rule, (3) failing to find that the primary use of the apartments was for housing at cost and not for charitable use, (4) finding that the rental apartment units were exempt because they were operated in connection with a nursing home that was exempt, and (5) creating the "natural expansion" test to determine if the apartment buildings are used for charitable purposes.

Plaintiff describes its national corporate status and purposes as those of a nonprofit corporation generally enjoying federal and state exemptions as a nonprofit entity because of its policy not to deny anyone admission, and, once admitted, its policy not to remove anyone from any home for financial inability to pay. Its motto is "In Christ's Love, Everyone Is Someone." Its primary mission to society is to provide shelter and supportive services to older persons, the handicapped, and others in need. Plaintiff's major support comes from gifts and donations, averaging, in recent years, $2,659,500 annually. Concerning plaintiff's Kearney Village, its primary purpose is to operate integrated, multilevel care facilities to maintain aging, feeble, and infirm elderly persons in a sheltered living environment including the independent living units.

"An appeal from a judgment of the district court concerning action by a county board of equalization is heard as in equity and reviewed de novo." (Syllabus of the court.) Chief Indus. v. Hamilton Cty. Bd. of Equal., 228 Neb. 275, 422 N.W.2d 324 (1988).

The burden of proving the right to an exemption is upon the claimant, United Way v. Douglas Co. Bd. of Equal., 215 Neb....