Hattiesburg Area Senior Services, Inc. v. Lamar County, 91-CA-181

• Decision Date: 27 January 1994
• Docket Number: No. 91-CA-181,91-CA-181
• Parties: HATTIESBURG AREA SENIOR SERVICES, INC. and Wesley Manor Retirement Community, Inc. v. LAMAR COUNTY, Mississippi, and the City of Hattiesburg, Mississippi.
• Court: Mississippi Supreme Court

Page 440

633 So.2d 440

HATTIESBURG AREA SENIOR SERVICES, INC. and Wesley Manor Retirement Community, Inc. v. LAMAR COUNTY, Mississippi, and the City of Hattiesburg, Mississippi.

No. 91-CA-181.

Supreme Court of Mississippi.

Jan. 27, 1994.

Rehearing Denied March 24, 1994.

Thomas D. Murry, Albert G. Delgadillo, Donna M. Barnes, Jeffry M. Cox, Mitchell, McNutt, Threadgill, Smith & Sams, Tupelo, Carey R. Varnado, Mongatue Pittman & Varnado, Hattiesburg, Richard D. Foxworth, Columbia, for appellant.

William E. Andrews, III, Purvis, Paul Richard Lambert, Hattiesburg, for appellee.

EN BANC.

BANKS, Justice, for the Court:

Here, we once again confront the question whether residential rental property owned by a not-for-profit corporation is tax exempt as belonging to a "charitable society ... and used exclusively for such society," as provided in Section 27-31-1(d), Mississippi Code 1972 Annotated (Supp.1993). The fact that the corporate parties here were organized by a religious organization notwithstanding, we are unable to distinguish the property here in question from that found taxable in Better Living Services, Inc. v. Bolivar County, 587 So.2d 914 (Miss.1991). We affirm the judgment of the chancellor holding that the property here in question is subject to taxation.

I.

Through the year 1987, appellant, Hattiesburg Area Senior Services, Inc. (hereinafter "HSS") enjoyed exemption from the assessment of ad valorem taxes. The exemption was based on Sec. 27-31-1(d) of the Mississippi Code 1972 Annotated, which exempts property held by several types of organizations, namely charitable societies. Appellant, Wesley Manor Retirement Community, Inc. (hereinafter "WM"), opened its doors in October 1988. In 1988, the Lamar County Board of Supervisors placed the real and personal property held by HSS and WM on the assessment rolls for ad valorem taxation by Lamar County and the City of Hattiesburg. HSS paid a total of $12,627 in city and county ad valorem taxes in 1988; WM paid $1,265.

On November 7, 1988, HSS and WM filed a complaint against Lamar County and the City of Hattiesburg in the Lamar County Chancery Court. HSS and WM sought a declaratory judgment that they were exempt from ad valorem taxation, an injunction mandating a return of their 1988 tax payments, and a ban against future ad valorem taxation. HSS and WM were assessed 1989 ad valorem taxes in the amounts of $13,812.96 and $30,814.86, respectively. HSS and WM amended their original complaint to include relief from these taxes in their prayer for relief.

A trial was conducted on August 30 and 31, 1990. The parties made thirty-four stipulations of fact; ten stipulations were subject to objections from the County regarding relevancy. Following trial, the court issued a memorandum opinion declaring that plaintiffs had not met their burden of establishing that they were, in fact, "charitable societies" under Sec. 27-31-1(d). The court also sustained each of the relevancy objections to some of plaintiffs' proffered stipulations and exhibits. A final judgment was issued dismissing plaintiffs' claims with prejudice and plaintiffs filed a timely notice of appeal to this Court.

II.

In 1962, the North Mississippi Annual Conference of the Methodist Church incorporated a board of trustees to develop dwelling facilities for older persons in North Mississippi. The organization was chartered as North Mississippi Home for the Aging (hereinafter "NMHA"). NMHA erected its first facility in 1967 in Tupelo. During the 1970's, NMHA developed several more institutions in Tupelo, Clarksdale, and Columbus. In the early 1980's, NMHA began to develop projects in south Mississippi at the request of the Methodist Church in that part of the State. Due to the expansion in its mission, NMHA reincorporated in 1982 under the HSS operates 40 apartment units, and WM operates 60. For a cost of $695 per month, HSS and WM provide their residents with shelter, utilities, cable television, activities and programs, maintenance and upkeep on the premises, and one noon cafeteria meal per day. Additional meals are available at an extra cost. Delivery service is also provided at a nominal cost. All meals are approved by a geriatric dietitian and structured to achieve low sodium and low cholesterol goals. Accommodations are also made to meet special dietary needs, such as those held by individuals suffering from diabetes.

name of United Methodist Senior Services of Mississippi, Inc. ("UMSSM"). UMSSM opened the Hattiesburg Area Senior Services (HSS) facility in August 1986; it opened the Wesley Manor retirement facility in October 1988.

Additional services, such as housekeeping, transportation, and meal preparation help, are also available at an additional charge. On-premises medical staff is not provided by WM and HSS. That is a primary distinction between "continuum care" facilities, as these are called, and nursing homes. Furthermore, residents at WM and HSS are expected to tend to their own personal hygiene needs. Periodic health monitoring and screening is provided through a volunteer venture with the University of Southern Mississippi School of Nursing. As part of their training, nursing students occasionally visit the facilities to provide blood pressure checks and other routine diagnostic services.

The administrator for WM claimed that over 2,000 volunteer hours were logged at WM for the year 1989. The record is unclear on whether this figure is comprised substantially or almost completely of time spent by volunteers in conjunction with an Outreach Program operated from the premises of WM. That program provides in-home services to individuals who live independently in private homes in Lamar County and the surrounding area. The services provided include homemaker services, home health aid services, shopping services, and limited emergency transportation. The appellant corporations HSS and WM do not actually operate or facilitate the Outreach Program, though it is run from the WM premises. ¹

The operating budgets at HSS and WM are expected to be funded entirely through the fees charged the residents at those institutions. According to the accountant for WM, HSS, and UMSSM, the Hattiesburg facilities have nevertheless operated at a loss for each of their years of existence. The audited financial statements presented by Lamar County and the City of Hattiesburg show that HSS did have a net income of approximately $47,000 for the year 1988. ² The accountant for appellants also testified that the Hattiesburg facilities often experience cash flow shortages. When such shortages occur, interfund transfers are made from entities under the UMSSM umbrella to make up the difference. Those transfers are treated as debts on the books of the transferee and assets on the books of the transferor. They are expected to be paid back, at least in part. ³

The agreement between HSS and WM provides that individuals who do not pay their rent will be evicted. The President of UMSSM testified that no person had ever been evicted from HSS or WM for inability to pay his rent, however. Federal rent subsidies are available through the Department of Housing and Urban Development to residents who meet certain designated maximum income levels. For instance, "[p]ersons who qualify for residency in [HSS] with gross annual income of less [than] $9,300 for a single individual or $10,650 for a couple are expected to personally pay only 30% of their The only source of non-debt revenue for HSS and WM outside of rent payments by residents is gift contributions from the public. From the inceptions of the institutions through the first half of 1990, contributions designated for use by HSS and Wesley totaled $174,000. That sum was given and used to help defray the construction costs of HSS and WM, which amounted to $1.68 million and $3.03 million respectively.

adjusted monthly income for the rent portion of the monthly charge." "Sunday Fund" assistance has been available for residents unable to make their rent payments. It was stipulated that "The Senior Services Sunday Fund" is a fund made up of contributions from individuals, primarily from within the State of Mississippi, but also including other friends, supporters and benefactors of UMSSM and its related corporations. Contributions are received on annual basis and payments are made to or on behalf of residents of various facilities, including those of HSS and Wesley, who are in need of assistance to meet their monthly expenses. The administrator of WM testified that no resident of his institution who had applied for Sunday Fund assistance had ever been denied. Through June 30, 1990, Sunday Fund assistance has been provided to HSS and Wesley residents as follows: 1987) HSS residents received a total of $500, and WM residents received a total of $0 ⁴; 1988) HSS residents received a total of $653, and WM residents received a total of $100; 1989) HSS residents received a total of $600 and WM residents received a total of $2,640; 1990) HSS residents received a total of $250 and WM residents received a total of $2,245.

UMSSM is the sole member of HSS and Wesley. No dividends or other similar distributions of earnings or profits are made by HSS or WM. The charters for WM and HSS provide that upon dissolution, the organization's assets must be distributed to another 501(c)(3) organization or charitable group.

WM and HSS are recognized as exempt from federal income taxation under Sec. 501(c)(3) of the Internal Revenue Code which also enables them to receive tax exempt contributions from the public. They are also recognized as exempt from state income taxation under Sec. 27-7-29(3) of the Mississippi Code, which excludes charitable organizations.

HSS enjoyed an exemption from ad valorem taxes in 1986 and 1987 based on Sec. 27-31-1(d) of the Mississippi Code 1972 Annotated. WM was not yet in existence at that time. WM opened in October 1988, and, in that year, the Lamar...