In re Davis

• Decision Date: 01 November 2013
• Docket Number: No. 109,338.,109,338.
• Citation: 311 P.3d 1168
• Court: Kansas Court of Appeals
• Parties: In the Matter of the APPLICATION OF DAVIS, Henry A. & Alberta FOR EXEMPTION FROM AD VALOREM TAXATION IN SHAWNEE COUNTY, Kansas.

311 P.3d 1168

In the Matter of the APPLICATION OF DAVIS, Henry A. & Alberta FOR EXEMPTION FROM AD VALOREM TAXATION IN SHAWNEE COUNTY, Kansas.

No. 109,338.

Court of Appeals of Kansas.

Nov. 1, 2013.

Appeal from the Court of Tax Appeals.

Henry A. and Alberta Davis, appellantspro se.

No appearance by appellee.

Before BUSER, P.J., BRUNS, J., and JAMES L. BURGESS, District JudgeRetired, assigned.

MEMORANDUM OPINION

PER CURIAM.

As was their routine for nearly 4 decades, Henry and Alberta Davis applied for an ad valorem tax exemption for the 2011 tax year on a building they own in East Topeka.The building has been used as a place of worship by the Emmanuel Temple Church of God in Christ—where Henry is the pastor or “Elder”—since 1974.The Shawnee County appraiser recommended granting the exemption for 2011 as he and his predecessors had done each year for the previous 36 years.The Court of Tax Appeals (COTA), however, denied the 2011 property tax exemption.In doing so, COTA found that the church building was not exempt as a place of worship because the Davises might benefit from any appreciation of the real property.The Davises filed this judicial review action, pro se, arguing that COTA erroneously interpreted the law and that the decision rendered by COTA was not supported by substantial evidence.Finding the Davises' arguments to be persuasive, we reverse COTA's decision and we remand with directions to grant the tax exemption pursuant to K.S .A.2011 Supp. 79–201First.

Facts

The facts of this case are not in dispute.In 1973, Elder Davis and his wife purchased a church building for the purpose of starting the Emmanuel Temple Church of God in Christ.Since 1974, the Davises continuously used the building as a place of public worship for Emmanuel Temple.The same year, the Davises first obtained tax-exempt status for the church building.At that time, the county appraiser indicated that the church building would “be exempt so long as similarly owned and used for religious purposes.”And for the next 36 years, the church building remained exempt from taxation as a place of public worship.

In 2011, the Davises once again applied for a property tax exemption for the church building.As had been true since 1974, the county appraiser recommended that the requested exemption be granted for the 2011 tax year.But on August 31, 2012, COTA denied the property tax exemption.Even though the Davises had never received rent from the members of Emmanuel Temple or anyone else and there was no evidence of appreciation presented, COTA concluded that the church building was not exclusively used as a place of public worship because it also served as investment property.

The Davises petitioned COTA for reconsideration, and COTA conducted an evidentiary hearing on November 30, 2012.At the hearing, the Davises—who were not represented by legal counsel—called their son, Henry Davis, Jr., as a witness.The junior Henry testified that Emmanuel Temple used the church building exclusively as a place of worship and for related religious activities since 1974.He also testified that his parents had never received any rent or other income from the real property.

Additionally, Alberta Davis testified to COTA that she and her husband had founded Emmanuel Temple, which is affiliated with the international Church of God in Christ.She also testified that she and Elder Davis retained ownership of the church building in accordance with the policy of the Church of God in Christ.Specifically, she stated that the international organization allows individual pastors—called Elders—to start their own churches and then voluntarily apply for placement under the jurisdiction of the Church of God in Christ.Alberta further explained that she and Elder Davis have no intention of selling the property.In response to a question, however, Alberta speculated that if they ever did sell the building, the proceeds would probably be distributed by her and her husband among the members of Emmanuel Temple.

COTA considered the evidence and denied the exemption in a later written order.It found a simultaneous investment use because “[t]he applicant, and not the church, is the fee simple owner of the subject property.”Although it is difficult to determine from the record, it appears that Emmanuel Temple Church of God in Christ is not a legal entity.Regardless, COTA recognized that no rent had ever been collected by the Davises from Emmanuel Temple or any other source.Nevertheless, COTA reasoned that the Davises were “benefiting from any appreciation in the value or investment uses of the property.”

The Davises timely filed a petition for judicial review with this court on February 1, 2013.Although the Davises filed a brief on June 11, 2013, no other briefs were filed.Moreover, we note that the record on appeal in this case is quite thin.

Analysis

Issue Presented

On appeal, we must determine whether COTA erred in concluding that the Davises' ownership of a church building used as a place of public worship and the consequential possibility of appreciation amounted to simultaneous use under K.S.A.2011 Supp. 79–201First.

Standard of Review

We review final orders of COTA under the Kansas Judicial Review Act (KJRA).K.S.A.2011 Supp. 74–2426(a).Because appellate courts are not to give deference to COTA's interpretation of a statute, our review of questions involving statutory interpretation is unlimited.See In re Tax Appeal of LaFarge Midwest,293 Kan. 1039, Syl.¶ 3, 1043, 271 P.3d 732(2012).Additionally, we review COTA's factual findings to determine if there is substantial evidence in light of the record as a whole to support them; we must review evidence both supporting and detracting from COTA's decision.See K . S.A.2011 Supp. 77–621(c)(7), (d);Redd v. Kansas Truck Center,291 Kan. 176, 183, 239 P.3d 66(2010).In this judicial review action, the burden is on the Davises to prove that COTA “erroneously interpreted or applied the law” or that no substantial evidence supported its decision.SeeK.S.A.2011 Supp. 77–621(a)(1), (c)(4), (c)(7); In re Tax Appeal of LaFarge Midwest,293 Kan. at 1043, 271 P.3d 732.

The fundamental rule of statutory construction is to discern the legislature's intent through the plain meaning of the statutory language.In considering the plain meaning of a statute, we review the statute as a whole, “reconciling and bringing the provisions into workable harmony if possible.”Although we must strictly construe statutes creating tax exemptions in favor of imposing the tax strict construction “should not lead to unreasonable interpretation.”In re Tax Appeal of LaFarge Midwest,293 Kan. at 1045, 271 P.3d 732.

Application of K.S.A.2011 Supp. 79–201 First

Here, COTA denied the Davises a property tax exemption under K.S.A.2011 Supp. 79–201First, concluding that they simultaneously used the church building for worship and investment purposes.Under K.S.A.2011 Supp. 79–201First, all buildings are exempt from ad valorem taxes if “used exclusively as places of public worship ... and used exclusively for the accommodation of religious meetings ... together with the grounds ... if not leased or otherwise used for the realization of profit.”Exclusive use means that a building must be used “solely, and purely for the purposes stated, and without participation in any other use.”Board of Wyandotte County Comm'rs v. Kansas Ave. Properties,246 Kan. 161, 166, 786 P.2d 1141(1990).We note, however, that K.S.A.2011 Supp. 79–201First specifies that a building is still considered to be used exclusively as a place of public worship and accommodation of religious meetings even if there is a day care or bookstore located on the property.

In Kansas, it is the use of the property, not the character of the owner, which determines the applicability of an ad valorem tax exemption.See In re Tax Appeal of Univ. of Kan. School of Medicine,266 Kan. 737, 751–52, 973 P.2d 176(1999)(explaining the legislative shift from exemptions based on ownership to those based on use);Seventh Day Adventist v. Board of Commissioners,211 Kan. 683, 690, 508 P.2d 911(1973).In the present case, it is undisputed that the Davises are the owners of the property.It is also undisputed that the church building has been used solely by the Emmanuel Temple Church of God in Christ as a place of public worship and for related religious meetings since 1974.

A review of the record reveals no evidence to suggest that Elder Davis or his wife ever received rent or any other income from the church building.Likewise, there is no evidence in the record to suggest that the church building has appreciated in value.As such, we find that COTA's assumption concerning appreciation was—at best—speculation.Nevertheless, COTA denied the property tax exemption, finding that the church building constituted an investment because the Davises might someday benefit financially from the sale of the property.

We pause to note that the Davises, who are acting pro se, contend in their brief that K.S.A.2011 Supp. 79–201Second is applicable to this case.Because they did not present that argument to COTA, it is not properly before this court.In re Equalization Appeal of Prieb Properties,47 Kan.App.2d 122, 126, 275 P.3d 56(2012)(party appealing from administrative decision is limited to those issues actually raised below).Regardless, although perhaps an argument could be made that the Davises would also be entitled to an exemption under K.S.A.2011 Supp. 79–201Second,we conclude as a matter of law that K.S.A.2011 Supp. 79–201First is applicable in this case because the undisputed evidence reveals that the church building has been used continuously as a place of public worship and for related religious meetings since at least 1974.

Perhaps some of the confusion regarding which section of K.S A.2011 Supp. 79–201 applies is due to the fact that COTA relied on In re Tax Exemption Application of...