ISAIAH 61: 1, INC. v. City of Bridgeport

• Decision Date: 13 July 2004
• Docket Number: (SC 17036).
• Citation: 851 A.2d 277,270 Conn. 69
• Court: Connecticut Supreme Court
• Parties: ISAIAH 61:1, INC. v. CITY OF BRIDGEPORT.

270 Conn. 69

851 A.2d 277

ISAIAH 61:1, INC. v. CITY OF BRIDGEPORT.

(SC 17036).

Supreme Court of Connecticut.

Argued January 15, 2004.

Officially released July 13, 2004.

Borden, Norcott, Palmer, Vertefeuille and Zarella, Js.

Russell D. Liskov, associate city attorney, for the appellant (defendant).

Margaret J. Slez, for the appellee (plaintiff).

Opinion

ZARELLA, J.

The sole issue presented in this appeal is whether certain property owned by the plaintiff, Isaiah 61:1, Inc., qualifies for tax exempt status under General Statutes § 12-81 (7).¹ We conclude that it does and, therefore, affirm the judgment of the trial court.

We briefly set forth the following relevant facts. In April, 1982, the plaintiff incorporated in the state of Connecticut as a nonprofit corporation, which the Internal Revenue Service recognizes as a tax exempt organization under 26 U.S.C. § 501 (c) (3). The plaintiff's certificate of incorporation provides that the plaintiff's purposes are: "1. To establish and maintain, in the inner city of Bridgeport, Connecticut, a center of hospitality, whose services are offered to all in need, regardless of race, color, creed, faith, sex or social status, as a witness of concern for the impoverished, the oppressed, the addicted, the confused, the alienated, lonely and unloved in our midst; to provide shelter, companionship, and place of sharing and caring, meals, clothing referrals and all other feasible services for ex-offenders and others who seek the aid of [the plaintiff] . . . . 2. To cooperate with local agencies, churches and civic groups to provide support and service to meet the needs of ex-offenders. 3. To introduce ex-offenders coming out of penal institutions to a caring community which will aid them spiritually and physically in the difficult process of re-entry into society by bearing witness to faith, hope, and love in place of doubt, despair and indifference." The plaintiff's bylaws elaborate on these goals and set forth a mission statement declaring that "[t]he purpose of the [plaintiff] is to identify and assist men and women leaving correctional facilities who want to change their lives, within the context of their community, in order to successfully re-enter society. To accomplish these goals, [the plaintiff] will offer substance abuse counseling, vocational counseling and family therapy since reintegration with family is an imperative dimension for one's wholeness."

On June 28, 1995, the plaintiff acquired the subject property, which is located at 120 Clinton Avenue in Bridgeport, by special warranty deed. After substantial renovations to the building, the building opened in 1998 as a licensed rooming house capable of housing fourteen occupants.

The plaintiff entered into a two year contract with the state department of correction (department), commencing July 1, 1996, which the parties renewed in 1998 and again in 2000. In exchange for the exclusive use of the plaintiffs 120 Clinton Avenue facility to house, to rehabilitate and to counsel male inmates completing the final months of their sentences, the department agreed to pay the plaintiff on the basis of the level of occupancy. The payments constituted approximately 90 percent of the plaintiff's funding.

As part of the rehabilitation process, the plaintiff requires its inmate residents to seek employment, although their participation in the program is not contingent upon whether they actually are employed. Employed residents pay weekly "rent," the amount of which the plaintiff determines from a sliding scale based upon the individual's income. These weekly payments range from $10 to $80 and constitute approximately 9 percent of the plaintiff's funding.² Residents who are unemployed remain in the program but are not required to pay weekly "rent." In previous years, the residents have contributed as much as $33,516 in "rent" annually.

The defendant city of Bridgeport (city) assessed taxes on the subject property in 1999, and the plaintiff appealed to the board of assessment appeals, which denied the appeal. Thereafter, the plaintiff appealed to the trial court, which reversed the decision of the board of assessment appeals and determined that the property qualified for tax exempt status under § 12-81 (7). The city appealed to the Appellate Court, and we transferred the appeal to this court pursuant to General Statutes § 51-199 (c) and Practice Book § 65-1.

It is well settled that "[w]e review the trial court's conclusion in a tax appeal pursuant to the well established clearly erroneous standard of review. Under this deferential standard, [w]e do not examine the record to determine whether the trier of fact could have reached a conclusion other than the one reached. Rather, we focus on the conclusion of the trial court, as well as the method by which it arrived at that conclusion, to determine whether it is legally correct and factually supported." (Internal quotation marks omitted.) Fanny J. Crosby Memorial, Inc. v. Bridgeport, 262 Conn. 213, 219-20, 811 A.2d 1277 (2002). "A finding of fact is clearly erroneous when there is no evidence to support it . . . or when although there is evidence in the record to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." (Internal quotation marks omitted.) United Technologies Corp. v. East Windsor, 262 Conn. 11, 23, 807 A.2d 955 (2002).

It is equally well established that "in taxation cases. . . provisions granting a tax exemption are to be construed strictly against the party claiming the exemption," who bears the burden of proving entitlement to it. (Internal quotation marks omitted.) Fanny J. Crosby Memorial, Inc. v. Bridgeport, supra, 262 Conn. 220. "Exemptions, no matter how meritorious, are of grace. . . . [Therefore] [t]hey embrace only what is strictly within their terms. . . . We strictly construe such statutory exemptions because [e]xemption from taxation is the equivalent of an appropriation of public funds, because the burden of the tax is lifted from the back of the potential taxpayer who is exempted and shifted to the backs of others." (Citation omitted; internal quotation marks omitted.) Id. "[I]t is also true, however, that such strict construction neither requires nor permits the contravention of the true intent and purpose of the statute as expressed in the language used." (Internal quotation marks omitted.) Hartford Hospital v. Hartford, 160 Conn. 370, 375, 279 A.2d 561 (1971).

The city claims that the plaintiff's property does not qualify for tax exempt status under § 12-81 (7), and is not otherwise tax exempt under General Statutes § 12-88, because: (1) the premises are rented to department inmates; (2) the inmates occupying the premises pay "rent" to the plaintiff; (3) the plaintiff's bylaws and certificate of incorporation are silent with respect to the provision of housing;³ and (4) the inmates who reside at the facility are low income wage earners whose "rent" is subsidized by the department. The city thus claims that our decision in Fanny J. Crosby Memorial, Inc. v. Bridgeport, supra, 262 Conn. 213, controls the present case.

The plaintiff responds that its property qualifies for tax exempt status under §§ 12-81 (7) and 12-88. Specifically, the plaintiff asserts that "the subject property is used exclusively for the charitable purpose set forth in its certificate of incorporation and that such property does not constitute state subsidized housing or housing for persons or families of low and moderate income as those exceptions are intended under . . . § 12-81 (7)." (Internal quotation marks omitted.) Moreover, the plaintiff contends that, under our holding in Hartford Hospital v. Hartford, supra, 160 Conn. 378, the plaintiff's receipt of "rent" from the resident inmates does not undermine the exclusive use of the property for charitable purposes. We agree with the plaintiff.

Section 12-81 sets forth a description of property that is deemed tax exempt if certain requirements are satisfied. General Statutes § 12-81 provides in relevant part: "The following-described property shall be exempt from taxation . . . (7) . . . Subject to the provisions of sections 12-87⁴ and 12-88,⁵ the real property of, or held in trust for, a corporation organized exclusively for. . . charitable purposes . . . and used exclusively for carrying out . . . such purposes . . . ." Subdivision (7) of § 12-81 provides, however, that, "[o]n and after July 1, 1967, housing subsidized, in whole or in part, by federal, state or local government and housing for persons or families of low and moderate income shall not constitute a charitable purpose under this section. . . ."⁶ General Statutes § 12-81 (7). In construing this statute, we have embraced a broad definition of the term "charitable purpose," which, includes, inter alia, "activities . . . which are intended to improve the physical, mental and moral condition of the recipients and make it less likely that they will become burdens on society and more likely that they will become useful citizens. . . . Charity embraces anything that tends to promote the well-doing and the well-being of social man." (Citation omitted; internal quotation marks omitted.) United Church of Christ v. West Hartford, 206 Conn. 711, 719, 539 A.2d 573 (1988).

Property otherwise exempt from taxation under § 12-81 (7) also must satisfy the conditions set forth in General Statutes § 12-88, which provides in relevant part: "Real property belonging to, or held in trust for, any organization mentioned in subdivision (7) . . . of section 12-81, which real property is so held for . . . the purposes stated in the applicable subdivision . . . shall be exempt from taxation . . . . The real property belonging to . . . any such organization . . . not used exclusively for carrying out . . . such purposes but leased, rented or otherwise used for other purposes, shall not be exempt. ....