Loyal Order of Moose, No. 259 v. County Bd. of Equalization of Salt Lake County, 17573

• Decision Date: 28 October 1982
• Docket Number: No. 17573,17573
• Citation: 657 P.2d 257
• Parties: In the Matter of LOYAL ORDER OF MOOSE, # 259, Plaintiff, v. COUNTY BOARD OF EQUALIZATION OF SALT LAKE COUNTY, State of Utah, Defendant.
• Court: Utah Supreme Court

Page 257

657 P.2d 257

In the Matter of LOYAL ORDER OF MOOSE, # 259, Plaintiff, v. COUNTY BOARD OF EQUALIZATION OF SALT LAKE COUNTY, State of Utah, Defendant.

No. 17573.

Supreme Court of Utah.

Oct. 28, 1982.

Henry E. Heath, Dennis M. Astill, Salt Lake City, for plaintiff.

David L. Wilkinson, Atty. Gen., Theodore Cannon, County Atty., Bill Thomas Peters, Salt Lake City, for defendant.

HOWE, Justice:

Loyal Order of Moose # 259 (Moose Lodge or Lodge) seeks reversal of a Utah State Tax Commission (Commission) decision which denied it an exemption from the ad valorem property tax for 1977 and 1978 on its lot and building at 607 East 200 South in Salt Lake City.

Moose Lodge is a non-profit corporation organized under the laws of this state and is a charter member of the Loyal Order of Moose of the World. The Lodge's declared purpose is "to unite its members in the bonds of fraternity, benevolence and charity; to assist their families in the time of need; to render particular service to orphaned children, aged members and their wives; and to further the mutual welfare of its members and their families." Current charitable activities of the Lodge include sponsorship of Mooseheart (an Illinois city for orphaned or destitute children), Moosehaven (a Florida city for the aged), and the National Arthritis Foundation. It also participates in a number of community and children's projects at the local level. In fiscal year 1977, approximately 20.6 percent of total Lodge receipts went for charitable donations. In fiscal year 1978, approximately 18.9 percent of total Lodge receipts was donated to charity. Both of these percentages include the value of voluntarily contributed man-hours and donated mileage from private vehicles, as well as proceeds from the rental of the Lodge building.

Additionally, in the years in question the Lodge operated a private liquor club six days a week for members only, held dinners and dances on Fridays and Saturdays and permitted square dance lessons to be taught and wedding receptions to be held for member families in the building.

The building has several rooms and is used for a variety of activities. Two large meeting rooms, for example, are used for social and organizational functions as well as some charitable activities.

Moose Lodge applied to the Salt Lake County Board of Equalization for tax exemption of the lot and building. When the application was denied, it filed a notice of appeal to the Commission which granted it a formal hearing but also denied it an exemption. The Lodge brings this petition for a Writ of Review but without having expressly waived the right of review and trial de novo in the Tax Division of the Third Judicial District Court. This omission is not jurisdictional. Rather, it is properly treated as a pleading deficiency which was not timely objected to and, in any case, results in no prejudice to the Board. Salt Lake County v. Tax Commission ex rel. Greater Salt Lake Recreational Facilities, Utah, 596 P.2d 641 (1979). This Court now entertains this review.

The Lodge contends that the Commission erred (1) in its construction of the constitutional and statutory provisions; (2) because the Lodge's property meets statutory requirements for tax exemption; (3) in its literal interpretation of the constitutional provision which requires exclusive use of property for charitable purposes; (4) by its application of the actual use of the property in question as a test for a property tax exemption; (5) in concluding that the Lodge's property was used primarily as a center of social and recreational exchange rather than exclusively for charitable purposes; and (6) because the Commission's findings of fact are inadequate and unsupported by substantial evidence.

I.

The constitutional provision in issue is Article XIII, Section 2 of the Utah Constitution which provides in part:

All tangible property in the state, not exempt under the laws of the United States, or under this Constitution, shall be taxed in proportion to its value, to be ascertained as provided by law. The property of the state, counties, cities, towns, school districts, municipal corporations and public libraries, lots with buildings thereon used exclusively for either religious worship or charitable purposes ... shall be exempt from taxation. [Emphasis supplied.]

U.C.A., 1953, § 59-2-1, et seq., complement Article XIII, Section 2. Section 59-2-30 provides:

Property used for religious worship or charitable purposes--Requirements for exemption. This section is intended to clarify the scope of exemptions for property used exclusively for either religious worship or charitable purposes provided for in section 2 of Article XIII of the Constitution of the state of Utah. This section is not intended to expand or limit the scope of such exemptions. Any property whose use is dedicated to religious worship or charitable purposes including property which is incidental to and reasonably necessary for the accomplishment of such religious worship or charitable purposes, intended to benefit an indefinite number of persons is exempt from taxation if all of the following requirements are met:

(1) The user is not organized to produce a profit from the use of the property.

(2) No part of any net earnings, from the use of the property, inures to the benefit of any private shareholder or individual, but any net earnings shall be used directly or indirectly, for the charitable or religious purposes of the organization.

(3) The property is not used or operated by the organization or other person so as to benefit any officer, trustee, director, shareholder, lessor, member, employee, contributor, or any other person through the distribution of profits, payment of excessive charges or compensations.

(4) Upon the liquidation, dissolution, or abandonment of the user no part of any proceeds derived from such use will inure to the benefit of any private person.

Section 59-2-31 provides:

Applicability of constitutional provision for exempting property used for charitable purposes.--

(1) Property used exclusively for religious, hospital, educational, employee representation, or welfare purposes which use complies with the requirements of section 59-2-30, shall be deemed to be used for charitable purposes within the exemption provided for in section 2 of Article XIII of the Constitution of the state of Utah, and section 59-2-30.

(2) This section shall not defeat exemptions for property not specifically enumerated which may be found to be within the exemption provided in section 2 of Article XIII of the Constitution of the state of Utah.

The Commission has construed the constitutional exemption strictly when applied to club houses and to fraternal and benevolent societies. Moose Lodge argues that the policy consideration to encourage charity favors a liberal construction of the exemption. However, in view of the important policy consideration that the burdens of taxation should be shared equitably, the general rule is that the language of the exemption should be strictly construed. This rule was recognized early in the jurisprudence of this state in Parker v. Quinn, 23 Utah 332, 64 P. 961 (1901). Although we departed from that rule for many years, ¹ recent cases of this Court have again followed it. Salt Lake County v. Tax Commission ex rel. Good Shepherd Lutheran Church, Utah, 548 P.2d 630 (1976); Baker v. One Piece of Improved Real Property, Utah, 570 P.2d 1023 (1977). In the latter case, we specifically held that general rule of strict construction to apply to tax exemptions for club houses and fraternal and benevolent societies. Therefore, the Commission's application of the general rule to the present case was correct.

II.

The Lodge contends that its property meets the statutory criteria (§§ 59-2-30 and 31) for exemption. However, that is no guarantee that the Lodge is in a "safe harbor" of exemption. Our statutes granting tax exemptions cannot be broader or narrower than our constitutional provision on which they are based. The legislature, in this particular instance has made this rule clear in the statutory provisions themselves. Pertinent statutory language from § 59-2-30 explains:

This section is intended to clarify the scope of exemptions for property used exclusively for either religious worship or charitable purposes provided for in section 2 of Article XIII of the Constitution of the state of Utah. This section is not intended to expand or limit the scope of such exemptions.

Section 59-2-31(2) provides:

This section shall not defeat exemptions for property not specifically enumerated which may be found to be within the exemption provided in section 2 of Article XIII of the Constitution of the state of Utah.

Thus Section 2 of Article XIII grants a charitable exemption and our statutes cannot expand or limit the scope of the exemption or defeat it. To the extent the statutes have that effect, they are not valid. See Salt Lake County v. Tax Commission ex rel. Good Shepherd Lutheran Church, supra.

III.

The Lodge contends that the Commission committed error by literally reading Section 2, Article XIII to require that property be "used exclusively" for charitable purposes in order to qualify for tax exemption. The thrust of its argument is that in a long succession of cases this Court has interpreted the provision broadly because to be literal is to foil the intent of the provision to grant charitable exemptions.

We recognize the strictness of the plain meaning of "used exclusively." Such a use is one which is singly or solely devoted. At the same time, we appreciate our responsibility to interpret "used exclusively" in a manner consistent with constitutional and legislative intent to grant charitable exemptions.

In Parker v. Quinn, supra, this Court was able to preserve the legislative intent to allow a charitable exemption without broadening the constitutional language. ² In that case the Mormon Fifteenth...