Metropolitan Government of Nashville and Davidson County v. Tennessee State Bd. of Equalization, 01-S-01-9007-CH00062

• Decision Date: 03 September 1991
• Docket Number: No. 01-S-01-9007-CH00062,01-S-01-9007-CH00062
• Citation: 817 S.W.2d 953
• Parties: The METROPOLITAN GOVERNMENT OF NASHVILLE AND DAVIDSON COUNTY, Plaintiff-Appellant, v. TENNESSEE STATE BOARD OF EQUALIZATION, et al, Defendants-Appellees. 817 S.W.2d 953
• Court: Tennessee Supreme Court

Page 953

817 S.W.2d 953

The METROPOLITAN GOVERNMENT OF NASHVILLE AND DAVIDSON

COUNTY, Plaintiff-Appellant, v. TENNESSEE STATE BOARD OF EQUALIZATION, et al,

Defendants-Appellees.

No. 01-S-01-9007-CH00062.

817 S.W.2d 953

Supreme Court of Tennessee,

at Nashville.

Sept. 3, 1991.

Rehearing Denied Oct. 28, 1991.

Susan Short Jones, Stephen Nunn, Dept. of Law of the Metropolitan Government of Nashville and Davidson County, Nashville, for plaintiff-appellant.

Charles W. Burson, Atty. Gen. and Reporter, William P. Sizer, Asst. Atty. Gen., Nashville, for defendant-appellee.

OPINION

REID, Chief Justice.

This case presents a direct appeal, pursuant to Sec. 16-4-108, Tennessee Code Annotated (T.C.A.), by the Metropolitan Government of Nashville and Davidson County from the decree of the chancery court holding that the 1984 amendment to T.C.A. Sec. 67-5-212(a)(1), relating to the exemption from taxation of church parsonages, does not violate Article II, Section 28 of the Tennessee Constitution, which authorizes the legislature to exempt real and personal property "used purely and exclusively for religious, charitable, scientific or educational purposes." The language of the amendment and its purpose as confirmed by its legislative history require the determination that the amendment is unconstitutional.

Metropolitan Government filed a complaint for declaratory judgment against the State Board of Equalization, which is a state agency charged with the duty to effect the assessment of taxes in Tennessee, and against approximately 140 corporations or unincorporated associations that own church parsonages within Davidson County. The complaint seeks a declaration that the 1984 amendment to T.C.A. Sec. 67-5-212(a)(1), which provides that "a church parsonage shall be deemed to be property used purely and exclusively for religious purposes," violates Article II, Section 28 of the state constitution.

Although Article II, Section 28 was amended in 1972 to become effective January 1, 1973, the provision material to the issue in this case has remained essentially the same since the adoption of the 1870 Constitution. As amended in 1972, the section provides:

In accordance with the following provisions, all property real, personal or mixed shall be subject to taxation, but the Legislature may except ... such as may be held and used for purposes purely religious, charitable, scientific, literary or educational....

Article II, Section 28 is not self-executing, nor does it establish public policy regarding exemptions from taxation. Its purpose and effect were stated by the Court in City of Nashville v. State Board of Equalization, 210 Tenn. 587, 360 S.W.2d 458 (1962), as follows:

[T]his provision of our Constitution does not grant any tax exemption, does not establish any public policy of exemption, but merely authorizes, permits, the legislature to grant exemption in the cases specified.

360 S.W.2d at 462.

Since the adoption of the 1870 Constitution, the legislature has enacted legislation granting exemptions to certain property. Prior to the 1984 amendment, T.C.A. Sec. 67-5-212(a)(1) was as follows:

There shall be exempt from property taxation the real and personal property, or any part thereof, owned by any religious, charitable, scientific or nonprofit educational institution which is occupied and used by such institution or its officers purely and exclusively for carrying out thereupon one (1) or more of the purposes for which the institution was created or exists or which is occupied and used by another exempt institution purely and exclusively for one (1) or more of the purposes for which it was created or exists under an arrangement whereunder the owning institution receives no more rent than one dollar ($1) per year; provided, that the owning institution may receive a reasonable service and maintenance fee for such use of the property; provided, however, that no church shall be granted an exemption on more than one (1) parsonage which shall include not more than three (3) acres of land except as hereinafter provided; and provided further, that no property shall be totally exempted, nor shall any portion thereof be pro rata exempted unless such property or portion thereof is actually used purely and exclusively for religious, charitable, scientific or educational purposes.

The 1984 amendment, the constitutionality of which is the issue before the Court, added the following sentence at the end of T.C.A. Sec. 67-5-212(a)(1):

For the purposes of this section, a church parsonage shall be deemed to be property used purely and exclusively for religious purposes; provided, however, that no church shall be granted an exemption on more than one (1) parsonage.

(Emphasis added.)

Section 67-5-212(b)(1), T.C.A., the validity of which is not attacked in this case, sets forth the procedure for claiming exemption from taxation. That section provides:

All such institutions so claiming exemption under this section shall be required to make application for such exemption to the assessor of property upon a proper form prepared by the state board of equalization and supplied by the assessor of property, and the completed form shall show ownership, estimated value, description and location of property, the purposes for which the property is used, and such other information as may be required by either the state board of equalization or the local assessor of property. No exemption shall be granted unless and until the same is approved in writing and signed by the executive secretary or staff attorney to the state board of equalization or such other person as may be designated by the board. The assessor of property shall maintain on file all applications which are approved for exemption.

The chancery court found that in adopting the 1984 amendment the legislature did not exceed its constitutional authority to grant property tax exemptions for property used for religious purposes. The chancellor's conclusion is set forth as follows:

It is made abundantly clear that T.C.A. Sec. 67-5-212(a)(1) does not create a per se property tax exemption for parsonages nor does this statute foreclose inquiry as to the actual use of parsonages.... The record herein persuades the Court to conclude that it was the intent of the Legislature to exempt from property tax parsonages used 'purely and exclusively' for religious purposes and that no constitutional conflict exists between T.C.A. Sec. 67-5-212(a)(1), as amended in 1984, and Article II, Section 28 of the Constitution of Tennessee.

The issue is whether the legislature, in adopting the 1984 amendment to T.C.A. Sec. 67-5-212(a)(1), exceeded its constitutional authority to grant property tax exemptions for property used for purely religious purposes.

The responsibility for determining the meaning of a constitutional provision rests in the last analysis with the judiciary, but courts must give careful consideration to the interpretation placed upon the constitution by the legislature. LaFever v. Ware, 211 Tenn. 393, 365 S.W.2d 44 (1963). The approach used by courts in this state in construing a property tax exemption for a religious organization was stated by the Court in Mid-State Baptist Hospital, Inc. v. City of Nashville, 211 Tenn. 599, 366 S.W.2d 769 (1963), as follows:

[I]n Tennessee, contrary to most other states, a tax exemption in favor of religious, scientific, literary and educational institutions is liberally construed rather than strictly.

366 S.W.2d at 773.

Under our liberal construction of tax exemptions for religious organizations, the test for determining whether the use requirement of Article II, Section 28 and T.C.A. Sec. 67-5-212(a)(1) is met is as stated in the Court's decision in Methodist Hospitals of Memphis v. Assessment Appeals Comm'n, 669 S.W.2d 305 (Tenn.1984):

In a series of cases decided since City of Nashville v. State Board of Equalization [210 Tenn. 587, 360 S.W.2d 458 (Tenn.1962) ], this Court has held that the use requirement for property to be tax exempt is met where the use is "directly incidental to or an integral part of" one of the recognized purposes of an exempt institution.

669 S.W.2d at 307.

Pursuant to the application of the use requirement as described above, employee parking lots owned by non-profit hospitals, employee lunch rooms owned by non-profit corporations, and off-campus housing facilities owned by non-profit educational institutions have been found to be exempt from property taxation. See Vanderbilt v. Ferguson, 554 S.W.2d 128 (Tenn.App.1976); Shared Hospital Services Corporation v. Ferguson, 673 S.W.2d 135 (Tenn.1974); George Peabody College for Teachers v. State Board of Equalization, 219 Tenn. 123...