Philada Home Fund v. Board of Tax Appeals

• Decision Date: 16 February 1966
• Docket Number: No. 39548,39548
• Citation: 214 N.E.2d 431,5 Ohio St.2d 135
• Parties: , 34 O.O.2d 262 The PHILADA HOME FUND, Appellant, v. BOARD OF TAX APPEALS et al., Appellees.
• Court: Ohio Supreme Court

Page 135

5 Ohio St.2d 135

214 N.E.2d 431, 34 O.O.2d 262

The PHILADA HOME FUND, Appellant, v. BOARD OF TAX APPEALS et al., Appellees.

No. 39548.

Supreme Court of Ohio.

Feb. 16, 1966.

Syllabus by the Court

Real property owned by a nonprofit charitable corporation the stated purpose of which is to secure and operate resident apartments for aged and needy persons is not exempt from taxation under Section 5709.12, Revised Code, even though it is shown that the rent intended to be charged is at or below cost, and in no event to result in a profit, and that it is expected that some persons unable to pay the full rental will be assisted by subventions from corporate funds.

Ohio real estate was acquired in December 1963 by the appellant, The Philada Home Fund, a nonprofit Ohio corporation, hereinafter referred to as the Fund, for the stated purpose of erecting thereon apartments solely for the occupancy by 'aged and needy self-respecting persons of good character,' couples and individuals at rentals at or below cost. The articles of incorporation stated this purpose and provided further that it be carried out under 'liberal rules and regulations to be adopted by the trustees, one such regulation, however, to be that the principal and income of the Fund and all amounts received * * * in trust shall always be used exclusively for the purposes of the Fund as a purely public charity.'

Land acquisition cost was $84,000. The site was promptly cleared, an architect was employed, bids were taken, a contract was let containing a provision guaranteeing that maximum price would not exceed $393,733, and construction was commenced diligently and proceeded uninterruptedly.

At or shortly after August 11, 1964, when application for exemption from real property tax was filed with the Hamilton County auditor, a home with a capacity of 34 residents, consisting of 13 double apartments, each containing a living room, dressing room, bath, bedroom and combination kitchen and dining room, and eight single apartments, each containing a combination bedroom and living room, bath, dressing room and combination kitchen and dining room, had been substantially completed. The average cost per unit will be approximately $22,750.

No formal rules for admission requirements or rental charges had been adopted, but the board tentatively fixed the monthly rentals at $60 per month for single apartments and $75 per month for doubles and contemplated that loss from rentals to some residents who are unable to pay the fixed rentals will be covered by subventions from the Fund.

The Board of Tax Appeals held that real property owned by a charitable institution but rented for residential purposes is not used exclusively for charitable purposes so as to be exempt under Section 5709.12, Revised Code. The board's opinion cited Benjamin Rose Institute v. Myers, Treas., 92 Ohio St. 252, 110 N.E. 924, L.R.A.1916D, 1170; Beerman Foundation, Inc., v. Board of Tax Appeals, 152 Ohio St. 179, 87 N.E.2d 474; Cleveland Branch of Guild of St. Barnabas for Nurses v. Board of Tax Appeals, 150 Ohio St. 484, 83 N.E.2d 229; and Doctors Hospital v. Board of Tax Appeals, 173 Ohio St. 283, 181 N.E.2d 702.

Paxton & Seasongood, Murray Seasongood, Clyde M. Abbott, Harry Stickney and Leonard S. Meranus, Cincinnati, for appellant.

William B. Saxbe, Atty. Gen., Jon A. Ziegler, Columbus, Melvin G. Rueger, Pros. Atty., and Robert W. Worth, Cincinnati, for appellees.

PAUL W. BROWN, Judge.

The question before the court is whether the decision of the Board of Tax Appeals refusing the claimed exemption is unreasonable or unlawful for the year in question.

The charitable purpose of the nonprofit corporation which owns this housing and holds it for rent only to aged and needy persons at or below cost may be admitted, but the exemption is claimed under Section 5709.12, Revised Code, which extends exemption only to property 'that is used exclusively for charitable purposes.' The only use of this property is for private residential housing. A long line of Ohio cases hold that property partly or incidentally used for private residence is nonexempt as not used exclusively for charitable purposes. Among the cases so holding are Incorporated Trustees of Gospel Worker Society v. Evatt, Tax Commr., 140 Ohio St. 185, 42 N.E.2d 900; Mussio v. Glander, Tax Commr., 149 Ohio St. 423, 79 N.E.2d 233; Cleveland Branch of Guild of St. Barnabas for Nurses v. Board of Tax Appeals, 150 Ohio St. 484, 83 N.E.2d 229; Western Reserve Academy v. Board of Tax Appeals, 153 Ohio St. 133, 91 N.E.2d 497 (although reversed in part as to exemption of public academies by our judgment in Denison University v. Board of Tax Appeals, 2 Ohio St.2d 17, 205 N.E.2d 896, is still authority for the proposition that 'residence in a dwelling with a family is a private use of the premises and not a use exclusively for charitable purposes,' as we held in Doctors Hospital v. Board of Tax Appeals, 173 Ohio St. 283, 181 N.E.2d 702).

Exemptions, even charitable ones, must be strictly construed. An estimated 13 per cent of the total property in Ohio is already exempt. See Charities and the Ohio Tax Laws, 18 O.S.L.J. 228, 237. Exemption of selected private residences from taxation is pro tanto a violation of constitutional requirements of tax uniformity. As pointed out in Dayton Metropolitan Housing Authority v. Evatt, Tax Commr., 143 Ohio St. 10, 33, 53 N.E.2d 896, 905, 152 A.L.R. 223, '[t]he private homeowner whose property is located on the opposite side of the street from the property of the appellant [housing] authority should not be penalized in the support of his government by increased taxes upon his property to make good the loss of public revenues resulting from the tax exemption of the property of the authority, unless the prople of the state, through constitutional or legislative enactment, clearly adopt a policy which makes such discrimination possible.'

It is reasonable to assume that the tax valuation of the subject buildings would exceed 40 per cent of cost. Applying the Hamilton County tax rate against such a figure, it is found that exemption would equate to a monthly rental subsidy of approximately $30 for each of these apartments. Until the Legislature chooses to permit a similar exemption to all equally aged and needy residents of this state, or until the code of regulations and practice of Philada gives assurance that a benefit to the public generally commensurate with the loss of tax revenue is clearly present, we must hold that the claimed exemption violates the fundamental constitutional requirement of tax uniformity and equality, and that the proposed use is not exclusively charitable.

Our decision in this case is buttressed by the holding in County of Douglas v. OEA Senior Citizens, Inc., 172 Neb. 696, 707, 111 N.W.2d 719, 725, wherein the court stated:

'* * * No definition of charity found in any available lexicon is sufficient upon which to declare what has been described in this record as exclusively charitable, that is that the furnishing of low-cost housing at its real cost is charitable.'

The fact that it is contemplated that residents of the apartments who are unable to pay the full rentals will be assisted by subventions from the Fund, the fact that contributions to the Fund have been designated as deductible charitable contributions by the Internal Revenue Service, and the fact that the property passing to the Fund under the will of Ada R. Seasongood was exempted from succession tax under Section 5731.09, Revised Code, are of value in determining that the purposes of the Fund are charitable, which is not disputed, but are not helpful or dispositive of the inquiry here which involves the twofold test of whether this real estate claimed to be exempt under Section 5709.12, Revised Code, is used exclusively for charitable purposes.

Beerman Foundation, Inc., v. Board of Tax Appeals, 152 Ohio St. 179, 87 N.E.2d 474, is not authority for the claimed exemption as claimed by the appellant, but is merely an ad hoc adjudication against exemption.

In addition, it would appear clear to us that the prospective beneficiaries of the charitable Fund in question are so insufficiently defined by the broad classification, 'aged and needy,' as to make the denial of exemption reasonable and lawful even under the broadest possible application of Section 5709.12, Revised Code. The test is present exclusive use for charitable purposes. Wehrle Foundation v. Evatt, Tax Commr., 141 Ohio St. 467, 49 N.E.2d 52. The future intended use test applied by this court in Good Samaritan Hospital Assn., of Sandusky v. Glander, Tax Commr., 155 Ohio St. 507, 99 N.E.2d 473, has application only to real property of public or existing established and operating institutions for charitable purposes in which the imminently intended use is clearly and exclusively charitable. The reason for exemption is present benefit to the general public sufficient to justify the loss of tax revenue. Young Men's Christian Assn. of Omaha v. Douglas County, 60 Neb. 642, 83 N.W. 924, 52 L.R.A. 123.

The decision of the Board of Tax Appeals, being neither unreasonable nor unlawful, is therefore, affirmed.

Decision affirmed.

ZIMMERMAN, MATTHIAS and HERBERT, JJ., concur.

TAFT, C. J., and O'NEILL and SCHNEIDER, JJ., dissent.

SCHNEIDER, Judge (dissenting).

There are many attitudes as to the office of a dissenting opinion. I employ it in this case not so much to fault the majority as to spread upon the record that the instant case and Jewish Hospital Assn. of Cincinnati v. Board of Tax Appeals, 5 Ohio St.2d 179, 214 N.E.2d 441, becloud the tax-exempt status, if they do not remove it completely, of every home for the aged and indigent members of every fraternal and religious society throughout the state of Ohio. Even the exempt status of the ordinary buildings of recognized non-profit public but privately owned charitable hospitals is now in doubt,...