Sangralea Boys Fund, Inc. v. State Bd. of Tax Com'rs, 49T10-9508-TA-00079

• Decision Date: 22 October 1997
• Docket Number: No. 49T10-9508-TA-00079,49T10-9508-TA-00079
• Citation: 686 N.E.2d 954
• Parties: SANGRALEA BOYS FUND, INC., Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent.
• Court: Indiana Tax Court

Page 954

686 N.E.2d 954

SANGRALEA BOYS FUND, INC., Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent.

No. 49T10-9508-TA-00079.

Tax Court of Indiana.

Oct. 22, 1997.

Frank E. Tolbert and John Damm, Miller, Tolbert, Muelhausen, Muelhausen & Groff, Logansport, for Petitioner.

Jeffrey A. Modisett, Attorney General, Joel Schiff, Deputy Attorney General, Indianapolis, for Respondent.

FISHER, Judge.

Sangralea Boys Fund, Inc. (Sangralea) appeals the final determination of the State Board of Tax Commissioners (State Board) denying it a property tax exemption for 1992 and 1993. The relevant facts are undisputed, and both parties have filed motions for summary judgment.

The State Board argues that IND.CODE ANN. § 6-1.1-10-16 (West 1989) (amended 1993, 1995) (the Act) requires a unity of ownership, occupation, and use of a piece of property by the party seeking a tax exemption. The State Board's position is that because Sangralea leases the property to other not-for-profit entities, who in turn carry out Sangralea's charitable functions, Sangralea does not use and occupy the property and is therefore not entitled to the exemption. Finding that a unity of ownership, occupance, and use is not required, this Court REVERSES the State Board's final determination denying Sangralea an exemption, and GRANTS summary judgment in favor of Sangralea. ¹

FACTS AND PROCEDURAL HISTORY

Sangralea is a not-for-profit corporation organized in 1957 under Kansas law. The Indiana Secretary of State admitted Sangralea to transact business in Indiana as a not-for-profit corporation in 1963. Sangralea's organizational documents disclose that it was created to provide homes for "young people" and to provide scholarships for students, "especially bible students." (Pet'r Br. at 2); (Resp't Br. at 4). Further, Sangralea furnishes "education, personal adjustment and maturation" for these youths and assists in the "entire program of their social rehabilitation." (Pet'r Br. at 3). Simply put, Sangralea provides guidance and education for troubled children. The parties do not dispute that Sangralea uses its facilities in Onward, Indiana in a manner consistent with its organizational mandates and in compliance with the State's requirements to maintain not-for-profit status. (Pet'r Br. at 4); (Resp't Br. at 4).

In 1987, Sangralea decided to lease portions of the property it owned to three not-for-profit entities: HIM Ministries, White's Institute a/k/a Stow Home, and Villages of Indiana, Inc. (hereinafter collectively referred to as "Lessees"). The leases are rent free and are for the purpose of providing cost-effective operation of Sangralea's activities. (Tr. at 6, 7). Lessees are required to engage in activities consistent with those for which Sangralea was organized and operated. (Pet'r Br. at 7); (Tr. at 28). Sangralea has at all relevant times maintained an "advisory position" with Stow House and a position on the Board of Directors of HIM Ministries and Villages of Indiana. Further, the executive director of Sangralea, Jack D. Laymon, maintains a residence on the property and oversees all the activities that take place.

The Cass County Board of Review denied Sangralea a property exemption on August 20, 1992 and again on August 12, 1993. Sangralea filed two Form 132 petitions with the State Board asking for a review of the denial of these exemptions. The State Board held two hearings regarding the Form 132 petitions. The first hearing took place on July 15, 1994. The second hearing was held on March 21, 1995. On July 3, 1995, the State Board denied Sangralea an exemption for a majority of the property. The State Board exempted the Executive Director's Residence as well as the Administration Building. The remaining portions of the property were deemed taxable and given an assessed value of $108,370. Sangralea filed its original tax

appeal on August 3, 1995. Sangralea filed its motion for summary judgment on March 19, 1996. The State Board filed its own motion for summary judgment on March 25, 1996. This Court heard oral argument regarding both motions on May 29, 1996.

ANALYSIS AND OPINION

Standard of Review

Summary judgment is appropriate only where no genuine issue of material fact exists and a party is entitled to judgment as a matter of law. IND.TRIAL RULE 56(C). Where there is no genuine issue of material fact, the Court's task is to apply the law to those facts. Knauf Fiber Glass v. State Bd. of Tax Comm'rs, 629 N.E.2d 959, 960 (Ind. Tax Ct.1994). Cross motions for summary judgment do not alter this standard. Roehl Transp., Inc. v. Department of State Revenue, 653 N.E.2d 539, 541 (Ind. Tax Ct.1995). This Court reverses final determinations by the State Board only when the decision is unsupported by substantial evidence, is arbitrary or capricious, constitutes an abuse of discretion, or exceeds statutory authority. Bender v. State Bd. of Tax Comm'rs, 676 N.E.2d 1113, 1114 (Ind. Tax Ct.1997).

Discussion

The Indiana Constitution gives the legislature the discretion to provide a tax exemption for property being used for "municipal, educational, literary, scientific, religious or charitable purposes." IND. CONST. art. X, § 1(a)(1). ² The General Assembly has provided such an exemption in the Act. The Act provides in pertinent part:

(a) All or part of a building is exempt from property taxation if it is owned, occupied, and used by a person for educational, literary, scientific, religious, or charitable purposes....

(c) A tract of land, including the campus and athletic grounds of an educational institution, is exempt from property taxation if:

(1) a building which is exempt under subsection (a) or (b) is situated on it; and

(2) the tract does not exceed:

(A) fifty (50) acres in the case of

(i) an educational institution; ...

IND.CODE ANN. § 6-1.1-10-16(a), (c) (emphasis added).

The parties agree that Sangralea actually owns the property and engages in the type of educational, religious and charitable activities required by the Act. ³ The parties also agree that Lessees engage in charitable activities. Sangralea argues that unity of ownership, occupation, and use of the property by a single entity is not required by the language of Act. The State Board has construed the Act as containing just such a requirement. The State Board is incorrect.

Tax exemption statutes are strictly construed against the person claiming the exemption. Department of State Revenue v. Fort Wayne Nat'l Corp., 649 N.E.2d 109, 113 (Ind.), cert. denied, 516 U.S. 913, 116 S.Ct. 298, 133 L.Ed.2d 204 (1995). The Court should give words their common and ordinary meaning without over-emphasizing a strict literal or selective reading of individual words. Spaulding v. International Bakers Servs., Inc., 550 N.E.2d 307, 309 (Ind.1990). However, exemption statutes are not to be construed so narrowly as to defeat the legislature's purpose in enacting them. Mechanics Laundry v. Department of State Revenue, 650 N.E.2d 1223, 1227 (Ind. Tax Ct.1995).

For guidance in determining the intent of the legislature, it is proper to examine the history surrounding the Act. See Harris v. City of Muncie, 163 Ind.App. 522, 325 N.E.2d 208, 211 (1975); see also Jefferson Smurfit Corp. v. Department of State Revenue, 681 N.E.2d 806 (Ind. Tax Ct.1997) (examination of legislative history to interpret statute). As recently as 1971, Indiana exempted buildings from tax if "used and set apart for ... charitable purposes ... provided the same is owned and actually occupied by the institution, individual or corporation using it for such purpose." IND.CODE ANN. § 64-201 (Burns 1971) (emphasis added). However, courts interpreted this statute liberally.

An example of this interpretation is State Bd. of Tax Comm'rs v. Wright, 139 Ind.App. 370, 215 N.E.2d 57 (1966). Wright involved a church seeking a property tax exemption for cabins used to house ministers and laypersons during religious conferences. The cabins were built by those who would later occupy them at the religious conferences. The State Board denied the exemption because it concluded that the church did not actually occupy the buildings. The trial court reversed this State Board decision. The Court of Appeals affirmed the trial court's finding that the requirements of the statute were satisfied because the cabins were constructively occupied by the church through its members. Id. at 63. In its holding, the Court stated that "[t]he only purpose and the only use of the cabins was shown to be religious." Id. The Court of Appeals' ruling demonstrates that the Act's predecessor, even though requiring "actual" occupancy and a unity of ownership, occupation, and use, was construed liberally to allow a charity flexibility in choosing the best methods of carrying out its mission with its property. The analysis in Wright plainly revolved around the use of the property in furtherance of the charity's exempt purpose. Other cases contained similar analysis. See State Bd. of Tax Comm'rs v. Indianapolis Lodge #17, Loyal Order of Moose, 245 Ind. 614, 200 N.E.2d 221, 225 (1964); Himes v. Free Methodist Publishing House, 145 Ind.App. 463, 251 N.E.2d 486, 489 (1969). ⁴

In 1975, the Act was rewritten in its present form. Act of Mar. 18, 1975, No. 45, § 1, 1975 Ind. Acts 247, 312. The recodification in 1975 included an uncodified savings clause which stated that the "substantive operation and effect of any law repealed ... shall continue without interruption if that law is reenacted, in the same or restated form, by this act." Id. § 5, 1975 Ind. Acts at 466. By removing the word "actually," and reorganizing the wording of the statute, this Court believes the legislature did not reenact the law in the same or in a restated form. Instead, the legislature eased the restrictions contained in the 1971 version of the statute. ⁵ See Allstate Ins. Co. v. Larkin's Body Shop & Auto Care, Inc., 673 N.E.2d 846, 848 (Ind.Ct.App.1996) (it may be presumed that...