Sebastian County Equalization Bd. v. Western Arkansas Counseling & Guidance Center, Inc., 88-53

• Decision Date: 11 July 1988
• Docket Number: No. 88-53,88-53
• Citation: 752 S.W.2d 755,296 Ark. 207
• Court: Arkansas Supreme Court
• Parties: SEBASTIAN COUNTY EQUALIZATION BOARD, et al., Appellants, v. The WESTERN ARKANSAS COUNSELING & GUIDANCE CENTER, INC., Appellee.

Page 755

752 S.W.2d 755

296 Ark. 207

SEBASTIAN COUNTY EQUALIZATION BOARD, et al., Appellants, v. The WESTERN ARKANSAS COUNSELING & GUIDANCE CENTER, INC., Appellee.

No. 88-53.

Supreme Court of Arkansas.

July 11, 1988.

Charles Karr, Fort Smith, for appellants.

Paul L. Giuffre, Fort Smith, for appellee.

HAYS, Justice.

The only issue is whether the trial court correctly granted a tax exemption to the appellee, Western Arkansas Counseling and Guidance Center.

The Guidance Center is a community mental health clinic operating in six counties in western Arkansas. It was organized in 1969 as a non-profit corporation pursuant to Ark.Code Ann. §§ 20-46-301 (1987), et seq., as are similar mental health centers throughout the state. The Guidance Center serves six counties including Sebastian County and owns properties in all six counties.

The Center's properties have been exempt from taxation since the Center acquired them, but as a result of reappraisal the Sebastian County property was added to that county's tax rolls in 1986. The Center appealed to the County Equalization Board and the county court where the assessment was affirmed. The assessment was then appealed to the circuit court which reversed the county court and granted the Center tax exempt status from the assessed ad valorem taxes. It is from that order that the appellants bring this appeal.

Appellants' argument is that the Center failed to meet its burden of showing its status as a charitable organization as required by the pertinent constitutional provision, Art. XVI, § 5:

(b) The following property shall be exempt from taxation: public property used exclusively for public purposes; churches used as such; cemeteries used exclusively as such; school buildings and apparatus; libraries and grounds used exclusively for school purposes; and buildings and grounds and materials used exclusively for public charity.

In order to qualify for the exemption under the constitution, an entity must show that it is a charitable organization and that the property claimed for exemption is used exclusively for charitable purposes.

There can be no real dispute that the Center is a charitable organization. It was stated in Burgess, Judge v. Four States Memorial Hospital, 250 Ark. 485, 465 S.W.2d 693 (1971) that a benevolent and charitable organization's property used as a hospital may be constitutionally exempt from taxation if it is open to the general public, if no one may be refused services on account of inability to pay and if all profits from paying patients are applied to maintaining the hospital and extending and enlarging its charity. See also Hot Springs School District v. Sisters of Mercy, 84 Ark. 497, 106 S.W. 954 (1907).

Appellant does not contend that a mental health clinic is distinguishable from a hospital for purposes of applying the test of Burgess, supra, nor do we recognize a distinction. The Center's operations meet the requirements stated in Burgess in all respects. Pete Kennemer, the executive director of the Center testified that any resident of the six counties served by the Center who seeks its services would be treated, that the Center accepts anyone regardless of race, creed, color or ability to pay. The Center's acceptance and treatment of those who are unable to pay is further established by the Center's subsidizing of a majority of its clients, as noted below. Kennemer stated that any excess income was used for expansion or as operating income and none was used for private gain.

Turning to the primary argument, appellant insists because the Center has paying clients, it is not used exclusively for charitable purposes, as required by Art. XVI, § 5 of the Constitution. However, as our cases have interpreted that provision, the fact that some patients pay for services does not destroy the constitutional exemption.

This question was directly answered in Burgess, supra, on similar facts where the same argument was made. The hospital in question was a non-profit corporation that was formerly owned by the St. Louis Southwestern Railroad Lines Hospital Trust and was used exclusively by employees of the railroad and its subsidiaries who were members of the trust. The hospital and its buildings were donated to the Four States Memorial Hospital in 1967. The evidence showed that 50-53% of the hospital patients were members of the trust and an additional 700-1000 patients were not members....