State Bd. of Tax Com'rs v. Wright

• Decision Date: 17 March 1966
• Docket Number: No. 20111,20111
• Citation: 215 N.E.2d 57,139 Ind.App. 370
• Parties: The STATE BOARD OF TAX COMMISSIONERS, Appellant, v. Erwin E. WRIGHT, Appellee.
• Court: Indiana Appellate Court

Page 57

215 N.E.2d 57

139 Ind.App. 370

The STATE BOARD OF TAX COMMISSIONERS, Appellant, v. Erwin E. WRIGHT, Appellee.

No. 20111.

Appellate Court of Indiana, In Banc.

March 17, 1966.

[139 INDAPP 371]

Edwin K. Steers, Atty. Gen., Lloyd C. Hutchinson, Charles W. Rau, Deputy Attys. Gen., for appellant.

Robert F. McCrea, William T. Hornaday, Bloomington, Thomas & Thomas, Brazil, for appellee.

WICKENS, Judge.

One hundred and four cabins used for temporary dwelling purposes during church conferences are located on premises owned by the Wabash Annual Conference of the Free Methodist Church on North America, Inc. ¹ Whether these cabins are entitled to be held exempt from property tax, as being used exclusively for religious purposes and owned and actually occupied by the religious conference is the issue here.

This was a class action brought to the lower court as an appeal from the final determination of the State Board of Tax Commissioners ² to tax the cabins. The Board appealed here assigning as error the overruling of its motion for new trial.

Appellee, a minister, and others were assessed as the 'owners' for property tax on the cabins they occupy during Church conferences. Since 1928 the Church has owned a tract of land which has been and is used for various religious activities. These include an annual ten day summer conference during which time evangelistic and religious instruction is offered for the benefit of ministers and laymen. Also during this conference the Church's work for the coming year is discussed and programed. In addition, each year two children's camps and a young people's camp, each being a week in duration, are conducted for religious instruction purposes. Further annual activities on the Church grounds consist of a two day men's training meeting plus a one day service for the Women's Missionary Society. Testimony was elicited that all such activities and functions are religiously oriented.

The conference grounds are comprised of a large, wooden structure, the tabernacle for worship and services, a youth activities building, a women's missionary building, a memorial structure, a dining hall, an office, and a children's dormitory, [139 INDAPP 373] all buildings being rustic and camp-like. None of these structures has been taxed. Prior to this action no effort had been made to assess the 104 cabins. Basically these cabins are characterized as being simple frame structures, having dimensions averaging around 14 22 . Since the conferences are held during the late summer no heating facilities have been installed in the cabins. Most of them have no running water although water as well as electricity is available. These utilities are paid for in one lump sum and the costs are generally pro-rated among the cabin occupants. At a central location the Church provides toilet and bath facilities. Recreational facilities are termed as 'very meager' consisting of an area for baseball and handball plus some play ground facilities for younger children. There is no water for recreational purposes on or within close proximity of the Church grounds. No vacationing is permitted on the grounds and a witness testified he knew of no one who had ever entered the conference grounds in the spring and resided there until the fall.

Evidence further discloses that the only reason for the existence of the cabins in question is to provide shelter for ministers and leading laymen while attending Church conferences. During an additional two week optional period, the cabins may be occupied for purposes of general repair and maintenance. The cabins are also occupied by persons other than appellee and those of the class he represents, the Church exercising the right to assign the cabins to others, whenever full rooming capacity is reached in the other campground facilities. According to the evidence only one occupant ever questioned the Church's rule that the cabins could only be occupied during the prescribed period and upon the Church retaining its firm stand on the matter, the occupant acceded. There was no reoccurance.

Articles of Agreement were entered into between the Church and builders and/or holders of the cabins, copies of which were admitted in evidence. The agreement forms provide[139 INDAPP 374] that in consideration of $35 paid initially the Church 'rents leases and lets' a designated plot of ground to an occupant for the purpose of erecting a cottage for the use and occupancy by the occupant while attending services and gatherings under the auspices of the Church, 'so long as they will and do conform fully with the rules and regulations of such use and occupancy as may be adopted by the party of the first part (the Church) from time to time.' No other consideration is provided. Testimony reveals that the Church derives no income from the cabins. Nowhere in the Articles of Agreement is the occupant referred to as an owner nor do the articles confer upon him what we consider to be the legal rights of an owner. Instead the agreement specifically confers residence privileges while attending Church services and gatherings upon the occupant who at all times is governed by the Church's rules and regulations as to occupancy. The instrument does not purport to give the occupant the right to maintain a permanent residence.

The trial court expressly found; that the Board's action was arbitrary and capricious; that the cabins' occupants have no title in the cabins; that title to the cabins is vested in the Church; that the occupants have only a license to build and occupy cabins strictly for religious purposes; that the cabins are a necessary adjunct to the camp for religious purposes; that the cabins are used exclusively for religious purposes; that the Church through its members has at all times constructively occupied the cabins.

All tax exemption is an important topic of public interest. A new and unique inquiry is whether cabins built and/or occupied by church members on church premises for temporary residential purposes during church conferences, should be afforded property tax exemption. A justification for tax exemption is the public benefit. Thus the purpose of exemption, whether under religious or other classification, is to insure that property and funds devoted to one public benefit [139 INDAPP 375] are not diminished by being diverted through taxation for another public benefit.

Property tax exemption for religious purposes has its historical roots in antiquity. ³ It is more fundamental than mere tradition. From it has probably sprung those features of estate and income tax laws which exempt contributions for religious, charitable and public purposes and also exempt certain organizations. It is possible that the legal concept of a 'charity' and its favorable treatment found in the law of trusts has developed therefrom.

Constitutional authority for permitting tax exemption to property utilized for religious purposes exists in this State:

'The General Assembly shall provide, by law, for a uniform and equal rate of assessment and taxation; and shall prescribe such regulations as shall secure a just valuation for taxation of all property, both real and personal, excepting such only for municipal, educational, literary, scientific, religious, or charitable purposes, as may be specially exempted by law.' (Emphasis supplied.) Constitution of Indiana, Art. 10, § 1.

Under this authority the General Assembly has enacted property tax exemption laws, applicable provisions of which read as follows:

[139 INDAPP 376] 'The following property shall be exempt from taxation:

'Fifth. Every building, or part thereof, used and set apart for educational, literary, scientific, religious or charitable purposes by any institution or by any individual or individuals, association or corporation, provided the same is owned and actually occupied by the institution, individual, association or corporation using it for such purpose or purposes, * * *.

'Sixth. Every building or part thereof used for religious worship, and the pews and furniture within the same, and also the parsonage belonging thereto and occupied as such, and the land whereon said building or buildings are situate, not exceeding fifteen (15) acres, when owned by a church or religious society, or in trust for its use.' Acts 1919, ch. 59, § 5, p. 198, § 64--201 Burns' 1961 Replacement.

These provisions limiting property exempt status also should be noted:

'If all or any part, parcel or portion of any tract or lot of land or any buildings or personal property enumerated in the preceding section as exempt from taxation shall be used or occupied for any other purpose or purposes than those recited in said section by reason whereof they are exempted from taxation, such property, part, parcel or portion shall be subject to taxation so long as the same shall not be set aside or used exclusively for some one of the purposes specified in said enumeration.' Acts 1919, ch. 59, § 6, p. 198, § 64--202 Burns' 1961 Replacement,

and

'When real estate which is exempt from taxation is leased to another whose property is not exempt, and the leasing of which does not make the real estate taxable, the leasehold estate and the appurtenances shall be listed as the property of the lessee thereof, or his assignee, as real estate.' Acts 1919, ch. 59, § 33, p. 198, § 64--204 Burns' 1961 Replacement.

Examination of the statutory history of property tax exemption indicates that Indiana by its General Assembly in 1961 endeavored to improve assessment and collection of property taxes. As a result of this a new real estate reassessment was completed and additional efforts were made to [139 INDAPP 377] equalize the burden of taxes on property. No change was then made in the exemption statutes quoted. We refer to the 'Property Assessment Act of 1961.' Acts 1961, ch. 319, § 101, p. 893, § 64--301 et seq. Burns' 1961 Replacement.

It is interesting, and we think important here, to note...