United Presbyterian Ass'n v. Board of County Com'rs of Jefferson County

• Citation: 448 P.2d 967,167 Colo. 485
• Decision Date: 23 December 1968
• Docket Number: No. 22901,22901
• Parties: The UNITED PRESBYTERIAN ASSOCIATION, a non-profit Colorado corporation; Howard A. Latting, A. A. Hall, and Raymond E. Carper, constituting the Colorado Tax Commission; and Colorado Tax Commission, Plaintiffs in Error, v. The BOARD OF COUNTY COMMISSIONERS OF the COUNTY OF JEFFERSON, State of Colorado, Defendant in Error.
• Court: Supreme Court of Colorado

Page 967

448 P.2d 967

167 Colo. 485

The UNITED PRESBYTERIAN ASSOCIATION, a non-profit Colorado

corporation; Howard A. Latting, A. A. Hall, and Raymond E.

Carper, constituting the Colorado Tax Commission; and Colorado Tax Commission, Plaintiffs in Error, v. The BOARD OF COUNTY COMMISSIONERS OF the COUNTY OF

JEFFERSON, State of Colorado, Defendant in Error.

No. 22901.

Supreme Court of Colorado, En Banc.

Dec. 23, 1968.

Rehearing Denied Jan. 27, 1969.

Donald D. Cawelti, Kelly O'Neall, Jr., Denver, for The United Presbyterian Ass'n.

Duke W. Dunbar, Atty. Gen., Frank E. Hickey, Deputy Atty. Gen., John E. Bush, Asst. Atty. Gen., Denver, for Colorado Tax Commission.

Joseph E. Maker, Golden, J. Frederick Schneider, Ronald Lee Cooke, Denver, for defendant in error.

HODGES, Justice.

Defendant in error, Board of County Commissioners for Jefferson County, brought an action in district court against plaintiffs in error, the United Presbyterian Association and the Colorado Tax Commission to remove the tax exempt status for the years 1964, 1965 and 1966 of Highland West, a senior citizens' residential home owned by the Association. The trial court, after a stipulated trial de novo, vacated the Tax Commission's ex parte order granting exemption from ad valorem taxes for these three years, and the court ordered the Association's property, Highland West, restored to the assessor's rolls and taxes to be duly collected thereon. Supersedeas is in effect while the Association and Tax Commission prosecute this writ of error.

The sole question presented for review is whether or not Highland West, owned and operated by the non-profit Association, as a home for physically independent elderly persons who pay for their tenancy, is entitled to tax exemption. Plaintiffs in error claim that the property is tax exempt, because it is owned and used for a charitable purpose within the purview of applicable Colorado law. The defendant in error asserts the contrary. The tax status of a senior citizens' home of the kind typified by Highland West, is a question of first impression in this court. Counsel for all parties have submitted able briefs, with extensive argument and review of authority, and in the course of this opinion, we shall treat all significant contentions therein raised.

Plaintiff in error, The United Presbyterian Association, was incorporated as a Colorado non-profit corporation in 1961. Its formation was sponsored by three Denver area churches, each of which designated three trustees to constitute the Board of the Association. The Association's articles of incorporation declare the following corporate purpose:

'To provide elderly persons on a nonprofit basis, with housing facilities and services, specially designed to meet the physical, social and psychological needs of the aged, and contribute to their health, security, happiness and usefulness in longer living.'

Its by-laws provide for the disposition of the Association's assets upon dissolution, and prescribe that the remaining net assets shall be set over to the three sponsoring churches to be used, as they may direct, in furtherance of 'the charitable, educational and benevolent purposes of this corporation.'

The Association built Highland West, a 12-story apartment house containing 121 units, ranging in size from buffet apartments to two-bedroom apartments. The building has special construction features designed for the elderly: ramps in lieu of steps, wide doors to accommodate wheel-chairs, grab bars at strategic locations, an electronic alarm system connecting each apartment with the resident manager's office, and elevators of a size to admit stretchers. The building also has a lounge, recreation room, and enclosed roof deck for common use by the tenants, as well as two kitchens for group use. The total cost of Highland West was $1,552,354.11, of which $176,712.32 is attributable to land acquisition cost.

The building was financed by funds derived from a loan in the sum of $1,554,790 obtained from a private mortgage company, and insured by the Federal Housing Administration under Section 231 of the National Housing Act. The Federal Housing Administration required the three sponsoring churches to advance $90,000 to the Association, which was done in the following manner: $45,000 loan from the Denver Presbytery, secured by a conveyance of Association property worth $20,000, subject to repurchase; and, $30,000 and $15,000 loans from the other two churches respectively. All loans are non-interest bearing. In addition, the Federal Housing Administration required establishment of a $32,000 trust fund, and the money therefor came from tenants' occupancy fees.

The home is operated by the Association. The trustees receive no compensation, but a realty firm is employed to manage the property. A resident manager and an assistant manager are also employed.

Persons desiring to reside in Highland West are required to submit a written application together with a $100 application fee, to the Admissions Committee of the Association. The application must contain information as to the personal history, financial status, and health of the applicant. The Admissions Committee screens all applicants, pursuant to standards prescribed in the Association's by-laws, and admission to residence is contingent upon the Committee's approval.

Although partially handicapped persons will be admitted, they must be fully self-sustaining physically, because Highland West is not a nursing home. The physical requirement for residency was stated thus by one of the Association's witnesses:

'If this individual is coming from a place where a daughter is taking care of them and the daughter can no longer carry the burden, then Highland West is not the place for them, they have gone beyond Highland West; because Highland West is designed for people that are physically independent, they are up and going, they are participating in activities.'

Upon being accepted, the prospective tenant must sign a written form agreement which obligates him to pay an occupancy fee and a monthly rental. The occupancy fee is fixed at an amount ten times the monthly rental. The monthly rentals vary from $62 to $155. There are 30 different monthly rentals within this range and the average monthly rental exceeds $100. The occupancy fee, being ten times the monthly rental, will vary from $620 to $1,550. Both the occupancy fee and the monthly rentals are based on the kind of accommodation provided, thereby corresponding to the rate structure used by commercial multiple dwellings. In addition, the tenants pay a small sum for use of the washers and dryers; they are subject to special charges for extra services of nursing, preparation of meals, and cleaning during temporary illness; and, if they change from one apartment to another, they must pay a $25 charge to cover the 'administrative costs' of moving. According to the Agreement, the monthly rentals may be increased at any time. It is also to be noted that the Agreement provides that in the event Highland West is found not to be exempt from ad valorem taxes, the monthly rentals will thereupon be increased to provide an amount sufficient to pay such taxes.

Upon termination of the Agreement, the occupancy fee, less cost of redecorating the unit, is not refundable until 30 days after the apartment is relet and a new occupancy fee is received. The Association's balance sheet, which shows the full sum of occupancy fees as a liability, should be read in light of this provision in the Agreement, because refund of any occupancy fee is always offset by receipt of a new fee, with a 30-delay in the Association's favor. a 30-day delay in the Association's favor.

There is nothing in the Association's articles of incorporation, by-laws, or in its Agreement with the tenant, which imposes any obligation upon the Association with respect to a resident who loses either his financial or physical independence.

Although the by-laws authorize discretionary disbursements from a charity fund to needy residents, there is no duty to provide any financial assistance to them. The Association's Board of Trustees has designated the interest from the $32,000 trust fund to be placed in a separate charity fund, but this designation is subject to change. The trustee's fees for maintaining the trust fund are deducted before the interest is set over to the charity fund, so that a proportionate part of the trustee's fees are deducted from the interest allocated to charity.

As of the time of hearing, the total amount which had accrued in the charity fund was $1,000.92, from which only $96 had been expended for 'rent adjustments' due to financial need. Of the 121 units in Highland West, only two have been reserved for charitable use. These two units were vacant at the time of the hearing, and there is no evidence to show that they have ever been occupied. Total donations of cash and furnishings to Highland West do not exceed $3,000. All else is either charges to residents or loans.

To determine whether or not Highland West is exempt from ad valorem taxation requires consideration of Art. X, § 5 of the Colorado Constitution, which reads in pertinent part:

'Property, real and personal, that is used solely and exclusively * * * for strictly charitable purposes * * *, shall be exempt from taxation, unless otherwise provided by law.'

From 1876 to 1967, the legislature has not 'otherwise provided by law,' but has retained the statute pertaining to tax exemption in substantially the same words as the constitutional provision. McGlone v. First Baptist Church of Denver, 97 Colo. 427, 50 P.2d 547. However, in 1964 the exemption statute was amended to impose the dual requirement that the property be 'owned and used' for strictly charitable purposes. 1965 Perm.Supp., C.R.S.1963, 137--2--1(8). But the Constitution requires only 'use,' and use, rather than ownership, is the well-established test of exemption...