Waterbury First Church Housing, Inc. v. Brown

• Citation: 170 Conn. 556,367 A.2d 1386
• Court: Supreme Court of Connecticut
• Decision Date: 13 April 1976
• Parties: WATERBURY FIRST CHURCH HOUSING, INC. v. F. George BROWN, Tax Commissioner.

Page 1386

367 A.2d 1386

170 Conn. 556

WATERBURY FIRST CHURCH HOUSING, INC. v. F. George BROWN, Tax Commissioner.

Supreme Court of Connecticut.

April 13, 1976.

Ralph G. Murphy, Asst. Atty. Gen., with whom were Richard K. Greenberg, Asst. Atty. Gen., and, on the brief, Carl R. Ajello, Atty. Gen., for appellant (defendant).

J. Warren Upson, Waterbury, with whom were W. Fielding Secor, Waterbury, and, on the brief, Harry C. Blake and Raymond F. Voelker, Waterbury, for appellee (plaintiff).

Before HOUSE, C.J., and LOISELLE, BOGDANSKI, LONGO and MacDONALD, JJ.

MacDONALD, Associate Justice.

The issue raised by this appeal is whether a nonprofit housing corporation, which, with financial assistance from the federal government, rents apartments to the elderly at below market rates, constitutes a 'charitable organization' so as to be entitled to exemption from the sales and use tax upon the sales to it of tangible personal property, as provided in § 12-412(h) of the General Statutes. ¹

The facts have been stipulated and, insofar as relevant, may be briefly summarized. The plaintiff is a nonstock corporation, organized under the laws of the state of Connecticut by certificate of incorporation dated June 20, 1969, for the purpose of acquiring a site upon which to construct and operate housing for senior citizens, and whose only activity is the operation and management of Robin Ridge Apartments in Waterbury, the housing units for the elderly subsequently constructed by it. The expenses of the corporation consist principally of the operating expenses of the apartment units and the debt service on the mortgage note of $2,841,000 which the corporation issued to secure building funds, and, to meet those expenses, the plaintiff relies primarily on rental income from its tenants and federal assistance. The federal housing administration (FHA) guaranteed the corporation's mortgage note and, in addition, provides a program of rent supplements to tenants whose income does not enable them to meet the rent set by the corporation. The tenants' rent, combined with the low-interest, long-term mortgage made possible by the federal guarantee and with the federally provided direct rent supplements, allows the corporation to meet all of its expenses while providing apartments at rates below market. The corporation's only other source of funds has been a $17,000 loan from the First Congregational Church of Waterbury, which the plaintiff is obligated to begin repaying after the mortgage is fully paid. It does not appear from the record that the plaintiff relies to any extent on the recipt of gratuitous transfers of real or personal property to help defray its costs. The management of the corporation is conducted by a board of directors composed entirely of members of the First Congregational Church of Waterbury who are not compensated for their services.

The plaintiff corporation is exempt from federal taxation as a charitable organization within the standards of the Internal Revenue Code, 26 U.S.C. § 501(c)(3). ² Also, the plaintiff has been designated a community housing development corporation so as to qualify for property tax abatement, pursuant to §§ 8-217 and 8-218 of the General Statutes. ³

The defendant tax commissioner, after a hearing, denied the plaintiff's application for exemption from the sales tax upon sales to it of tangible personal property, and from that decision the plaintiff, pursuant to the provisions of § 12-422, appealed to the Court of Common Pleas. The court, in sustaining the appeal, ordered that the defendant issue a tax exemption certificate to the plaintiff, and it is from the judgment rendered thereon that the defendant tax commissioner has appealed to this court.

The determining factor in the decision of the trial court appears to be the standard it employed to determine the plaintiff's charitable status as stated in its conclusion: 'The use to which plaintiff's real property is dedicated is the sole determinative factor with respect to plaintiff's entitlement to the statutory exemption from sales and use taxes.' We agree that this is one of the standards to be employed and that this standard has been met by the plaintiff. The meaning of 'charitable' is not confined to its use in § 12-412(h). Our General Statutes for many years have exempted from taxation the real property of Connecticut corporations 'organized exclusively for . . . charitable purposes,' § 12-81(7), and there is no reason to believe that the legislature intended a special meaning when it exempted 'charitable organizations' from the sales and use tax. ⁴

'The definition of charitable uses and purposes has expanded with the advancement of civilization and the daily increasing needs of men. Mitchell v. Reeves, 123 Conn. 549, 554, 196 A. 785. It no longer is restricted to mere relief of the destitute or the giving of alms but comprehends activities, not in themselves self-supporting, which are intended to improve the physical, mental and moral condition of the recipients and make it less likely that they will become burdens on society and more likely that they will become useful citizens. Bader Realty & Investment Co. v. St. Louis Housing Authority, 358 Mo. 747, 752, 217 S.W.2d 489. Charity embraces anything that tends to promote the well-doing and the well-being of social man. Ibid. An institution is charitable when its property and funds are devoted to such purposes as would support the creation of a valid charitable trust. Davie v. Rochester Cemetery Ass'n, 91 N.H. 494, 495, 23 A.2d 377.' Camp Isabella Freedman of Connecticut, Inc. v. Canaan, 147 Conn. 510, 514, 162 A.2d 700, 703.

The purposes for which a corporation is organized are to be found in its charter, St. Bridget Convent Corporation v Milford, 87 Conn. 474, 482, 88 A. 881, and the plaintiff's certificate of incorporation lists as a purpose: 'For elderly families and elderly persons on a non-profit basis, to provide rental housing and related 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.' ⁵ Moreover, the plaintiff's charter specifically prohibits it and any officer, member or employee from ever receiving any pecuniary profit from the corporation's operation. We can take judicial notice of the fact that in recent years large sums of public funds have been expended to provide low-income housing, and the plaintiff's dedication to making private lowrental housing for elderly persons on fixed incomes a reality clearly is an effort to 'make it less likely that they will become burdens on society' and is, therefore, charitable. Camp Isabella Freedman of Connecticut, Inc. v. Canaan, supra, 147 Conn. 515, 162 A.2d 703. 'Whether the property for which exemption is claimed is actually and exclusively used for . . . (charitable) purposes must be determined from the facts of the case.' Id., 514, 162 A.2d 703. On the factual record of this case, it seems clear that the plaintiff has satisfied the requirement that it be 'organized exclusively for charitable purposes.' Id., 515, 162 A.2d 700.

The existence of a purpose that can be characterized as charitable, however, does not in itself render a corporation charitable and tax-exempt. An institution must be exclusively charitable, not only in the purposes for which it is formed and to which its property is dedicated, but also in the manner and means it adopts for the accomplishment of those purposes. Connecticut law for over 150 years has recognized that an essential characteristic of a charitable organization, besides a charitable purpose, is that it achieve its purpose 'through the means of funds, derived from the gratuities of the benevolent.' American Asylum v. Phoenix Bank, 4 Conn. 172, 177. In the American Asylum case, decided in 1822, this court was called upon to decide whether an incorporated school, whose sole object was the education and instruction of the deaf and dumb and whose only means of doing so were derived from the charity of individuals who either contributed gifts to the school or subscribed to membership shares of the nonprofit corporation, was 'an incorporated school for charitable purposes.' Referring to an early landmark decision of the United States Supreme Court, then only recently decided, Chief Justice Hosmer stated (p. 177): 'The interesting and luminous decision of the supreme court of the United States, in the case of the trustees of Dartmouth College v. Woodward, 17 U.S. 518, 4 Wheat. 518, 4 L.Ed. 629, with which I entirely accord, and to which I shall have a silent reference in my opinion, only renders it necessary to state the grounds of it very briefly. Eleemosynary corporations, or those created for charitable purposes, are such as are constituted for the perpetual distribution of the free alms of the founders of them, to such purposes as they have directed. Of this description are hospitals for the maintenance of the poor, sick, or impotent, and colleges or schools for the promotion of piety and learning. The establishment of an institution for the dissemination of learning, has always been considered a charity. The true test of an institution is its origin and objects. If it is founded on donations, and has for its purpose the accomplishment of a charity, by the distribution of alms, it most unquestionably is eleemosynary.' (Emphasis added.)

Obviously, the scope of charitable purposes has moved considerably beyond the 'mere relief of the destitute or the giving of alms.' Camp Isabella Freedman of Connecticut, Inc. v. Canaan, supra, 147 Conn. 514, 162 A.2d...