Case Title: AOF/Shadybrook Affordable Housing Corp. v. Yazel

Citation: 

Docket Number: 107508

State: oklahoma

Court: Oklahoma Supreme Court

Date: 2012-06-19T00:00:00Z

Document:
AOF/SHADYBROOK AFFORDABLE HOUSING CORPORATION v. YAZEL2012 OK 59Case Number: 107508Decided: 06/19/2012THE SUPREME COURT OF THE STATE OF OKLAHOMA
NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION IN 
THE PERMANENT LAW REPORTS. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR 
WITHDRAWAL. 

AOF/SHADYBROOK AFFORDABLE HOUSING CORPORATION, an Oklahoma 
not-for-profit corporation, Plaintiff-Appellee,v.KEN YAZEL, TULSA COUNTY 
ASSESSOR,andTULSA COUNTY ex rel. TULSA COUNTY BOARD OF 
EQUALIZATION and DENNIS SEMLER, TULSA COUNTY TREASURER, 
Defendants-Appellants.
ON APPEAL FROM THE DISTRICT COURT OF TULSA COUNTY,STATE OF 
OKLAHOMA,HONORABLE P. THOMAS THORNBRUGH
¶0 The Tulsa County Assessor's office assessed ad valorem taxes on the 
Shadybrook Apartment Complex for the years 2004, 2005, and 2006. Shadybrook, 
under protest, timely paid the taxes each year, but appealed the Assessor's 
valuation to the Tulsa County Board of Tax Roll Corrections and the Tulsa County 
Board of Equalization. After receiving unfavorable decisions, Shadybrook 
appealed to the district court. The trial court granted summary judgment in 
favor of Shadybrook, determining that Shadybrook qualified for an exemption from 
ad valorem taxation pursuant to the Oklahoma Constitution, Article 10, § 6A. The 
Assessor appealed. On the first appeal in this case, the Court of Civil Appeals, 
Division IV, upheld the trial court's ruling in part but reversed and remanded 
with instructions to the trial court to determine whether Shadybrook's use of 
the property was for charitable purposes under Article 10, § 6A so as to 
overcome this Court's ruling in London Square Village v. Oklahoma County 
Equalization and Excise Board.1 Neither party petitioned this Court for certiorari from 
that opinion. On remand, the trial court found in favor of Shadybrook and the 
Assessor appealed. We retained the appeal. We hold that Shadybrook's operation 
of the low-income housing complex was a charitable use under the constitutional 
ad valorem tax exemption in Article 10, § 6A of the Oklahoma Constitution. The 
statutory language in 68 O.S. 2004 § 2887(8)(a)(2)(b) excluding 
property funded with proceeds from the sale of federally tax-exempt bonds from 
ad valorem exemption is unconstitutional.2 London Square Village is overruled.
AFFIRMED
Mark R. Reents, Clark & Williams, Tulsa, Oklahoma, for 
Plaintiff-AppelleeLeisa S. Weintraub, Tulsa County Assessor's Office, 
Tulsa, Oklahoma, for Defendants-Appellants
GURICH, J.
Facts & Procedural History
¶1 This is an appeal from the Journal Entry of Judgment, filed on September 
22, 2009, in Tulsa County, Honorable P. Thomas Thornbrugh.3 The case involves the 
assessment of ad valorem taxes on the Shadybrook Apartments for the years 2004, 
2005, and 2006.4 AOF/Shadybrook Affordable Housing Corporation is an 
Oklahoma not-for-profit corporation.5 In 1998, AOF acquired Shadybrook using proceeds from 
the sale of Tulsa County Industrial Revenue Bonds. The income from those bonds 
is exempt from federal income tax.6 
¶2 The Shadybrook apartment complex is located in Tulsa and consists of 120 
one-bedroom apartment units. Shadybrook was rented almost exclusively to persons 
of little financial means who were either disabled or over the age of sixty-two 
(62). Annual Department of Housing and Urban Development Income Guidelines were 
used in determining tenant eligibility. Income of the tenants at Shadybrook fell 
primarily in the "Extremely Low" and "Very Low" income categories for the years 
2004, 2005, and 2006.7 
¶3 The fair market rent established for Shadybrook was $559.00 per month. 
While the rent paid by every tenant was based on his or her ability to pay, all 
tenants were required to pay a minimum $25.00 contribution. Except for one or 
two HUD-approved tenants who paid fair market rent, no tenant paid the total 
cost of rent. The rent receipts collected at Shadybrook were applied to the 
upkeep, maintenance, and equipment of the Shadybrook Apartments, and all 
residents occupying Shadybrook received the same treatment, regardless of the 
amount of rent they paid.8 
¶4 From 1998 through 2003, the Tulsa County Assessor granted Shadybrook an 
exemption from ad valorem taxation pursuant to 68 O.S. § 2887(8) because Shadybrook was organized as a 
charitable institution and satisfied the income standards of IRS Revenue 
Procedure 96-32. 
¶5 However, in 2003, § 2887(8) was amended to exclude properties acquired or 
improved with proceeds from the sale of federally tax-exempt bonds.9 Because Shadybrook was 
acquired with proceeds from the sale of federally tax-exempt bonds, the 
Assessor's office assessed ad valorem taxes on Shadybrook beginning in 2004 and 
ending in October of 2006 when AOF sold the property.10 The taxes assessed against Shadybrook were $41,530.00 
in 2004; $39,847.00 in 2005; and $40,847.00 in 2006. Shadybrook, under protest, 
timely paid the taxes each year, but appealed the Assessor's valuation to the 
Tulsa County Board of Tax Roll Corrections and the Tulsa County Board of 
Equalization.11 
¶6 At each administrative hearing, Shadybrook objected to being taxed, 
claiming exemption from ad valorem taxation under Article 10, § 6A of the 
Oklahoma Constitution. The Assessor's office argued that since Shadybrook was 
acquired with proceeds from the sale of federally tax-exempt bonds, Shadybrook 
was not exempt from ad valorem taxes under 68 O.S. 2004 § 2887(8)(a)(2)(b). Both Boards 
denied Shadybrook's request for exemption from payment of ad valorem taxes. 
Shadybrook timely appealed the Boards' rulings to the district court of Tulsa 
County.
¶7 On appeal to the district court, the parties did not dispute that 
Shadybrook fell within the exception to exemption stated in 68 O.S. 2004 § 2887(8)(a)(2)(b). However, 
Shadybrook argued that the exception was invalid under the Oklahoma Constitution 
because it imposed stricter requirements for exemption from ad valorem taxation 
than those set by the Oklahoma Constitution.12 Although the Assessor treated Shadybrook as a 
charitable institution from 1998 to 2003, the Assessor argued in response that 
even if the statute imposed greater burdens on the exemption than allowed by the 
Constitution, the property was not being used for charitable purposes and not 
exempt from ad valorem taxes. 
¶8 The trial court granted Shadybrook's motion for summary judgment, finding 
that 68 O.S. 2004 § 
2887(8)(a)(2)(b) imposed impermissible barriers on the exemption of property 
in charitable use beyond those provided for in Article 10, § 6A of the Oklahoma 
Constitution. The Assessor appealed. 
¶9 In the first appeal in this case, the Court of Civil Appeals held that 
"if AOF's use of Shadybrook constitute[d] a charitable purpose, 
then § 2887(8)(a)(2)(b) would impose a greater burden on the receipt of the 
Article 10, § 6A charitable exemption than does the Constitution."13 COCA upheld the trial court's ruling in part but 
reversed and remanded for further proceedings in the trial court to determine 
the factual issue of whether Shadybrook's use of the property was for charitable 
purposes under Article 10, § 6A, "so as to overcome the Supreme Court's ruling 
in London Square Village v. Okla. County Equalization and Excise 
Board."14 
¶10 On remand, the trial court held a bench trial to determine these issues. 
The trial court held that Shadybrook was "physically dedicated to a charitable 
purpose" under Article 10, § 6A of the Oklahoma Constitution and that 
Shadybrook's use of the property during 2004, 2005, and 2006 did not fall under 
the rule announced by this Court in London Square Village. The Assessor's 
office timely appealed this judgment, filing a Petition in Error and a Motion to 
Retain the appeal in the Supreme Court. This Court granted the Assessor's motion 
on November 16, 2009, and retained the appeal.15 
Standard of Review
¶11 Whether property is being used exclusively for charitable purposes so as 
to qualify for the Article 10, § 6A exemption from ad valorem taxation presents 
a question of law concerning the scope of the constitutionally mandated 
exemption. Integris, 2002 OK 85, ¶ 6, 58 P.3d  at 203. Questions of law are 
reviewed de novo, which necessitates a plenary, independent, and non-deferential 
examination of the trial court's legal rulings. Id. This Court has long 
held that whether property is exempt from taxation under Article 10, § 6A 
depends on whether it was actually used for charitable purposes as determined by 
the facts in evidence and that each case must stand on its own merits. In re 
Farmers' Union Hosp. Ass'n of Elk City, 1942 OK 128, ¶ 8, 126 P.2d 244, 246.16 The burden of proving the existence of an exemption is 
on the individual seeking the exemption, and constitutional provisions are 
strictly construed against those claiming the exemption. Austin, Nichols 
& Co. v. Okla. Cnty. Board of Tax-Roll Corrections, 1978 OK 65, ¶ 19, 578 P.2d 1200, 1203-04.
Analysis
¶12 Article 10, § 6A of the Oklahoma Constitution states: "Except as 
otherwise provided in subsection B of this section, all property used for free 
public libraries, free museums, public cemeteries, property used exclusively for 
nonprofit schools and colleges, and all property used exclusively for religious 
and charitable purposes . . . shall be exempt from taxation."17 In this Court's most recent discussion of the 
charitable use exemption in Integris, several Integris-related nonprofit, 
charitable entities used office space in a multi-story office building for 
charitable, educational, and scientific purposes and sought a pro rata exemption 
from ad valorem taxation. Integris, 2002 OK 85, ¶ 2, 58 P.3d  at 202. Even though the 
entity that owned the building was not a charitable organization and part of the 
building was leased to for-profit entities that were not charitable, this Court 
allowed an exemption for the portion of the building that was physically used 
for charitable purposes. Id. ¶ 16, 58 P.3d  at 206. We stated that the 
proper interpretation of the words "used exclusively for charitable purposes" in 
Article 10, § 6A is "the use to which the property is dedicated and devoted." 
Id. ¶ 9, 58 P.3d  at 204. Physical use to which the property is dedicated 
and devoted is determinative. Id. 
¶13 While Integris reaffirmed that the physical use of the property 
determines whether an entity is charitable under Article 10, § 6A, the facts in 
that case differ significantly from the facts of today's case. London Square 
Village is factually similar to today's case. Because London Square 
Village provides only limited guidance, the trial court, in deciding whether 
Shadybrook used the property for a charitable purpose, applied a seven-factor 
test this Court cited favorably in Glass v. Oklahoma Methodist Home for the 
Aged, 1972 OK 
135, ¶ 21, 502 P.2d 1268, 1273, and later in Baptist Health Care Corp. v. Okmulgee County 
Board of Equalization, 1988 OK 11, ¶ 10, 750 P.2d 127, 130 n.3.18 
¶14 This seven-factor test is precedential authority in charitable use 
exemption cases involving care centers for the elderly, like those in 
Glass and Baptist Health Care Corp., and we expressly adopt it 
today as authority in cases involving low-income housing complexes. We 
reiterate, however, that the physical use to which the property is dedicated and 
devoted is determinative and that these factors are only relevant to the 
extent they indicate whether the questioned entity's physical use of the 
property is dedicated and devoted to a charitable purpose. See 
Integris 2002 OK 
85, ¶ 9, 58 P.3d  at 204. 
¶15 The parties agreed, and the trial court found, that only three of the 
seven factors were disputed: (1) Were the Shadybrook facilities open to all 
regardless of ability to pay? (2) Were donations made for the use of needy 
persons? (3) Did Shadybrook operate without a profit or private advantage to its 
founders and officials in charge?
Shadybrook Facilities Were Open to All Regardless of Ability to 
Pay
¶16 The trial court first addressed whether the Shadybrook facilities were 
open to all regardless of ability to pay. The Assessor argued that Shadybrook 
was not open to all regardless of their ability to pay because HUD rules 
required tenants, even those with no apparent incomes, to pay a $25.00 per month 
contribution for operating costs of the facility. 
¶17 Assistance does not have to be cost-free for an organization to qualify 
as an exclusively charitable organization, and a minimum contribution from 
residents does not preclude an organization from having a charitable purpose. In 
Tulsa County v. St. John's Hospital, 1948 OK 84, 191 P.2d 983, we held that a hospital owned and managed 
by a corporation organized for benevolent purposes, which had no capital stock, 
dividends, salary, wage, or pecuniary profits, which devoted all its income to 
caring for the sick and injured, and which received and cared for patients 
without discrimination, was a charitable institution regardless of the fact that 
it charged and received pay for patients able to pay. Other jurisdictions have 
also found that assistance does not have to be cost free for an organization to 
qualify as an exclusively charitable organization.19 
¶18 In this case, the record reflects that all Shadybrook residents received 
the benefits provided by the complex regardless of whether they could make the 
required minimum contribution. Shadybrook's occupancy manager testified that 
even though each tenant paid a different amount of reduced rent, all tenants 
received the same services regardless of the amount of rent they paid. In fact, 
the trial court found that Shadybrook extended its benefits to some individuals 
who could not make the reduced rent payments. The trial court was correct in 
concluding that the Shadybrook facilities were open to all regardless of ability 
to pay. 
Regardless of Federal Funding, Shadybrook's Purpose Was 
Charitable
¶19 The trial court next addressed whether there were donations made for the 
use of needy persons. The Assessor argued that because operational expenses and 
debt service were paid almost entirely with HUD subsidies, Shadybrook's use of 
the property for low-income housing was not for a charitable purpose. 
¶20 We recently considered the charitable use exemption in 
Integris:
The framers of Oklahoma's Constitution no doubt were mindful that charitable 
institutions . . . provide services which relieve the State of burdens which 
it would otherwise have to bear and in crafting the art. 10, § 6 
tax-exemption intended to foster such charitable acts. . . . In recognition of 
the burden on state government which is lifted by the charitable acts of others, 
the framers allow an exemption from taxation for property which is "used 
exclusively" - i.e. property which is physically dedicated and devoted - for 
charitable purposes.20 
¶21 In this case, the record indicates that Shadybrook's use of HUD subsidies 
to operate the apartment complex reduced the burden that might otherwise rest on 
the State of Oklahoma to provide such low-income housing to the elderly and 
disabled population. In tax years 2004, 2005, and 2006, only three tenants were 
financially capable of paying and were charged fair market rent. The remaining 
118-119 tenants paid substantially lower rent than fair market rent. Without the 
HUD subsidies, only three of the approximately 120 tenants could have lived at 
Shadybrook. The HUD subsidies alone allowed Shadybrook to continue to make the 
apartments available to its elderly and disabled tenants while still paying its 
operating expenses. From the perspective of the tenants, Shadybrook provided a 
safe and decent place to live; it made no difference to them whether funding 
came from a private citizen or via the federal government. We find that 
regardless of the source of the funding, the end result in this case furthered 
Shadybrook's charitable purpose and relieved the State of Oklahoma of burdens it 
might otherwise have to bear. 
Shadybrook Did Not Operate to the Private Advantage of 
Founders or Officials in Charge
¶22 Finally, the trial court addressed whether Shadybrook operated without a 
profit or private advantage to its founders and officials in charge. The 
Assessor argued that Shadybrook may have operated to the private advantage of 
Jack T. Hammer, a majority stockholder in the HSI Company, which provided 
management services to Shadybook. 
¶23 The record indicates that AOF President, Phil Kennedy testified that HSI 
was entitled to a maximum one percent (1%) of the gross revenues of the 
Shadybrook complex in return for its management services.21 Mr. Kennedy testified that this typically amounted to 
between five and six hundred dollars per month, or approximately five dollars 
per apartment. However, he also testified that no actual payment had been made 
to HSI during any of the tax years in question because the economic conditions 
of the property would not support the payment. Mr. Kennedy further testified 
that the HSI payments had accrued, however, and could potentially be claimed in 
the future. 
¶24 The record is clear that during the tax assessment years in question, Mr. 
Hammer did not receive any private gain because no actual payment was made to 
HSI during 2004, 2005, or 2006. The economic conditions of the property could 
not support the payment. Additionally, it is not clear from the record whether 
Mr. Hammer will ever receive the payments under the HSI management contract. As 
such, we find that because Mr. Hammer did not receive private gain during the 
tax assessment years in question, this factor does not preclude Shadybrook from 
the claimed constitutional exemption. 
The Trial Court Correctly Prorated a Portion of the Complex 
for Tenants Who Paid Fair Market Rent
¶25 After weighing these factors and determining that Shadybrook's use of the 
property was for a charitable purpose under the Oklahoma Constitution, the trial 
court addressed whether the presence of a small number of tenants who paid the 
fair market rent affected Shadybrook's tax-exempt status. Oklahoma precedent on 
this issue is clear. Non-charitable use of a portion of a property otherwise 
dedicated to a charitable use results in pro rata taxation of the non-charitable 
portion. Integris, 2002 OK 85, ¶ 11, 58 P.3d  at 204; Oklahoma Cnty. 
v. Queen City Lodge No. 197, 1945 OK 55, ¶ 62, 156 P.2d 340, 354. We find the trial court was correct 
in prorating a portion of the complex based on the tenants who paid fair market 
rent.22 
London Square Village Is Overruled 
¶26 Since London Square Village was decided in 1976,23 the Oklahoma Legislature has amended the ad valorem tax 
code to exempt from ad valorem taxation low-income housing complexes that 
satisfy the statutory requirements. In 1988, 68 O.S. §§ 2401 et seq. was repealed and replaced by 
68 O.S. §§ 2801 et seq. Included in the 
new ad valorem tax code was § 2887.24 As originally enacted, it provided:
The following property shall be exempt from ad valorem taxation:
. . . . 
8. All property of any charitable institution organized or chartered under 
the laws of this state as a nonprofit or charitable institution, provided the 
net income from such property is used exclusively within this state for 
charitable purposes and no part of such income inures to the benefit of any 
private stockholder. 68 O.S. 1992 § 2887(8).
In 2000, § 2887 was amended to read:
The following property shall be exempt from ad valorem taxation:
. . . . 
8. All property of any charitable institution organized or chartered under 
the laws of this state as a nonprofit or charitable institution . . . which 
additionally satisfies the income standards set forth in Internal Revenue 
Service Revenue Procedure 96-32 if the property provides residential 
rental accommodations regardless of whether services or meals are provided. 
68 O.S. 2001 § 2887(8) (emphasis added).25 
¶27 Revenue Procedure 96-32 sets forth a safe harbor under which 
organizations that provide low-income housing will be considered charitable. It 
provides objective income and occupancy requirements, and those organizations 
that meet the objective criteria are considered to have a charitable purpose 
under the Internal Revenue Code. The Internal Revenue Code defines charitable 
as: 
Relief of the poor and distressed or of the underprivileged; advancement 
of religion; advancement of education or science; erection or maintenance of 
public buildings, monuments, or works; lessening of the burdens of 
Government; and promotion of social welfare by organizations designed to 
accomplish any of the above purposes, or (i) to lessen neighborhood tensions; 
(ii) to eliminate prejudice and discrimination; (iii) to defend human and civil 
rights secured by law; or (iv) to combat community deterioration and juvenile 
delinquency.
26 C.F.R. § 1.501(c)(3)-1(d)(2) (2012) (emphasis added).26 
¶28 Before the most recent amendment to 68 O.S. § 2887 in 2003, most low-income housing complexes 
were exempt from ad valorem taxation in Oklahoma so long as they satisfied the 
requirements of Revenue Procedure 96-32 and other statutory requirements. The 
holding in London Square Village essentially became obsolete as most 
assessors looked to 68 O.S. § 2887(8) and Revenue Procedure 96-32 to decide 
if a housing complex was exempt. In fact, the Assessor treated Shadybrook as a 
charitable organization and exempted it from ad valorem taxes from 1998-2003. 

¶29 In 2003, the legislature again amended 68 O.S. § 2887(8). The amendment prevented complexes 
improved or acquired with proceeds from the sale of federally tax-exempt bonds 
from receiving the ad valorem tax exemption. While the amendment put Shadybrook 
back on the county tax rolls because it was acquired with proceeds from the sale 
of federally tax-exempt bonds, Shadybrook continued to provide beneficial social 
services to its elderly and disabled tenants that relieved the state of burdens 
it might otherwise have to bear.27 Likewise, it continued to qualify as a charitable 
organization under Revenue Procedure 96-32. 
¶30 Courts must "recognize that the concept of charity evolves over time to 
take into account the changing needs of society, new discoveries, and the 
varying conditions, characters, and needs of different communities."28 What qualifies as an exclusively charitable purpose is 
"'subject to judgment in the light of changing community mores.'"29 While Revenue Procedure 96-32 does not dictate whether 
a use is charitable under the Oklahoma Constitution, the Legislature's use of 
Revenue Procedure 96-32 to determine whether a complex is exempt from ad valorem 
taxation reflects the altered environment in Oklahoma since this Court's 
decision in London Square Village.30 The definition of charitable in Revenue Procedure 96-32 
is consistent with this Court's most recent discussion of charitable in 
Integris. As such, we overrule London Square Village. We are 
persuaded by the dissent in London Square Village, which recognized that 
"it is academic that charity is not confined to almsgiving or relief of poverty 
and distress but has a broader signification, embracing the improvement and 
happiness of man. . . . Although . . . only families of low income may receive 
direct benefit from the housing project, all persons in the community benefit 
indirectly. Charity of this type tends to be of a most practical character." 
London Square Village, 1976 OK 159, 559 P.2d  at 1227-28 (Doolin, J., 
dissenting ¶ 9).31 
68 O.S. 2004 § 
2887(8)(a)(2)(b) as Amended is Unconstitutional
¶31 Because Shadybrook has demonstrated that its property was used 
exclusively for charitable purposes under the Oklahoma Constitution, we agree 
with the trial court that the statute in question is unconstitutional to the 
extent it imposes stricter requirements for exemption from ad valorem taxation 
than those set by § 6A. The constitutional ad valorem tax exemption is not 
conditioned upon whether a property is purchased with proceeds from the sale of 
federally tax-exempt bonds. Rather, § 6A requires only that an entity be used 
exclusively for charitable purposes. Therefore, the statutory language in 
68 O.S. 2004 § 
2887(8)(a)(2)(b)32 excluding property funded with proceeds from the 
sale of federally tax-exempt bonds from ad valorem exemption is unconstitutional 
to the extent it creates a burden on entitlement to the § 6A exemption. 

Conclusion
¶32 We find that Shadybrook has overcome its burden of proving the existence 
of an exemption and has demonstrated that its operation of the low-income 
housing complex was a charitable use entitling it to the ad valorem tax 
exemption in § 6A. London Square Village is overruled. The statutory 
language in 68 O.S. 2004 § 
2887(8)(a)(2)(b) excluding property funded with proceeds from the sale of 
federally tax-exempt bonds from ad valorem exemption is unconstitutional. We 
affirm the trial court's order in all respects. 
AFFIRMED
¶33 COLBERT, V.C.J., KAUGER, WATT, WINCHESTER, EDMONDSON, REIF, COMBS, 
GURICH, JJ. - CONCUR
¶34 TAYLOR, C.J. - DISSENTS 
FOOTNOTES
1 1976 OK 159, 559 P.2d 1224.
2 [N]o asset consisting of a single-family or 
multi-family dwelling unit owned by an entity the property of which would 
otherwise be exempt pursuant to subparagraph a of this paragraph shall be exempt 
from ad valorem taxation if any such dwelling unit was improved with or acquired 
with any portion of proceeds from the sale of obligations issued by any entity 
organized pursuant to § 176 of Title 60 of the Oklahoma Statutes if the interest 
income derived from such obligations is exempt from federal income tax . . . 
. 68 O.S. 2004 § 
2887(8)(a)(2)(b).
3 On March 28, 2009, the trial court issued a thirty-five 
page final order in the case, which included extensive findings of fact and 
conclusions of law. On April 2, 2009, the Assessor filed a Motion to Correct, 
Modify, Vacate or Reconsider Final Order. On September 22, 2009, the trial court 
issued a Journal Entry of Judgment in the case, denying the Assessor's motion 
and incorporating by reference its Final Order issued on March 28, 2009. 
4 Because the issues were the same for all three years, 
the trial court consolidated the cases.
5 AOF is a subordinate of The American Opportunity 
Foundation, Inc., a Georgia 501(c)(3) corporation, which is exempt from federal 
income taxation under § 501(c)(3) of the Internal Revenue Code and which 
receives a group exemption as a central organization whose subordinates are 
recognized as exempt from federal taxation under § 501(c)(3).
6 The Tulsa County Industrial Authority is an entity 
organized pursuant to 60 O.S. § 176.
7 In 2004, 90% of the tenants were categorized as either 
extremely low or very low; in 2005, 98% of the tenants were categorized as 
extremely low or very low; and in 2006, 95% of the tenants were categorized as 
extremely low or very low. Shadybrook's occupancy manager testified that during 
2004, 2005, and 2006, extremely low income for one person would have been a 
gross annual income between $0 and $11,450.00. Very low income for one person 
would have been a gross annual income between $11,450.00 and $19,100.00. 
8 The difference between what the tenant was charged and 
the fair market rent was the subsidy Shadybrook received from HUD, which allowed 
Shadybrook to continue to make the apartments available to low-income 
clients.
9 68 O.S. 2004 § 2887(8)(a)(2)(b) provides: 

The following property shall be exempt from ad valorem taxation:
. . . .
8. All property of any charitable institution organized or chartered under 
the laws of this state as a nonprofit or charitable institution, provided the 
net income from such property is used exclusively within this state for 
charitable purposes and no part of such income inures to the benefit of any 
private stockholder, including a property which is not leased or rented to any 
person other than a governmental body, a charitable institution or a member of 
the general public who is authorized to be a tenant in property owned by a 
charitable institution under § 501(c)(3) of the Internal Revenue Code and which 
includes but is not limited to an institution that either:
a. additionally satisfies the income standards set forth in Internal Revenue 
Service Revenue Procedure 96-32, which may be audited by the county assessor of 
the applicable county, in addition to other requirements of this subparagraph, 
as a condition of obtaining and maintaining the exemption, if: 
(1) the property provides residential rental accommodations regardless of 
whether services or meals are provided, and
(2) the property:
(a) is occupied as of the applicable January 1 assessment date if the 
structure is a single-family dwelling, or
(b) has an average seventy-five percent (75%) occupancy rate, based upon the 
total number of units suitable for occupancy, during the calendar year preceding 
the applicable January 1 assessment date if the property contains multiple 
structures suitable for multi-family housing. The owner of any property subject 
to the occupancy requirements prescribed herein shall submit a report to the 
county assessor of the county in which the property is located no later than 
December 15 each year regarding the occupancy rate for the preceding eleven (11) 
months. If the report indicates that the average occupancy rate was less than 
seventy-five percent (75%), the county assessor shall determine the taxable 
value of the property for the succeeding assessment year and the property shall 
not be exempt for any subsequent assessment year unless the average occupancy 
rate is at least seventy-five percent (75%) during the succeeding eleven-month 
period. No asset consisting of a single-family or multi-family dwelling unit 
owned by an entity the property of which would otherwise be exempt pursuant to 
subparagraph a of this paragraph shall be exempt from ad valorem taxation if any 
such dwelling unit was improved with or acquired with any portion of proceeds 
from the sale of obligations issued by any entity organized pursuant to Section 
176 of Title 60 of the Oklahoma Statutes if the interest income derived from 
such obligations is exempt from federal income tax . . . . 
68 O.S. 2004 § 
2887(8)(a)(2)(b) (emphasis added).
The amendment became effective January 1, 2004.
10 The years in question regarding this dispute are (1) 
the taxes for calendar year 2004, beginning on January 1, 2004, and ending on 
December 31, 2004; (2) the taxes for calendar year 2005, beginning January 1, 
2005, and ending December 31, 2005; and (3) the taxes for a portion of calendar 
year 2006, beginning on January 1, 2006, and ending on October 31, 2006. 
11 Shadybrook properly and timely filed all appeals before 
the Boards.
12 To be exempt from ad valorem taxation under Article 10, 
§ 6A of the Oklahoma Constitution, a property must be used exclusively for 
charitable purposes. To be exempt from ad valorem taxation under 
68 O.S. 2004 § 2887(8)(a)(2)(b), a property 
must qualify as charitable and not be funded by proceeds from the sale of 
federally tax-exempt bonds. Shadybrook argues that 68 O.S. 2004 § 2887(8)(a)(2)(b)'s additional 
requirement excluding property funded with proceeds from the sale of federally 
tax-exempt bonds from ad valorem exemption imposes stricter requirements for 
exemption than required by the Oklahoma Constitution. For this Court to declare 
the statute unconstitutional, Shadybrook must demonstrate that its use of the 
property was charitable under the Oklahoma Constitution. See In the 
Matter of the Assessment of Real Prop. of Integris Realty Corp., 
2002 OK 85, 58 P.3d 200. 
13 AOF/Shadybrook Affordable Housing Corp. v. Ken 
Yazel, et al., Case No. 105,645, at 11 (June 20, 2008) (unpublished) 
(emphasis added).
14 Id. at 18. On the first appeal in this case, the 
Assessor also argued that AOF was forbidden under the trust code to use 
tax-exempt property for the housing project. COCA found that the Assessor's 
argument failed to disclose how a violation of the trust code was determinative 
of whether the property qualified for the charitable use tax exemption. COCA 
affirmed the trial court on this issue. Additionally, AOF conceded that a small 
fraction of its property did not qualify for the charitable exemption, so the 
trial court calculated the fraction and the tax. COCA also affirmed this portion 
of the trial court's order. 
15 The case was assigned to my chambers for review on 
February 24, 2011.
16 See also Immanuel Baptist Church v. 
Glass, 1972 OK 
79, ¶ 12, 497 P.2d 757, 760; Okla. Cnty. v. Queen City Lodge No. 197, 1945 OK 55, ¶ 22, 156 P.2d 340, 346. 
17 Okla. Const. art. X, § 6A.
18 Both in Glass and Baptist Health Care 
Corp., this Court cited the Oregon Supreme Court's decision in Oregon 
Methodist Homes, Inc., v. Horn, 360 P.2d 293, 298-303 (1961), where the 
Oregon Supreme Court listed these seven factors to consider in determining 
whether a property is being used exclusively for charitable purposes. The 
factors include: (1) are rent receipts applied to upkeep, maintenance, and 
equipment of the institution? (2) do residents receive the same treatment, 
regardless of race, creed, color, religion, or ability to pay? (3) are the 
facilities open to all, regardless of race, creed, color, religion, or ability 
to pay? (4) are charges made to all residents and, if made, are lesser charges 
made to the poor or are any charges made to the indigent? (5) is there a 
charitable trust fund created by benevolent and charitably minded persons for 
the needy or are donations made for the use of such persons? (6) does the 
institution operate without a profit or private advantage to its founders and 
officials in charge? (7) do the articles or bylaws of the corporation make 
provision for the disposition of surplus assets upon dissolution? Baptist 
Health Care Corp., 1988 OK 11, ¶ 10, 750 P.2d  at 
130 
n.3.
19 See, e.g., Yorgason v. Cnty. Bd. of 
Equalization of Salt Lake Cnty., ex rel. Episcopal Mgmt. Corp., 
714 P.2d 653, 660 (Utah 1986); Santa Catalina Island Conservancy Grp. v. Cnty. of 
Los Angeles, 178 Cal. Rptr. 708, 716 (1981); Belle Harbor Home of the 
Sages v. Tishelman, 420 N.Y.S.2d 343, 345 (1979); Martin Luther Homes v. 
Cnty. of Los Angeles, 90 Cal. Rptr. 524, 527 (1970). 
20 See also Cox v. Dillingham, 
1947 OK 250, ¶ 17, 184 P.2d 976, 979-80. "[O]ur Constitution . . . is 
plain and unambiguous, and . . . it is apparent that the framers of that 
instrument sought to encourage and assist institutions of learning and 
charitable and other institutions, which are beneficial to the state, and to 
some extent relieve the government of some of its burdens." (emphasis 
added). Jurisdictions are split on the question of whether federal funding is 
the equivalent of outside private donations when determining whether an entity 
has a charitable purpose. See, e.g., Housing Southwest, Inc. v. 
Washington Cnty., 913 P.2d 68, 72 (Idaho 1996) (there is no legislative 
direction that indicates federal subsidies qualify as donations); 
Yorgason, 714 P.2d  at 657, 660 (use of the property is determinative, and 
it is irrelevant that the government, rather than a private benefactor, makes up 
the defecit); Fransican Tertiary Province v. State Tax Comm'n, 566 S.W.2d 213, 223 (Mo. 1978) (federal subsidies have the same effect as charitable 
contributions from the private sector).
21 The HSI management contract was HUD-approved and at a 
fair market rate for the services provided. 
22 After prorating the portions of the property not 
dedicated to a charitable use, the trial court found that the Tulsa County 
Treasurer should refund Shadybrook $41,184.00 for tax year 2004, $39,514.00 for 
tax year 2005, and $33,452.00 for tax year 2006. Neither party has suggested 
that the trial court's calculations were incorrect. 
23 In London Square Village, the plaintiff was a 
not-for-profit corporation whose purpose was to provide housing for low and 
moderate income families. London Square Village, 1976 OK 159, ¶ 2, 559 P.2d  at 1224. Through federally 
guaranteed loans, the London Square Village apartment complex was constructed to 
provide such low-income housing. Apartments in the complex were rented to all 
members of the public, and all renters, rich and poor alike, were required to 
pay rent. Id. ¶ 12, 559 P.2d  at 1226. 
Renters could apply to HUD for rent supplements, and those supplements were 
granted on the basis of an applicant's ability to pay. Id. Renters who 
were eligible to receive rent supplements under HUD standards included the 
elderly, physically handicapped, persons displaced from their homes by urban 
renewal or disaster, and military personnel on active duty. Id. London 
Square Village collected rent from each tenant less the amount of supplement 
received from HUD. From those payments, the complex paid operating expenses and 
mortgage payments. This Court held that the London Square Village apartment 
complex was not exempt from ad valorem taxes because although low-income housing 
for such persons "was a worthwhile cause of beneficial interest to society," the 
apartment complex was not used exclusively for charitable purposes when each 
and every occupant was required to pay for accommodations. Id. 
24 The statute at issue in London Square Village, 
68 O.S. 1971 § 2405, was the precursor to the 
statute at issue in this case. 
25 In 2001, § 2887(8) was amended again. The amendment 
divided the existing paragraph 8 into an introductory paragraph and 
subparagraphs (a) and (b). It provided: 
The following property shall be exempt from ad valorem taxation:
. . . . 
8. All property of any charitable institution organized or chartered under 
the laws of this state as a nonprofit or charitable institution, . . . and which 
includes but is not limited to an institution that either:
a. additionally satisfies the income standards set forth in Internal Revenue 
Service Revenue Procedure 96-32 if the property provides residential rental 
accommodations regardless of whether services or meals are provided, or
b. is a continuum of care retirement community providing housing for the 
aged, licensed under Oklahoma law, owned by a nonprofit entity recognized by the 
Internal Revenue Service as a § 501(c)(3) tax-exempt entity and located in a 
county with a population of more than five hundred thousand (500,000) according 
the latest Federal Decennial Census. 68 O.S. 2002 § 2887(8).
In 2003, § 2887(8) was again amended. This amendment provided the exception 
to the exemption that is at issue in this case. See supra n.9. 
Although § 2887(8)(a)(2)(b) was amended in 2010 to include "Except as provided 
in Section 178.6 of Title 60 of the Oklahoma Statutes," the exception to the 
exemption remains.
26 This definition of charitable is consistent with this 
Court's most recent discussion in Integris of the charitable use 
exemption. There we stated that "charitable institutions . . . provide services 
which relieve the State of burdens which it would otherwise have to 
bear." Integris, 2002 OK 85, ¶ 12, 58 P.3d  at 205 (emphasis 
added).
27 For example, Shadybrook received and administered a 
federal grant to pay for a Service Coordinator who assessed, evaluated, and 
resolved any physical or emotional needs of the tenants. If necessary, 
Shadybrook worked with the tenants' grown children to advise them of any 
abnormal behavior exhibited by the adult parent. Shadybrook also helped tenants 
receive medical, eye, and dental services, arranged for $1.00 telephone services 
for the tenants, held programs four times per month addressing fire protection, 
health issues, and security, and arranged transportation for the tenants to do 
their grocery shopping. Shadybrook provided these services to its tenants 
regardless of whether a tenant could pay his or her rent. Shadybrook managed to 
provide these services while operating without a profit. 
28 Evelyn Brody, All Charities Are Property-Tax Exempt, 
But Some Charities Are More Exempt Than Others, 44 New. Eng. L. Rev. 621, 
635 (2010).
29 Yorgason, 714 P.2d  at 656.
30 "Stare decisis should be more than a fine sounding 
phrase [and] a substantial departure from precedent can only be justified . . . 
in the light of experience with the application of the rule to be abandoned or 
in the light of an altered historic environment." GEICO v. Quine, 
2011 OK 88, n.5, 264 P.3d 1245, 1249 n.5 (citing Phillips v. Okla. Tax 
Comm'n, 1978 OK 
34, ¶ 48, 577 P.2d 1278, 1285-1286 (citations omitted)).
31 Although the apartments at the London Square Village 
complex were rented to the elderly, physically handicapped, persons displaced 
from their homes by urban renewal or disaster, and military personnel on active 
duty and Shadybrook was rented primarily to elderly and disabled tenants, 
See supra ¶ 2, we find that financial ability to pay under HUD 
standards was the deciding criteria in both cases. Today's holding is not 
limited to subsidized low-income housing complexes rented primarily to the 
elderly and disabled. 
32 [N]o asset consisting of a single-family or 
multi-family dwelling unit owned by an entity the property of which would 
otherwise be exempt pursuant to subparagraph a of this paragraph shall be exempt 
from ad valorem taxation if any such dwelling unit was improved with or acquired 
with any portion of proceeds from the sale of obligations issued by any entity 
organized pursuant to Section 176 of Title 60 of the Oklahoma Statutes if the 
interest income derived from such obligations is exempt from federal income tax 
. . . . 68 O.S. 2004 § 
2887(8)(a)(2)(b).