TITEA~TORNEY GENERAL 

OF TElxAs 

Avemiw. TWAS 787ti 

a0EsN I” EILL 

A-- CIlmmERJuly 8, 1974 

The Honorable Alton R. Griffin 

Criminal District Attorney 

Lubbock County Courthouse 

Lubbock, Texas 79401 

Opinion No. H- 342 

Re: Whether hospitals will lose 

their tax exemptions if they make 

available premises to Blood 

Services of Texas 

Dear Mr. Griffin: 

Your question asks whether two hospitals will lose their ad valore m 

tax exemptions if they permit a separately operated blood bank to use a 

portion of their premises for the purposes of obtaining blood from family 

members of patients. 

Article 8, Section 1 of the Texas Constitution requires that “Taxation 

shall be equal and uniform:” However, Subsection 2(a) of Article 8 

authorizes the Legislature to exempt various classes of property including 

property owned by institutions of “purely public charity. ” 

In the Constitution of 1876, Section 2 of Article 8 excepted from ad 

valorem t.axation “all buildings used bxclusively and owned by persons or 

associations of persons for school purposes, and the necessary furn:ture 

of all 8mools, . , .and institutions of purely public charity. ” Since t.hat time 

the Section has been amended on a number of occasions and a great deal 

of language appears between “buildings used exclusively and owned by” 

and “purely public charity” and a literal reading would not link the two 

phrases. Nevertheless they are linked and we believe that, in adopt.ing 

the various amendments, it was not the ~intent of the people to effect a 

change insofar as the Section appIies to institutions of purely public charity. 

Acting under that authority, the Legislature has adopted Article 

p. 1594 
The Honorable Alton R. Griffin page 2 (H-342) 

7150, V.T.C.S., exempting certain described properties from taxation. 

In its Sec. 7 it exempts: 

All buildings and personal property belonging to 

institutions of purely public charity, together with .the 

lands belonging to and occupied by such institutions, 

including hospital parking facilities, not leased or 

otherwise used with a view to profit, unless such 

rents and profits and all moneys and credits are 

appropriated by such institutions solely to sustain 

such institutions and for the benefit of the sick and 

disabled members and their families and the burial 

of the same, or for the maintenance of persons 

when unable to provide for themselves, whether such 

persons are members of such institutions or not. . . . 

It goes on to define an institution of “purely public charity” as: 

. . . one which dispenses its aid to its members and 

others in sickness or distress, or at death, without 

regard to poverty or riches of the recipient, al’so when 

funds, property and assets of such institutions are 

placed and bound by its law to relieve, aid and administer 

in any way to the relief of its members when in want,. 

sickness,and distress, and provide homes of its helpless and dependent members and to educate and maintain 

the orphans of its deceased members or other persons . . . . 

The Texas Supreme Court has defined “purely public charity” to 

depend on the existence of three elements: 

. . . . First, it made no gain or profit; second, it 

accomplished ends wholly benevolent; and third, it 

benefit,ed persons, indefinite in numbers and in personalities, by preventing them, through absolute gratuity, 

from becoming burdens to society and to the state. 

p. 1595 
The Honorable Alton R. Griffin page 3 (H-342) 

City of Houston v. Scottish Rite Benevolent Ass’n, 230 S. W. 978, 981 

(Tex. 1921); cited with approval. River Oaks Garden Club v. City of Houston, 

370 S. W. td 851 (Tex. 1963); and in City of Amarillo v. Amarillo Lodge No. 

731, AF & AM, 488 S. W. 2d 69 (Tex. 1972). 

We assume the hospitals and the blood bank qualify as institutions 

of purely public charity, but, of course, whether any institution qualifies 

as one of purely public charity will ultimately depend upon whether, in fact, 

it meets the three point test , above set out; . 

In Hilltop Village, Inc. v. Kerrville Ind. Sch. Dist., 426 S. W. 2d 

943 (Tex. 1968), a case decided under this constitutional provision, the 

Supreme Court specifically indicated that an institution’s use of property 

for incidental purposes will not defeat a tax exemption. Hilltop Village, 

Inc. v. Kerrville I. S. D., supra, at 947. See also, Santa Rosa Infirmary v. 

City of San Antonio, 259 S. W. 926, 932 (Tex. Comm. App. 1924). 

The operation of the incidental facilities in Hilltop Village resulted 

in a profit which was divided between the outside operations and the institution. Whether the use of hospital facilities by a blood bank is an incidental 

use of those facilities is a question of fact which we cannot resolve in this 

opinion. If the use is incidental the tax exemption will probably be preserved under the guidelines set down in Hilltop Village. 

If a full development of the facts does not indicate that the use of 

the hospital facilities by the blood bank meets the incidental use test 

under the guidelines set down in Hilltop Village , then it arguably can be 

contended that the tax exemption will be secure if the blood bank operates 

as an institution of purely public charity. All of this involves the resolution of fact questions which are not before us. Assuming, without deciding, 

that the blood bank is a charity, it will be necessary to determine whether 

use of property by more than one institution of purely public charity will 

defeat a charitable tax exemption. 

In City of Amarillo v, Amarillo Lodge No. 731, AF & AM, supra, 

the court said: 

ps 1596 
The Honorable Alton R. Gritfin page 4 (H-342) 

The exemption of an institution of purely public 

charity as such is not authorized by the constitutional 

provision in question, It is only property owned by 

such an institution and used exclusively for purely 

public charity that may qualify for the exemption. 

Morris v. Lone Star Chapter No. 6. R.A. M., 68 

Tex. 698, 5 S. W. 519. The institution must be one 

of purely public charityiin the purposes for which it 

is formed and in the means used to~accomplish such 

purposes, and the property claimed to be exempt 

must be owned and used exclusively by the institution 

in furthering its charitable activities. Hilltop Village, 

Inc. v. Kerrville Ind. Sch. Dist., Tex. Sup., 426 S. W. 

2d 943. (488 S. W. 2d at 72) [Emphasis added] 

Although this statement of the court lends itself to a broad interpretation, we believe that,its context and the case authority on which it is based 

suggest a narrower meaning is appropriate. For example, Hilltop Village, 

as noted above, indicated that incidental use of property for non-chaiitable 

purposes would not destroy an otherwise valid charitable tax exemption. 

We have found only one case in which the issue was raised as to 

whether a charitable exemption is defeated merely because more than 

one charitable institution used the property. The Court of Civil Appeals 

held in City of Houston v. River Oaks Garden Club, 360 S. W. 2d 855 

(Tex. Civ. App. --Houston 1962) that multiple use by various charities 

was sufficient to di.sallow the exemption. The Supreme Court affirmed on 

different grounds and specifically declined to reach the question of use by 

multiple charities. River Oaks Garden Club v. Ci,ty of Houston, 370 S. W. 

2d 851, 853 (Tex. 1963). However, Justice Norvell, joined by Justices 

Greenhill, Griffin and Smith, dissented and said: 

. . . the mere fact that a charitable use is 

sometimes made of the property by some 

organisation other than the owner, should not 

affect the tax exemption classification of the 

property so long as no,charge is made for 

such,use. (370 S. W. 2d at p. 862.) 

p* 1597 
I 

. 

The Honorable Alton R. Griffin page 5 (H-342) 

We note also that the Court of Civil Appeals opinion and other courts’ 

broad statement on exclusive use are based on decisions involving use by 

non-charitable institutions. See, e.g., City of Houston v. Scottish Rite 

Benevolent Association, 230 S. W. 978 (Tex. 1921) (used by “Masonic 

organizations, whose activities included other fields than charity”); Morris 

v. Lone Star Chapter No. 6, Royal Arch Masons, 5 S. W. 519 (Tex. 1887) 

(two of the building’s three floors rented for profit), State v. Settegast, 

254 S. W. 2d .9 2 5 (Tex. Comm. App. 1923) (property consisted of 

rent houses, the revenues from which were used for charitable purposes); 

B. P. 0. E. Lodge No. 151 v. City of Houston, 44 S. W. 2d 488 (Tex. Civ. 

App. -- Beaumont 1931, error ref’d) (‘property used by profit-oriented 

“restaurant keeper, barber, gymnasium operators, and electric bath 

giver”). 

The leading case in which an exemption was upheld is Santa Rosa 

Infirmary v. City of San Antonio, 259 S. W. 926 (Tex. Comm. App. 1924) 

where the court said: 

The constitutional requirement is twofold: the 

property must be owned by the organization claiming 

the exemption; it must be exclusively used by the organization, as distinguished from a partial use by it, and 

a partial use by others, whether the others pay rent or 

not. (259 S. W. at 932). 

The authority cited to support this statement, was City of Houston v. 

Scottish Rite Benevolent Association, rupra, where the Court had said: 

“The actual, direct use must be exclusive on the part of such an institution as is favored by the constitutional provision. ” (230 S. W. at 981). But 

the Court was dealing with a use by two Masonic orders whose work was 

only pa’rtly charitable. 

When the Supreme Court discussed the Santa Rosa case by adopting 

the Commission of Appeals opinion in City of Longview v. Markham-McRee 

Memorial Hospital, 152 S. W. 2d 1112 (Tex. 1941) it stressed the landlordtenant relationship of the use that destroyed the exemption. In City of 

p. 1598 
The Honorable Alton R. Griffin page 6 (H-342) 

Longview two doctors rented offices in a hospital building. The doctors 

paid rent and contributed a substantial amount of their services to the 

hospital’s charity cases. Additionally they also performed an essential 

service to the hospital by serving as house physicians. Although the 

fact that other doctors used the hospital facilities to treat private patients 

did not endanger the tax exemption, the renting of offices in the hospital 

did. The court avoided the dual use issue and said: 

While it is true that the use of these offices results 

in a necessary contribution to the operation of the 

hospital, it seems to us quite obvious that the letting 

and occupancy of same is dominantly a commercial 

and private transaction. We therefore conclude that 

the property in question is not exempt from taxes 

under our Conatitution. (152 S. W. 2d at 1114) 

Given the failure of the Supreme Court to decide definitively any 

case on the ground property was,used by more than one charitable 

institution and that the original statements of the court concerning 

exclusive use have arisen in cases in which at least one user of the 

property was not a charitable institution; we feel justified in predicting 

that our Texas Supreme Court would, at least hold that if a normal 

landlord-tenant relationship is not present, and no rent is charged, that 

the use of a portion of a charitable hospital by a charitable blood bank 

will not cause the hospital to lose its tax exempt status. 

SUMMARY 

A hospital operating as a purely public charity 

will not lose the tax exempt status of its property 

because it is used in part by a blood bank if such 

additional use is incidental and if the blood bank 

p. 1599 
I 

‘ 

The Honorable Alton R. Griffin page 7 (H-342) 

is also a purely public charity and if a normal 

landlord-tenant relationship in not involved 

and no rent is charged. 

Very truly yours, 

Attorney General of Texas 

DAVID M. KENDALL, Chairman 

‘1 

p. 1600