MARK WHITE 

### AttorneyGeneral 

# The Attorney General of

# Texas December 29, 1980

HonorableWilliamR.Moore TomGreenCounty Attorney Courthoua SanArrgelo,Texas 76901 OpinionNo. w-288 Ret ConsUtuUonality of the &a&able tax exemption statute kecth Ltl8 of 

### the Property Tax Code)endrelated questions Dear Mr.Moore: 

### Youlmvi raised question 

### concern* the applicability ofsection 1118 of the Property Tax Code to facilities ofa non-profit corporation, Baptist Memorials Geriatric Center, include a geriatric hospital, a retirement village, andahotel, 8ectlon ll.18 of the Property Tax Code, which became effective Jsnuary l, 1380,establishes new criteria for 

### determining whether.pmperty ownersare eligible for charitable tax exemptions. Acts 1979,68thLeg., ch., 844 

### at 2217. Includedkre criteria.based a% (l)organizational purposes; (2) mcde ofoperation; and (3)dedication ofassets. Prop. TaxCode s11l8(c)(l), (c)(2), (c)(3). Property owned by an organixatlon can qualify for 

### an exemption only if the.organixatlon meets these criteria. Prop. Tax Code SlLl8@. : Specifklly, youask (l) lasection lL18~conatltuttonal? .A’

. (2) CM the retirement village beeparated from the rest of 

### the facilities for purposes ofdetermining advalorem tax status? (3) What part, if 

### any, of the center Is exempt from advalorem taxes? Wefirst’address the constitutional issue. Article VIU,section 2(a) of 

### the Constitution of 

### Texas provides, inpertinent part:

. ..ITlhe legislature MY, bp general laws, exempt from taxation.

..

. all buildings used exclusively and ownedby.

..institutions ofpurely publiccharity; and all laws exempting property from taxation other than

n. cHonorable William R. Moore - Page TWO w-288)

the property mentioned in this Section shall be null and void.

- (Emphasis addedX
The legislature may not allow charitable tax exemptioN for property not owned by institutions of “purely public charity. n Dick&n v. Woodmen of the WorldLife 7~.

260 S.W. 2d 315(Tex. Civ. App. - San Antonio 1955, writ rePd.1.However, section lL16does not employ the familiar phrase “institutions of purely public charit? to describe organizations whose property is eligible for tax exemption, its failure to do so is not fatal. The “ourelv oublic charity” constItutiona limitation isa part of section 111%by implication; t&-express St&tory requirements constitute additional limitetiohs. See City of Amarillo v. Amarillo Lodge No.731,A.P. & A.M., 488 S.W. 26 69 (Tez972). where the suoreme court. in NsumiN that this constitutional limitation was by implication a Nrt of the statute there involved, fo&d the statute unconstitutional asapplied rather than unconstitutional on its face. The law is well-settled that the CoNUtution of Texas allows the legislature to exempt property of charitable institutions from taxation in Cezcases, but does not compel it. See Tex. Con% art VIII,S2(a). Inour opinion, the definition of “charitable functions” fiction 

## um)a) clearly serves not to enlarge the meaning of “purely public charity,” but to deny tax exemptions to property owned by institutions of purely public charity that are not ~organized to perform the charitable functions defined. Where section lL18has the effect of denvim? tax exemotions to omani~tio~ that might otherwise 

### have been properly allowed-tiem, it wib be enforced See Hilltop Village, Inc. v. Kerrville lnd School District, 426 S.W. 2d 943 (Tex. 1968). Where it 1s used to bestow tax exemptioN on property that does not meet the “purely public charity” test, it will be held unconstitutional as applied. City of Amarillo v. Amarillo Lodge, supra Wethus conclude that section lL16isconstitutional on its face. In Hilltop Village, the court noted that the activity of providing facilities to meet special residential requirements of the aged might qualily an institution for tax exemption as one of purely public charity, but only where it also qualified under the 

### statutory definition of such institutions for tax exemption purpose Because the controlling statute then (former article 7150,section 7, V.T.C.S.) restricted exemptions to property of JnstitutioN dispeNir@ aid 

### “without regard to the poverty orriches of the recipient,” e requirement the claimant failed to meet, the exemption was denied. 426 S.W. 2d at 948. See also City of Waco v. Texas Retired Teacher Residence t;rtion. 464 S.W. mex, l97l). Accordingly, ifthe property 

### ofthe center G accorded a charitable exemption, it must first be exempt under section 1118. Because we conclude that this corporation does not qualify as e “charitable organization” under section ll.18, we need not further consider whether it is an institution ofwpurelypublic charity” under the constitution. “Charitable otgtt~-~izatio~~ must be “organized exclusively to perform.

..one or more of the Distedl charitable functiow.” Prop. Tax Code s1L16(c)O). (Emphasis added). Although the additional requirement that they be engaged exclusively in perfdrming such functiorm is qualified to the extent that the incidental performance of non-chantable functions will not result in loss of the exemption, there is no similar, Honorable WIlliem R. Moore - Page Three (MC 288)

exception to the requirement that a charitable organization be “organized exclusively to perform [such functions]

.” (Emphasis edded). The statutory requiement of exclusivity cannot be ignored. InSetterlee v. Gulf Coast Waste Disposal Authority, 576 S.W. 2d 773 (Tex. 1978), the supreme court considered a statutory tax exemption of all property “belonging exclusively” to the state or a political subdivision. In denying an exemption because property was not exclusively (though substantially) owned by a public entity, the court equated the word
“exclusively” with the terms “only” and “to the exclusion of all others” The statutory condition of exclusivity was strictly contrued against the claimant. 5’76SW. 2d et 177. Based on the facts supplied us, the Baptist Memorials Geriatric Center is clearly not a charitable organization within the restricted meaning ofsection lL18. According to its corporate charter (article 2), which isnot significantly modified or supplemented by bylaw provisions, the objectives and purposes of the Center are:

. . . to engage in religious, missionary, benevolent, eleemosynary and scientific undertakings which may beauthorized by the Baptist General Convention of Texas, or the Executive Board thereof. It is readily apparent that the declared corporate purposes of the Center are much broader than the statutorily defined charitable functions that eligible charitable institutions must be organized exclusively to perform. Section lI.l8(c) does not include religious functions or scientific functions in its statutory list of“charitable functions.” Although the corporate charter may be amended to cure the problem in subsequent years, the tax status of the corporation for this year isdetermined byits qualifications on January 1,1980. Prop. Tax Code fIlL42. Accordingly, nopart of the property owned by the corporation is tax-exempt undersection lL18,nor under any other provision that we have found. Wehave not overlooked City of McAllen v. Evangelical Lutheran Good Samaritan F 530 SW. 2d 806 (Tex. 1975),wherein the supreme court, inconsidering a claim or e tax exemption under former article 7150, section 7, stated that although charitable institutions are entitled to an exemption ofonly that property which isused by the institution exclusively for purely public charity, it does not follow:

that every use of the property must be gratuitous.

.. .Nor does it follow that all religious or other benevolent activities must be excluded in the operation of the hospital or home. It is no fatal defect to join charitable and religious purposes; the exemption will not be withdrawn so long as the charitable requirements ere met. (Emphasis added). 530 S.W. 2d at 810-1L The key is the emphasized language “so long as the charitable requirements are met.” Former article ‘7150,section 7, V.T.C.S., did not require that

p. 920Honorable William R. Moore - Page Four (?4V-288)

,

the institution claiming sn exemption be organized exduSiVdy for certain charitable purposes and no other. The present statute &es. Fora charitable exemption to apply, both the constitutional and statutory requirements must be met. Under section ll.18 of the Property Tax Code, the charitable requirements are not met by an institution organized to perform any functions other then those charitable functions the statute sets out. In view of our conclusions, separate consideration of the retirement village property isunnecessary. SUMMARY Section Il.18 of the Property Tax Code governing charitable tax exemptions is constitutionat To be eligible for the exemption, property must be owned by an institution of purely public charity that is organized exclusively to perform certain charitable functions defined bythe statute. The Baptist Memorials Geriatric Center &es not satisfy this test; accordingly, its property isnot eligible for atax exemption.



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Attorney General ofTexas JOHN W.FAINTER, JR. First Assistant Attorney General RICHARD E. GRAY III Executive Assistant Attorney General Prepared byJon Bible and Bruce Youngblood Assistant Attorneys General APPROVED: OPINION COMMITTEE Susan L.Garrison, Acting Chairman Jon Bible Rick Gilpin C. Robert Heath Myra McDaniel Bruce Youngblood

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