MARK WHITE 

Attorney General 

The Attorney General of Texas 

December 29, 1980 

Honorable William R. Moore 

Tom Green County Attorney 

Courthoua 

San Arrgelo, Texas 76901 

Opinion No. w-288 

Ret ConsUtuUonality of the 

&a&able tax exemption statute 

kecth Ltl8 of the Property Tax 

Code) end related questions 

Dear Mr. Moore: 

You lmvi raised question concern* the applicability of section 1118 

of the Property Tax Code to facilities of a non-profit corporation, Baptist 

Memorials Geriatric Center, include a geriatric hospital, a retirement 

village, and a hotel, 

8ectlon ll.18 of the Property Tax Code, which became effective 

Jsnuary l, 1380, establishes new criteria for determining whether.pmperty 

owners are eligible for charitable tax exemptions. Acts 1979, 68th Leg., ch., 

844 at 2217. Includedkre criteria.based a% (l) organizational purposes; (2) 

mcde of operation; and (3) dedication of assets. Prop. Tax Code 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, you ask 

(l) la section lL18 ~conatltuttonal? 

.A’. 

(2) CM the retirement village be eparated from 

the rest of the facilities for purposes of determining 

ad valorem tax status? 

(3) What part, if any, of the center Is exempt 

from ad valorem taxes? 

We first’ address the constitutional issue. Article VIU, section 2(a) of 

the Constitution of Texas provides, in pertinent part: 

. . .ITl he legislature MY, bp general laws, exempt 

from taxation. . . . all buildings used exclusively and 

owned by. . . institutions of purely public charity; and 

all laws exempting property from taxation other than 

n. c 
Honorable 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 World Life 7~. 

260 S.W. 2d 315 (Tex. Civ. App. - San Antonio 1955, writ rePd.1. However, 

section lL16 does 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 is a 

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 as applied 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). In our 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 lL18 has 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 We thus conclude that section lL16 is constitutional 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 or riches 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, if the property of the 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 of wpurely public 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. In Setterlee 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. 5’76 SW. 2d et 

177. 

Based on the facts supplied us, the Baptist Memorials Geriatric Center is clearly 

not a charitable organization within the restricted meaning of section lL18. According 

to its corporate charter (article 2), which is not 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 be authorized 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 is determined by its qualifications 

on January 1, 1980. Prop. Tax Code fIlL42. Accordingly, no part of the property owned 

by the corporation is tax-exempt under section lL18, nor under any other provision that 

we have found. 

We have not overlooked City of McAllen v. Evangelical Lutheran Good Samaritan 

F 

530 SW. 2d 806 (Tex. 1975), wherein the supreme court, in considering a claim 

or e tax exemption under former article 7150, section 7, stated that although 

charitable institutions are entitled to an exemption of only that property which is used 

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. 920 
Honorable 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 is unnecessary. 

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 by the statute. The Baptist 

Memorials Geriatric Center &es not satisfy this test; 

accordingly, its property is not eligible for a tax exemption. 

22% 

Attorney General of Texas 

JOHN W. FAINTER, JR. 

First Assistant Attorney General 

RICHARD E. GRAY III 

Executive Assistant Attorney General 

Prepared by Jon 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 Y oungblood 

p, 921