* 

RNEY GENERAL 

OFI'EXAS 

Honorable Michael J. Simmang Opinion No. M-694 

County Attorney 

Lee County Re: Ad Valorem Tax Exemption 

Olddings, Texas Status of Lee Memorial 

Hospital of Qlddlngs, 

Dear Mr. Simmang: Texas 

You have requested an opinion on the tax exemptlon 

status of Lee Memorial Hospital located in Olddings, Lee 

County, Texas. 

Your opinion request reads, in part, as follows: 

"Lee Memorial Hospital was first chartered as a non-profit corporation on April 

10, 194-r* The original article stated that 

the hospital was founded for the purpose of 

providing a suitable place in the Immediate 

locality where members and families of members of the corporation may obtain medical, 

dental, health, surglcal,~nurslng, hospltalfza, 

tfon and related services and benefits. The 

articles further stated that there would be 

no capital stock and no dividends and any 

profit would be used to further the charitable 

purposes for which the corporation was created. 

The by-laws provided that members of the corporation would be those who paid a membership 

fee of $100.00 and would be chosen from 

people residing in the territory serviced by 

the corporation. 

"The charter was amended on January 7, 

1957, to show that the services of the hospital would be extended to all residents of 

the community regardless of whether or not 

they were members in the corporation. 

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. . 

‘..’ ,, 

: ,. 

Honorable Michael J. Simmang, page 2 (M- 694) ” : ” 

“On August 1, 1969, the Articles were 

again amended to show the duration of the 

corporation to be perpetual and changing the 

registered name of the corporation and 

adopting the Texas Non-Profit Corporation 

Act. . . . Again, on June 22, 1970, the 

Articles were amended to show that upon 

dlssolutlon of the corporation any remaining assets would be distributed to a 

strictly charitable organization. The bylaws were also amended to that effect. : 

,, 

“The ownership of the hospital is 

currently vested In the members of the cornmunity who have taken out membership anr: ‘d?,,. 

the Board of Directors Is elected from this 

membership. No physician is a member of 

the Board of Directors, nor does any physician derive any benefits from the hospital 

other than being able to place his patients 

in the hospital.” 

Article III of Lee Memorial Hospital’s Articles of Incorporation provides: 

“This corporation does not contemplate 

pecuniary gain or prnfft to the members 

thereof and Is organized as a charitable 

corporation under the Provisions of Article 

1302, sub-paragraph 2A, Revised Cfvil Statutes 

of Texas, for the purpose of owning and operatfng a non-profit cooperative hospital, 

and for the purpose of providing a suitable 

place fn the immediate locality where members and families of members of this Corporation and other residents of the community may 

obtain medical, dental, health, surgical, 

nursfng, hospitalization, and related services and benefits.” 

By supplemental letter, you also advfsed us: 

“1 * There are no restrictions on admission 

of patients and patfente are admitted 

-3347- 
Honorable Michael J. Simmang, page 3 (M-694) 

regardless of their ability to pay. 

If a person comes to the hospital 

completely unable to pay, they are 

admitted as a c~harity case. 

“2. No salaries are paid by the hospital 

to any doctors practicing In the 

hospital. 

“3. No hospital space is rented or leased 

to any doctors or to any other individuals or corporations. 

“4. The hospital does not operate a pharmacy but does operate a cafeteria 

which is open only to the patients 

and to the employees. The public does 

not have access to the cafeteria.” 

Article VIII, Section 2 of the Texas Constitution gave 

the Legislature the following authority: 

“All occupation taxes shall be equal 

and uniform upon the same class of subjects 

within the limits of the authority levying 

the tax; but the legislature may, by general 

laws, exempt from taxation D e a lnstltutfons of purely public charity; and all 

‘laws exempting property from taxation other 

than the property above mentioned shall be 

null and void.” (Emphasis Added) 

Pursuant to this authority, the Legislature enacted 

Article 7150 (7) Vernon’s Civil Statutes, which as last 

amended In 1969, exempts the following property: 

“7 0 Public Charltfes. All buildings 

and personal property belonging to lnstitutlons of purely publfc charity, together 

with the lands belonging to and oacupied 

by such fnstftutions, includfng hospital 

parking facflitfes, not leased or otherwise 

used with a view to profit, unless such 

-3348- 
Honorable Michael J. Slmmang, page 4 (M-694) 

rents and profits and all moneys and 

credits are appropriated by such lnstltutlons solely to sustain such Institutions 

and for the benefit of the sick and disabled members and their famllles 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 lnstitutlons or not. An institution of purely public charity under this 

article is 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, also 

when funds, property and assets of such institutions are placed and bound by its law 

to relieve, aid and admlnister in any way 

to the relief of its members when In want, 

sickness and distress, . . .' 

Section 7 was found to apply to a hospital situation in 

the case of Santa Rosa Infirmary v. City of San Antonio, 259 

SW 926 (Tex. Comm. A PP., J 

In the case of San Antonio Conservation Society, Inc. 

v. City of San Antonlo, 455 SW 2d '143 (Tex. Sup., 1970) 

th e ourt ruled on the ixemption status of'a 

corporatfon chartered for the purpose of preserving his;, 

torlcal bulldlngs and sites. In determining whether this 

Section 7 of Article 7150 provides the exclusive definition 

and meaning of the term "lnstltutlon of purely public charity," 

the Court held, 

"Section 7 concerns and defines charity 

in the sense of almsgfvlng and the three 

cases cited above (i.e. City of Houston v. 

Scottish Rite Benev. Assin., 111 Tex. 131 

230 SW 978 (1921) Santa Rosa Infirmary v: 

City of San Antonio, supra, and Hlllt 

Village, Inc. v. Kerrville Ind. SchooyPDlsi t 42b SW 2d 943 (T 8 lgb6)J 

i%%whlch an fnstltutT:n ml% meet to 

state 

qualify for that kind of charity. Those 

-3349- 
Honorable Michael J. Slmmang, page 5 (M-694) 

cases arose by reason of claims that the 

institutions In question provided relief 

to the needy, the sick, and the distressed; 

and in doing so relieved the government 

of burdens it would otherwise be charged 

with solving." (at p. 745) 

Thus, inasmuch as Lee Memorial Hospital is an lnstitution dispensing aid to persons in sickness or distress, its 

exemption status should be governed by the line of cases 

above cited and Article 7150 (7). 

To qualify as an almsgfving charity, the Institution 

must meet the tests set forth in City 

Rite Benev. Ass'n., supra, to wit: 

'In our opinion, the Legislature might 

reasonably conclude that an institution was 

one of 'purely public charlty' where: First, 

it made no gain or profit; second, It accomplished ends wholly benevolent; ana, 

hirci, it benefited ersons, Indefinite in 

numbers and in personaltles, by preventing 

them, through absolute gratuity, from becoming burdens to society and to the StaFe. 

0 

0 0 * Charity need not be universal 

to be public. It is public when It affects 

all the people of a community or state, 

by assuming, to a meterial extent, that 

which otherwise might become the obligation 

or duty of the community or the state. 

The care of those unable to provide for 

themselves certainly may devolve on those 

of the same community or state. D o .I' (Rmphasls Added).lat pa 981). 

The rule with regard to tax exemptfon is well stated in 

McCallum v, Associated Retail Credit Men of Austin, 41 SW 2d 

45 (Tex. Comm. A PP., 311 I' 0 e . where a tax is levied by a 

general law and one claims an exemptfon therefrom by reason 

of some exemption statute, he must bring himself clearly 

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Honorable Michael J. Slmmang, page 6 (M-694)’ 

within the exemption. . . .” See also, B. & P.O.E. v. Cit 

of Houston, 44 SW 2d 486 (Tex. Civ. App., 1931, error ret’. 

Therefore we must determine from the material submitted 

whether Lee Memorial Hospital meets the statutory and case 

law requirements heretofore enumerated. 

From your Information, Lee Memorial Hospital devotes any 

gain or profit made by it for the sole purpose of sustaining 

its operation, admits any person requesting admission to it 

without regard to their ability to pay and allows none of 

its property to be used for the purpose of benefiting any 

prlvate Individual. 

The case of Santa Rosa Infirmary v, City of San Antonio,, 

supra, dealt with the right of the Santa Rosa Hospital to be 

exempt from the ad valorem tax as a 

within Subdivision 6, Article 7507, 

which is now Article 7150 (7). The 

what Is meant by gain or profit, as 

number one, by stating, 

“purely public charity” 

Vernon’s Civil Statutes, 

Court therein defined 

these words appear In test 

I, 

. . . nothing more was intended than 

that no private Individual should reap a 

profit, or where a corporation was the owner 

that no distributable earnings in the shape 

of dividends must accrue.” (at p” 935) 

Since Lee Memorial Hospital 

to perpetuate Its operation, and 

from the use of its property, it 

test. 

is usi,ng its profits, if any, 

allows no person to benefit, 

would qualify under the first 

The Santa Rosa Case further 

. _ _ . 

held that the fact that pay 

patients preaominate over cnarlty patients does not disqualify 

an Institution from being a “purely public charity.” (See 

ppO 934 and 935). The Court concluded by stating, 

“The theory upon which Institutions 

of this character are exempted from taxation is that they serve the government by 

relieving it to some extent of what would 

otherwise be a public duty or governmental 

function to care for the Indigent sick and 

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. . 

Honorable Michael J, Simmang, page 7 (M-694) 

afflicted, and it Is the assumption by such 

lnstltutlons of this burden which compensates 

the government for the exemption granted' 

them from the general obligation resting upon 

all citizens to pay taxes. v . .' 

Since the operation of Lee Memorial Hospital Is similar 

to the conduct of the Santa Rosa Infirmary, Lee Memorlalls 

operations should likewise be considered benevolent in nature. 

If such an institution restricts admission to its facilities, there ir; no assurance that society is or will be relieved 

of a burden It owes to its populace and, thus, the Institution 

would not meet the third test to qualify it as a "purely 

public charity" (See Hilltop Village, Inc. v. Kerrville Ind. 

School District, supra). However, Lee Memorial HosDltal has 

placed no restriction on its admission requirements and accepts applicants without regard to their financial circumstances, thereby meeting the third requirement to be a "purely 

public charity. 

The remaining problem Is whether the lncldental use of the 

hospital properties for the operation of a cafeteria defeats 

the exemption to which Lee Memorial Hospital Is otherwise entitled. This precise question was answered In Hflltop Village, 

Inc. v. Kerrville Ind. School District, supra, when the Court 

held, 

II 

e . . Nor will the incidental uses 

of the properties for the operation of 

guest facilities, a canteen, ,a beauty shop 

and vfnding machines defeat the exemption 

. . * 

Thus, this incidental use,of its properties by Lee Memorial 

would not defeat Its exemption. 

Under the well established rules enumerated by case law, 

it Is our opinion that Lee Memorial Hospital makes no gain or 

profit, accomplishes ends wholly benevolent, and benefits persons, indefinite In number and in personalities, by preventing 

them, through absolute gratuity, from becoming burdens to 

society and to the state, and is thus entitled to exemption 

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. . 

Honorable Michael J. Simmang, page 8 (M-694) 

under Article VIII, Section 2, Texas Constitution and Article 

7150 (7), Vernon's Civil Statutes, as a "purely public charity." 

SUMMARY 

Under the facts submitted end law 

cited, Lee Memorial Hospital is a "purely. ': 

public charity" and IS 'exempt from the ., 

ad valorem tax. '. 

Youwvery truly, 

General of Texas 

Prepared by Harriet D. Burke 

Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE 

Kerns Tayl~or, Chairman 

W. E. Allen, Co-Chairman 

Gordon Cass 

Arthur Sandlin 

William J. Craig 

John B. Reese 

MEADE F. GRIFFIN 

Staff Legal Assistant 

ALFRED WALKER 

Executive Assistant 

NOLA WHITE 

First Assistant 

.’ 

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