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### RNEY GENERAL OFI'EXAS

Honorable Michael J. Simmang Opinion No. M-694 County Attorney Lee County Re: AdValorem TaxExemption Olddings, Texas Status of Lee Memorial Hospital of Qlddlngs, Dear Mr. Simmang: Texas Youhave requested anopinion on the tax exemptlon status 

### ofLee

### MemorialHospitallocatedinOlddings,Lee County, Texas. Your opinion request reads, in part, as follows:

"Lee Memorial Hospital was first chartered as anon-profit corporation onApril 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 

### familiesofmembers of the corporation mayobtain medical, dental, health, surglcal,~nurslng, hospltalfza, tfon and related services and benefits. The articles further stated that there would be nocapital stock and nodividends andany profit would be used to further the charitable purposes for which the corporation wascreated. The by-laws provided that members of the corporation would be those whopaid amembership fee of $100.00 andwould be chosen from people residing in the territory serviced by the corporation. "The charter was amended 

### onJanuary7, 1957, to showthat 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) ” : ”

“OnAugust 1, 

### 1969, the Articles were again amended to showthe duration of the corporation to be perpetual and changing the registered nameof the corporation and adopting the Texas Non-Profit Corporation Act.

. . . Again, on June 22, 1970, the Articles were amended to showthat upon dlssolutlon of the corporation any remaining assets would be distributed to a strictly charitable organization. Thebylaws were also amended to that effect. : ,,

“The ownership of the hospital is currently vested In the members of the cornmunity whohave taken out membership anr: ‘d?,,. the Board of Directors Is elected from this membership. Nophysician is amemberof 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 acharitable corporation under the Provisions of Article 1302, sub-paragraph 2A, Revised Cfvil Statutes of Texas, for the purpose of owning and operatfng anon-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.” Bysupplemental letter, you also advfsed us:

“1* There are norestrictions onadmission of patients andpatfente are admitted

-3347-Honorable Michael J. Simmang, page 

### 3 (M-694)

regardless of their ability to pay. If aperson comes to the hospital completely unable to pay, they are admitted as a c~harity case.

“2. Nosalaries are paid by the hospital to any doctors practicing In the hospital.



### “3. Nohospital space is rented or leased to any doctors or to any other individuals or corporations.



### “4. Thehospital does not operate apharmacybut does operate acafeteria which is open only to the patients and to the employees. Thepublic does not have access to the cafeteria.” Article VIII, Section 2of the Texas Constitution gave the Legislature the following authority:

“All occupation taxes shall be equal anduniform upon the sameclass of subjects within the limits of the authority levying the tax; but the legislature may, by general laws, exempt from taxation Dealnstltutfons of purely public charity; andall

‘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:

“70 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 aview 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 whenunable to provide for themselves, whether such persons are members of such lnstitutlons or not. Aninstitution 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 whenfunds, property andassets of such institutions are placed andbound by its law to relieve, aid and admlnister in anyway to the relief of its members whenIn want, sickness and distress,

. . .' Section 7was found to apply to ahospital situation in the case of Santa Rosa Infirmary v. City of SanAntonio, 259 SW

### 926 (Tex. Comm.A PP., J In the case of SanAntonio Conservation Society, Inc. v. City of SanAntonlo, 455 SW2d '143 (Tex. Sup., 1970) the 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 7of Article 7150 provides the exclusive definition andmeaning of the term "lnstltutlon of purely public charity," the Court held, "Section 7concerns 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 SW978 (1921) Santa Rosa Infirmary v: City of SanAntonio, supra, and Hlllt Village, Inc. v. Kerrville Ind. SchooyPDlsi t 42b SW2d943 (T 8 lgb6)J i%%whlch an fnstltutT:n ml% meet tostate 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). Toqualify as analmsgfving 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 madenogain or profit; second, It accomplished ends wholly benevolent; ana, hirci, it benefited ersons, Indefinite in numbers and in personaltles, bypreventing 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 whenIt affects all the people of a community or state, by assuming, to ameterial 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 maydevolve on those of the samecommunity or state. Do.I' (Rmphasls Added).lat pa 981). The rule with regard to tax exemptfon is well stated in McCallum v, Associated Retail Credit Menof Austin, 41SW2d 45 (Tex. Comm.A PP., 311 I'0e. where atax is levied bya general law and one claims an exemptfon therefrom by reason of someexemption statute, hemust bring himself clearly

-3350-Honorable Michael J. Slmmang, page 6 (M-694)’

within the exemption.

. . .” See also, B. &P.O.E. v. Cit of Houston, 44SW2d486 (Tex. Civ. App., 1931, error ret’

. Therefore wemust determine from the material submitted whether Lee Memorial Hospital meets the statutory and case law requirements heretofore enumerated. Fromyour Information, Lee Memorial Hospital devotes any gain or profit madeby 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 SanAntonio,, 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 nowArticle 7150 (7). The what Is meant bygain 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 noprivate Individual should reap a profit, or where a corporation was the owner that nodistributable 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 noperson to benefit, would qualify under the first
TheSanta 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 ppO934 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 someextent of what would otherwise be apublic 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' themfrom 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; noassurance that society is or will be relieved of aburden 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 norestriction on its admission requirements andaccepts 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 wasanswered In Hflltop Village, Inc. v. Kerrville Ind. School District, supra, whenthe Court held, II e. . Norwill the incidental uses of the properties for the operation of guest facilities, a canteen, ,abeauty shop and vfnding machines defeat the exemption

. . * Thus, this incidental use,of its properties byLee Memorial would not defeat Its exemption. Under the well established rules enumerated by case law, it Is our opinion that Lee Memorial Hospital makes nogain or profit, accomplishes ends wholly benevolent, andbenefits persons, indefinite In number andin personalities, bypreventing 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 andArticle 

### 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 ., advalorem tax. '. Youwvery truly,



### Generalof Texas Prepared by Harriet D. Burke Assistant Attorney General APPROVED: OPINIONCOMMITTEE 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 ALFREDWALKER Executive Assistant NOLAWHITE First Assistant .’



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