## NEY GENERAL

0F TEXAS

September9, 1966

HonorableHaroldVlttitoe Opinion

### No. C-75% CountyAttorney Brooks County Courthouse Re: Exemption from Falfurrias,Texas ad valorem taxes of properties belonging to The Dear Mr. Vlttitoe: Ed Rachal Foundation

We have been furnishedwith several letters and briefs in connectionwith your request on the above captionedmatter. We quote the following excerpt from one of thesebriefs.

"Theproperties of the Foundation passed under the Last Will and Testament of Ed Rachal, Deceased, which has been dulyprobated In the County Court of Brooks County,Texas. The Foundation
was charteredunder theWon-Profit CorporationAct for the State of Texas on July 29, 1965. There have been no past charitable activities of th F a ti0n %I view of Its newness,howkeytte lsnned future activities of the Foundapublic library area of public charity, and althoughpresentplans of the Foundation are indefinite, theywill be within The limits of itspurposes as set forth In itsArticles of Incorporation. A copy of itsArticles of Incorporation is enclosed for your use, As indicated in the letter to the various taxing authorities The Ed Rachal Foundation has been held to be exempt from Federal Income Taxes under theprovisions of Section 

### 501a as a corporationdescribed in Section 501 c (3)of the InternalRevenue Code 11 inasmuchas the corporation is organized and operated exclusively for charitable purposes. For the same reason the Office of the Comptrollerof PublicAccounts for the State of Texas has ruled The Ed Rachal Foundation exempt from Franchise Taxes as a p'urely

public charity." (EmphasisSupplied.) 

### -3645-Honorable HaroldVittltoe, Page 2 (c-758),

At the outset, the fact that The Foundation has been held to be exempt from federal income taxes and has been accorded an exemption from franchise taxes by the Comptroller, is not determinativeof exemption from ad valorem taxes. Section 2 of Article VIII of the Constitutionof the State of Texas empowers the Legislature to exempt; from taxation certain enumeratedproperties,among which are e .institutionsof purely public charity." Section 7 of Article 7150, Vernon's Civil Staututes,which was enacted in pursuance to the foregoing Constitutionalauthorization,reads as follows:

"Public charities. - All buildings belonging to institutionsof purely public charity, togetherwith the landsbelonging to and occupiedby such institutionsnot leased or otherwiseused with a view to profit, unless such rents and profits and all moneys and credits are appropriatedby such institutions solely to sustain such institutions and for the benefit of the sick and disabledmembers and their families and the burial of the s&me, or for themaintenance of persons when unable to provide for themselves,whether such persons aremembers of such institutionsor not. An institution of purely public charityunder this article is
one which dispenses Its aid to itsmembers and others in sickness or distress, or at death,without regard to poverty or riches of the recipient,also when the funds,property and assets of such institutionsare placed and bound by its laws to relieve, aid and administer in any way to the relief of itsmembers when in want, sicknessand distress,and provide homes for its helpless and dependentmembers and to educate and maintain the orphans of its deceasedmembers
or other persons."

We have been furnishedwith considerable information about properties,both real and personal, located in Brooks, Cameron,and Webb Counties,Texas, as well as with certain arguments that the use to which saidproperties are presently being put justifies the allowance of charitable exemptions. Since we do not agree,we do not deem itnecessary to take up the uses of said properties at this time, since, as stated in the above quoted portion from one of the briefs, there have been no charitableactivitiesby the Foundation in view of its newness and, at themoment, there are onlyplanned -3646-.

Honorable Harold Vittitoe, Page 3 (c-758)

future charitableactivities, the precisenature of which have not been determined.

Numerous decisions of our courts clearly establish the rule that in order to gain the exemptiongranted by Section 7 the charitable institutionmust not only own theproperty for which exemption is sought,but must, in addition,

Numerous decisions of our courts clearly establish the rule that in order to gain the exemptiongranted by Section 7 the charitable institutionmust not only own theproperty for which exemption is sought,but must, in addition,

actual, and exclusive property make an actual, direct exclusiveuse of said property for charitablepurposes. Santa Rosa Infirmaryv. City of Infirmary San Antonio, 259 S.W. 926 (T Antonio, 24). enevolent and Protec&ve Order of Elksec: CT?y oPfPiiouston: 84 S.W. 26 rotec&ve Elksec: oPfPiouston: (T CL A 1931 error ref )* City of Longview v. Markh~~cRe~'Me%ial &pital, 26 Markh~~cRe~'Me%ial &pital, 137 Gex. 178 152 S W 1112 (1941)'Markham Hospitalv. City of LongGiew,~l$l'S.W. 26 695 (Tex:mv. App. 1945, error ref.}

The case of Hedgecroftv. City of Houston, 150 Tex. 654, 244 S.W. 26 632 (1952)demonstrateswhat facts are sufficient to constitute 'actualuse.' The courtwas there concernedwith the following facts. The Hedgecroft Corporation had acquired title to thepropert $ in question throughgift and conveyance on December 30, 19 8. Before that time the corporationhad agreedwith a construction company to make the necessary alterationsand repairs of the property to fit it for the operation of a hospital, clinic and training school; and beginning with theweek ending July 7, 1948, and continuinguntil December 29, 1948, the constructioncompany had been pre aring plans for repairs and alterations. From August 1, 19 8,

ft throughDecember 27, 1948, a blue print company had furnishednumerous blue prints concerning the ccntemplated repairs. Prior to the corporation'sacquisition of the property in question and immediately thereafter includingJanuary 1, 1949, the corporationwas engaged in planning and making the necessary repairs. The remodelingwas completed on May 13, 1949, to an extentwhich allowed the clinic to move on to the premises; and the clinic had sincebeen continuously in operation there. The City of Houston and the Houston Independent School District instituteda suit for taxes for theyerr 1949.

In holding that the property in questionwas exempt, the court reviewed decisions in other States in which exemption had bean accorded on the basis that if the subsequentuse of thepremises created a tax exempt situation then a use which was confined to readying them for suchpurpose established a right to exemption.

At page 636 the court said:
-3647-Honorable HaroldVittltoe, Page 4 (C-758)

I, The work proceededuntil it was compieied on May 13, 1949, and since that time the hospital and clinic have been operated
as a public charity. The facts alleged show, In our opinion, an actual and direct
use of the property on and prior to January 1949 f 9 or the charitablepurpose." (Emphasis 1,

. __ suppliZE)-

The most recent case involving the exemption of propertiesbelonging to a charitable foundation is David Graham Hall Foundation v. Highland Park, et al. 371 S.W. 2d '(62 (T Ci A 1963 co~~erne~'wi~~'the f I The courtwas' f~lE~:~~g'~a~~s",~'~;,Cedat page 765 of the opinion:

"TheDavid Graham Hall Foundationwas

established in 1940. Its corporate charter recites that it was created for the 'support of any benevolent, charitable, educational
or missionaryundertaking.' Over theyears it has engaged In many laudableactivities, among them the study,prevention and cure of communicablediseases, the establishment of blood banks, etc.

"TheFoundation is sole owner of the property in question, Lot 16 of Block 87, Highland Park 4th Installment. The dimensions of the lot are 250' by 250'. On it four buildings are located: a main building and three residences.

"Themain buildinghouses the Foundation's administrativeoffices and laboratories. This building also houses the administrative offices of the David Graham Hall Trust, a relatedbut separate organization. The Trust owns many properties the revenue from which is devoted to the support of the Foundation.

. . . "Of the three residences on the property, two of.them are rent houses, the revenues from which are devoted to the Foundation's actiirities. The third residence Is known as the caretaker'shouse. This house has also been rented form indet,ermina+e period for the
sum of $50.00 per month. During World War

-3648-Honorable Harold Vittltoe, Page 5 (C-758)

II these houses were occupied ~j.npart at least at a nominal rental by war refugees whoperformed services for the Foundation.”
The court held that the property of the charitable organization was not exempt from the payment of ad valorem taxae since the particular property in question had not

exclmeively for charitable purpoeee. At page 764, been used the court stated: -

“As was pointed out by our Supreme Court recently it will not suffice for one to show that he corneawithin the statutory proviaiona for tax exemption if the facts do not bring his 

### caeawithin the requirements for tax exemption aa laid down in Art, VIII, Sac. 2 of our State Constitution. River Oak8 Garden Club v. City of Houston, Tex. 370 S.U. 26 851.

. . .

. . .
n is two-f&r The aonrtitutional requirement

the property must be owned by the organization alaiming the 

### examption; and it muat be exclurmively used by the organization, ae distinguished from a partial uaa by it and a partial use by others whether the others pay rent or 

### not. A th itiee, omitted -7

. . . (J&ha6is”th%e)
It is our opinion that under the decisions above cited none of the properties belonging to the Foundation are now exempt from ad valorem taxes, because said properties are not presently being devoted to the actual, direct and exclusive charitable use requisite to exemption.
SUMMARY
The properties belonging to The EdRachal Foundation are not now exempt from ad valorem taxes because said properties are not presently being devoted to the

-3649-Honorable HaroldVittitoe, Page 

### 6 (C-758)

actual, direct and exclusive charitableuse requisite to exemption.

Yours very turly,

WAGGONRRCARR Attorney General of Texas

MMcGP:lr



### APmOVED: OPINION COMMITTEE

W. V. Geppert, Chairman Arthur Sandlin Jack Goodman John Pettit Pat Bailey

APPROVED FOR THE ATTORNEX GENERAL BY: T. B. Wright



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