Case Name: SEBASTIAN COUNTY v. EDUCARE CENTERS of Arkansas, INC.
Court: Arkansas Supreme Court
Jurisdiction: Arkansas
Decision Date: 1988-10-17
Citations: 296 Ark. 538
Docket Number: 88-51
Parties: SEBASTIAN COUNTY v. EDUCARE CENTERS of Arkansas, INC.
Judges: Purtle, J., concurs.
Reporter: Arkansas Reports
Volume: 296
Pages: 538–541

Head Matter:
SEBASTIAN COUNTY v. EDUCARE CENTERS of Arkansas, INC.
88-51
758 S.W.2d 413
Supreme Court of Arkansas
Opinion delivered October 17, 1988
[Supplemental Opinion on Denial of Rehearing November 21, 1988.]
Martin, Vater, Karr & Hutchinson, by: Charles Karr, for appellant.
Wright, Lindsey & Jennings, for appellee.

Opinion:
Tom Glaze,
Justice. This case involves the ad valorem assessment of property owned by appellee, Educare Centers of Arkansas, Inc. (Educare), a corporation for profit that operates four of its centers in Sebastian County. The Sebastian County Court, ujpholding the County Board of Equalization, ruled that Educare's property was subject to taxation. Educare successfully appealed that ruling to the Sebastian County Circuit Court, which determined Educare was a school and exempt as such under Ark. Const, art. 16, § 5(b). In this appeal, appellant argues the trial court was wrong because Educare operates child care facilities, not schools. It further contends that, even if Educare qualified as a school, a school must be a non-profit organization to claim an exemption.
The parties' dispute centers on Ark. Const, art. 16, § 5(b), which reads as follows:
(b) The following property shall be exempt from taxation: public property used exclusively for public purposes; churches used as such; cemeteries used exclusively as such; school buildings and apparatus; libraries and grounds used exclusively for school purposes; and buildings and grounds and materials used exclusively for public charity.
The exemptions set out in art. 16, § 5(b), are acts of grace, and must be strictly construed, and every reasonable intendment must be made that it was not the design to surrender the power of taxation, or to exempt any property from its due proportion of the burden of taxation. Brodie v. Fitzgerald, 57 Ark. 445, 22 S.W. 29 (1893).
In the early case of Phillips County v. Sister Estelle, 42 Ark. 536 (1884), this court, in construing the above constitutional provision, extended tax freedom to a private nonprofit institution, which operated exclusively for school purposes. Twelve years later, the court, in considering the public property exemption contained in art. 16, § 5(b), rejected a public school's claim for exemption of property which the school had purchased and held in its commercial capacity, i.e., with a view towards making an investment and a profit. School District of Ft. Smith v. Howe, 62 Ark. 481, 37 S.W. 717 (1896). Cf. Hilger v. Harding College, 231 Ark. 686, 331 S.W.2d 851 (1960) (wherein the court denied an exemption for Harding College's dairy, laundry and print shop because their services competed with like businesses in the community and were not used exclusively for school purposes); see also 71 Am. Jur. 2d State and Local Taxation § 382 (1973) (in general, educational institutions kept and maintained for profit are regarded as taxable in the same manner as other business enterprises, even if provision is made for the payment of the tuition fees of the children of poor parents out of an endowment fund).
We noted in Hilger the similarity of the language employed in art. 16, § 5(b), that exempts property used for school, public and charitable purposes, and stated the principles and rules applying to one category will apply with force to the other categories. Hilger, 231 Ark. at 694, 331 S.W.2d at 856. In reviewing the language of art. 16, § 5(b), particularly in light of this court's holdings in Sister Estelle and Howe, we believe the conclusion is inescapable that any school must operate its institution, and use its property, directly and exclusively for school purposes and with no view to profit, before the school, or its property, is entitled to an exemption.
In the present case, Educare offers strong evidence and forceful argument that it qualifies as a school, not a child care facility, as the term school is intended under art. 16, § 5(b). Nonetheless, even if we agreed with Educare on that point, Educare was established and is operated to make a profit. Educare's executive director even conceded that fact in his testimony. That being so, we hold that the trial court's decision finding Educare exempt from taxes under art. 16, § 5(b), is erroneous. Accordingly, we reverse and remand this cause.
Purtle, J., concurs.
Dudley and Newbern, JJ., dissent.