Title: Monroe v. Baptist Health Care Foundation
Citation: 772 So. 2d 414
Docket Number: 1981456
State: Alabama
Issuer: Alabama Supreme Court
Date: March 10, 2000

772 So. 2d 414 (2000)
H.E. MONROE, Jr., in his official capacity as commissioner of revenue for the State of Alabama; Sarah N. Spear, in her official capacity as revenue commissioner of Montgomery County, Alabama
v.
BAPTIST HEALTH CARE FOUNDATION and Baptist Outreach Services Corporation.
1981456.

Supreme Court of Alabama.
March 10, 2000.
Rehearing Denied May 19, 2000.
Thomas T. Gallion III and Constance C. Walker of Haskell, Slaughter, Young &amp; Gallion, L.L.C., Montgomery, for appellants Montgomery County revenue commissioner.
Gwendolyn B. Garner, asst. atty. gen., State Department of Revenue, for appellant state revenue commissioner.
Tony G. Miller and Thomas H. Brinkley of Maynard, Cooper &amp; Gale, P.C., Birmingham, for appellees.
HOUSTON, Justice.
Two questions were properly preserved for our review: First, is the use of property owned by a nonprofit corporation organized under the laws of Alabama and operated and used by that nonprofit corporation exclusively as an apartment complex for low-income and fixed-income elderly a use that is "exclusively" or "purely" charitable, so as to qualify for an exemption from the payment of ad valorem taxes under Amendment 373(k) of *415 the Constitution of Alabama of 1901 and Ala.Code 1975, § 40-9-1(1)? We conclude that it is. Second, can a vacant lot owned by that same nonprofit corporation and held for future use in close connection with the operation of the apartment complex be granted a similar exemption? We conclude that it can be. Therefore, we affirm the judgment of the trial court.
Amendment 373(k) provides in pertinent part that "property devoted exclusively to... charitable purposes" is exempt from ad valorem taxation. Section 40-9-1(1) states in pertinent part that "all property, real and personal, used exclusively for ... purposes purely charitable" is exempt from ad valorem taxation. This case addresses the ad valorem taxation of two parcels of real property. The first parcel is used for operation of a "well-elderly" retirement home known as "Bell Oaks"; that home is owned and operated by Baptist Outreach Services Corporation ("BOSC"), which is a nonprofit corporation exempt from federal income taxation pursuant to I.R.C. § 501(c)(3). The second parcel of land is a vacant strip adjacent to Bell Oaks. The second parcel is owned and operated by Baptist Health Care Foundation ("BHCF"), which is also a nonprofit corporation exempt from income taxation pursuant to I.R.C. § 501(c)(3). The second parcel is being held for future charitable use in conjunction with Bell Oaks. Both BOSC and BHCF are now part of the Baptist Health System ("Baptist Health").
In 1998, BOSC and BHCF sued the State revenue commissioner and the Montgomery County revenue commissioner. The complaint alleged that the defendants were improperly assessing ad valorem taxes on the two parcels. This case was submitted to the trial court on the briefs, oral arguments, and one deposition. On May 4, 1999, the trial court entered an order in favor of BOSC and BHCF. The defendants appeal.
The dispositive issue is whether these two parcels are being used exclusively for charitable purposes. If they are, then there is no question that BOSC and BHCF are exempt from ad valorem taxation under the clear wording of Amendment 373(k) and § 40-9-1(1).
The defendants contend that neither the property occupied by Bell Oaks nor the second parcel is devoted exclusively to a charitable purpose. The defendants' position is basically that Bell Oaks does not qualify for the total tax exemptions set out in Amendment 373(k) and § 40-9-1(1) because Bell Oaks receives rental income beyond its operating cost and turns away the indigent and the sick elderly. The defendants argue that the vacant parcel does not qualify because, they say, it is not being used for a charitable purpose.
In Mingledorff v. Vaughan Regional Medical Center, Inc., 682 So. 2d 415, 418 (Ala.1996), we wrote:
This definition is consistent with the definition of `charity' set out in Black's Law Dictionary (6th ed.1990):
It is not disputed that Bell Oaks was built for a charitable purpose. Jody Pigg, chief financial officer for Baptist Health, in the only deposition submitted in this case, testified that BHCF "wanted to develop a housing complex for the retiring community as a gesture of community support." The net earnings of Bell Oaks do not inure to the benefit of any director, officer, or private individual, but are devoted to other charitable purposes. The slight profit of Bell Oaks would not pay for any kind of major construction, repair, or capital improvement that Bell Oaks may need in the future. The record indicates that Bell Oaks was built with a sizable amount of capital debt. In 1996, approximately $2.8 million of debt was paid by charitable contributions from other Baptist entities. Bell Oaks could not set its rates as low as it does if it were required to service its own debt. Additionally, Bell Oaks has not had a rate increase in the past six years. Pigg stated the purpose for keeping the rates unchanged:
In Vaughan Regional Medical Center, supra, this Court defined "charitable" in its broadest sense and noted a "trend toward defining a `charity' broadly." 682 So. 2d  at 421. In regard to that trend, it quoted 71 Am.Jur.2d State and Local Taxation, § 373 (1972):
(Emphasis added.)
This broad definition of "charitable" is instructive. Johnson, Vaughan Regional Medical Center, and Black's Law Dictionary indicate that "assisting people to establish themselves in life" is a charitable purpose. This is the function Bell Oaks serves. It should be exempt.
Vacant property of a nonprofit corporation being held with a good-faith intent that it be used for charity has a charitable purpose. Its purpose is future charitable use. It is significant, we think, that BHCF has satisfied the I.R.S. that its charitable status entitles it to be exempt from federal income taxation. I.R.C. § 501(c)(3) states in pertinent part that the income-tax exemption is available to "[c]orporations... organized and operated exclusively for ... charitable ... purposes." Contrary to the defendants' urgings, we can discern no logical basis for imposing a more stringent requirement on nonprofit organizations seeking the ad valorem tax exemption under Amendment 373(k) and § 40-9-1(1). The second parcel should not be taxed.
For the foregoing reasons, the judgment is affirmed.
AFFIRMED.
HOOPER, C.J., and MADDOX, COOK, LYONS, JOHNSTONE, and ENGLAND, JJ., concur.