Opinion ID: 1228773
Heading Depth: 1
Heading Rank: 1

Heading: CLASSIFICATION vs. DESIGNATION

Text: Much of the debate between the parties involves the question whether Westminster may rely upon the classification statutes to gain tax-exempt status or whether it must rely solely upon the designation statutes. The arguments advanced on this question focus upon the effect of the General Assembly's action in granting tax-exempt status to the Westminster-Canterbury facilities in Richmond, Lynchburg, and Winchester. Westminster argues that it is entitled to tax-exempt status under Code §§ 58.1-3609 and 58.1-3617, both classification statutes, because it is a nonprofit religious association whose property is used exclusively for charitable purposes. Westminster also argues that it is entitled to tax-exempt status under Code § 58.1-3606(A)(5), another classification statute, because it is a religious association similar to the Young Men's Christian Association. Westminster says that to qualify for tax exemption under Code §§ 58.1-3609 and 58.1-3617, it must establish it is a nonprofit, religious association whose property is used exclusively for charitable purposes and that to qualify under Code § 58.1-3606(A)(5), it must also establish it is a religious association similar to the Young Men's Christian Association. Westminster submits that its not-for-profit status has never been disputed, leaving only the question whether it has shown that its property is used exclusively on a charitable basis by a religious association ... or a religious association similar to the YMCA. Westminster points out that the General Assembly, in designating the Westminster-Canterbury facilities in Richmond, Lynchburg, and Winchester as tax-exempt, used such phrases as benevolent and religious organization and charitable and benevolent organization within the context of Section 6(a)(6) of Article X of the Constitution of Virginia. From this usage, Westminster argues that if those facilities, admittedly identical in all material respects with the facility at Virginia Beach, come within the definitional ambit of `charitable,' `benevolent' and `religious' within the context of Section 6(a)(6) of Article X of the Constitution of Virginia, then the facility in Virginia Beach must accordingly be `charitable,' `benevolent' and `religious' within the meaning of that Article, and hence must be `charitable' and `religious' within the purview of Virginia Code Sections 58.1-3606A.5, 58.1-3609 and 58.1-3617. Westminster adds that the conclusion is inescapable that either Westminster is `charitable' and `religious' within the parameters of the statutes upon which it relies or ... the Virginia General Assembly has, on three separate occasions ..., exempted the other facilities through unconstitutional enactments. And, Westminster concludes, [a]ll doubts about the constitutional validity of a statute are to be resolved in favor of its validity. We disagree with Westminster's interpretation that the General Assembly's action with respect to the three other Westminster-Canterbury facilities establishes the charitable, benevolent, and religious nature of the Virginia Beach facility. While that interpretation might arguably be reasonable, if there is another reasonable interpretation of the General Assembly's prior action, then Westminster's interpretation must lose. This follows because under our present Constitution, which became effective July 1, 1971, the rule in Virginia is that [e]xemption of property from taxation ... shall be strictly construed. Art. X, § 6(f). And, under this rule, [e]xemption from taxation is the exception, and where there is any doubt, the doubt is resolved against the one claiming exemption. Golden Skillet Corp. v. Commonwealth, 214 Va. 276, 278, 199 S.E.2d 511, 513 (1973). Westminster came into existence and acquired its property after July 1, 1971. Hence, its claim to exemption must be strictly construed. This means that Westminster's entitlement to exemption must appear clearly from the statutory provisions upon which it relies. As noted previously, Westminster relies upon Code §§ 58.1-3606(A)(5) and 58.1-3617. Under § 58.1-3606(A)(5), however, only property belonging to organizations conducted exclusively as charities may be exempted from taxation, and under § 58.1-3617, only property used exclusively for charitable purposes may be exempted. We do not think it appears clearly that Westminster is an organization conducted exclusively as a charity or that its property is used exclusively for charitable purposes. Hence, it is at least doubtful that Westminster is entitled to exemption under the classification statutes. It does not follow, however, that the General Assembly's action with respect to the three other Westminster-Canterbury facilities, which are admittedly identical to the Virginia Beach facility, is of doubtful validity. The General Assembly does not labor under the stricture imposed upon tax authorities by the classification statutes. The language exclusively as charities and exclusively for charitable purposes, found in the classification statutes, does not appear in Article X of the Constitution, the source of the General Assembly's authority to exempt property from taxation by designation, and no statute imposes such a restriction upon the General Assembly. In our view, the General Assembly deliberately created this classification-designation dichotomy in the field of tax exemption, reserving unto itself the authority to grant exemptions where entitlement under the stricter terms of the classification statutes might be doubtful. This dichotomy is the source of the other reasonable interpretation we make of the General Assembly's prior action with respect to housing organizations having Westminster's specific characteristics. We interpret the consistent manner in which the General Assembly has dealt with such organizations to mean that they must obtain exemption via the designation route. This is not to say that every organization providing housing for the elderly must obtain exemption by designation. Those clearly qualifying under the classification statutes are entitled, of course, to exemption at the hands of tax authorities. But, because Westminster does not clearly qualify under those statutes, we reject its claim for exemption by classification. [1]