Opinion ID: 1600552
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Heading: The pertinent parts of section 427.1, Code of 1966, read as follows:

Text: Exemptions. The following classes of property shall not be taxed:    (9) All grounds and buildings used    by    charitable, benevolent,    and religious institutions and societies solely for their appropriate objects   . The case turns upon the meaning of the words in this statute. Our latest consideration of the statute appears in South Iowa Methodist Homes, Inc. v. Board of Review of Cass County, 257 Iowa 1302, 136 N.W.2d 488. That case involved the taxation, during construction, of a facility by plaintiff and for the same purpose as Wesley Acres. By stipulation the question of appropriate objects was removed and the opinion started with the assumption that the building when completed and occupied would be within the exemption. Plaintiff here relies strongly on its charter provisions to lend weight to its claim for tax exemption. Plaintiff's Articles of Incorporation clearly show that the purposes for which plaintiff exists are within the statute. This is not enough. As will be shown in Division II, infra, the use of the property and not the purposes of the institution applying for exemption controls the availability of exemption under the statute. The trial court stressed room gifts and monthly payments in denying exemption. Room gifts and monthly payments by those who are able to pay are not the sole criteria by which we may ascertain whether the use or uses made by plaintiff of Wesley Acres are for its appropriate objects as a charitable institution. We must, therefore, determine first what objects are charitable and second, whether the actual uses made by plaintiff are consistent therewith. It should be kept in mind that the statute does not limit exemption to facilities used solely by or for the financially destitute. As many of the basic problems now before us are thoroughly discussed in both the majority and dissenting opinions in South Iowa Methodist Homes v. Board of Review, supra, we will refer thereto but omit the citations therein. We are fully aware of the problems facing taxing authorities incident to exempt property. We quote from the dissenting opinion: The tax burden, federal, state and local, grows heavier and heavier. The amount of property of the national and state governments, and of various institutions exempted under our statutes, likewise increases by leaps and bounds. So as taxes increase, the amount of property available to pay them diminishes. Thus `charity' is often illusory.    (loc. cit. 1314 of 257 Iowa, loc. cit. 495 of 136 N.W.2d) However, if our tax and exemption statutes are to be revised the problem is for the legislature and not the courts. As noted in the majority and dissenting opinions taxation is the rule and exemption the exception. Exemption statutes are to be strictly construed. (loc. cit. 1304 and 1309, 136 N.W.2d 488) These rules must be applied in harmony with the legislative mandate to construe the provisions and proceedings under the Code liberally and with a view to promote its objects and assist the parties in obtaining justice. Section 4.2, Code of Iowa. (loc. cit. 1305 of 257 Iowa, 136 N.W.2d 488) Institutional exemptions are viewed with more favor than exemptions to private persons. [loc. cit. 1305 of 257 Iowa, 136 N.W.2d 488) National Bank of Burlington v. Huneke, 250 Iowa 1030, 98 N.W.2d 7, involved a charitable trust. The testator bequeathed his property to a trustee for the express and sole purpose of acquiring, constructing, maintaining, and operating a charitable,    hospital    and to operate the aforesaid hospital on a strictly charitable, scientific and educational basis, so that none who need the use of said facilities may be denied admittance, and I do hereby specifically direct that no substantial part of the activities of such trustee shall be carrying on propaganda or otherwise attempting to influence legislation, and I further hereby specifically direct that the aforesaid hospital shall be operated on a strictly nonprofit basis and that in the managment thereof only such charges may be made from patients admitted as may be necessary to meet current operating and maintenance expenses, and that no profit shall be charged any persons seeking admittance thereto. (loc. cit. 1033 of 250 Iowa, loc. cit. 9-10 if 98 N.W.2d) The hospital was to be operated on a nonprofit basis. Charges were limited to the amount necessary to meet current expenses. Patients were not limited to those unable to pay. In a significant particular the case before us is similar, i. e. admission is not limited to those who can pay either in the way of a room gift or monthly charge. In Huneke, supra, exemption was upheld. While the case involved a moneys and credits tax the reasoning is appropriate here. First Methodist Episcopal Church of Ft. Madison v. Donnell, 110 Iowa 5, 81 N.W. 171, 46 L.R.A. 858, involved a subscription to build a church. It is helpful here only for the definition of charity. We quote:     the sole purpose of the plaintiff's statutory existence as a corporate body was to do good. If so, contributions for its support must be classed as charity. `Charity,' says Judge Cooley in Allen v. Duffy, [43 Mich.1, 38 Am.Rep. 159] 4 N.W. 427, `is active goodness. It is doing good to our fellow men. It is fostering those institutions that are established to relieve pain, to prevent suffering, and to do good to mankind in general or any class or portion of mankind.' (loc. cit. 5 and 6, loc. cit. 171 of 81 N.W.) See also Morrow v. Smith, 145 Iowa 514, 124 N.W. 316, 26 L.R.A.,N.S., 696 for discussion of charity. Chapman v. Newell, 146 Iowa 415, 125 N.W. 324 quotes several definitions of charitable gift and gifts considered as such. Among them are: `Charity' is defined as something done out of good will, benevolence, and a desire to add to the happiness or the improvement of one's fellow beings, and almost anything that tends to promote the well-doing or well-being of social man. (loc. cit. 420, loc. cit. 327 of 125 N.W.) Various definitions and examples of charity and charitable gifts are considered in Heald v. Johnson, 204 Iowa 1067, 216 N.W. 772. Detailed analysis of the multitude of authorities on this subject would unduly extend this opinion and serve no useful purpose. An appropriate example appears in Andrews v. Y.M.C.A., 226 Iowa 374, 284 N.W. 186. We quote: Appellant has introduced evidence and has cited authorities in support of its position that it comes within the class of charitable institutions. It is our judgment that it does. Benevolence and charity do not always consist wholly of almsgiving, or the relief of the wants of the needy, or helpless. It includes also the gratuitous or partly gratuitous improvement of spiritual, mental, social and physical conditions of young people, by the maintenance of courses of study, lectures, religious services, libraries, entertainments, gymnasiums, recreation grounds, and other kindred activities, by various institutions. [Citations] The appellant has been, and is doing a highly commendable and admirable service. (loc. cit. 383 and 384, loc. cit. 191 of 284 N.W.) To paraphrase, we think appellant in the case before us is rendering a commendable and admirable service that is vitally needed. We think its objects are charitable. II. Nonprofit status of a corporation does not establish a right to tax exemption. The articles of incorporation may be considered but are not controlling. In Readlyn Hospital v. Hoth, 223 Iowa 341, 344, 272 N.W. 90, 91, this rule is stated: The objects and purposes of the corporation as expressed in its articles of incorporation may be considered in determining this question, but the recital thereof in its articles is not controlling in determining the question of exemption. This question must be determined from the use made of the property rather than the declaration made in its articles of incorporation. See also Theta Xi Building Association v. Board of Review, 217 Iowa 1181, 1183, 251 N.W. 76. III. We do not agree with the trial court that the residents obtain accommodations by pooling their resources. There is no pooling of assets. There is no claim that the total of all room gifts did or could finance the facility. The evidence indicates that the per room cost was far in excess of any room gift. The residents regardless of their finances, including those with none, receive the same care, accommodations and attention. It should be kept in mind that it is the use of the property by the institution, not by its members, that determines whether the use is objectively appropriate. A church does not lose tax exemption because some of its members are wealthy or because it is built through subscriptions and contributions. A hospital does not lose tax exemption because it charges patients for care. A school does not lose exemption by charging tuition. Income producing property owned by a nonprofit corporation may be subject to property tax but that is not the kind of property involved here. Plaintiff should not lose its tax exempt status because many of the residents can and do make room gifts and pay a monthly charge. IV. We are not unaware of the multitude and diversity of pronouncements among jurisdictions. There is little discernible harmony. To use an overworked statement each case is decided according to its own merits. In each case there is some distinguishing feature or statute. Those homes where admission is limited to the physically and financially independent are held taxable. There is no such limitation here. Defendant cites and quotes from Methodist Old Peoples Home v. Korzen, 39 Ill. 2d 149, 233 N.W.2d 537, at 542: While charging fees would not necessarily remove plaintiff from the category of a charitable institution   , the fact that it allocates living space from the standpoint of desirability of location and size on the basis of the amounts of the Founder's Fee (cf. `occupancy fee' in the case at bar) and monthly charges paid by a resident seems to us lacking in the warmth and spontaneity indicative of charitable impulse. Rather, it seems more related to the bargaining of the commercial market place. (Emphasis added) In the case before us the size of a room gift in no way controls the accommodations furnished.