Court Opinion

ID: 4133063
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:33:36.427797+00
Date Added: 2024-06-11T14:34:13.810251
License: Public Domain

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                    Tsm       A!ETVNRNEY             GIECMEIRAL
                                   OF      TE:XAS
                               AUSTIN.     TESXAS    78711

     The Honorable Ted Butler                           Opinion No. H- 315
     Criminal District Attorney
     San Antonio, Texas 78204                           Re: The constitutionality  of
                                                        Article 7150, $ 28, V. T. C. S.,
                                                        providing a tax exemption for
                                                        certain organizations which
                                                        hold land for donation to medi-
                                                        cal uses

     Dear Mr.     Butler:

           You have asked our opinion on two questions which are:

           “(1)   IS Section 28 of Article  7150 of the Revised Civil
                  Statutes of Texas as enacted and added by the 63rd
                  Legislature,  constitutional?

           “(2)   Assuming that the answer to question (1) above is
                   Yes, then under the facts presented, will the San
                  Gnio     Medical Foundation qualify as Tax Exempt
                   pursuant to Article 7150, Section 28, of the Revised
                  Civil Statutes of Texas? ”

           The 63rd Legislature   added two sections 28 to Article 7150, V. T. C. S.
     For the purpose of this opinion we are interested in the one which provides:

                        “The following   property   shall be exempt from taxation,
                    to-wit:

                       ‘Sec. 28. Nonprofit corporations  hdding property for
                   medical center development. --All rea1 and personal pro-
                   perty owned by a nonprofit corporation,   as defined in the

                                         p. 1456
The Honorable   Ted,Butler    page 2     (H-315)

            Texas Nonprofit Corporation Act, and held for use
            in the development of a med,ical center area or areas
            in which the nonprofit corporation has donated land
            for a state medical,   dental, or nursing school, or for
            other hospital, medical, and educational uses and uses
            reasonably related thereto, during the time remaining
            property is held for the development to completion of
            such medical center and not leased or otherwise used
            with a view to profit, shall be exempt from all ad valorem
            taxation as though such property were, &ring such time,
            owned and held by the State of Texas for such health and
            educational purposes. ”

Article 7150 was enacted under the authority of and is limited by Article
8. § 5 1 and 2 of the Texas Constitution which provide in part:

                “Section 1. Taxation shall be equal and uniform.
            All property in this State, whether owned by natural
            persons’or  corporations,   other than municipal, shall
            be taxed in proportion to its value, which ehall be
            ascertained as may be provided by law. . , ,

                “Section  2. All occupation, taxes shall be equal and
            uniform upon the same class of subjects within the limits
            of the authority levying the tax; but the legislature may,
            by general laws, exempt from taxation. . . institutions
            of purely public charity; and all laws exempting property
            from taxation other than the property above mentioned shall
            be null and void. ”

       According to the information you supplied us the San Antonio Medical
Foundation acquireslarge     areas of land and donates it to various hospitals
and other medical institutions.   Perhaps the largest beneficiary   of the
foundation’s largess is the University of Texas which is operating or is
constructing a medical school, a dental school andanursing school on land
donated by the foundation and is affiliated with at least two teaching hospitals
located on land furnished by the foundation.

                                       p. 1457
The Honorable   Ted Butler   page 3    (H-315)

       The traditional test used to determine if an institution is one of
purely public charity within the meaning of our constitutional exemption
is whether first, it makes no gain or profit; second it accomplishes      ends
wholly benevolent; and third, it benefits “persons,     indefinite in numbers
and personalities,    by preventing them, through absolute gratuity, from
becoming burdens to society and to the state. ” City of Amarillo v.
Amarillo    Lodge No. 731, A. F. & A.M.,      488 S.W.2d 69 (Tex. 1972);
City of Houston v. Scottish Rite Benevolent Association,        230 S.W. 978
(Tex. 1921). See also San Antonio Conservation Society, Inc. v. City of
San Antonio, 455 S.W.2d 743 (Tex. 1970) where it was held that the
preservation    of an historic house qualified as a charitable activity entitled
to a tax exemption since the definition of charity cannot be limited to
almsgiving.    Therefore the third requirement of the test is met if an activity
affects the people of the community by assuming to a material extent that
which might otherwise become the duty or obligation of the community.
San Antonio Conservation Society, supra, at 746. Once an institution has
met the test, then its property can constitutionally    be exempted from taxa-
tion so long as that property is itself used exclusively for charitable purpo-
 ses. City of Amarillo,      supra.

        It is a cardinal rule of statutory construction that an act will be
construed so as to sustain its constitutionality.     McKinney v. Blanken-
ship,    282 S.W.2d 691 (Tex.   1955). Therefore,    we believe section 28
should be interpreted as intended to exempt only those institutions who~se
activities meet the three part test employed in City of Houston v. Scottish.
Rite, supra, City of Amarillo v. Amarillo       Lodge, supra. Any broader
interpretation would result in a finding that the exemption falls outside the
definition of “purely    public charity” and thus is constitutionally  invalid.

       In addition to passing “public charity” muster, a public charity’s
property,   to be exempted, must be used exclusively for charitable purpo-
ses. The use permitted in 5 28 and here.urder consideration    is not a use
encompassed in the normal concept of that word but consists of being
“held for use” for future donation for purely charitable purposes.

      It is suggested that, in this instance, the act of the medical foundation
in donating the land to an appropriate medical organization is the foundation’s

                                      p. 1458
.   .   -

    The Honorable   Ted Butler    page 4    (H-315)

    “use”of the land for charitable purposes.      If we take this view of the matter,
    support for the exemption is found in the decision       of the Supreme Court oft
    Texas, written by Justice Smedley, in Hedgecroft v. City of Houston, 244
S.W.2d 632 (Tex. 1951). Hedgecroft was a corporation organized to operate
    a hospital for the treatment of poliomyelitis     and similar diseases and recog-
    nized as an institution of public charity.    Hedgecroft had been denied a tax
    exemption for the period of time during which its property was being remodel-
    ed preparatory   to the property’s conversion to a hospital. The Supreme Court
    reversed and held that Hedgecroft was entitled to an exemption since the
    remodeling of the premises was appropriate and necessary to its operation
    for charitable purposes.    By way of limitation,    however, the Court ind,icated
    that intentions, plans and hopes alone are insufficient to confer the exemption.

            So long, then, as $ 28 is limited to institutions meeting the three part
    definition of a public ,&rity we believe that holding property prior to actual
    donation for a medical,     dental or nursing school or for other hospital,
    medical and educational uses can be considered appropriate and necessary
    to its use for purely public charitable purposes.

          We believe that the Hedgecroft   exception however must be applied
    narrowly and that each case where the Hedgecroft exception is involved must
    be examined on its own facts.   Here the foundation has the heavy burden of
    demonstrating that its holding of the property is necessary as well as
    appropriate to its ultimate use. The ultimate use for purely charitable
    purposes must be certain and not based merely on intentions and plans.
    Evidence that the premises are being r.eadled for such use should be shown.

           We are unable to answer your second question squarely since, even
    if we assume, as we have, the accuracy of all the facts you have provided,
    we do not have sufficient information to determine if the foundation’s
    property is entitled to an exemption under the Hedgecroft exception.    For
    example, we have not been informed of the length of time property is held
    prior to donation and the reason for which it is held rather than being
    immediately   donated.   Therefore,  we are unable to determine whether
    the foundation’s holding of the property is appropriate and necessary to
    its ultimate purely public charitable use.

                                           p. 1459
.   .   .    -

            The Honorable   Ted Butler   page 5       (H-315)

                                         SUMMARY

                           Article 7150, $ 28, V. T. C. S., as interpreted
                       and limited (relating to land held for donation to
                       medical organizations)   is constitutional.  Whether
                       a particular foundation’s property qualifies for a
                       tax exemption depends upon the facts which must
                       be such as to bring the foundation’s holding for
                       uses within the guidelines laid down in Hedgecroft
                       v. City of Houston.

                                                                Very truly yours,

                                                                Attorney   General   of Texas

            Opinion Committee

                                                  I

                                                  p. 1460