Court Opinion

ID: 9698181
Source: CourtListenerOpinion
Date Created: 2023-08-25 19:44:07.85205+00
Date Added: 2024-06-11T18:20:39.162380
License: Public Domain

Spencer, J.,
dissenting.
I respectfully dissent from the majority opinion herein. What I predicted in my dissent in Evangelical Lutheran Good Samaritan Soc. v. County of Gage, 181 Neb. 831, 151 N. W. 2d 446 (1967), is coming true in this case because this case goes even further than Good Samaritan. There, I said: “If this opin*581ion stands, every nursing home in the state, by incorporating as a nonprofit corporation, can avoid taxation and still drain off all profits in salaries and expenses.”
The Bethesda Foundation operates other nursing homes and businesses. Its operating revenue and expenses are all controlled by the central office of the Foundation and all its separate institutions are shown on one consolidated annual balance sheet and Internal Revenue Service form. If one nursing home operation shows a net gain from operations, this gain is used somewhere within the Foundation to offset those operations of the Foundation which show a net loss. While the evidence shows the Foundation has been having serious financial problems, the evidence also shows that Ash Manor Nursing Home, standing by itself, has in fact been a profitable operation.
Although the Foundation is organized as a nonprofit corporation, it owns and has been involved with various profit-making ventures. Specifically, the Foundation has been engaged in farming operations in Central City, Nebraska; and the sporting goods business and the commercial laundry business, both in Ainsworth, Nebraska. The witness didn’t know whether these were profitable businesses, but they neither lost nor made any large sums. The Foundation has bought and sold nursing homes at various times, including those organized on a profit basis.
The Foundation presently owns all the stock of B. F. Aviation which is a private profit corporation. B. F. Aviation operates a charter airline service for private charter as well as for the Foundation, and at least 50 percent of its business is with customers other than the Foundation. The Foundation owned three airplanes before B. F. Aviation was formed. It now owns five airplanes which are presently worth somewhere in the neighborhood of $600,000, and the *582record indicates it is contemplating purchasing another aviation company. The founder of the Bethesda Foundation and members of his family are officers of B. F. Aviation. B. F. Aviation has not been profitable to date. Money from profitable segments of the operation of the Foundation, such as the nursing home involved herein, which have been funneled through the central office of the Foundation, have been used to finance B. F. Aviation.
In addition to the profit-oriented enterprises above described, the Foundation has had a close association with a private corporation called Turcon, Inc., which was in the construction business. This corporation is of particular interest because it was operated and primarily owned by petitioner’s founder, Mr. Charles Turner. In addition to building nursing homes for the petitioner, this company also engaged in many private construction activities, including the construction of Mr. Turner’s personal home at cost; the construction of sewer lines; and a swimming pool for the city of Bellevue. Turcon also loaned money to its officers, including Mr. Turner. Eventually, Turcon was absorbed by the Foundation and Turcon’s assets were transferred to the Foundation. Of particular interest in this case is that the Foundation, on a form filed with the Internal Revenue Service, took a bad debt expense in excess of $151,000. A portion of this amount was attributable to money owed by Turner to the Foundation when Turcon was phased out. Mr. Turner not only headed both the Foundation and Turcon but he also employed members of his family at Turcon.
It is important to keep in mind that in interpreting and applying constitutional and statutory provisions relating to exemption from taxation, the rule of strict construction applies. It is the burden of the taxpayer to show that the property involved is clearly within the claimed exemption. I cannot bring myself to believe that money from nonprofit corpo*583rations can be used in any way to support a profit enterprise and the nonprofit corporation be eligible for tax exemption.
The constitutional provision involved herein, Article VIII, section 2, provides in part as follows: “The Legislature by general law may exempt * * * property owned and used exclusively for educational, religious, charitable, or cemetery purposes, when such property is not owned or used for financial gain or profit to either the owner or user.”
It is to be noted that the Legislature may only provide exemption if the property is owned and used exclusively for educational, religious, charitable, or cemetery purposes. The word “exclusively” is one of general understanding and certainly should preclude the exemption granted herein.
In Todd v. County of Box Butte, 169 Neb. 311, 99 N. W. 2d 245 (1959), this court said: “Statutes exempting property from taxation are to be strictly construed, and one contending that his property is exempt from such tax must show clearly that he is within the exceptions provided by statute.”
Quoting from the majority opinion herein: “In Good Samaritan this court concluded that the nursing homes were charitable institutions, noting that the concept of charity was broad enough to include practical enterprises for the good of humanity operated at a moderate cost to those who receive benefits.” In this respect it is important to note that the charges at Ash Manor are equal to those of non tax-exempt nursing homes. Furthermore, it is to be noted that when Ash Manor receives an indigent person it subsequently applies for and always receives Medicaid payments retroactive to the time that person became a resident. The charity dispensed by Ash Manor is no more nor less than that which will be dispensed by all nursing homes, whether tax exempt or otherwise. Tax exemption, therefore, makes these nonprofit institutions more competitive *584than the private operators with whom they compete, and could eventually eliminate those operators.
The intent of the law is not to exempt every nonprofit corporation which may be of some benefit to mankind. In the instant case the facts demonstrate that, although the nursing home was organized on a nonprofit basis, it is so similar to nursing homes being operated on a profit basis that an exemption should not be granted.
By the majority opinion this court imposes a burden on the taxpayers of the communities where these so-called nonprofit nursing homes are located to help support any business organized for profit or otherwise which the Bethesda Foundation sees fit to operate.
As I suggested at the outset, by the mere expedient of incorporating as a nonprofit corporation, every nursing home in the state may compel the taxpayers of the community in which it is located to support its enterprise. The majority opinion goes too far - much too far.
White, C. J., and Kuns, Retired District Judge, join in this dissent.