Court Opinion

ID: 4133036
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:33:13.515993+00
Date Added: 2024-06-11T14:34:13.695400
License: Public Domain

TITEA~TORNEY       GENERAL
                                            OF TElxAs
                                        Avemiw. TWAS 787ti
      a0EsN     I”     EILL
A--                  CIlmmER-

                                                              July   8, 1974

              The Honorable    Alton R. Griffin                             Opinion   No.   H-   342
              Criminal  District   Attorney
              Lubbock County Courthouse                                     Re:   Whether hospitals    will lose
              Lubbock,  Texas     79401                                     their tax exemptions    if they make
                                                                            available  premises   to Blood
                                                                            Services   of Texas

              Dear      Mr.     Griffin:

                     Your question    asks whether   two hospitals   will lose their ad valore m
              tax exemptions    if they permit a separately    operated   blood bank to use a
              portion of their premises     for the purposes   of obtaining   blood from family
              members    of patients.

                     Article   8, Section 1 of the Texas Constitution       requires   that “Taxation
              shall be equal and uniform:”        However,    Subsection    2(a) of Article   8
              authorizes     the Legislature   to exempt various     classes    of property  including
              property     owned by institutions   of “purely   public charity. ”

                      In the Constitution      of 1876, Section 2 of Article       8 excepted   from ad
              valorem     t.axation “all buildings       used bxclusively   and owned by persons         or
              associations      of persons    for school purposes,        and the necessary      furn:ture
              of all 8mools, . , .and institutions       of purely public charity. ” Since t.hat time
              the Section has been amended             on a number of occasions       and a great deal
              of language appears         between    “buildings   used exclusively     and owned by”
              and “purely      public charity”      and a literal  reading would not link the two
              phrases.       Nevertheless     they are linked and we believe         that, in adopt.ing
              the various     amendments,        it was not the ~intent of the people to effect a
              change insofar       as the Section appIies to institutions       of purely public charity.

                         Acting     under   that authority,     the Legislature       has adopted   Article

                                                               p.    1594
The   Honorable        Alton     R.   Griffin      page     2     (H-342)

7150, V.T.C.S.,     exempting                certain     described      properties       from   taxation.
In its Sec. 7 it exempts:

                         All buildings    and personal     property     belonging    to
                   institutions    of purely public charity,         together   with .the
                   lands belonging       to and occupied     by such institutions,
                   including    hospital    parking facilities,      not leased or
                   otherwise     used with a view to profit,          unless such
                   rents and profits       and all moneys and credits          are
                   appropriated      by such institutions       solely to sustain
                   such institutions       and for the benefit of the sick and
                   disabled     members      and their families       and the burial
                   of the same,      or for the maintenance          of persons
                   when unable to provide         for themselves,        whether    such
                   persons     are members       of such institutions       or not. . . .

         It goes   on to define           an institution     of “purely     public   charity”      as:

                   . . . one which dispenses      its aid to its members       and
                   others in sickness    or distress,    or at death,    without
                   regard to poverty or riches of the recipient,         al’so when
                   funds, property    and assets    of such institutions    are
                   placed and bound by its law to relieve,        aid and administer
                   in any way to the relief    of its members     when in want,.
                   sickness,and   distress,   and provide    homes of its help-
                   less and dependent     members     and to educate and maintain
                   the orphans of its deceased       members    or other persons     . . . .

         The Texas Supreme    Court                has defined        “purely   public    charity”       to
depend    on the existence of three                elements:

                   .   .   .   . First,
                                    it made no gain or profit;    second,   it
                   accomplished     ends wholly benevolent;    and third, it
                   benefit,ed persons,     indefinite in numbers   and in person-
                   alities,  by preventing     them, through absolute   gratuity,
                   from becoming      burdens to society   and to the state.

                                                    p.     1595
The   Honorable     Alton   R.   Griffin   page   3        (H-342)

City of Houston v. Scottish   Rite Benevolent  Ass’n,   230 S.W. 978, 981
(Tex.  1921); cited with approval.   River Oaks Garden Club v. City of Houston,
370 S. W. td 851 (Tex.   1963); and in City of Amarillo  v. Amarillo  Lodge No.
731, AF     & AM,   488 S.W. 2d 69 (Tex.    1972).

       We    assume   the hospitals and the blood bank qualify as institutions
of purely    public charity,  but, of course,   whether   any institution qualifies
as one of    purely public charity  will ultimately   depend upon whether,      in fact,
it meets    the three point test , above set out;      .

       In Hilltop   Village,    Inc. v. Kerrville    Ind. Sch. Dist.,      426 S.W.2d
943 (Tex.    1968), a case decided under this constitutional           provision,   the
Supreme    Court specifically       indicated  that an institution’s   use of property
for incidental    purposes     will not defeat a tax exemption.       Hilltop Village,
Inc. v. Kerrville      I. S. D., supra, at 947.     See also, Santa Rosa Infirmary               v.
City of San Antonio,         259 S.W. 926, 932 (Tex.      Comm.     App. 1924).

        The operation    of the incidental     facilities    in Hilltop  Village   resulted
in a profit which was divided between the outside operations                  and the institu-
tion.    Whether   the use of hospital    facilities      by a blood bank is an incidental
use of those facilities    is a question    of fact which we cannot resolve           in this
opinion.      If the use is incidental    the tax exemption         will probably   be pre-
served    under the guidelines    set down in Hilltop Village.

       If a full development       of the facts does not indicate      that the use of
the hospital   facilities    by the blood bank meets the incidental         use test
under the guidelines        set down in Hilltop   Village    , then it arguably   can be
contended    that the tax exemption       will be secure if the blood bank operates
as an institution      of purely public charity.      All of this involves    the resolu-
tion of fact questions       which are not before     us. Assuming,       without deciding,
that the blood bank is a charity,        it will be necessary      to determine    whether
use of property      by more than one institution        of purely public charity will
defeat a charitable       tax exemption.

       In City of Amarillo        v, Amarillo     Lodge     No.      731, AF   & AM,   supra,
the court said:

                                           ps 1596
The   Honorable     Alton   R.   Gritfin    page   4     (H-342)

                       The exemption        of an institution      of purely public
                  charity as such is not authorized             by the constitutional
                  provision    in question,      It is only property         owned by
                  such an institution       and used exclusively         for purely
                  public charity      that may qualify for the exemption.
                  Morris    v. Lone Star Chapter No. 6. R.A. M., 68
Tex. 698, 5 S.W. 519. The institution             must be one
                  of purely public charityiin         the purposes       for which it
                  is formed     and in the means used to~accomplish                such
                  purposes,     and the property        claimed      to be exempt
                  must be owned and used exclusively                 by the institution
                  in furthering    its charitable      activities.      Hilltop   Village,
                  Inc. v. Kerrville       Ind. Sch. Dist.,         Tex. Sup., 426 S.W.
2d 943.     (488 S.W. 2d at 72) [Emphasis             added]

       Although   this statement    of the court lends itself to a broad interpreta-
tion, we believe    that,its context and the case authority      on which it is based
suggest a narrower      meaning is appropriate.      For example,     Hilltop Village,
as noted above,    indicated   that incidental  use of property    for non-chaiitable
purposes    would not destroy    an otherwise   valid charitable    tax exemption.

        We have found only one case in which the issue was raised as to
whether     a charitable        exemption    is defeated   merely  because more than
one charitable        institution   used the property.       The Court of Civil Appeals
held in City of Houston v. River              Oaks Garden Club, 360 S.W.2d 855
(Tex.     Civ. App. --Houston           1962) that multiple    use by various  charities
was sufficient       to di.sallow the exemption.         The Supreme     Court affirmed   on
different     grounds and specifically          declined  to reach the question    of use by
multiple     charities.       River   Oaks Garden Club v. Ci,ty of Houston, 370 S.W.
2d 851, 853 (Tex.          1963).   However,      Justice Norvell,   joined by Justices
Greenhill,      Griffin     and Smith,    dissented    and said:

                  . . . the mere fact that a charitable        use is
                  sometimes     made of the property       by some
                  organisation    other than the owner,      should not
                  affect the tax exemption    classification     of the
                  property    so long as no,charge     is made for
                  such,use. (370 S.W. 2d at p. 862.)

                                           p* 1597
    I
.

        The   Honorable    Alton    R.   Griffin      page    5      (H-342)

                  We note also that the Court of Civil Appeals               opinion and other courts’
        broad statement       on exclusive      use are based on decisions         involving    use by
        non-charitable     institutions.       See, e.g.,      City of Houston v. Scottish Rite
        Benevolent     Association,       230 S.W. 978 (Tex.        1921) (used by “Masonic
        organizations,     whose activities        included other fields than charity”);         Morris
        v. Lone Star Chapter No. 6, Royal Arch Masons,                     5 S.W. 519 (Tex.      1887)
        (two of the building’s       three floors     rented for profit),     State v. Settegast,
        254      S. W. 2d       .9 2 5 (Tex.     Comm.      App. 1923) (property      consisted     of
        rent houses,     the revenues       from which were used for charitable             purposes);
        B. P. 0. E. Lodge No. 151 v. City of Houston,                44 S.W.2d 488 (Tex.       Civ.
        App. -- Beaumont         1931, error     ref’d)   (‘property    used by profit-oriented
        “restaurant     keeper,     barber,    gymnasium        operators,    and electric    bath
        giver”).

                  The leading case in which           an exemption  was upheld is Santa Rosa
        Infirmary    v. City of San Antonio,           259 S.W. 926 (Tex. Comm.   App. 1924)
        where the court said:

                                The constitutional    requirement    is twofold:    the
                          property   must be owned by the organization           claiming
                          the exemption;      it must be exclusively     used by the organ-
                          ization,  as distinguished      from a partial   use by it, and
                          a partial  use by others,      whether  the others pay rent or
                          not.     (259 S. W.      at 932).

        The authority   cited to support this statement,      was City of Houston v.
        Scottish  Rite Benevolent   Association,   rupra,    where the Court had said:
        “The actual,   direct use must be exclusive      on the part of such an institu-
        tion as is favored   by the constitutional  provision.   ” (230 S. W. at 981). But
        the Court was dealing with a use by two Masonic          orders whose work was
        only pa’rtly charitable.

                 When the Supreme      Court discussed   the Santa Rosa case by adopting
        the Commission      of Appeals  opinion in City of Longview      v. Markham-McRee
        Memorial    Hospital,   152 S.W.2d 1112 (Tex.   1941) it stressed  the landlord-
        tenant relationship    of the use that destroyed   the exemption.     In City of

                                                       p.     1598
The   Honorable     Alton   R.   Griffin   page   6    (H-342)

Longview      two doctors    rented offices     in a hospital  building.    The doctors
paid rent and contributed        a substantial    amount of their services      to the
hospital’s    charity  cases.     Additionally    they also performed      an essential
service    to the hospital    by serving    as house physicians.       Although   the
fact that other doctors       used the hospital     facilities to treat private    patients
did not endanger      the tax exemption,       the renting of offices    in the hospital
did.    The court avoided      the dual use issue and said:

                  While it is true that the use of these offices          results
                  in a necessary      contribution    to the operation    of the
                  hospital,   it seems to us quite obvious that the letting
                  and occupancy      of same is dominantly       a commercial
                  and private    transaction.       We therefore    conclude    that
                  the property     in question    is not exempt from taxes
                  under our Conatitution.          (152 S. W. 2d at 1114)

         Given the failure    of the Supreme        Court to decide definitively    any
case on the ground property         was,used       by more than one charitable
institution    and that the original      statements     of the court concerning
exclusive     use have arisen in cases in which at least one user of the
property     was not a charitable     institution;    we feel justified  in predicting
that our Texas Supreme         Court would, at least hold that if a normal
landlord-tenant     relationship    is not present,      and no rent is charged,       that
the use of a portion      of a charitable     hospital   by a charitable   blood bank
will not cause the hospital       to lose its tax exempt status.

                                      SUMMARY

                       A hospital  operating    as a purely public charity
                  will not lose the tax exempt status of its property
                  because it is used in part by a blood bank if such
                  additional   use is incidental   and if the blood bank

                                           p.   1599
    I
‘

        The   Honorable    Alton   R.   Griffin         page   7    (H-342)

                          is also a purely public charity and if a normal
                          landlord-tenant  relationship  in not involved
                          and no rent is charged.

                                                                     Very     truly   yours,

                                                                    Attorney      General      of Texas

        DAVID    M.   KENDALL,          Chairman

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                                                        p.   1600