Court Opinion

ID: 9547897
Source: CourtListenerOpinion
Date Created: 2023-08-07 17:53:58.206463+00
Date Added: 2024-06-11T15:18:11.936114
License: Public Domain

OAKS, Justice
(concurring):
I concur in the opinion of the Court.
This additional opinion will only elaborate on the question of what constitutes “charitable purposes” under Article XIII, § 2 of our Constitution and under U.C.A., 1953, *1197§§ 59-2-30 and -31. Such elaboration is timely, since our recent insistence that a post-January 1,1983, tax exemption be limited to circumstances where the property is “used exclusively for either religious worship or charitable purposes,” In the Matter of Loyal Order of Moose, # 259 v. County Board of Equalization, Utah, 657 P.2d 257 (1982), will make determination of what is “charitable” much more critical than it was under the prior practice of permitting exemption when property was only “primarily” so used.
In resolving any controversy over the meaning of “charitable purposes,” we cannot be unaware of the impact of charitable exemptions on taxpayers who must thereby bear an increased burden of funding the revenue needs of government. But neither can we be unresponsive to the enormous benefit conferred on the public by charitable activities. Consequently, the courts must be careful to preserve the tax exemption the Constitution mandates for property used for “religious worship or charitable purposes,” but also vigilant to assure that this exemption is not extended beyond the limits established for it.
Section 59-2-30 establishes four requirements that must be met if property is to be exempt from taxation. Those requirements are necessary for exemption, but they are not sufficient. Exempt property must still be “used exclusively for either religious worship or charitable purposes” within the meaning of the Constitution.
Our decisions have established several ground rules that are helpful in determining whether property is used for “charitable purposes.”
First, the test of charitable purpose is public benefit, or, as it is sometimes expressed, contribution to the common good or the public welfare. Salt Lake County v. Tax Commission ex rel. Greater Salt Lake Recreational Facilities, Utah, 596 P.2d 641, 643 (1979); Youth Tennis Foundation v. Tax Commission, Utah, 554 P.2d 220, 221, 223 (1976). Justice Traynor’s definition is classic: “If the benefit conferred has a sufficiently widespread social value, a charitable purpose exists.” In re Henderson’s Estate, 17 Cal.2d 853, 857, 112 P.2d 605, 607 (1941). What qualifies under this standard is “subject to judgment in the light of changing community mores.” Greater Salt Lake Recreational Facilities, 596 P.2d at 643. The public benefit standard is based on the conclusion that the public will receive benefits from the use of the property for charitable purposes “equivalent at least to the public revenue that would otherwise be derived from it.” Salt Lake Lodge No. 85, B.P.O.E. v. Groesbeck, 40 Utah 1, 8, 120 P. 192, 194 (1911), overruled on another point in Matter of Loyal Order of Moose, # 259, supra.
The benefiting of an indefinite number of persons is not an essential element of charitable purpose at common law. Even the benefiting of a limited and identifiable class can be charitable if that result is also beneficial to the public. Restatement (Second) of Trusts § 368, 375 comments a, c, g, h, and j (1959); G. Bogert, The Law of Trusts & Trustees § 362, pp. 4-15, § 365, p. 28 (rev. 2d ed. 1977); 4 A. Scott, The Law of Trusts § 375.2 (3d ed. 1967); In re Henderson’s Estate, 17 Cal.2d at 861-62, 112 P.2d at 609-10; Dwan, “Charities for Definite Persons,” 82 U.Pa.L.Rev. 12 (1933).
Section 59-2-30’s reference to “intended to benefit an indefinite number of persons” does not impose that qualification as a requirement for all charitable exemptions. This “indefinite number” qualification modifies the word “property” in the immediately preceding “including” phrase, not the earlier use of “property” as the subject of the sentence. Under this construction, which obviates serious doubts about the constitutionality of this phrase,1 the re*1198quirement of “indefinite number” only limits the circumstances in which property “incidental to” the accomplishment of religious and charitable purposes qualifies for exemption.2 Consequently, the preamble to the four requirements in § 59-2-30 is properly read as follows: “Any property whose use is dedicated to religious worship or charitable purposes ... is exempt from taxation if all of the following requirements are met: .... ”
Second, we have decisively rejected the contention that all nonprofit corporations are entitled to a charitable exemption for purposes of our property tax. Nonprofit character and use is necessary, § 59-2-30; William Budge Memorial Hospital v. Maughan, 79 Utah 516, 3 P.2d 258 (1931), but it is not sufficient. Friendship Manor Corp. v. Tax Commission, 26 Utah 2d 227, 239, 487 P.2d 1272, 1280 (1971); Greater Salt Lake Recreational Facilities, 596 P.2d at 644. As we said in the latter case,
It is not within the constitutional purview that tax exemption be granted merely because a “non-profit” corporation is interposed between an entrepreneur and his customers even though the activity to which the enterprise is oriented is physically, mentally, or spiritually uplifting.
Third, for a use to qualify as a “charitable purpose,” it must also include the element of gift that is at odds with the exchange of equivalents identified in the idea of “reciprocity.” See the discussion in the majority opinion. Thus, in Greater Salt Lake Recreational Facilities, supra, we declared:
By exempting property used for charitable purposes, the constitutional convention sought to encourage individual or group sacrifice for the welfare of the community. An essential element of charity is an act of giving.
596 P.2d at 643. A gift or sacrifice for the welfare of the community can be identified either from a substantial imbalance in the exchanges between the charitable organization and recipient (i.e., the absence of reciprocity) or in the fact that the burdens of government are substantially lessened as a result of the use of the property.
There are ample illustrations of the denial of charitable exemption where there was “reciprocity” in the alleged charity’s transactions with its recipients. In Friendship Manor Corp. v. Tax Commission, supra, the member-tenants all paid the same rent and received essentially the same benefits. Moreover, what they were receiving—private housing—was a service not provided by government, so the public burden was not lessened by the provision of these services by a non-profit organization. The same is true of the remunerated recreational, research, and social services involved in Eyring Research Institute, Inc. v. Tax Commission, Utah, 598 P.2d 1348 (1979), and Baker v. One Piece of Improved Real Property, Utah, 570 P.2d 1023 (1977). In such circumstances, this Court has referred approvingly to the statement that “[wjhere material reciprocity between alleged recipients and their alleged donor exists — then charity does not.” Friendship Manor Corp., supra, 26 Utah 2d at 238,487 P.2d at 1279. Applying that principle to the facts of that case, the Court concluded: “Where the senior citizen is paying for all of the services he receives ... no charitable purpose is involved.” 26 Utah 2d at 239, 487 P.2d at 1280.
However, the mere fact that recipients pay something to receive a charitable organization’s bounty, such as contributions to the organization or outright payments for services (such as patient charges, student tuitions, or museum admissions), does not disqualify an activity from charitable *1199status under the test of reciprocity, provided the total nature of the exchange is such that one can identify a clear gift to the recipient. Thus, there is no disqualification for reciprocity where persons who pay the same amount receive significantly different services for their payments. Otherwise, there would be substantial doubt about the exempt status of acknowledged charitable activities whose benefits are conferred exclusively or primarily upon contributing or dues-paying members, such as the welfare activities of churches or the rest homes of fraternal organizations. Similarly, there is no disqualification for reciprocity where persons making the same payments receive the same services, provided the organization is so funded (such as by a significant endowment) or conducted (such as by extensive use of volunteers) that all recipients of its services receive measurably more than they pay.
In the alternative, a use of property may also satisfy the gift test where the activity is one that government would otherwise provide to these same recipients, so that its provision on a private, nonprofit basis confers a public benefit by substantially lessening the burdens of government. Cf. Youth Tennis Foundation, 554 P.2d at 221-22 (“the justification for tax exemption is to give encouragement and support to those who assist in discharging those [government] responsibilities”); William Budge Memorial Hospital, 79 Utah at 521, 528-29, 3 P.2d at 260, 263.
For the reasons explained in the majority opinion, the activities carried on in the various union offices in the building involved in this case do not qualify for the charitable exemption because they fail under this third test. The organization’s concentration on promoting the financial and other specific interests of its dues-paying members is such that its activities do not include the essential element of gift.
DURHAM, J., does not participate herein.
BURNS, District Judge, sat.

. If the reference to benefiting an indefinite number was construed as a requirement for all charitable exemptions, this would significantly narrow the exemption mandated in Article XIII, § 2 of our Constitution, since there was no such requirement at common law. Authorities cited earlier. Such narrowing would be contrary to the declaration in the second sentence of § 59-2-30 that it is not intended to limit the scope of charitable exemptions. More impor*1198tantly, such narrowing would violate the principle that our tax legislation cannot validly limit the scope of the exemption in the Constitution. Matter of Loyal Order of Moose, # 259, supra.

. This construction also minimizes the scope of the expansion of charitable purposes involved in the “incidental to” phrase, about which this Court has already expressed constitutional doubts. Salt Lake County v. Tax Commission ex rel. Good Shepherd Lutheran Church, Utah, 548 P.2d 630, 631 (1976).