Court Opinion

ID: 9682605
Source: CourtListenerOpinion
Date Created: 2023-08-24 08:14:46.754601+00
Date Added: 2024-06-11T18:17:40.381718
License: Public Domain

RENDLEN, Chief Justice,
dissenting.
I respectfully dissent to the majority’s finding that the Baptist Book Store does not operate for purposes purely charitable, within the meaning of § 137.100(5), RSMo 1978, and to the majority’s ruling that the Book Store’s property, both real and personal, is therefore subject to ad valorem property taxes.
Stripping the stated purposes of the Sunday School Board to their bare essentials, the organization was created to support the Southern Baptist Convention in “bringing men to God” by making available reading material, music, and audio-visuals, and by fostering Christian education, Sunday schools and service programs as an auxiliary to the Convention’s churches. The operation of the Baptist Book Store helps fulfill these goals by selling religious materials to churches and Sunday schools (such transactions comprise at least two-thirds of the store’s sales), and by expanding the Baptist ministry beyond the hearing range of the pulpit. Sales to the general public provide a distribution outlet not only to those who are already church members and who may wish to supplement the message and inspiration derived from Sunday worship but also to those unable to attend church services. Additionally, providing readily accessible materials to the general public allows the Baptist Convention to reach beyond its present membership and fulfill its proselytizing function. The operation comports with the charitable use of property claimed *8by the organization. The majority correctly states the long-held rule that the use of property determines tax-exempt status and that the nature of the organization owning the property is significant only insofar as the organization must be not-for-profit. Franciscan Tertiary Province v. State Tax Commission, 566 S.W.2d 213, 223 (Mo. banc 1978); City of St. Louis v. State Tax Commission, 524 S.W.2d 839, 844 (Mo. banc 1975); YMCA v. Sestric, 362 Mo. 551, 242 S.W.2d 497, 505 (1951); Salvation Army v. Hoehn, 354 Mo. 107, 188 S.W.2d 826, 828 and 830 (1954), citing State ex rel. Spillers v. Johnston, 214 Mo. 656, 633, 113 S.W. 1083, 1085, 21 L.R.A., N.S., 171 (Mo.1908). However, the majority charges that several factors tarnish the characterization of the Book Store’s use of its property as charitable, namely:
First, the Book Store “sells to all members of the general public as well as to churches and Sunday schools”;
Second, the materials sold are “not purely denominational”;
Third, “Something less than half of the items the Baptist Book Store sells are also carried by commercial retailers”;
Fourth, the Book Store charges “competitive retail prices” rather than providing its merchandise “at or below its cost to the bookstore”;
Fifth, the Book Store is not “operated entirely on a not-for-profit basis.”
I cannot agree that these factors individually or in combination destroy the characterization of this property as dominantly charitable; hence, I believe this record justifies preserving the tax exemption respondent previously enjoyed.
An analysis of the above-referenced factors demonstrates the dominantly charitable nature of the Book Store property, real and personal. Concerning the majority’s first point of attack, sales to the general public (as previously noted) facilitate the Sunday School Board’s efforts of disseminating its religious messages to the public and of broadening the Southern Baptist Convention’s membership. These materials are made available to a wider and more diverse audience than it is able to reach directly on Sundays; it is able to offer these throughout the week rather than once weekly.
As to the second factor, the majority inappropriately attacks the Book Store’s charitable use of this property on the ground that the materials the store sells are not purely denominational. As respondent stated in oral argument, the Baptist religion shares many beliefs with other Christian faiths (and, I would venture to say, even with many non-Christian faiths); what is important to recognize is that the materials sold are religious in nature and that they do not conflict with the tenets of the Baptist church but are in line with the church’s teachings. The sale of these materials, therefore, do not denigrate the charitable nature of the use of this property.
In response to the majority’s third point of criticism, although it may be possible to buy at commercial retail stores a number of items sold at the Book Store, the fact remains that two-thirds of all of the Book Store’s sales are to churches and Sunday schools. The implication is not that the books and other items are of a secular or non-religious nature but that by being sold in commercial stores, they have commercial value despite their religious appeal. The only reference in the majority opinion to the sale of non-religious books concerns a Yellow Pages advertisement indicating that in addition to selling religious materials, the Book Store also engages in the sale of “general books.” It is not clear from the record that these books are of such a non-religious, non-inspirational, nor non-charitable nature that would indicate that they do not further the charitable goals of the Book Store and of the Southern Baptist Convention. Nor is it clear that even some secular books are not meaningfully tangential to the Convention’s non-secular goals. Furthermore, it is not clear that these “general books” represent more than a de minimis portion of the Book Store’s sales. Finally, the parties had stipulated at trial that the Book Store’s inventory consisted of “religious literature and supplies,” but made no reference to *9non-religious books. Since this point was not argued at the trial or appellate level and is not otherwise supported in the record, it appears inappropriate for the majority opinion to sua sponte suggest the point is made on the basis of a Yellow Pages advertisement. While this Court, during oral argument, inquired about the Book Store’s sale of art supplies to the public, respondent explained that the record indicates that the purpose of offering those supplies for sale was to benefit Sunday school teachers and children by augmenting the religious material available to them. Respondent’s analogy at oral argument to Missouri Goodwill Industries v. Gruner, 357 Mo. 647, 210 S.W.2d 38 (1948), is well-taken: in Gruner, the purchase of Goodwill products by persons having no interest in aiding the handicapped was not fatal to Goodwill’s charitable nature, id. at 41; likewise, as respondent analogized, the fact that members of the general public purchase some of these art supplies for non-religious purposes should not be the source of an attack on the status of the real estate as being charitable in nature.
Finally, as to the majority’s fourth and fifth criteria, I cannot agree with the majority’s implication that this religious bookstore is competing for profits and therefore cannot claim tax-exempt status. It is difficult to imagine that a bookstore which confines itself to selling bibles and religious and incidentally “general books” is competing for profit in the traditional sense of the word. The parties stipulated at trial that less than half the religious books and supplies carried by this store are also carried by some commercial retailers. Moreover, only one-third of all sales are to persons or organizations other than churches and Sunday schools. Rather than evidencing a commercial enterprise whose primary purpose is profit, these facts indicate that the raison d’etre of the Book Store is to spread religious messages that the Sunday School Board deems consonant with the tenets of the Southern Baptist Convention. And although some sales may be made to members of the general public, sales of principally religious materials serve as an effective means of furthering the religious goals of the Convention. To compare prices charged by the Book Store with prices found in commercial retail stores offers little in determining respondent’s exempt status. Common sense suggests that religious books are not bestsellers; a general awareness of manufacturing processes suggests that the smaller the number of units manufactured, the higher will be the per-unit manufacturing cost. Hence, a retailer must pay the publisher a higher price if the publisher is to recoup his costs, and the retailer must pass this cost to the consumer or incur a loss. Thus, there are very practical reasons that the prices of these books are at levels similar to commercial books; therefore, the prices that the Book Store charges simply do not bear on the issue at bar.
If the majority’s position is that the prices are competitive item for item — that is, that a buyer of any given book will pay the same price or less at the Baptist Book Store than he would for the same book at any other store, then that position is also defective. Ironically, if respondent could achieve tax-exempt status by lowering its prices or by giving away its materials (as the majority suggest), competition would be altered if not destroyed — consumers would have no incentive to purchase books at commercial stores when they could get the same item for less or for free from the Baptist Book Store. In addition, as this Court noted in Gruner, 210 S.W.2d at 41, some competition with sellers of similar goods is not fatal to tax-exempt status, and as the Court held there, I do not regard the negligible “competition” here as a serious menace to trade; hence, I would preserve the Book Store’s tax exemption.
Related to the notion of competition is the majority’s insistence that the Book Store operates at a profit. This it finds by deleting from respondent’s costs a deduction for the Book Store’s general and administrative expenses, which are incurred from services provided by the parent Sunday School Board in Nashville. These include such things as accounting and payroll services, which, as respondent indicated in *10oral argument, must necessarily be provided locally if not by the Board. Accordingly, it is appropriate that this item should be considered as a deduction in the Book Store’s profit and loss statement, and from this it is clear that the Book Store did not operate at a profit in 1980 or 1981.
Assuming arguendo that the store did operate at a profit during those years, this fact alone should not deprive respondent of an exemption as a charity. In YMCA v. Sestric, 362 Mo. 551, 242 S.W.2d 497 (Mo. banc 1951), an exemption was granted even though YMCA residence halls showed an excess of income over expenses in two of three years for which tax assessments were under attack. “Whether a particular facility made a profit or suffered a loss for any particular year, the fact of such profit or loss ... would simply be evidence ... on the proposition of whether the purpose of the use was to make a profit.” Id., 242 S.W.2d 497 at 506. See also Community Memorial Hospital v. City of Moberly, 422 S.W.2d 290 (Mo.1967) (large income from paying patients did not jeopardize hospital’s charitable status because its purpose was not to make profits but to devote any income from its operation to its patients, whether or not they could pay). The majority accepts the holding in Franciscan Tertiary Province of Missouri v. State Tax Commission, 566 S.W.2d 213, 224 (Mo. banc 1978), that it is not impermissible
for the project at times or even fairly regularly to operate in the black ... provided, of course, that any income over expenses is achieved incidentally to the accomplishment of the dominantly charitable objective and is not a primary goal of the project, and provided further that all such gain is devoted to the charitable objectives of the project.
“Profit incidental to a dominantly charitable objective” is the shibboleth of cases dealing with charitable exemptions. The majority concedes the Book Store sustained losses in 1978 and 1979; furthermore, they admit that the “profits” earned in 1980 and 1981 are not substantial. These facts suggest that the Book Store does not have profit-making as a primary objective, but rather that it has earned profit only incidentally in pursuing its dominantly charitable purpose. This distinguishes the case before us from Evangelical Lutheran Synod v. Hoehn, 355 Mo. 257, 196 S.W.3d 134 (Mo.1946), on which appellant (and to a lesser extent, the majority) relies. In Evangelical, this Court denied a tax exemption for the property on which the Concordia Publishing House operated. Factually, Evangelical is quite distinct from the case before us, although there is some resemblance in that Concordia was a publisher primarily of religious books and in that it turned over much of its profits to the Lutheran Synod. However, the real property questioned there consisted of eighteen lots, on which were six buildings that Concordia used for its operations. Net assets were valued in 1944 at $1,332,290.30, and these produced net income of $225,889.89, representing a 17% return on assets; Concordia turned over $125,000 to the Synod that year. Id. at 138. This Court found that Concordia was “competitive and [was] run like any other similar business,” id. at 144, and that “its profits have been used for extension of its properties, or paid to or held for the Synod.” Id. at 138. The Baptist Book Store’s assets and income are but a miniscule fraction of Concordia’s, and are not used for the extension of its properties.
More importantly, it must be noted that Evangelical was decided in light of an 1875 Constitutional provision prohibiting religious corporations from owning real estate other than for “ ‘church edifices, parsonages, and cemeteries.’ ” Id. at 140, citing Mo. Const. Art. II, § 8 (1875). Although this provision was eliminated from the 1945 Constitution, the case was decided under the earlier provision. 196 S.W.2d at 140-141. Because Concordia’s buildings did not fit into any of the three classifications of the Constitutional exemptions then in vogue, the Court found that the appellant taxpayers could not hold title to the lots and buildings and therefore could not claim the property as tax exempt. But the appellants in that case further argued that the Synod was both a religious organization and *11a charitable one, and therefore endeavored to persuade the Court to grant it an exemption as a charitable corporation so as to evade the constitutional prohibition against a religious organization’s ownership of property. The Court held that the Synod could not subvert the constitutional provision by creating the publishing house as a subsidiary to hold title to land not used for the approved purposes. Id. at 142.
The Court then focused on. Mo. Const. Art. X, § 6 (1875) which exempted from real property taxes lots of one acre or less and buildings thereon when used “exclusively for religious worship, for schools, or for purposes purely charitable .... ” After re-emphasizing that the publishing house was competitive and operated like any other similar business, and after re-emphasizing the 17% return that Concordia earned in 1944, the Court indicated that even though Concordia’s earnings were destined to go to the parent Synod, Concordia could not be classified as a charitable organization on that basis alone. Id. at 144. In sum, the Court ruled that tax-exempt land must be used exclusively for religious worship or for purposes purely charitable, but held that a “competitive commercial business operated for a profit does not comply with that requirement, even though the profits are devoted to religion.” Id. at 147; see also Franciscan Tertiary Province of Mo., Inc. v. State Tax Commission, 566 S.W.2d 213, 224 (Mo. banc 1978). Thus, Concordia could not be classified as a charitable organization simply because it donated substantial portions of its profits to its parent, a religious organization. A business organized for profit “cannot secure an exemption from taxation as a charitable institution merely because, as an incident to its operation, it administers a charity.” 71 Am.Jur.2d State and Local Taxation, § 363.
The Evangelical ruling does not require a religious bookstore to be classified as a non-charitable organization — it merely holds that an organization cannot achieve charitable status simply by donating profits to a religious group. Unlike Concordia, whose primary purpose was to generate profit, the Baptist Book Store serves to further the goals of the Southern Baptist Convention; the “profits” that the majority claims the Book Store has earned are merely incidental to the Book Store’s charitable goals. Although an exempt status is not available to businesses such as Concordia whose claims for such status rest simply on turning over profits to a parent organization to be used for “independently charitable purposes,” Franciscan, 566 S.W.2d at 224, the “profits” that the Book Store has relinquished to the Sunday School Board are completely distinguishable and are payment for services rendered, which should be added to the cost of operations in determining whether or not profit was actually earned.
YMCA v. Sestric, 362 Mo. 551, 242 S.W.2d 497 (Mo. banc 1951), also cited by the majority, focused not only on profits but on the use made of the property being assessed. See also Salvation Army v. Hoehn, 354 Mo. 107, 188 S.W.2d 826, 828 (Mo.1045), 84 C.J.S. Taxation § 282, and 71 Am.Jur.2d State and Local Taxation, § 365, citing St. Louis YMCA v. Gehner, 329 Mo. 1007, 47 S.W.2d 776 (Mo. banc 1932). The Court in Sestric approved exemption where the uses of the property were intimately connected with the accomplishment of the organization’s purely charitable goals, with the qualification that the uses themselves did not have profit as their primary purpose. Id., 242 S.W.2d at 505. The Court distinguished between this kind of use and the one in which the primary purpose for using the property is to make a profit, even though the profit is made for the express purpose of furthering a purely religious goal. Id. This reasoning was repeated in Franciscan, supra, 566 S.W.2d at 223, which held that use of the property lies at the heart of the exemption, not the general nature of a parent entity that utilizes a commercial enterprise for support. In the case before us, the Baptist Book Store’s function is to spread the religious tenets of the Southern Baptist Convention. It bears continued reemphasis. Its primary purpose is not to make a profit but to supply religious reading and audiovisual materials to churches, Sunday schools, and the general public.
As the majority has acknowledged, statutes granting exemptions are to be strictly *12but reasonably construed against the party claiming them. A reasonable construction, however, is one that does not “ ‘curtail the intended scope of the exemption ....’” Missouri United Methodist Retirement Homes, Inc. v. State Tax Commission, 522 S.W.2d 745, 751 (Mo.1975), citing YMCA v. Sestric, 362 Mo. 551, 242 S.W.2d 497, 502 (Mo. banc 1951). Furthermore, the Court in United Methodist added that the taxing authorities are not permitted to defeat the stated public policy of exempting charitable property “by unreasonable or unrealistic application of the ‘strict construction’ rule.” 552 S.W.2d at 751. To exclude respondent from tax-exempt status on the basis that use of its property is not purely charitable erodes the public policy of § 137.100(5). A profit earned incidental to the sale of religious books and materials that promote the basic charitable purpose of the organization should not subject respondent to taxation. We should follow St. John’s Medical Center v. Spradling, 510 S.W.2d 417, 419 (Mo.1974), in repudiating those cases that give only an unacceptably narrow construction to the charitable exemption statute.
I am in agreement with the Circuit Court and would affirm its judgment.
As an addendum, I note that the majority has failed to take cognizance of our recent decision in Barnes Hospital v. Leggett, 589 S.W.2d 241 (Mo. banc 1979), in which this Court overruled a long line of cases that had held the charitable nature of property to be tainted in toto if only a fraction of the property was used for non-charitable purposes. The Court in Barnes established “a new sense of direction” by granting proportional exemptions where property is used partly for profit and partly for charitable purposes. Id. at 243, expressly overruling Wyman v. City of St. Louis, 17 Mo. 335 (1852); State ex rel. Spillers v. Johnston, 214 Mo. 656, 113 S.W. 1083 (Mo.1908); Evangelical Lutheran Synod v. Hoehn, 355 Mo. 257, 196 S.W.2d 134 (Mo.1946); St. John’s Mercy Hospital v. Leachman, 552 S.W.2d 723 (Mo. banc 1977). In so doing, the Barnes Court held that
Mo. Const. Art. X, § 6 and § 137.100, RSMo 1978, which exempt from taxation property “used exclusively * * * for purposes purely charitable,” authorize a partial exemption of a building or tract, where that building, or tract, is used in part for charitable purposes and in part for non-charitable purposes.
Id. at 244. In my view, the use of the Baptist Book Store’s property is wholly charitable; to hold otherwise erroneously overrides the trial court and does not comport with the facts. However, if the majority persists in classifying the use of this property as only partially charitable and in determining that only two-thirds of the materials sold are religious, then they must take Barnes into account unless that case is intended to be overruled sub silencio. Proceeding in the “new direction” prescribed in Barnes, it is clear that apportionment is required when a charitable organization uses property for dual purposes, charitable and non-charitable. It is also clear from Barnes that a fractional non-charitable use may restrict an exemption, but does not obliterate it. Thus I would affirm the judgment or at the very least remand this cause to the Circuit Court for a determination of what percentage of the property should be taxable and what portion should remain tax-exempt under the teachings of Barnes.