E ATT-S NEY GENERAL
CD EXAS
Mr. Joe Resweber Opinion No. C- 697
County Attorney
Harris County Re: Whether Clareivood House,
Houston, Texas an elderly persons’
retirement home, is exempt
from ad valorem taxes as
an institution of purely
Dear Mr. Resweber: public charity.
In connection with your request for an opinion on the
above captioned matter, we have been advised of the follow-
ing facts. Clarewood ~House, hereinafter referred to as the
Home, is owned by the Sharpstown Tower Corporation, which is
incorporated under the Texas Non-Profit Corporation Act for
the oharitable or benevolent purposes of providing elderly
persons with housing facilities and were specially designed
to meet the physical, social, and psychological needs of the
aged and contribute to their health, security, happiness, and
usefulness in longer living. The corporation Is 100s financed
as an F.H.A Loan Project. The Commlssloner of Internal Revenue
has heretofore granted this corporation a tax exemption as having
been organized~and operated exclus%vely for charitable purposes
and no part of the earnings of which inures to the benefit of
any private shareholder or lndivldual. See Sec. 501(c (
the Internal Revenue Code of 1954, 26 U.S.C. Sec. 501 I c 31 35);
also annotations In 69 A.L R.2d 871, 878.
The corporation’s property consists of 8.388 acres. of:
land loaated In a metropolitan area of Houston, adjacent to
the large Sharpstown Shopping Center. The Home was located
to avoid isolation from the community and designed to meet
the needs of elder1 citizens for adequate housing In that
community, costing x 4,700,OOO.OO. It has eleven stories,
containing two hundred eighty-eight apartment residence units,
each having Its own private bath with tub or tub-shower combi-
nation. There are no’:ateps in the Home; only elevators and
inolines which have handrails are provided,- with some units
having side door ovens and baths for wheel-chair residents.
A specially designed nursing aare unit is connected to the
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Mr. Joe Resweber, Page 2 (C-697)
Home by covered passageways and ramps. Included in the unit
are rooms for occupational therapeutic activity of several
kinds and rooms for residents requiring nursing care by
resident nurses. A twenty-four nursing unit is provided at
rates which the residents can afford to pay and at a rate
well-below the prevailing rates in 'hiouston. A furnished
chapel and various recreational areas' are available to all
without cost, Much, of the cost of operating the Home is to
be paid for by contributions or donations, which now exceed
$450,000.00. No founder's or finder's or admission fee is
charged, but those residents who are financially able to
pay for their care are charged a fee on a basis determined
by the Board of Directors. Admission.,in each case is
determined on its own merits and as a matter of mutual
agreement. Hotel-type room and bath, with 288 square feet
normally bring a fee of $80.00 monthly; efficiency units
of 354 square feet for $100.00 monthly; the one-bedroom,
living dining combination, with kitchen, electric range,
and more elaborate facilities for $150.00 monthly; two-
bedroom, two-bath apartments extensive facilities and con-
taining 780 square feet for $190.00 monthly, ten of which
are specially designed for wheel-chair tenants. Additional
elaborate facilities include a library, game room, beauty
shop, restaurant, hobby rooms, auditorium for lectures and
cultural events, telephone and message service, coin-operated
laundry, and sun decks. All apartments are air-conditioned
with a picture-window view.. and have,,tile flooring. When it
becomes debt-free, the land and buildings are required to be
deeded to the First Methodist Church.
Fifteen units In the Home have so far been set aside for
use by retired persons unable to pay for such facilities, three
of which are oocupied by tenants paying no rental and six of
which are occu led by tenants paying only partial rental. Thus
nine of the 28 2; apartment units havebeen occupied by tenants
who are unable to pay the normal rental charges, and at this
time, an additional six patrons unable to pay are being added
as tenants. The Board of Directors assert they are increasing
the number of full and partial charity tenants just as fast as
resources permit! Revenues have not been sufficient to pay
the debt charges and all operating expenses and over $450,000.00
In deficits have had to be raised by donations. Although It was
a group of Individuals who organized the Home, It Is non-sec-
tarian, with most denominations represented by tenants. The
average age of the 275 residents Is 77. Sixty per cent of
them receive Social Security benefits,~ sixty-five per cent being
under 72; and one-third of the residents would face serious
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Mr. Joe Fiesieber, page 3~ (C- 697)
difficulty without the social security. All are unemployed
but five. The Board of Directors have avoided requiring infor-
mation smacking of a “pauper’s oath” or disclosure of their
amount of income; but in all cases it asrrertains that the aged
persons are “needy” and it Is satisfied that no recipient of
charity Is a property owner. Our rough calculation Indicates
that an average apartment unit costs approximately $~~,OOO.OO
to ereat.
Cn the basis of the information furnished to us in a
letter of the Vice President and General Manager, we com-
pute the following data relevant to apartments which have
been in use on a charitable or part-paid basis, as follows:
Total of the usual monthly rental ‘Lpg
Total monthly rental charged and oollected .
Anount commuted per month as charity 7m.00
When wemultiply this $785.00 per month by 12’, we arrive at
ths awn of $9,420.00 which represents part of the charity con-
tributed by Clarewood House during a year’a period of time.
Under conditions at the date of this writing, it is anticipated
that .more than $18,000.00 will be ,-presented as charity for this
tax year.
In addition, it~ia fair to atate that charity is also
preaent not only from the Home paying the entire or partial
oosts for some of the residents but also charity,is present
with respect to all of the aged residents who are furnished
services and facilities at a rate substantially less than cost.
We have not attempted to convert this charity into dollars,
but it appears that the charity to the public resulting from
the operation of the Home is substantial and not merely nominal,
aa the revenues have not been anffioient to pay debt charges
and operating expenses and over $450,000,00 in deficits have
had to be raised by donations.
The Home claims exemption from ad valorem taxes under
Article VIII, zection 2 of the Constitution of Texas, which
provides that . . . the legislature may, by general laws,
exempt from taxation . . . instltutlons~ of purely public
oharlty; and all laws exempting property from taxation otffer
than the property above mentioned shall be null and void.
The Legislature, in Article 7150, Section 7, V.C.S. of
Texas, provided:
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Mr. Joe Resweber, Page 4 (C-697)
Public charities. All buildings and per-
,”
sonal'property belonging to Institutions
of purely public charity, together with
the lands belonging to and occupied by
such institutions not leased or otherwise
used with a view to prof%t, unless such
rents and profits and all moneys and credits
are appropriated by such institutions solely
to sustain such institutions and for the
benefit of the sick and disabled members
and their families and the burial of the
same, or for the maintenance of persons
when unable to provide for themselves,
whether such persons are members of such
institution or not. An Institution of
purely public charity under this article
Is one which dispenses Its aid to Its
members and others in sickness or distress,
or at death, without regard to poverty or
riches of the recipient, also when the funds,
property and assets of such institutions are
placed and bound by its law to relieve, aid
and administer in any way to the relief of
its members when in want, sickness and dis-
tress, and provide homes for its helpless
and dependent members and to educate and
~maintaln the orph$ns of its-deceased members
or other persons. ‘/
In Interpreting the phrase “purely public charity” in
our Constitution, Article VIII, Section 2, the word "purely"
in the Constitutional provision above quoted modifies the word
“charity” and not the word “public” so as to require an lnstl-
tution to ha've a wholly altruistic quality and exclude from It
every private or selfish interest or profit or corporate gain.
Benevolent dc Protective Order of Elks v. City of Houston, 44
. . 4uu, 4 (Tex.Civ.App. 1931, error ref.).
The property of the institution must be used wholly and
exclusively for charitable purposes and such use of the property
must be actual, direct, and exclusive. City of Houston v.
Soottlsh Rite Benevolent Assn., 111 Tex. 191 230 S . W.
n cannot be used to engage In. a c~ommerclal &siness. gk!;:?'
v. Woodmen of the World Life Ins. Society 280 S.W.2d 3r7TTex
55 error ref.). Nor may it bi used to enter into
a landlord ani tenant relationshlp'which creates a commercial
transaction or lease, particularly where rent is paid. David
371~2d
ere actual
rent is not paid such ion-charitable use destroys the exemptlon.
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Mr. Joe Reaweber, page 5 (C- 697)
of Longview v. Markham - McRee Memorial Hospital, 152 S.W.2d
(T C A 1941 j . s anta Rosa Infirmary v. City of San
Antonioex&?:W~P&6 (T&E. Sup. Ct. 1924). However, our courts
inthese cases have clearlv indicated that charitable institu-
tions might derive, as an incident of the administration-of the
charities, rents and profits where they were devoted directly
and solely to those very charities. Moreover, as pointed out
In the Santa Rosa Infirmary case, supra, where all facilities
are exCluslvely operated by members of the institution, tax
exemption Is not lost by the needy patron capable of paying,
doing so, for maintenance or for services rendered therein by
others not wholly engaged in a charitable work. Nor did the
operation of a small drug store in the building destroy the
tax exempt structure. The requirement Is merely that the
buildings be used and occupied by the charitable Institution
and none other.
It Is pertinent to observe that such a charitable lnstl-
tution aa an Infirmary need not be supported exclusively by
gratuities or donations to be exempt from taxation, since it
was held in the Santa Rosa Infirmary case, supra, that it does
not loae ita exempt status by paying for its plant from inci-
dental earnings or expending its funds realized therefrom in
training nurses, being within the proper upkeep and maintenance
needs for which profits may be appropriated. 7 Baylor Law
Rev. 494, 497.
From the above authorities, it is also seen that owner-
ship as well as exclusive use by the charitable Institution is
required tn the sense of a perpetual dedication of the property
and the miscellaneous mutations of profits derived to charitable
uaea or purposes. No private individual may obtain any profit
or gain, or If a corporate owner is involved, no distributable
earnings, such as dividends, may result. In addition, the
institution must benefit persons indefinite in numbers and
oersonalitles. to the end that they will be prevented from
becoming burdens to society or to the State.‘
v. Missouri-Pacific Lines Hospital Ass.!n., 99
Civ.App. 1930B error ref.)
Cn the other hand, the authorities above cited hold that
the chatity is not required to be universal to be public and
the institution is not reauired to search out the needy persons
on the highways and byways. Raymondvllle Memorial Hospital v.
State 253 S.W.2d 1012 (Tex.C?v.App. 1952, error ref., n.r.e.f;
eylor Law Rev. 133, 138. The charity is deemed public if
It affects all of the people of a state or community through
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Mr. Joe Resweber, Page 6 (C- 697)
its assumption, to a material extent,‘that whidh otherwise
t become the obligation or duty ,of the state or community.
YF awme charity Is not necessarily rendered “private”
as distinguished from “public’ because limited In sect, class
or fraternal order, etc. 11 Baylor Law Rev. 137. It is said
‘oharlty need not be universal to be public.” -City of Palestine
v. Missouri-Pacific Lines Hospital Ass’n., supra; B.P.O.E. Lodg
V. ty of houston, 44 S W
. . 26 4oti (Tex.Clv.App’ 193, error ref. e, .
The latest definition and test of charity, as inter-
preted by the Supreme Court of Texas. Is set out in River Oaks
barden Club v. City of Houston, 370 S.W.2d 851 (1963’). I
fl t four decision th Court applied the so-called “q%i
pr?qui” idea earlier’exp~essed In City of Houston v. Scottish
Rite Benevolent AssIn., supra, wherein It was said that a
charitable Institution must meet three criteria to warrant
tax exemption: (1) It must make no gain or profit, (2) must
accomplish ends wholly benevolent, and (3) must benefit persons
indefinite in number by preventing them from becoming burdens
on the community or state. 18 Southwestern Law Journal 703,
707-708.
It affirmatively appears from the River Oaks Qarden Club
case, supra, that first; In order to justly a charitable tax
exemption, the institution’s activity Itself must be one in
which the state or community could have an obligation to support;
and secondly, the institution must substantially tend to lessen
that obligation so that the.benefits therefrom run to a relatively,
large segment of the public. Further, It cautions us that a
charter declaration of the purpose and obligations Is not con-
clusive, and we must look further to the actual operations of
the institution and the effect and result thereof. No guide-
lines are provided as to just what actlv%fles are to be deemed
to be government obligations or just what degree, or percentage
or extent of charitable benefits must be provided to warrant
an exemption. Institutions, though plainly altruistic, will
apparently’ not be held to be purely charitable which do not
provide provable benefits covering a substantial number of
people in those areas falling within the traditional definition
of public welfare. Examples are institutions devoted to the
promotion of the fine arts of gardening, dramatics, interior
decorating, maintenance of historical landmarks, or those arts
characterized as “aesthetio”, as evidenced in the River Oaks
Carden Club case, supra. It is left to the function of our
courts to determine where the line will be drawn and to provide
other examples.
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nr. Joe Resueber, Page 7 (C-697)
The problem of applying the rule of River Oaks, supra ,
to the facts of this or other situations is accurately described
in 18 Southwestern Law Journal 703, 711 (1964):
‘Even If the courts interpret the uid ro E
standard liberally, the uncertainty %iTi-
w lc per-
vades the criteria-for charitable exemptions
in Texas will work a hardship’onlnstitutione
in the ..fringe area. In most cases one should
be able to look to the constitution and the
exempting statutes to determine whether a
narticular oraanisatlon auallfles for exemotion.
It is our considered opinion that, assuming an absence
of controverey,as to the particular facts submitted, the Home
may not be said to fall within the “fringe area.” While the
courts have failed to state what they regard as sufficient
charitable benefit running to the public, they have said that
if It was shown to be “substantial,” the charitable exemption
could be established. Based upon the facts submitted to us, it
Is our opinion that the substantial benefit test has been met.
What is ade,quate housing for the needy aged? According to our
governmental current standards of society by 1961, adequate
housing !‘means housing which the aged can afford, which meets
the special physical needs of the aged, and which is designed
to avoid isolation from the rest of the community or an lnsti-
tutlonallsed feeling.” (White House Conference on Aging Policy
Statement on Housing, January 11, 1961). According to the
Polioy Statements and Recommendations of the White House Con-
ferenoe on Aging, February, 1961, the average person can now
expect to live longer than before - past seventy and into the
eighty bracket - and will have longer periods of retirement.
We now have five times more people over sixty-five than we had
In 1900; the number will double in the next forty years, while
the number over seventy-five will triple. In Harris County,
Texas, the problem is the same and within the next four years,
there will be 108,600 people over sixty-five. The harsh social
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Hr. Joe Resweber, Page 8 (C-697)
and economic facts revealed in the Conference Report show that
suoh a “retired citizen Is one who by reason of age has ceased
to work his customary intensity of employment.
not engage in other types of part-time occupation.He *y Or 2:
regular normal earned Income, however, hae in fact ceased.”
The problem, of adequate housing and care for the aged
18 being undertaken as an obligation by all echelons of govern-
ment. Drugs and medical care have extended life; the industrial
revolution and population explosionhave combined to bring an
ever increasing higher standard and quality into the lives of
even the poor and needy. What 18 now “decent” and “reaeuaable”
houelng and care for the aged was, indeed, luxury when the
framers wrote our State Constitution over one hundred years
Since the introduction of the common law Into this
%,“;e in 1840 the Texas Constitutions have been framed with
reference to it. and our Constitution 1s reoulred to be lnter-
Qreted in the light of the development of Uie common law as
declared by the courts of the
The Supreme Court of Texas will apply words in the
Constitution to present-day conditions and may find words ‘to
have been therein used In a eenee broad enouah to include things
not then within human e erience or knowledge. ” Roy v. Schneider,
110 Tex. 369, 221 S.W. 2 8 0, 918 (1920). Since the Supreme Court
in River Oaks Garden Club v. City of Houston, BuQra, has said
that the framers of our Constitutions Intended the meaning of
the charitable exemption to cover “that which otherwise might
become the obligation or duty of the community or the state”
(370 S.W.2d 854, ~‘s;,c ..I,, it Is therefore necessary to observe
what obligations the government has undertaken and how the
courts of the country have interpreted purely Qubllti charity
in the light of the common law. In addltlon, our Constitution,
Art. III, Sec. 51a, authorizes certain expenditures for needy
aged persons, and the Le lslature, In Articles 6%c, 6753, 1524b
through 1524k, 1528a, 12t 9k has provided extensively for the
care and housing of the aged. We do not read Into these
governmental obligations an Intent to exclude tax exemQtlon
for charitable activities to be undertaken by the citizens
themselves. The state government claims no monopoly on charity.
The obligation or duty of government under ItB general
welfare powers is aa narrow or broad a8 the customs, mores,
ethics, standards, and eoolal conscience of it8 people at a
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r
Mr. Joe Retiweber, Page 9 (C-697)
particular time. There could therefore be no fixed, unchang-
ing, and inflexible meaning of what constitutes "charity,"
nor do we think the constitutional framers intended to write
Into the Constitution a particular standard or social concept
ai':tbelr time. The concepts of "general welfare" and "charity"
are not etatlc. Needs that were narrow or parochial a century
ago are interwoven in our day with the well-being of the
community and etate.
The' White House Conference of 1961 established the Qrin-
ciple and objective that "All aging people . should be ade-
quately housed,in a suitable neighborhood of their choice and
supplied with community facilities and services at rents they
can afford. There Is, and will continue to be, a need for an
lhcreaee in all types of housing . . . . The aged have special
needa as to both their housing and their total environment.
Integral parts of their problem on the planning and developing
of 'facilities for the aged - such as transportation, shopping,
medical and hospital facilities, utilities, churches, cultured
outletcl and congenial neighbors." All of these things the Home
in this case sought to provide in a purported charitable way.
We have heretofore rendered 0 inion Numbers WW-771 (1960),
WW-1277 (1962) ww-1318 (1 w&24 (1962) C-209 (1964)
and Opinion No: C-357 (196 ), in which we recognized that hohes
for the aged, under the facts submitted, were Institutions of
purely public charity and involved that which otherwise might
beoome the obligation or duty of the community or state within
the legal concepte set out In River Oaks Carden Club v. City of
Houston, supra. This is in accordance with the common law
meanlna of nurelv DubliC charits in other Surisdlctlons and we
‘,
The authorities throughout the nation are generally In
accord In upholding this legal concept, as so clearly set out
in Flfleld Manor v. County of Los Angeles, sups, 10 Cal.Rptr.
at Q. 249 :
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Mr. Joe Resweber, Page 10 (C-697)
II
. . . Relief of poverty 1s not a condition
of charitable asalstance: If the benefit con-
ferred has a sufficiently widespread social
value, a charitable purpose exibts. It is a
matter of common knowledge that aged people ':
require care and attention apart from financial
assistance, and the supply of this care and
attention Is as much a charitable and benevo-
lent purpose as the relief of their financial
wants. Every clvlllz~ed community must provide
facilities, either public or private, for the
care of old people regardless of financial
condition. . . .
. . :.. . 'The concept of charity Is not con-
fined to the relief of the needy and destitute,
for "aged people require care and attention
apart from financial asslBtance, and the BUQQ~Y
of this care and attention 1s as much a charlta-
ble and benevolent purpose as the relief df
their financial wants!,' So the 'charge of fees
by such an institution aB a home for the aged
will not necessarily prevent its classification
as charitable If such Bums "go to pay the ex-
penses of operations and not to the profit of
the founders or shareholders," for all persons~
may "'under certain conditions be proper subjects
of charity." In short, as the word "charity"
Is commonly unaeistood in modern usage, It does
not refer only to aid, to the poor and destitute
and exclude all humanitarian activities, though
rendered at cost or less, which are maintained
to care for the physical and mental well-being
of the recipients, and which make it less
likely that such recipients will. become burdens
on society."
1st Homes, Inc. v. Horn, 226 Ore. 298,
) the court also recognized the
o;e authorities, and that such homes
for the aged could,.be an exerapt charitable lnatltutlon, 1:'
likening them in analogg to the charitable teats applied to
hospitals, but denied the exemption upon the ground ,that the
facts revealed the lack of any charter provlslon for a contln-
uatlon of charitable works aen, the assets were disposed of in
the event of corporate dissolution. Other determlnlng factors
considered to be relevant in the determination, besides the
charter purposes and by-law QroViSion8, Were the aQQllOatlOn
L
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Mr. Joe Resweber, Page 11 (C-697)
or use of receipts; whether patrons received the same ,treatment
irrespective of ability to pay; whether the doors of the home
were open to the poor as well as the rich and without other
discrimination; whether charges were made to all patrons and
whether any charges were made to the Indigent; whether a charl-
table trust fund was created; and whether If the home had no
operational gains, there were offsetting advantages.
The Court In Trainee v. St. Petereburg Methodist Rome, Inc.,
173 So.26 176 (Fla. Igbb}, recognized that providing homes for
the aged wa8 a proper charitable Qurpoae, but denied the
exemption upon a showing that the facllltlea were not available
to the general public, many applicants were not accepted unless
they are able to pay, and,the charter failed to disclose what
would happen to its assets in the event of corporate dissolution.
In the oaae of Clarewood House, we assume the facts to be
true that rufflclent applicants not able to pay are accepted
by the Boerd of Directors under the circumstances.
The Ohio Supreme Court, in The Phllada Home Pund v. Board
31 (19bb) and the Nebraska Supreme
as v. O.E.A.'Senior Citizens, Inc
7l9 725 m denied a chktable
whos; purpose war; merely “the furnlah-
lng of low cost housing at Its real cost.’ This activity the
courta said did not In itself fall within the meaning of “charity,’
declaring that “the reason for exemption Is present benefit to
the general public sufficient to justify the loss of tax revenue.”
The Institutions were unable to show clearly sufficient facts to
satisfy this test. In the County of Douglas case, supra, although
it was shown that the Internal Revenue Service and the Treasury
Department had ruled that the institution Van owned and operated
exclusively for charltable’purposes, the Court nevertheless held
to the contrary, saying:
“The design and purpoees of the building
on the land was to furnish housing to
selected people at low cost. There is
nothing to Indicate that it was to be below
the cost of the service furnished. . . .
In fact no right to remain In occupancy other
than at the will of the defendant waB a declared
purpo:e except as to a limited olass of occupants.
. . . (111 N.W.2d 725).
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Hr. Joe Resweber, Page 12 (C-697)
In the case of Clarewood House, we are advised by the
facts submitted that the malti”purQoBe and use Is not the mere
fUI?liBhing of relatively low-cost housing to selected people
but that charity Is the purpose, and the right to remain in
occupancy Is not at the will of the Board. The mere lack of
a church sponsor does not prevent the Home from having a chllrl-
table exemption. Apparently the cederal government Is satisfied
with Its exclusive charitable purpose and use and saw fit to
finance it one hundred per cent and give it an exemption from
taxes on the ground that it was organized and operated as exclu-
slvely charitable.
We find no substantial or material distinctions to be
made on the facts herein related as to Clarewood House as com-
pared to those related in our previous opinions. In Opinion
C-357, suppa, for exampl&, Lnvolving &you l%Xio%?,sponsored by
the Brazes Presbyterian Church, there was ‘I)o:: more charitable
benefit running to the public for Its operation than Is shown
in the Clarewood case,
In writing this opinion, we have attempted to set out
such legal guidelines as exist on the question presented for
the benefit of any other Interested parties faced with a
similar question. We hasten to point lout, however, that we
have assumed that no factual controversy exists between the
taxing authority and the party seeking the exemption. In issu-
ing official opinions, this office 1s not authorized to resolve
disputed factual Issues. Cur opiniona are based solely upon
the application of legal principles to the facts submitted to
us. If a taxing authority and a party seeking a tax exemption
are not in agreement aa to the evidential facta upon which a
claim for exemption 1s based, the Qartles must resolve their
dlaoute in a oourt of law that Is authorized to resolve dlwuted
l.a‘QaG.oulirly true, as stated by the-cited authorities, because
the burden of clear proof ls.~.on the one tilalming exemption;
exePlptlons from taxation are $5ver favored; and all doubts are
resolved against the exemption and in favor of the taxing power.
SUMMARY
The Attorney General’s office 1s not authorized to
pas0 on fact questlone. However, under the facts sub-
mitted, which we assume as true and unoontrover&lal,
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Mr. Joe Resweber, Page 13 (C-697)
Clarewood House is deemed to be an institution
of purely public charity which would be entitled
to exemption from ad valorem taxes under Article
VIII, Section 2 of the Texas Constitution.
Yours very truly,
WAGGONER CARR
Attorney General of Texas
APPROVED:
OPINIONCOMMITTEE
W. V. Geppert, Chairman
Pat Bailey
Robert Flowers
RJoy gYY;
. .
APPROVEDFOR TIiE ATTORNEY
GENERAL
BY: T. B. Wright
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