THE ATIT~~NEY GENERAL
OF TEXAS
Hon. A. P. AlIison
County Attorney
Kerr~Countg
Kerrville, Texas
Dear Sir: Opinion'Ho. O-7148
Re: Hospital tax exemption.
We acknowledge receipt of your request for "an opinion
as to whether or not the real estate upor).
which the Hal and
Charlle Peterson Foundation proposes to construct a hospital
will be exempt from county and state taxes."
Attached to your request ape statements of fact and a
copy of the 'Charter of Hal and Charlie Peterson Foundation"
of Kerrvllle, Texas. The purpose for which said corporation
was formed reads:
f,
. . . the support of ang,charitable or educational
undertaking as atithorlzedbg~subdivision 2 of Article ~'
1302 or the Revised Civil Statutes of the State of Texas
of 1925. Such purposes shall'alvags be limited to and.
exclusively for public charitable or educational~purposes
in the State of Texas, and no part of the earnings or
assets of this corporation shall ever inure to the benefit
of any private shareholder or individual, and no part of'.
the activities of this corporation shall be to carry on
propaganda, or otherwise to attempt to influence legisla-
tion.
Your statement of facts sets out:
%a1 and Charlie Peterson have set up a trust for
charitable purposes to which a substantial part of their
income has been directed, and which will be further endowed
by them and ultimately from their estate. It is contemplbt-
ea that then, or at least as tbs first major Investment or
activity on the apart of this charitable trust, ~111 be the
construction, equipment, and operation of a hospital located
In or adjacent to Kerrville.
"The location of this hospltal on the old St.
Charles hotel ,propertgIs under consideration. It
is preferred to construct a building of several
Hon. A. P. Allison, page 2 O-7148
stories and to make it large enough to accomodate
further need until probable expansion of the hospital.
For a few years, one or possibly two, stories of the
building will be available for rent.
'The trust is Irrevocable, title to the property
and all authority of operation is and will be In the
trustee, all income from rents and otherwise will go to
the trust and be used in the operation of the hospital.
It is understood the hospital will not be self-support-
ing, It will be operated by the trust fund, the ~income
from pay patients, supplemented with income from in-
vestments by the trust. Arrangement will be made to
provide hospitalization, medical and surgical facili-
ties, insofar as the trust Is capable of extending
same to patients who are unable to pay, it is contem-
plated of aourse as to charitable patients that the
patients of this comnmnitg and section will be given
preference.
"With this statement of the conditions existing and
contemplated the following question is state: 'Will the
hospital property, when erected and operating on the basis
above mentioned, renting a minor portion of the building
for a time, but with all rents going to the hospital and
used for the purposes above mentioned, be tax ,exemptunder
thenprovisionsof subdivision 7, of Article 7150, Revised
Texas Statutes, and other {rovislons of the Constitution
and Statutes of the State.
"Referring to your letter of January 30th, 1946 in con-
nection with the proposed Peterson Charitable Hospital,
I am enclosing herewith a copy of the charter, which I
believe you ~111 find furnishes all the desired information.
"Also, I take this opportunity to correct a statement
in my previous letter of the conditions contemplated. My
original letter of January 25, 1946 mentions that a minor
part of the hospital is to be rented. I was in error in
stating that it would at first be a minor part. I believe
a four story building Is contemplated, with two upper
stories for the hospital and two lower floors to rent.
The building will, of course, be under the management of
the trustees, and when it 1s found necessary the add;ttonal
space will, of course, be utlllzed by the hospital.
The purpose for which said corporation was incorporated
does not govern the matter of tax exemption of Its property,
but it is rather the use thereof.
...
Hon. A. P. Allison, page 3 O-7148
In the case of City of Longview v. Markham-McRee Hemor-~
la1 Hospital, X52 S.W. 26 1112, in the opinion of Judge German,
Commissioner, adopted by the Supreme Court, the Court said:
'Defendant corporation is admittedly a charitable
lnaltution, and is engaged in thenoperation of the
hospital In question as a charitable enttirprlse. Items-
is clearly such an Institution as comes w%hln the pro-
visions'of Se&Ion 2,of-Artlt?l&8 of thenVernofi'sAnn.
St. Constitution. The application of that provislan~~
of the Constitution is itivolvedhere. For purpose of
clear understanding, that constitutional p~ovlsion has
been paraphrased by the Supreme Court, Santa.Rosa-In-
firmary v. City,:: 2; A+ntonio,259 S.W. 926,,99, in
this language: But the Legislature may, by
general~laws, exempt from taxation * l + all balldings
used exclusively and owned by * * * Institutions of
purely public charity."" Morris v. Masons, 68 Tex. 698,
5 S.W. 519; City of Houstan v. Benevolent Ass'n, 111
Tex. 191, 230 S.W. 978.
I,
. . . . .
Ill
. . . the Constitution requrrea the property, aa a
prerequisite to its right to exemption, to be exclusively
used by the charitable institution, It is appaFent; lf~~any
part of it is rented out and the relation of landlord and
tenant created, that very fact would necessarily destroy
the exclusive use necessary to be retained by the owner to
bring its property within the plain terms of the Conatitu-
tion, and it has been therefore held, as it was in,that
case, and tn State v. Settegast (Tex. Corn.Appi) 254 S.W.
925, that the leasing of all or any part of a charitable
institution's property to those not themselves engaged ia
a wholly charitable work, or the occupancy of even a‘part
of the property by others under what amounts to an equiva-
lent situation * l *, destroys the exempt character of the
property, and it is-plain that in those cases there could
have been no other holding.
~' ~~NtThe~donst'ituti'nsl'r~equlrem~nt
1% two-fold;
thg property liazatbe-ovned by-the ~organi@atIon '~'"
claiiing'tiieeXemptIon';it muatbe~ escluiSvv‘dlyused
bg ~the org&niziitj.tin,
&a dlstm~ish~-~6ie~h~'iia~t~al
tlse~ by it and a partial mse by others, whether the
others pay rent or not.'
'"Thesequotations reflect the.'consistenthold+
inga ,ofour courts. Morris v,,tiaona;~68 T&X. 698,
703, 5 3.X. 519; City of Houston v. Scottish Rite
HOW‘.A. P. Allison, page 4 O-7148
Ass'n,~lll Texa 191;~230 S.,W;978; State v. Settegast,
Tex:,Corn.. 3.W:.925: Benevolent & Protective ,
App.. '254~:
Grder.of Elka Lodge v. Cityof Houston, Tex, Civ. App.,
44 3,W. 2d 488, writ refused."
,/
Also sesthe .Oase of Markham v. City of Longview, et al,
191
S.X. 2a 695, error refused. t
Iiiitlewofthe above-authorities and the facts stat@
in'your ,rHjuest'itinsthe.opin~1oi-i
'of'thisdepartment'that'then .~
hospital property, when erectea'ana operating on the basis above
mentioned, wil.1not be ,taxexempt.
Yours very truly
.,.'
.a, :,_,, ,~,,j ATTORNRYGEWERAL OF TEXAS
" '~ :' :
s,
By s/Jos. V; Frnka
Jos.'K Frnka
Asslstant
JVF:AMM:wc
,~,
APPRO~MUR 22',1946 .':
s/GroverSellers: "
ATTORNEYGENERALOF'TlSAS
i
Approved Oplnlon Committee By s/BWB Chairman