Untitled Texas Attorney General Opinion

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