Harmon v. North Pacific Union Conference Ass'n of Seventh Day Adventists

RABINOWITZ, Justice

(concurring in part and dissenting in part).

I find I am in agreement with the majority’s conclusion that appellee’s institution of a declaratory judgment action instead of following the procedures prescribed by statute for appeals from a decision of the board of equalization should not bar appellee from litigating its tax exemption claims. On the other hand, I cannot agree with the court’s holding that the three residences in question are each subject to taxation.

I think undue weight has been accorded to the well established canon of statutory construction which requires tax exemptions to be strictly construed. Seemingly ignored is a subsidiary principle to this rule of strict construction. For it is established that a strict construction must also be a reasonable construction. This latter principle finds illustration in Cedars of Lebanon *440Hospital v. Los Angeles County 1 where it was said:

But the rule of strict construction does not require that the narrowest possible meaning be given to words descriptive of the exemption, for a fair and reasonable interpretation must be made of all laws, with due regard for the ordinary acceptation of the language employed and the object sought to be accomplished thereby.2

In my view, a reasonable construction of AS 29.10.336 leads to the conclusion that the Reed, Hanson, and Kuebler residences are exempt from taxation.

Alaska’s Constitution provides in part that:

All, or any portion of, property used exclusively for non-profit religious, charitable, cemetery, or educational purposes, as defined by law, shall be exempt from taxation.3

Pursuant to this article of Alaska’s Constitution, the legislature enacted AS 29.-10.336, which states in part:

(a) Property * * * used exclusively for nonprofit religious * * * purposes * * * [is] exempt from [property] taxation.
(b) The term “property used exclusively for religious purposes” includes the following types of property owned by a religious organization:
(1) the residence of the pastor, priest, rabbi, minister, or religious order, which residence is owned by a recognized religious organization;
(2) a structure, and the land it stands on, which is used for public worship, solely charitable purposes, religious education, or a nonprofit hospital;
(3) the furniture and fixtures in a structure used exclusively for religious purposes;
(4) lots adjacent to a structure or residence mentioned in (1) or (2) of this subsection, and which are reasonably necessary to the convenient use of the structure;
(5) lots required by local ordinance for parking in connection with the structure as defined in (2) of this subsection.
(c)Property or part of the property described in (a) or (b) of this section from which rentals or income are derived is not exempt from taxation under (a) of this section, unless the rentals or income are derived from the rental of the property by religious or educational groups for classroom space.

I do not believe it reasonable to read these provisions more narrowly than their predecessor. Prior to the 1964 amendments, AS 29.10.336(c), then the only section on religious exemption, read:

The term “property used for religious purposes” includes the residence of the pastor, priest, or minister of a religious organization, and other property of the organization not used for business, rent, or profit, (emphasis added)

Evangelical Covenant Church of America v. City of Nome 4 presented the only occasion upon which this court was called upon to interpret AS 29.10.336(c) before the 1964 amendments became effective. In that case we held that the residence of an associate or lay pastor was exempt from taxation as was the residence of the head pastor of the Covenant Church at Nome. In so doing, it was stated that the “other property of the organization not used for business, rent, or profit” portion of AS 29.10.336(c) represented a “broadened tax exemption.” I believe two additional facets of the Evangelical Covenant Church decision are of significance here. First, it should be noted that the Evangelical opinion also characterizes the religious exemption provisions of article IX, section 4 of Alaska’s Constitution as a “broadened *441tax exemption.”5 As previously noted, article IX, section 4 of Alaska’s Constitution provides that “All, or any portion of, property used exclusively for non-profit religious, charitable * * * purposes, as defined by law, shall be exempt from taxation.” Second, in regard to the rule that each church congregation has but one pastor, Evangelical6 states:

We doubt whether such a rule can be said to have any place in this day and age when many a church congregation is ministered to by more than one pastor.

In my opinion, the 1964 amendments to AS 29.10.336(c) broadened, rather than narrowed, exemptions extended to property used exclusively for religious purposes. In light of these statutory changes, and what I consider to he the rationale of the Evangelical decision, I would hold that the residences of ministers-administrators Hanson and Reed are exempt from taxation.

I view the present text AS 29.10.336(a) and (b) as establishing broader exemptive categories than did its predecessor for several reasons. First, the 1964 amendments expanded the term “residence” to include the residence of a “rabbi” or entire “religious order.” Second, it appears that the 1964 amendments were designed to replace the former AS 29.10.336(c).’s “and other property of the organization not used for business, rent, or profit” with a comprehensive scheme of exemptions, which pertained not only to pastoral residences hut also embraced any structure, together with the underlying land, furnishings, and fixtures, and adjacent lots, which were used for charitable or religious purposes. I think it a permissible deduction, from a study of the provisions of AS 29.-10.336(b) (1), (2), (3), (4), (5), and (c), that the legislature intended to avoid the situation wherein a ejusdem generis construction would be applied to the former AS 29.10.336(c)’s “and other property” clause.7 It seems to me to be quite arguable whether churches could have obtained tax exemptions under the old act for parochial schools, hospitals, residences of religious orders, furniture and fixtures used, therein, lands lying adjacent to these structures which lands are reasonably necessary to the convenient use of such structures, and also for parking lots which were required by local ordinances.8 The new provisions embodied in AS 29.10.336(b) (1), (2), (3), (4), and (5) strike me as creating rather expansive tax exemptions. In light of the fact that AS 29.10.336(b) (1) exempts the entire residence of a religious order, it would appear anomalous to construe the amended statute as limiting “the residence of the pastor” to a single pastor for each congregation.9 I think such a result is precluded by a textual analysis of the new provisions embodied in AS 29.10.336 (b) and (c), and by the rationale of the Evangelical decision. In reaching this conclusion, I do not believe that “includes” as employed in AS 29.10.336(b) is intended as a word of limitation.10 These considerations lead me to conclude that the residences of ministers-administrators Reed and Hanson are exempt, under AS 29.10.-336(a) and (b) (1), from taxation. In these times, it cannot be denied that ministers often are required to perform administrative duties. In addition to the foregoing, I cannot hold, on the facts appear*442ing in this record, that the Hanson and Reed residences were not incidental to and reasonably necessary to carry out the purposes of their organization. This latter point requires reference to our decision in Matanuska-Susitna Borough v. King’s Lake Camp11 and its applicability to the question of the taxability of the Kuebler residence.

I consider the Kuebler teacher-administrator residence a closer case. In Matanuska-Susitna Borough v. King’s Lake Camp 12 we adopted a broad definition of the term “charity.” There we quoted Old Colony Trust Company v. Welch13 where the court said:

It is quite clear that what is done out of good will and a desire to add to the improvement of the moral, mental, and physical welfare of the public generally comes within this meaning of the word “charity.”

Given the foregoing, it is my view that the Kuebler residence comes within AS 29.10.336(b) (2), which grants exempt status to “a structure, and the land it stands on, which is used for * * * solely charitable purposes * *

Further, in my opinion the use of this residence by an administrator-teacher was “incidental to and reasonably necessary for the accomplishment of its charitable purposes.” 14 In Matanuska-Susitna Borough v. King’s Lake Camp15 this court held that a charity could use its properties in a manner which was incidental to and reasonably necessary for the accomplishment of its primary charitable purposes without losing its tax exemption. There we specifically held that receipt of certain incomes and rentals derived from the charity’s properties did not divest the charity of its exempt status under AS 29.10.336(c) because such rents and income were only incidental to and reasonably necessary to the achievement of the primary charitable purposes. Here I believe that the Kuebler residence is within the ambit of AS 29.10.-336(c) (2)’s “solely charitable” purpose category. Once a structure qualifies for exemptive status, such status can only be lost under AS 29.10.336(c) if nonclassroom rentals or income are derived therefrom. Since neither rents nor income are derived from the Kuebler residence, I would hold it exempt.

. 32 Cal.2d 729, 221 P.2d 31, 35 (1950).

. See also Serra Retreat v. Los Angeles County, 35 Cal.2d 755, 221 P.2d 59, 61 (1950).

. Alaska Const, art. IX, § 4.

. 394 P.2d 882, 885-886 (Alaska 1964).

. Id. at 885.

. Id. at 886 n. 15.

. Not untypically, the legislature has failed to provide an adequate record of the legislative history of the questioned amendments.

. AS 29.10.336(b) (1), (2), (3), (4), and (5).

. Property falling within AS 29.10.336(a) and (b) only loses its exempt status if nonclassroom rents or income are derived • therefrom. This is the only criterion established for divestiture of exempt property of its tax free status: See AS 29.10.336(c).

.I view the legislature’s use of “includes” in AS 29.10.336(b) as reflecting an intent not to restrict the enumerated religious exemptions by the inehisio unius est ex-clusio alterius principle.

. 439 P.2d 441, 444 (Alaska 1968).

. Id. at 445.

. 25 F.Supp. 45, 48 (D.Mass.1938).

. Matanuska-Susitna Borough v. King’s Lake Camp, 439 P.2d 441, 444 (Alaska 1968).

. Id.