The Attorney General of Texas
December 29, 1980
MARK WHITE
Attorney General
Honorable William R. Moore Opinion No. w-288
Tom Green County Attorney
Courthoua Ret ConsUtuUonality of the
San Arrgelo, Texas 76901 &a&able tax exemption statute
kecth Ltl8 of the Property Tax
Code) end related questions
Dear Mr. Moore:
You lmvi raised question concern* the applicability of section 1118
of the Property Tax Code to facilities of a non-profit corporation, Baptist
Memorials Geriatric Center, include a geriatric hospital, a retirement
village, and a hotel,
8ectlon ll.18 of the Property Tax Code, which became effective
Jsnuary l, 1380, establishes new criteria for determining whether.pmperty
owners are eligible for charitable tax exemptions. Acts 1979, 68th Leg., ch.,
844 at 2217. Includedkre criteria.based a% (l) organizational purposes; (2)
mcde of operation; and (3) dedication of assets. Prop. Tax Code s11l8 (c)(l),
(c)(2), (c)(3). Property owned by an organixatlon can qualify for an
exemption only if the. organixatlon meets these criteria. Prop. Tax Code
SlLl8@.
:
Specifklly, you ask
(l) la section lL18 ~conatltuttonal?
.A’.
(2) CM the retirement village be eparated from
the rest of the facilities for purposes of determining
ad valorem tax status?
(3) What part, if any, of the center Is exempt
from ad valorem taxes?
We first’ address the constitutional issue. Article VIU, section 2(a) of
the Constitution of Texas provides, in pertinent part:
. . .ITl he legislature MY, bp general laws, exempt
from taxation. . .. all buildings used exclusively and
owned by. . . institutions of purely public charity; and
all laws exempting property from taxation other than
n. c
Honorable William R. Moore - Page TWO w-288)
the property mentioned in this Section shall be null and void.
- (Emphasis addedX
The legislature may not allow charitable tax exemptioN for property not owned
by institutions of “purely public charity. n Dick&n v. Woodmen of the World Life 7~.
260 S.W. 2d 315 (Tex. Civ. App. - San Antonio 1955, writ rePd.1. However,
section lL16 does not employ the familiar phrase “institutions of purely public
charit? to describe organizations whose property is eligible for tax exemption, its
failure to do so is not fatal. The “ourelv oublic charity” constItutiona limitation is a
part of section 111%by implication; t&-express St&tory requirements constitute
additional limitetiohs. See City of Amarillo v. Amarillo Lodge No. 731, A.P. & A.M.,
488 S.W. 26 69 (Tez972). where the suoreme court. in NsumiN that this
constitutional limitation was by implication a Nrt of the statute there involved, fo&d
the statute unconstitutional as applied rather than unconstitutional on its face.
The law is well-settled that the CoNUtution of Texas allows the legislature to
exempt property of charitable institutions from taxation in Cezcases, but does not
compel it. See Tex. Con% art VIII, S2(a). In our opinion, the definition of “charitable
functions” fiction um)a) clearly serves not to enlarge the meaning of “purely
public charity,” but to deny tax exemptions to property owned by institutions of purely
public charity that are not ~organized to perform the charitable functions defined.
Where section lL18 has the effect of denvim? tax exemotions to omani~tio~ that
might otherwise have been properly allowed-tiem, it wib be enforced See Hilltop
Village, Inc. v. Kerrville lnd School District, 426 S.W. 2d 943 (Tex. 1968). Where it 1s
used to bestow tax exemptioN on property that does not meet the “purely public
charity” test, it will be held unconstitutional as applied. City of Amarillo v. Amarillo
Lodge, supra We thus conclude that section lL16 is constitutional on its face.
In Hilltop Village, the court noted that the activity of providing facilities to
meet special residential requirements of the aged might qualily an institution for tax
exemption as one of purely public charity, but only where it also qualified under the
statutory definition of such institutions for tax exemption purpose Because the
controlling statute then (former article 7150, section 7, V.T.C.S.) restricted exemptions
to property of JnstitutioN dispeNir@ aid “without regard to the poverty or riches of
the recipient,” e requirement the claimant failed to meet, the exemption was denied.
426 S.W. 2d at 948. See also City of Waco v. Texas Retired Teacher Residence
t;rtion. 464 S.W. mex, l97l). Accordingly, if the property of the center G
accorded a charitable exemption, it must first be exempt under section 1118.
Because we conclude that this corporation does not qualify as e “charitable
organization” under section ll.18, we need not further consider whether it is an
institution of wpurely public charity” under the constitution.
“Charitable otgtt~-~izatio~~ must be “organized exclusively to perform. . . one or
more of the Distedl charitable functiow.” Prop. Tax Code s1L16(c)O). (Emphasis
added). Although the additional requirement that they be engaged exclusively in
perfdrming such functiorm is qualified to the extent that the incidental performance of
non-chantable functions will not result in loss of the exemption, there is no similar
,
Honorable WIlliem R. Moore - Page Three (MC 288)
exception to the requirement that a charitable organization be “organized exclusively
to perform [such functions] .” (Emphasis edded).
The statutory requiement of exclusivity cannot be ignored. In Setterlee v. Gulf
Coast Waste Disposal Authority, 576 S.W. 2d 773 (Tex. 1978), the supreme court
considered a statutory tax exemption of all property “belonging exclusively” to the
state or a political subdivision. In denying an exemption because property was not
exclusively (though substantially) owned by a public entity, the court equated the word
“exclusively” with the terms “only” and “to the exclusion of all others” The statutory
condition of exclusivity was strictly contrued against the claimant. 5’76 SW. 2d et
177.
Based on the facts supplied us, the Baptist Memorials Geriatric Center is clearly
not a charitable organization within the restricted meaning of section lL18. According
to its corporate charter (article 2), which is not significantly modified or supplemented
by bylaw provisions, the objectives and purposes of the Center are:
. . . to engage in religious, missionary, benevolent, eleemosy-
nary and scientific undertakings which may be authorized by the
Baptist General Convention of Texas, or the Executive Board
thereof.
It is readily apparent that the declared corporate purposes of the Center are much
broader than the statutorily defined charitable functions that eligible charitable
institutions must be organized exclusively to perform. Section lI.l8(c) does not include
religious functions or scientific functions in its statutory list of “charitable functions.”
Although the corporate charter may be amended to cure the problem in subsequent
years, the tax status of the corporation for this year is determined by its qualifications
on January 1, 1980. Prop. Tax Code fIlL42. Accordingly, no part of the property owned
by the corporation is tax-exempt under section lL18, nor under any other provision that
we have found.
We have not overlooked City of McAllen v. Evangelical Lutheran Good Samaritan
530 SW. 2d 806 (Tex. 1975), wherein the supreme court, in considering a claim
For e tax exemption under former article 7150, section 7, stated that although
charitable institutions are entitled to an exemption of only that property which is used
by the institution exclusively for purely public charity, it does not follow:
that every use of the property must be gratuitous. . . . Nor does
it follow that all religious or other benevolent activities must
be excluded in the operation of the hospital or home. It is no
fatal defect to join charitable and religious purposes; the
exemption will not be withdrawn so long as the charitable
requirements ere met. (Emphasis added).
530 S.W. 2d at 810-1L The key is the emphasized language “so long as the charitable
requirements are met.” Former article ‘7150, section 7, V.T.C.S., did not require that
p. 920
Honorable William R. Moore - Page Four (?4V-288)
,
the institution claiming sn exemption be organized exduSiVdy for certain charitable
purposes and no other. The present statute &es.
Fora charitable exemption to apply, both the constitutional and statutory
requirements must be met. Under section ll.18 of the Property Tax Code, the
charitable requirements are not met by an institution organized to perform any
functions other then those charitable functions the statute sets out. In view of our
conclusions, separate consideration of the retirement village property is unnecessary.
SUMMARY
Section Il.18 of the Property Tax Code governing
charitable tax exemptions is constitutionat To be eligible for
the exemption, property must be owned by an institution of
purely public charity that is organized exclusively to perform
certain charitable functions defined by the statute. The Baptist
Memorials Geriatric Center &es not satisfy this test;
accordingly, its property is not eligible for a tax exemption.
22%
Attorney General of Texas
JOHN W. FAINTER, JR.
First Assistant Attorney General
RICHARD E. GRAY III
Executive Assistant Attorney General
Prepared by Jon Bible and Bruce Youngblood
Assistant Attorneys General
APPROVED:
OPINION COMMITTEE
Susan L. Garrison, Acting Chairman
Jon Bible
Rick Gilpin
C. Robert Heath
Myra McDaniel
Bruce Youngblood
p, 921