Untitled Texas Attorney General Opinion ( 1966 )

NEY GENERAL
0F TEXAS
September 9, 1966
Honorable Harold Vlttitoe Opinion No. C-75%
County Attorney
Brooks County Courthouse Re: Exemption from
Falfurrias, Texas ad valorem taxes
of properties
belonging to The
Dear Mr. Vlttitoe: Ed Rachal Foundation
We have been furnished with several letters and briefs
in connection with your request on the above captioned matter.
We quote the following excerpt from one of these briefs.
"The properties of the Foundation
passed under the Last Will and Testament
of Ed Rachal, Deceased, which has been
duly probated In the County Court of
Brooks County, Texas. The Foundation
was chartered under the Won-Profit Corp-
oration Act for the State of Texas on
July 29, 1965. There have been no past
charitable activities of th F a ti0n
%I view of Its newness, howkeytte
lsnned future activities of the Founda-
public library area of public charity,
and although present plans of the Founda-
tion are indefinite, they will be within
The limits of its purposes as set forth
In its Articles of Incorporation. A
copy of its Articles of Incorporation is
enclosed for your use, As indicated in
the letter to the various taxing author-
ities The Ed Rachal Foundation has been
held to be exempt from Federal Income
Taxes under the provisions of Section
501 a as a corporation described in Section
501 11
c (3) of the Internal Revenue Code
inasmuch as the corporation is organized
and operated exclusively for charitable
purposes. For the same reason the Office
of the Comptroller of Public Accounts for
the State of Texas has ruled The Ed Rachal
Foundation exempt from Franchise Taxes as
a p'urelypublic charity." (Emphasis Supplied.)
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Honorable Harold Vittltoe, Page 2 (c-758),
At the outset, the fact that The Foundation has been
held to be exempt from federal income taxes and has been ac-
corded an exemption from franchise taxes by the Comptroller,
is not determinative of exemption from ad valorem taxes.
Section 2 of Article VIII of the Constitution of the State of
Texas empowers the Legislature to exempt;from taxation certain
enumerated properties, among which are e .institutions of
purely public charity." Section 7 of Article 7150, Vernon's
Civil Staututes, which was enacted in pursuance to the fore-
going Constitutional authorization, reads as follows:
"Public charities. - All buildings be-
longing 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
profit, unless such rents and profits and all
moneys and credits are appropriated by such
institutions solely to sustain such institu-
tions and for the benefit of the sick and
disabled members and their families and the
burial of the s&me, or for the maintenance
of persons when unable to provide for them-
selves, whether such persons are members of
such institutions 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, prop-
erty and assets of such institutions are
placed and bound by its laws 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
maintain the orphans of its deceased members
or other persons."
We have been furnished with considerable information
about properties, both real and personal, located in Brooks,
Cameron, and Webb Counties, Texas, as well as with certain
arguments that the use to which said properties are presently
being put justifies the allowance of charitable exemptions.
Since we do not agree, we do not deem it necessary to take
up the uses of said properties at this time, since, as stated
in the above quoted portion from one of the briefs, there
have been no charitable activities by the Foundation in view
of its newness and, at the moment, there are only planned
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.
Honorable Harold Vittitoe, Page 3 (c-758)
future charitable activities, the precise nature of which
have not been determined.
Numerous decisions of our courts clearly establish
the rule that in order to gain the exemption granted by Sec-
tion 7 the charitable institution must not only own the pro-
perty for which exemption is sought, but must, in addition,
make an actual, direct and exclusive use of said property
for charitable purposes. Santa Rosa Infirmary v. City of
San Antonio, 259 S.W. 926 (T 24). enevolent
and Protec&ve Order of Elksec: CT?y oPfPiiouston:
oPfPiouston:84 S.W. 26
(T CL A 1931 error ref )* City of Longview v.
Markh``cRe~'Me%ial &pital, 137 Gex. 178 152 S W 26
1112 (1941)' Markham Hospital v. City of LongGiew,~l$l'S.W.
26 695 (Tex: mv. App. 1945, error ref.}
The case of Hedgecroft v. City of Houston, 150 Tex.
654, 244 S.W. 26 632 (1952) demonstrates what facts are suf-
ficient to constitute 'actual use.' The court was there con-
cerned with the following facts. The Hedgecroft Corporation
had acquired title to the propert in question through gift
and conveyance on December 30, 19$ 8. Before that time the
corporation had agreed with a construction company to make
the necessary alterations and repairs of the property to
fit it for the operation of a hospital, clinic and training
school; and beginning with the week ending July 7, 1948, and
continuing until December 29, 1948, the construction company
had been pre aring plans for repairs and alterations. From
August 1, 19ft8, through December 27, 1948, a blue print company
had furnished numerous blue prints concerning the ccntemplated
repairs. Prior to the corporation's acquisition of the prop-
erty in question and immediately thereafter including January
1, 1949, the corporation was engaged in planning and making the
necessary repairs. The remodeling was completed on May 13,
1949, to an extent which allowed the clinic to move on to the
premises; and the clinic had since been continuously in op-
eration there. The City of Houston and the Houston Indepen-
dent School District instituted a suit for taxes for the yerr
1949.
In holding that the property in question was exempt,
the court reviewed decisions in other States in which exemp-
tion had bean accorded on the basis that if the subsequent use
of the premises created a tax exempt situation then a use
which was confined to readying them for such purpose esta-
blished a right to exemption.
At page 636 the court said:
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Honorable Harold Vittltoe, Page 4 (C-758)
I, The work proceeded until it was com-
pieied on May 13, 1949, and since that time
the hospital and clinic have been operated
as a public charity. The facts alleged
show, In our opinion, an actual and direct
use of the property on and prior to January 1,
1949
. __9 for the charitable purpose." (Emphasis
suppliZE)-
The most recent case involving the exemption of prop-
erties belonging to a charitable foundation is David Graham
Hall Foundation v. Highland Park, et al. 371 S.W. 2d '(62
(T Ci A 1963 f I The court was'
co``erne~'wi``'the f~lE~:``g'~a``s",~'~;,Ced at page 765 of
the opinion:
"The David Graham Hall Foundation was
established in 1940. Its corporate charter
recites that it was created for the 'support
of any benevolent, charitable, educational
or missionary undertaking.' Over the years
it has engaged In many laudable activities,
among them the study, prevention and cure
of communicable diseases, the establishment
of blood banks, etc.
"The Foundation is sole owner of the
property in question, Lot 16 of Block 87,
Highland Park 4th Installment. The dimen-
sions of the lot are 250' by 250'. On it
four buildings are located: a main build-
ing and three residences.
"The main building houses the Founda-
tion's administrative offices and labora-
tories. This building also houses the ad-
ministrative offices of the David Graham
Hall Trust, a related but separate organi-
zation. The Trust owns many properties
the revenue from which is devoted to the
support of the Foundation.
. . .
"Of the three residences on the property,
two of.them are rent houses, the revenues from
which are devoted to the Foundation's acti-
irities. The third residence Is known as the
caretaker's house. This house has also been
rented form indet,ermina+eperiod for the
sum of $50.00 per month. During World War
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Honorable Harold Vittltoe, Page 5 (C-758)
II these houses were occupied ~j.npart at
least at a nominal rental by war refugees
who performed services for the Foundation.”
The court held that the property of the charitable
organization was not exempt from the payment of ad valorem
taxae since the particular property in question had not
been used exclmeively for charitable purpoeee. At page 764,
the court stated: -
“As was pointed out by our Supreme
Court recently it will not suffice for
one to show that he cornea within the
statutory proviaiona for tax exemption
if the facts do not bring his caea with-
in the requirements for tax exemption
aa laid down in Art, VIII, Sac. 2 of
our State Constitution. River Oak8
Garden Club v. City of Houston, Tex.
370 S.U. 26 851. . . .
. . .
n The aonrtitutional requirement
is two-f&r the property must be owned
by the organization alaiming the examp-
tion; and it muat be exclurmively used
by the organization, ae distinguished
from a partial uaa by it and a partial
use by others whether the others pay
rent or not. A th itiee, omitted -7
. . . (J&ha6is”th%e)
It is our opinion that under the decisions above cited
none of the properties belonging to the Foundation are now
exempt from ad valorem taxes, because said properties are
not presently being devoted to the actual, direct and ex-
clusive charitable use requisite to exemption.
SUMMARY
The properties belonging to The
Ed Rachal Foundation are not now
exempt from ad valorem taxes be-
cause said properties are not
presently being devoted to the
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Honorable Harold Vittitoe, Page 6 (C-758)
actual, direct and exclusive
charitable use requisite to ex-
emption.
Yours very turly,
WAGGONRRCARR
Attorney General of Texas
MMcGP:lr
APmOVED:
OPINION COMMITTEE
W. V. Geppert, Chairman
Arthur Sandlin
Jack Goodman
John Pettit
Pat Bailey
APPROVED FOR THE ATTORNEX GENERAL
BY: T. B. Wright
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