Congregation of United Brethren of Salem & Vicinity v. Commissioners of Forsyth County

The Constitution, Article V, section 5, empowers the Legislature to exempt from taxation "property held for educational, scientific, literary, charitable or religious purposes." This is the limit. The Legislature can exercise this power to the full extent, or in part, or decline to exempt at all. It can exempt one kind of property held for such purposes, either realty or personalty, and tax other kinds. It can exempt partially, as for instance up to a certain value, and tax all above it. It can exempt the property held for one or more of those purposes and tax that held for others — as, for instance, it may exempt churches or other property held for religious purposes, and tax buildings or other property held for scientific or literary purposes, for the constitutional provision is in the disjunctive, and authorizes the Legislature to exempt property held "for educational, scientific, literary, charitable or religious purposes." The property which is left subject to tax will be taxed uniformly as laid down in Redmond v. Commissioners, 106 N.C. 122. It is the power of exemption, within the limit, which is discretionary. Whether the Legislature can discriminate in the same class by exempting to a large value the property of a college or university, (494) and to a smaller amount the property of an academy or high school, is a large question which is not before us, for there is here no attempt to discriminate between corporations holding property for the same purpose, and any expression of opinion on that point would be obiterdictum. The Legislature has used its discretion of discriminating between the classes by exempting property held for religious purposes when rented out, "if the rentals are applied exclusively to the support of the gospel," while refusing to exempt any property held for the other classes if rented out. But it has not discriminated between institutions in the same class.

The act of the Legislature being therefore well within the constitutional discretion reposed in them, it only remains to apply it to the case in hand. Laws 1887, chapter 137, section 21, subsection 2, exempts from taxation "property belonging to and set apart and exclusively used for the university, colleges, institutions of learning, academies, the Masonic fraternity, Order of Old Fellows, Knights of Pythias, Independent Order of Mechanics, Good Templars and Friends of Temperance, Knights of Honor, Good Samaritans and Brothers and Sisters of Love and Charity, Royal Arcanum, Hibernian Benevolent Society of Wilmington, the Israel and Priscilla Tent of Wilmington, schools for the education of the youth, or the support of the poor and afflicted, orphan asylums, such property as may be set apart for and appropriated to the exercise of divine worship or the propagation of the gospel or used as parsonages, the same being the property of any religious denomination or society: Provided, that any such property is used exclusively for religious, charitable or educational purposes."

Thus the Legislature did not go to its full constitutional power of exempting all property held for the purposes named, but restricted the exemption to the property "belonging to and set apart and exclusively used" for such purposes. It emphasizes this by (495) again repeating in the proviso, if "such property is used exclusively for religious, charitable or educational purposes." This statute is copied in Laws 1889, chapter 218, section 23, and 1891, chapter 326, section 21. By the words "set apart and exclusively used" is contemplated such property as is used directly, immediately and solely for the purposes named. Property rented out is not "so set apart and used," even though the rents may be so applied. That would exempt the rents, but not the real estate itself. This was thought to work a hardship as to church property, so Laws 1893, chapter 296, section 20, extends the exemption as to property held for religious purposes, even though rented out. The proviso under that act reads: "Provided, that all property not used exclusively for religious, charitable or educational purposes, or which is held for the purpose of speculating in the sale thereof, investment, or for rent, shall not be exempt: Provided, further, that when the rental from such property is applied exclusively to the support of the gospel, the property shall not be taxed."

It was, and is, competent for the Legislature to also exempt property whose rental is applied to educational or charitable purposes; but it has not so enacted. That matter rests in the legislative discretion.

The property sought by the plaintiff to be exempted, in addition to its large property admittedly exempt, consisted of (1) solvent credits and notes secured by mortgage amounting to $87,043.48. It is found as a fact that the interest on these is applied exclusively and faithfully to educational, religious and charitable purposes. It seems to us that thecorpus of this fund is "set apart and used exclusively" for such purposes. It is the only mode in which it can be so set apart and used, and it is therefore exempt until the Legislature shall declare its will to tax it. This fund is not held for "investment" in the meaning of the proviso, for that contemplates the holding of the property for the benefit (496) of the corporation, to await enhancement or future use, but here the whole use — the interest — is applied as received, for the purposes named. Any part of such fund on which the interest is not so applied, but is allowed to accumulate, would not be exempt. (2) The second piece of property is a parcel of land of about twenty acres in the town of Winston, known as "The Reservation." On the north side is a church, covering about one-third of an acre, situated on a lot fenced in of about two acres. Excluding these two acres, the reservation is found to be worth $18,000. A number of lots have heretofore been sold off, leaving the tract of the present dimensions, and public notice has been given that lots were for sale. A part of it is now under lease. This property (leaving out the church enclosure) is certainly not in use for educational, charitable or religious purposes, and was properly held liable to taxation. (3) A tract of eighty acres in West Salem, chiefly in forest, and worth $5,000. A schoolhouse stands on the eastern side. It is found as a fact that only about two acres were necessary for the use of the school. It was properly held that the remainder of the tract was liable to taxation. It would be advantageous, no doubt, to the corporation to hold the unused seventy-eight acres as an investment, and reap the benefit of the increased value which will come to real estate adjacent to a growing and prosperous town like Winston; but in the meantime such property must bear its share of the public burdens. The exemption is for property now used for religious, charitable or educational purposes, and not for property abstracted from all use or used to create a large fund in future, which fund when so created may be used for such purposes. When so used, it will be exempt (subject to legislative change), but not till then. (4) A house and lot in the town of Salem, known as the "Bishop's House," worth $3,000, which is rented out as a residence, the corporation receiving the rents therefor, which are applied to religious, charitable and educational (497) purposes. For the reasons heretofore stated, the rents are exempt from taxation, but not the house and lot. The house not being needed for religious, charitable or educational purposes, nor used for a church, parsonage, school or hospital, the corporation is showing business judgment in renting it out. But the act of Assembly only exempts from taxation property which is used for the specified purposes, which, in this case, is the rent. The Legislature can exempt property whose rental is so applied, but so far it has only granted exemption to property rented out when the rental is "applied exclusively to the support of the gospel." Expressiounius, exclusio alterius. The house and lot would be equally subject to taxation if not rented out and unused. It is only property used for the specified purposes which is exempt.

The general rule is liability to taxation, and that all property shall contribute its share to the support of the government which protects it. Exemption from taxation is exceptional. It needs no citation from reiterated precedents that such exemptions should be strictly construed, and that if we had any doubts (which we have not), they should be resolved in favor of liability to taxation. R. R. v. Alsbrook, 110 N.C. 137. As above modified, the judgment is

Affirmed.

Cited: Keith v. Scales, 124 N.C. 508; Corporation Commission v.Construction Co., 160 N.C. 588, 590; Davis v. Salisbury, 161 N.C. 58;Southern Assembly v. Palmer, 166 N.C. 182.

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