ROCKY MOUNTAIN PLANNED	)
PARENTHOOD, INC.,	)
	)
Complainant,	)
	)
v.	)		Appeal Number 02-33008
	)
JEAN TWITTY, ASSESSOR,	)
GREENE COUNTY, MISSOURI,	)
	)
Respondent.	)

SUMMARY

Complainant appeals the non-exempt status of its property for tax year 2002.

On March 25, 2003, an evidentiary hearing was held before the Tax Commission hearing officer, Luann Johnson, at the Greene County Courthouse in Springfield, Missouri. Complainant was represented by Jeremy D. Shook, Esq. Respondent was represented by Glenn Green, Esq.

ISSUE

The issue in this case is whether a medical clinic providing reproductive education and health services is exempt from taxation. Specifically, this case asks (1) can a medical clinic which has failed to demonstrate the extent to which it provides low cost or free medical services qualify for a tax-exemption merely because it is owned by a not-for-profit corporation; and (2) can property owned by a not-for-profit corporation qualify for a tax exemption, where the owning corporation exists, in part, to benefit a second not-for-profit corporation. We have previously addressed the same issues in St. Luke's Shawnee Mission Medical Group, Inc. v. Keck, Appeals No. 99-59500 and 99-59501.

EXHIBITS

Complainant's Exhibits A through O were introduced into evidence. Complainant's Exhibit P was taken as an offer of proof but was not admissible as evidence inasmuch as it violated the Exchange Order, deals with fiscal year 2003, and is merely a statement of "projected charity care" created on March 22, 2003. Reliance upon this document by Complainant's counsel in his brief is not well taken.

HOLDING

Each tax exemption case is peculiarly one which must be decided upon its own facts. It is the public policy of the state that property actually and regularly used exclusively for charitable purposes shall be exempt from taxation, and taxing authorities are not to be permitted to defeat that policy by unreasonable or unrealistic application of the "strict construction" rule. Missouri United Methodist Retirement Homes v. State Tax Commission, 522 S.W.2d 745, 751 (Mo. banc 1975). However, taxation is the rule and claims of exemption from taxation are not favored. A property owner that claims entitlement to exemption from taxation bears a substantial burden of proof on all issues. Sunday School Board of the Southern Baptist Convention v. Mitchell, 658 S.W.2d 1 (1983). Complainant has failed to meet its burden of proof supporting its claim of entitlement to a tax exemption inasmuch as it has not demonstrated a dominate charitable use or that there is no possibility of another corporation gaining a profit from the operation of the property.

FINDINGS OF FACT

1. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the Greene County Board of Equalization.

2. Complainant is a not-for-profit corporation; incorporated in Colorado and operating in Missouri and other states. The purpose of the corporation, as stated in the amended articles, is:

"To provide family planning service and education to all persons in need of such services and education, to work toward the acceptance of healthy sexual attitudes in general population, and to support other individuals and organizations engaged in similar or ancillary activities, without regard to race, religion, age, sex, political affiliation, or educational attainment.

To support and promote, financially and otherwise, the program and policies of "Planned Parenthood Federation of America, Inc." and any successor or other organizations promoting the purposes herein stated.

The corporation is organized exclusively for charitable educational and scientific purposes, and no part of the net earnings of the corporation shall inure to the benefit of any director or officer of the corporation, or any private individual. . ."

3. In the event of dissolution of the corporation, no part of the assets of the corporation can be distributed to, nor inure to the benefit of, any individual. Transfer of the assets or the proceeds of the sale of assets can only be made to organizations created and operated for nonprofit purposes.

4. Complainant owns a parcel of property in Springfield, Greene County, Missouri, identified as parcel number 18-01-301-005, more commonly known as 626 East Battlefield Road, Springfield, Missouri .

5. Complainant uses the parcel to run a medical clinic providing reproductive education and health care.

6. The subject property generates a profit. The profits produced by said property are forwarded to Complainant's headquarters in Colorado and are co-mingled with profits received from other clinics which Complainant owns. Profits from all clinics are used to advance Complainant's corporate purpose but are not necessarily earmarked for the clinic from which the profits derived.

7. In 2001, Complainant's total revenues from the subject property were $842,803. After paying management fees to Complainant and paying a percentage to Planned Parenthood Federation of America, Inc., the Springfield property realized a net profit of $111,000 (Tr. 42). In Exhibit 0, the written direct testimony, Complainant's witness asserted that the subject property had a $199,000 operating loss for the fiscal year ending September 30, 2002. But, that witness testified at hearing that the facility had a net income of $111,165 for 2001 (Tr. 16, 42) and earned a profit for 2001 - 2002 (Tr. 41). The asserted net operating loss is not supported in any documents presented to the commission.

8. Complainant pays dues to Planned Parenthood Federation of America. Dues equal approximately 1% of expenses. In exchange for dues, Complainant receives access to group medical malpractice insurance, consultation services, the use of the trademark and access to standards of performance and operations. PPFA also audits compliance by affiliates (Tr. 7-8)

9. Complainant has the burden of proving entitlement to an exemption.

10. Complainant has not demonstrated that it provides any services to the community which are not available from another source.

11. Complainant has not demonstrated that it provides any significant care for indigent or low income people. Complainant's witness testified that as much as 30% of the fees at the subject property were written off but testified that the actual amount of fees which were written off could not be calculated from the subject's financial reports (Tr. 21).

12. Complainant has not demonstrated that it provides any care at a rate less than the rate charged by other medical facilities in the community.

13. Complainant has no guidelines for determining which individuals may be entitled to receive charitable care (Tr. 27, 37-38).

14. Complainant does not make a significant attempt to allow the community to know that it will provide charitable care. (Tr. 28).

15. In 2001, at its 32 clinics in 6 states, Complainant reached almost 19,500 with its educational programs (Exhibit O). A list of those programs are contained in Exhibits B and E.

16. Education and "Public Affairs" spending account for 12.3% of Complainant's total expenses (Exhibit F). The breakdown in spending between Education and Public Affairs is not documented. "Public Affairs" includes working to defeat unspecified "harmful state and federal legislation" (Exhibit C).

17. No "education expense" is shown on the unaudited financial statements for the subject property.

Burden of Proof

Although a taxing statute is construed strictly against the state, an exemption statute is strictly construed against the one claiming the exemption. State ex rel. Union Electric Co. v. Goldberg, 578 S.W.2d 921, 923 (Mo. banc 1979).

In order to prevail, Complainant must demonstrate by substantial and persuasive evidence, that it is entitled to an exemption.

Substantial evidence is that evidence which, if true, has probative force upon the issues, i.e., evidence favoring facts which are such that reasonable men may differ as to whether it established them, and from which the Commission can reasonably decide an appeal on the factual issues. Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact. The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief. Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).

Statutory Exemptions

Properties which can be exempted from taxation are set out within our Constitution and the statutes enacted to enforce that Constitution, to wit:

" . . .all property, real and personal, not held for private or corporate profit and used exclusively for religious worship, for schools and colleges, for purposes purely charitable, . . .may be exempt from taxation by general law but any such law may provide for approximate restitution to the respective political subdivisions of revenues lost by reason of the exemption. All laws exempting from taxation property other than the property enumerated in this article, shall be void. Article X, Section 6, Mo. Const. of 1945.

In support of this Constitutional provision, the Legislature has enacted Section 137.110, RSMo, which provides in relevant part:

The following property shall be exempt from taxation:

(5) All property, real and personal, actually and regularly used exclusively for religious worship, for schools and colleges, or for purposes purely charitable and not held for private or corporate profit, except that the exemption herein granted does not include real property not actually used or occupied for the purpose of the organization but held or used as investment even though the income or rentals received therefrom is used wholly for religious, education or charitable purposes; Section 137.110, RSMo.

Case Law on Charitable Use

In order for a property to be exempt from taxation for state, county or local purposes, the following tests must be met:

1. The property must be actually and regularly used exclusively for a charitable purpose, as charity is defined by Salvation Army v. Hoehn, 188 S.W.2d 826 (Mo. banc 1945). "Charity" is therein defined as ". . .a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing their hearts under the influence of education or religion, by relieving their bodies of disease, suffering or constraint, by assisting them to establish themselves for life, or by erecting or maintaining the public buildings or works or otherwise lessening the burdens of government." Salvation Army at 830.

2. The property must be owned and operated on a not-for-profit basis. The property "must be dedicated unconditionally to the charitable activity in such a way that there will be no profit, presently or prospectively, to individuals or corporations. Any gain achieved in use of the building must be devoted to achievement of the charitable objectives of the project." Franciscan Tertiary Province v. State Tax Commission, 566 S.W.2d 213, at 224 (Mo. banc 1978).

3. The dominant use of the property must be for the benefit of an indefinite number of persons and must directly or indirectly benefit society generally. "It is required that there be the element of direct or indirect benefit to society in addition to and as a result of the benefit conferred on the persons directly served by the humanitarian activity." Franciscan at 224. See also, Barnes Hospital v. Leggett, 589 S.W.2d 241 (Mo. banc 1979).

Charitable

The obvious problem with the purpose for the existence of this corporation is that it exists, in part, to benefit another corporation or other organizations. Benefiting another corporation, even if that second corporation is also involved in charitable activity, is not an exempt purpose. While the owner must be a not-for-profit organization, Franciscan's language specifically requires that the property - not the owner - be dedicated in such a way as to preclude any present or future profit to individuals or corporations. For this reason, a Baptist Book Store was not exempt, even though all of its profits went to an exempt organization to be used for exempt purposes. Sunday School Board of Southern Baptist Convention v. Mitchell, 658 S.W.2d 1 (Mo. banc 1983). Likewise, a medical clinic was not exempt just because it was owned by a not-for-profit hospital, in spite of the fact that the profits from the clinic were used to bolster less profitable clinics. Twitty v. State Tax Commission, 896 S.W.2d 680, 688 (Mo. App. 1995).

Complainant's Articles of Incorporation specifically allow it to disburse funds "to support and promote, financially and otherwise, the program and policies of 'Planned Parenthood Federation of America, Inc.' and any successor or other organizations promoting the purposes herein stated." If the subject property is currently making a profit or makes a profit in the future, there is nothing within the Articles of Incorporation which would prohibit Complainant from funneling those profits to a different corporation. In fact, Complainant specifically seeks to benefit other organizations. Therefore, the property is not "dedicated unconditionally to the charitable activity in such a way that there will be no profit, presently or prospectively, to individuals or corporations." Consequently, the subject property fails the Franciscan test.

We note that this analysis would also hold true if Complainant was receiving the funds generated from the subject property and funneling them to any other clinic under its control. Twitty, supra. The property -- and any profits from the property -- must be dedicated unconditionally to the charitable purpose of that particular property.

Complainant requests that we exempt its property from taxation because it is a not-for-profit corporation and because it provides medical services to the general public. These factors do not create an exemption. An exemption requires that the dominant use of the property is to provide charity - or a gift - to humanity, or some segment of humanity.

While it is true that a medical clinic can have paying patients and still maintain its charitable status, it has a burden to show a dominant charitable use and must demonstrate that the paying patients are incidental to that dominant charitable use. We have no evidence of a dominant charitable use in this case.

We know nothing about what "gift" the property is contributing to promote the public good. We can speculate that some patients may be receiving free or low cost medical services because we have heard that there is some sort of sliding scale for "charity" but we have not seen that scale so we can not determine if a gift is actually contemplated; we have no idea how many people may have been included or excluded because of this scale; and we have no idea of how much of the property's revenue falls within the provision for non-paying or doubtful accounts.

Recent cases support the requirement that Complainant prove actual charitable activities. In Tri-State Osteopathic Hospital Association v. Blakeley, 848 S.W.2d 571 (Mo. App. 1993) the court held that there was nothing magical about a clinic providing services in conjunction with a not-for-profit hospital. That court held:

" . . .(the fact that) the clinic is utilized to provide medical care as an integral part of Tri-State's overall mission to provide such care and treatment, could apply just as well to a clinic operated as a competitive business with its primary goal being that of profit. That type of use would not qualify as "charitable" under the statute."

And, again, in Tri-State Osteopathic Hospital Association, Inc. V. Blakeley, 898 S.W.2d 693 (Mo. App. 1995) the court held that:

". . .many provisions of the contract indicated that the clinic was functioning much the same as any other medical clinic being operated for profit. While such a comparison is not controlling, it can be useful in determining whether property is exempt from taxation pursuant to Section 137.100(5)."

That court went on to say that

". . .a business cannot compete for profit and then seek to insulate itself from taxation by claiming that its profits are used to attain a . . . charitable purpose."

Finally, in Twitty, supra, although finding that the property did not qualify for an exemption because it was outside the corporate purpose, the court also noted that the medical clinic in question did not provide anything that was not already available within the community. In a concurring opinion, Judge Parrish states,

"A medical clinic is operated on the property in question. There is no indication that patients treated at this location could not obtain treatment at other nearby medical facilities. There is no indication that this clinic's method of operation differs from other physicians' offices in the . . .area. Fees are charged. The amount of fees charged a particular patient depends on what services were provided. Some are collected. Some are not."

We have the same circumstances in this case. Complainant operates a medical clinic that provides essentially the same services provided by other for-profit clinics in the area. There is no evidence of any shortage of available services or physicians. There is no indication that this clinic's method of operation differs from other physicians' offices or clinics in the area. And, there is no evidence that any individuals were provided with free or below cost medical services. Complainant's witness testified that Complainant was committed to providing "affordable" health care and that clinic employees worked with individuals to try to make services affordable, but neither of these facts indicate that Complainant was providing services in a charitable fashion.

There is nothing in this case which would set apart from Tri-State, supra or Twitty, supra. Therefore, we find that Complainant has failed to establish that the dominant use of the property is for charitable purposes as required by Franciscan.

Complainant asserts that "there is no evidence that PPSM prices its services strictly on a competitive basis with other facilities in Greene County or that it competes with area medical providers." This suggestion misstates the burden of proof. The burden is upon Complainant to demonstrate that it is distinguishable from other medical providers. Complainant has failed to meet that burden.

Complainant's attempt to distinguish Sunday School Board of the Southern Baptist Convention v. Mitchell, 658 SW 2d 1 (Mo. banc 1983) is not persuasive. Like the Supreme Court in Sunday School Board, we cannot say that profit is not the primary goal of this project or that the profits made are purely incidental to the charitable purpose.

Educational

Complainant's claim for an educational exemption was never well developed. There was no evidence of any educational spending at the Springfield clinic. The overall educational spending which Complainant engaged in was co-mingled with its legislative efforts in its financial statements and the amount of actual educational spending was never discussed. Consequently, there is no evidence which would support a finding that the dominant use of the subject property was for educational purposes.

ORDER

The non-exempt status the subject property, as determined by the Assessor and approved by the Board of Equalization, is AFFIRMED.

A party may file with the Commission an application for review of a hearing officer decision within thirty (30) days of the mailing of such decision. The application shall contain specific detailed grounds upon which it is claimed the decision is erroneous. Failure to state specific facts or law upon which the appeal is based will result in summary denial.

If an application for review of a hearing officer decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission. If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of Greene County as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal. If any protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed. Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.

SO ORDERED June 3, 2003.

STATE TAX COMMISSION OF MISSOURI

Luann Johnson, Hearing Officer