Summary
In Hubbard Press v. Glander (1951), 156 Ohio St. 170, 46 O.O. 29, 101 N.E.2d 382, exemption was granted for the real and tangible personal property which Hubbard used for conducting its printing operations in Hancock County. Hubbard was then, and remains, a not-for-profit corporation organized "to manufacture, print, publish, sell and distribute offering envelopes, pledge cards, forms for accounts, financial records, statements and other supplies for use by churches and congregations in connection with their efforts to raise money" for themselves and their "benevolence, charitable, missionary and religious activities."
Summary of this case from Hubbard Press v. TracyOpinion
No. 32563
Decided October 31, 1951.
Taxation — Exemption — Property belonging to institution used exclusively for charitable purposes — Section 5353, General Code — Section 2, Article XII, Constitution — Nonprofit corporation promoting religious and charitable enterprises.
Where a nonprofit Ohio corporation organized and controlled by a religious denomination as one of its agencies for carrying on and promoting its religious and charitable enterprises has real and tangible personal property which is devoted and used exclusively in printing and distributing to its churches without profit envelopes and forms used solely to promote and to provide a means for the systematic giving of funds to the churches for their support and benevolences, such property by virtue of Section 2, Article XII of the Constitution of Ohio, and Section 5353, General Code, is exempt from taxation. ( American Issue Publishing Co. v. Evatt, Tax Commr., 137 Ohio St. 264, approved and followed.)
APPEAL from the Board of Tax Appeals.
The Hubbard Press is an Ohio corporation not for profit, and it filed with the Board of Tax Appeals two applications for exemption from taxation of its real property and its tangible personal property for the reason that the same is property belonging to it and used exclusively for charitable purposes within the meaning of Section 5353, General Code.
The Board of Tax Appeals, hereinafter called the board, consolidated the applications for hearing and denied them upon the ground that the properties claimed exempt are not used exclusively for charitable purposes.
Applicant, complaining that the decision of the board is unlawful and unreasonable, filed an appeal in this court under Section 5611-2, General Code.
Applicant was organized in 1949 for the purpose "to manufacture, print, publish, sell and distribute offering envelopes, pledge cards, forms for accounts, financial records, statements and other supplies for use by churches and congregations in connection with their efforts to raise money for their support and maintenance and for the benevolence, charitable, missionary and religious activities and objects of such churches and congregations, in the interest of the Presbyterian Church in the United States of America, and in the promotion of systematic and proportionate giving for the extension of the Kingdom of God throughout the earth. This is a corporation which does not contemplate pecuniary gain or profit, incidental or otherwise to its members."
The articles of incorporation provide that applicant's members shall consist of the trustees of the General Assembly of the Presbyterian Church in the United States, a representative of each of the boards of the Presbyterian Church in the United States, two representatives from the General Council of the General Assembly of the Presbyterian Church in the United States, and a citizen of the state of Ohio elected by the trustees of the General Assembly of the Presbyterian Church in the United States; and that in the event of the dissolution of the corporation its property and assets, after payment of its debts and expenses, shall be transferred to the trustees of the General Assembly of the Presbyterian Church.
No dividends are paid by applicant and no one derives any profit therefrom, its governing board receiving no compensation.
In the early part of the present century a Presbyterian minister, William H. Hubbard, originated and developed a program of systematic giving by the members of the church. He formulated the use of a certain type of envelope, his plan consisting of the furnishing of 52 envelopes, one for each week of the year, in which a member makes contributions for the church and its benevolences, the idea being to encourage giving to the church systematically by every member thereof.
Hubbard printed these envelopes himself and furnished them to the church at cost and after his death the operation which he had built up was turned over to the Presbyterian Church by his widow. The program of systematic giving which he developed became and continues to be an official policy of the Presbyterian Church.
In order to facilitate the program of printing and furnishing the envelopes, the Presbyterian Church formed a New York corporation sometime after 1913 for the printing of the envelopes and financial forms in connection therewith, and the work was done upon property of the Auburn Theological Seminary at Auburn, New York. The New York corporation printed the envelopes and forms, furnished them to various churches, and billed the churches for the supplies.
In 1938 the trustees of the New York corporation representing the Presbyterian Church decided to move the operation to a more central location, and the New York corporation thereupon began to charge the churches for the supplies a sum in excess of the mere cost so as to accumulate a fund to be used in acquiring and constructing a printing establishment in a location more convenient for the Church as a whole. Between 1938 and 1949 a considerable sum was accumulated.
In 1949 citizens of the city of Findlay, Ohio, donated to The Hubbard Press of New York the tract of real estate for which tax exemption is asked in this case, and the Presbyterian Church in the United States decided that the operation should be moved from New York to Findlay, and that the monies which had accumulated should be used for the construction of a modern printing plant to do the printing for the Church which was required in the functioning of its policy of systematic giving. Thereupon the applicant was organized by the Presbyterian Church. A building was constructed on the real estate in Findlay and the printing machinery was moved from New York to the new building. The title to the real estate and the title to the machinery were transferred from the New York corporation to applicant, and the New York corporation was dissolved.
All the property had been fully paid for when applicant commenced its operations in Findlay in July of 1949 and all taxes on the property, up to and including the tax year 1949, were paid.
Tax exemption for the real estate was recommended by the county auditor of Hancock county.
From the date it commenced its operations in Ohio, applicant has continued the printing of the envelopes and financial forms for the Presbyterian Church. Applicant does no outside commercial work of any kind and is engaged solely in this printing activity which is a part of the work of the Presbyterian Church in the United States in carrying out its program of worship and far-flung benevolences.
Applicant does the printing at cost, with enough added as a cushion to take care of fluctuating future expenses, since its orders come to it long in advance of the time when the supplies are to be furnished to the various churches.
Applicant furnishes contribution envelopes and financial forms to about 6,500 of the 8,500 Presbyterian churches in the United States.
Not only does applicant do no work other than the performance of the Church function described but it has steadily refused to take on any other business for which it has been solicited, even to the printing of church letterheads, and the record amply shows that its sole business is the furnishing of churches with the necessary facilities to carry out the Presbyterian Church's plan of systematic giving. It is organized as a corporation solely for convenience, just as the Church has organized various boards and agencies for the performance of its many religious and charitable activities.
On November 15, 1950, applicant was exempted from the federal income tax, the letter from the Commissioner of Internal Revenue, apprising it of such fact, reading in part:
"It is the opinion of this office, based upon the evidence presented, that you are exempt from the federal income tax under the provisions of Section 101 (6) of the Internal Revenue Code and corresponding provisions of prior revenue acts, as it is shown that you are organized and operated exclusively for religious purposes."
Messrs. Vorys, Sater, Seymour Pease and Messrs. Phillips, Farran McKeag, for appellant.
Mr. C. William O'Neill, attorney general, Mr. Robert E. Leach, Mr. Hugh A. Sherer and Mr. Robert Schuck, prosecuting attorney, for appellees.
It is agreed by all the parties in this case that the sole question before this court is whether the real and tangible personal property used by The Hubbard Press in the printing enterprise in which it is engaged is used exclusively for a charitable purpose. We are of the opinion that such property is so used and that this case comes squarely within the opinion and decision of this court in the case of American Issue Publishing Co. v. Evatt, Tax Commr., 137 Ohio St. 264, 28 N.E.2d 613.
In the American Issue case it appeared that The American Issue Publishing Company was incorporated in Ohio under the sponsorship and actual control of the Anti-Saloon League of America, and that the publishing company was a corporation for profit, with an authorized capital stock of $10,000. Its lands and other property were acquired from donations and the stock which was issued was held by persons in trust for the Anti-Saloon League, the shareholders being prohibited from receiving income from the shares or from transferring them or the property of the company to any person or persons other than those designated by the board of the Anti-Saloon League.
Those shares of stock and the complete control of the company duly passed to The Temperance Education Foundation, Inc., a nonprofit Ohio corporation organized and functioning solely for the purpose of temperance education. The publishing company confined itself wholly to printing literature and furnishing supplies for a consideration to the organization which sponsored it and to affiliated enterprises engaged in temperance work. Profits derived by the publishing company from its activities were devoted to providing additional equipment and increased facilities to promote and assist various projects and undertakings connected with temperance education in harmony with the policy of this state. None of the profit of the publishing company was ever paid to any of its shareholders nor was such payment possible under the arrangement under which the shares were held.
Upon the facts as above set out this court held that the publishing company was an institution used exclusively for charitable purposes within the contemplation of the Constitution, and that by virtue of Section 5353, General Code, its property was not taxable.
In our opinion the facts in the present case present a stronger case for exemption than those presented in the American Issue case.
In the American Issue case the publishing company was a corporation organized for profit and not only furnished literature and supplies for a consideration to its sponsor but likewise to affiliated enterprises engaged in temperance work.
In the present case applicant was organized as a corporation not for profit by the Presbyterian Church in the United States and is furnishing only those facilities which are essential to the carrying on of the great religious and charitable work of the Church.
In the American Issue case the profits derived by the publishing company from its acivities were devoted to providing additional equipment and increasing its facilities to promote and assist various projects and undertakings in connection with temperance education, whereas in the present case the plan of the applicant is to have no profits except so far as are necessary to take care of fluctuating prices and costs of future operations.
In the American Issue case not one penny of profit was ever paid to any shareholder of the publishing company, whereas, in the present case, there are no shareholders and no personal gain to any one, not even the trustees receiving any compensation.
In the American Issue case the court held that the publishing company was an institution used exclusively for charitable purposes because temperance education was in harmony with the policy of the state. Assuredly the extension of the Kingdom of God throughout the earth and the support and maintenance of the benevolent, charitable, missionary, and religious activities and objects of the Presbyterian churches and congregations throughout the United States are in harmony with the policy of Ohio.
In the third Article of the Ordinance of the Northwest Territory of 1787 it is declared that religion, morality, and knowledge are necessary to good government and the happiness of mankind, and in Article I, Section 7 of the Constitution of Ohio, it is stated, "religion, morality and knowledge, however, being essential to good government, it shall be the duty of the General Assembly to pass suitable laws to protect every religious denomination in the peaceable enjoyment of its own mode of public worship and to encourage schools and the means of instruction."
It would seem an unanswerable conclusion that, if a corporation for profit, publishing pamphlets and furnishing supplies for a consideration, is an institution used exclusively for charitable purposes, because its work is connected with temperance education in harmony with the policy of this state, a nonprofit corporation, a branch of a great Church, engaged in exclusively furnishing supplies without profit to that Church as an essential means for not only carrying on its great religious and benevolent activities but for preserving its very life, comes squarely within the tax exemption provided by Section 5353, General Code.
The board argues that this court has somewhat departed from the doctrine of the American Issue case in its subsequent decisions and cites In re Complaint of Taxpayers, 138 Ohio St. 287, 34 N.E.2d 748; Wehrle Foundation v. Evatt, Tax Commr., 141 Ohio St. 467, 49 N.E.2d 52; and Burns v. Glander, Tax Commr., 146 Ohio St. 198, 64 N.E.2d 678.
An examination of those cases discloses that they are in no way in conflict with the American Issue case. In re Complaint of Taxpayers was a case in which the Otterbein Press, owned by a church, was placed on the exempt list by order of the Tax Commission. In that case it appeared that more than 40 per cent of the total revenues of the applicant came from commercial printing done for regular business houses and in competition with ordinary printing establishments. This court held that the use of property exclusively for charitable purposes is the criterion of exemption thereof from taxation, and that the right of exemption is lost if the property be appropriated to other uses.
In the opinion the case was distinguished from the American Issue case because of the outside business activities of the applicant for exemption.
In the Wehrle case the property for which exemption from taxation was claimed was held by a nonprofit corporation for the purpose of ultimate distribution to such selected organizations as are operated for religious, charitable, scientific, literary, or educational purposes, or the prevention of cruelty to children or animals, and this court held that such property was not exempt because it was not presently being used for charitable purposes, the test being the present use of the property.
In the Burns case the property sought to be exempted was a farm which had been given to trustees to provide a home for aged and destitute people, but exemption was denied for the reason that the farm was rented and the proceeds used for the aged and the destitute, and, therefore, the present use of the farm itself was not exclusively for charitable purposes.
The Burns case was decided upon the authority of Incorporated Trustees of the Gospel Worker Society v. Evatt, Tax Commr., 140 Ohio St. 185, 42 N.E.2d 900, in which this court held that, "under Section 2 of Article XII, Constitution of Ohio, and Section 5353, General Code, property which is used to produce income to be used exclusively for charitable purposes may not be exempted from taxation. The test is the present use of the property rather than the ultimate use of proceeds received from the property sought to be exempted."
In the Gispel Worker Society case property was sought to be exempted which contained dormitories, dining rooms, kitchen, chapel, printing shops, and warehouses, and it was apparent that the charitable uses of the property were not exclusive.
In the present case the property sought to be exempted is used solely in carrying on the work and purposes of the Presbyterian Church. There is no outside or extraneous activity in connection with the property and there is no question of using proceeds from any commercial use of the property for charitable purposes. The property is exclusively used for such purposes and consequently the decision of the Board of Tax Appeals must be and is reversed.
Decision reversed.
WEYGANDT, C.J., ZIMMERMAN, MIDDLETON, TAFT, MATTHIAS and HART, JJ., concur.