Summary
holding that not-for-profit publishing corporation's use of property was not exclusively for charitable purposes when more than 40 percent of total revenues came from commercial printing
Summary of this case from Christian Voice of Cent. Ohio v. TestaOpinion
No. 28439
Decided May 28, 1941.
Taxation — Exemptions — Property used exclusively for charitable purposes — Section 2, Article XII, Constitution — Exemption lost if property appropriated to other use — Corporation not for profit owned by religious institution, not exempt — Substantial portion of gross income received in competition with commercial corcerns — Board of Tax Appeals may revise exempt list — Sections 1464-1, 5353 and 5570-1, General Code.
1. The use of property exclusively for charitable purposes is the criterion of exemption thereof from taxation. The right of exemption, derived from Section 2 of Article XII of the state Constitution, is lost if the property be appropriated to other uses. ( Cullitan, Pros. Atty., v. Cunningham Sanitarium, 134 Ohio St. 99, approved and followed.)
2. Where a substantial portion of the gross income of a corporation is received for work done in competition with commercial concerns in the same line, the property of such corporation may not be exempted from taxation under Section 5353, General Code, even though such corporation be one formed not for profit and owned by a religious institution, for whose use, benefit and behoof the property of the corporation is held. ( American Issue Publishing Co. v. Evatt, Tax Commr., 137 Ohio St. 264, distinguished.)
3. Under Sections 1464-1 and 5570-1, General Code, it is the duty of the Board of Tax Appeals to see that no property is improperly or illegally exempted from taxation, and such board at any time may revise the list of property exempted from taxation.
APPEAL from the Board of Tax Appeals.
This case is here on appeal from the decision of the Board of Tax Appeals entered on November 20, 1940, holding that the use of appellant's premises does not constitute such a use within the meaning of Section 5353, General Code, as to entitle appellant to the exemption of its premises from taxation, and sustaining the complaint of complainants.
Appellant, The Otterbein Press, incorporated under the laws of Ohio as a corporation not for profit, is the successor, as the official church publishing organ of the United Brethren Church, of "The Printing Establishment of the United Brethren in Christ."
The appellant corporation is the outgrowth of a reorganization, under Section 77-B of the Bankruptcy Act, of a predecessor corporation. Its purposes are as follows: "To publish religious periodicals and such other works as may conduce to the general benefit of the Church of the United Brethren in Christ, any net profits therefrom to be divided among the annual conferences of the Church of the United Brethren in Christ in the United States, to be applied by such conferences to the support of their indigent aged and disabled ministers, ministers' widows and orphans."
Appellant took over all of the old corporation's assets, including plant, machinery, equipment, cash, accounts receivable, work in progress, etc., including land with a tax valuation of $35,900 and buildings with a tax valuation of $227,690.
Under the Section 77-B bankruptcy reorganization plan, appellant was to retain 30 per cent of its future earnings for its own purposes. Of the remaining 70 per cent, one-half was to be used for the purpose of cancelling outstanding bonds of the old corporation, and one-half for cancelling outstanding notes.
Shortly after the reorganization plan had become operative, the real estate comprising the printing plant which had come to the appellant through the reorganization was placed on the exempt list by order of the Tax Commission of Ohio, where it has since remained. Appellant holds title to this printing plant property "for the use, benefit and behoof of the Church of the United Brethren in Christ."
Appellant's activities consist of printing, publishing and binding religious literature and church publications. It does the printing required by the 28 conferences or territories into which the church is divided. It furnishes this work to the various agencies of the church at cost plus a profit. A small amount of religious printing is done for denominations other than the United Brethren in Christ, which printing is paid for in the same manner as that for the United Brethren. In addition to religious printing, appellant does commercial printing for persons and corporations outside of the church. Gross sales in 1938 attributable to religious publications were $334,441.36; to commercial work $223,149.72. In 1939, the figures were $340,896.28 and $239,329.67, respectively. There was an operating profit of $60,000 in 1938 and of $90,000 in 1939. The commercial printing represents from 10 per cent to 20 per cent of the labor of the employees and of the use of the presses and other machinery.
Frank Zindorf and other complaining taxpayers of Montgomery county, Ohio, appellees herein, where the real estate in question is located, made demand upon the auditor of Montgomery county to strike appellant's property from the exempt list and place it upon the tax list and duplicate. Upon the failure and refusal of the county auditor, these complainants, under Section 5616, General Code, complained to the Board of Tax Appeals, requesting that appellant's property be removed from the auditor's list of exempted properties and placed upon the list of taxable properties, on the ground that such property was not exempt from taxation by virtue of the provisions of Section 5353, General Code, under which it theretofore had been placed upon the auditor's list of exempted properties.
Messrs. Iddings, Jeffrey Weisman, for appellees, Frank Zindorf and others.
Messrs. Coolidge Becker and Messrs. Dargusch, Caren, Greek King, for appellant.
Mr. Thomas J. Herbert, attorney general, and Mr. Perry L. Graham, for appellee, William S. Evatt, tax commissioner.
Whether the decision of the Board of Tax Appeals is reasonable and lawful depends upon a proper interpretation of Section 5353, General Code.
Under Section 2 of Article XII or the Constitution of Ohio, general laws may be passed exempting from taxation property used exclusively for charitable purposes. Under this section of the Constitution, the Legislature enacted Section 5353, General Code, providing as follows:
"Lands, houses and other buildings belonging to a county, township, city or village, used exclusively for the. accomodation or support of the poor, or leased to the state or any political subdivision thereof for public purposes, and property belonging to institutions used exclusively for charitable purposes, shall be exempt from taxation."
While appellant admits that from 10 per cent to 20 per cent of its facilities are used for purely commercial purposes, its sales figures disclose that more than 40 per cent of its total revenues come from commercial printing done for regular business houses and in competition with ordinary printing establishments.
Appellant relies upon the case of American Issue Publishing Co. v. Evatt, Tax Commr., 137 Ohio St. 264, 28 N.E.2d 613. The facts in the instant case, however, differ radically from the facts in the American Issue case. The American Issue Publishing Company did no outside or commercial work, and this court, upon the record in that case, held that The American Issue Publishing Company is an institution used exclusively for charitable purposes. It is clear from the record in the instant case that appellant's property is not used exclusively for charitable purposes, but that its printing establishment is conducted in competition with other commercial printing plants.
The use of property exclusively for charitable purposes is the criterion of exemption thereof from taxation. The right of exemption, derived from Section 2 of Article XII of the state Constitution, is lost if the property be appropriated to other uses. Cullitan, Pros. Atty., v. Cunningham Sanitarium, 134 Ohio St. 99, 16 N.E.2d 205, and cases there cited.
In the case of Cardinal Publishing Co. v. City of Madison, 208 Wis. 517, 243 N.W. 325, the Supreme Court of Wisconsin had before it an exemption-from-taxes statute which provided that property owned by any educational association used exclusively for the purposes of such association should be exempt from taxation. The following statement of Chief Justice Rosenberry is pertinent here: "It appears from the findings of the court that 20 per cent of the printing income of the plaintiff in the year 1928 was derived from printing the East Side News and the West Side News. For the year 1929 the plaintiff's printing income from the same sources was 7.5 per cent of its gross income, to which might be added the printing of the Central High School Mirror, 3.2 per cent, which would make its income from activities not associated with the university equal to 10.7 per cent of its total income. * * * It is sought here to justify the plaintiff's position upon the theory that the property used for the non-exempt purposes was property which was necessarily employed by the plaintiff for purposes which are exempt and that the use of the property when not employed for purposes which are exempt should not destroy its exemption. This construction would create an entirely new exemption statute. If the plaintiff wishes to claim the benefit of the exemption it should keep itself within the field prescribed by the Legislature. Whether it goes out of that field or not is a matter of choice. It may stay in and receive the exemption. It may depart from it and pay its taxes. It has chosen to depart, therefore its property is subject to taxation."
Appellant challenges the authority of the Board of Tax Appeals to order a revocation of an exemption from taxation. Section 1464-1, General Code, provides, in part, as follows:
"The Board of Tax Appeals shall exercise the following powers and perform the following duties of the Department of Taxation:
"1. To exercise the authority provided by law relative to consenting to the exempting of property from taxation, and revising the list of exempted property in any county."
Section 5570-1, General Code, provides, in part: "The Tax Commission shall, prior to January 1, 1925, revise the list in every county so that no property is improperly or illegally exempted from taxation; and shall have power to make further revision at any time thereafter."
The foregoing statutes confer full authority upon the Board of Tax Appeals for its action and decision herein. State, ex rel. Bartlett, Pros. Atty., v. Thatcher, County Aud., 138 Ohio St. 235.
Appellant challenges the right of the seven individual appellees herein to invoke the jurisdiction of the Board of Tax Appeals under Section 5616, General Code. However, this question is immaterial here, for the reason that it is the duty of the Board of Tax Appeals under Sections 1464-1 and 5570-1, General Code, to see that no property is improperly or illegally exempted from taxation. It therefore has the power to revise the list of exempted property at any time, and this it may do sua sponte.
This court will not interfere with a decision of the Board of Tax Appeals unless it appear from a consideration of the entire record that such decision is unreasonable or unlawful. Board of Education of Cleveland Heights City School Dist. v. Evatt, Tax Commr., 136 Ohio St. 283, 25 N.E.2d 453.
Being of the opinion that the decision of the Board of Tax Appeals is reasonable and lawful, such decision is affirmed.
Decision affirmed.
WEYGANDT, C.J., TURNER, WILLIAMS, HART, ZIMMERMAN and BETTMAN, JJ., concur.