Court: Washington Supreme Court; May 24, 1973; Washington; State Supreme Court
Yakima First Baptist Homes, Inc. seeks a declaration that its property, known as Sun Tower, is exempt from taxation, an injunction against county officials to prevent future tax assessments, and recovery of previously paid taxes. The organization, a nonprofit founded in 1966, has a board of directors comprised of First Baptist Church members, serving voluntarily. Sun Tower, a 12-story facility opened in 1968, accommodates residents aged 62 and older, with an average resident age of 78.8. The building offers dining and recreational services, with income directed towards loan repayments and operational costs. The case raises two main questions: the statutory authority for an injunction and the property’s tax exemption status. RCW 84.68.010 outlines when injunctions can be issued concerning tax collection, specifically if the tax law is void or if the property is tax-exempt. The respondent argues for tax exemption under RCW 84.36.040, which lists eligible properties for tax exemption, including homes for the aged provided they are supported by donations and that profits are reinvested for institutional purposes. The court finds no merit in the appellants' claim that RCW 84.36.040 is unconstitutional.
To assess the tax exemption status of libraries, orphanages, institutions, homes, and hospitals, the director of revenue is granted access to their financial records. The entity claiming tax exemption must submit a signed statement to the assessor, confirming that all income and receipts, including donations, are solely used for operational expenses. Homes for the aged and infirm may qualify for exemption if they are partially funded by public or private donations and if their resources are exclusively allocated to providing care for the elderly.
A claim has been made that this provision violates the equal protection clause of the state constitution, arguing that elderly individuals not residing in these homes receive no equivalent benefits. However, the exemption applies to the institution and its property, not to individual residents, with any benefit to residents being incidental. There is a legitimate basis for classifying these institutions as deserving of exemption.
Appellants argue that Sun Tower does not qualify for exemption under RCW 84.36.040, presenting several points: (1) Sun Tower is not a "home"; (2) its residents are not aged or infirm; (3) its funding is not entirely directed towards maintenance; and (4) it lacks sufficient public or private charitable support. Washington state law mandates that tax exemptions be narrowly interpreted against the claimant.
For Sun Tower to qualify for tax exemption, it must fulfill all statutory requirements, particularly that it is supported by donations or charity. In legal terms, "supported" implies ongoing financial maintenance rather than initial construction costs. Sun Tower's primary funding came from a federal loan, supplemented by loans from a church and minimal donations. The total amount of donations received does not meet the criteria of being "supported" as required by law.
The trial court found that Sun Tower's annual operating costs are funded primarily through rents from residents and federal rent subsidies, as detailed in finding of fact No. 13. A specific contract with the Federal Government mandates that a portion of the units be allocated to very low-income elderly individuals, for which direct rent subsidies are received. Additionally, the organization receives minimal miscellaneous donations, often in the form of equipment loans, which do not qualify as public donations under the relevant statute. The court emphasized that interpreting the statute to allow any contribution, regardless of size, to grant tax exemption would lead to absurd outcomes and contradict the statute's intent.
Regarding tax exemption under RCW 84.36.030, the court assessed whether the organization was nonsectarian and if the property was used for religious purposes. While the organization, Yakima First Baptist Homes, Inc., may be sectarian, the use of Sun Tower is deemed nonsectarian. Washington law focuses on the property's usage to determine tax exemption qualification. The respondent's claim that caring for the aged constitutes a religious purpose was rejected, as it does not fit commonly accepted definitions of 'religious.' Consequently, without a recognized religious purpose, the organization is ineligible for tax exemption under the statute, leading to the reversal of the judgment.
The dissenting opinion by Justice Finley asserts that the trial court's findings support the conclusion that The Sun Tower, a facility for the aged and infirm, qualifies for property tax exemption under RCW 84.36.040. This statute outlines a fourfold test for property tax exemption:
1. **Nature and Purpose of the Property**: The facility is categorized as a home for the aged and infirm, with requirements for residency including being at least 62 years old or physically handicapped. There are no restrictions on race or religion, and the average tenant age is 78.8 years.
2. **Funding**: The trial court noted that initial financing for the facility included $8,300 from the Baptist Church and over $6,422 from various donations, indicating support from public and private sources.
3. **Use of Funds**: All income and profits must be used for the institution's purposes after expenses are covered.
4. **Exclusive Use of Property**: The property must be dedicated solely to the enumerated purposes.
The findings reflect that the facility was created from the Yakima First Baptist Church's concern for the elderly poor and aims to provide non-profit housing and services tailored to the needs of elderly individuals. The dissent highlights that the majority opinion struggles particularly with the funding requirement, which is critical for meeting the exemption criteria.
Annual operating costs for the plaintiff are sourced from resident rent, federal rent subsidies, and miscellaneous donations, including the use of equipment essential for program operations. The plaintiff has a contract with the federal government that mandates allocating a portion of its units to very low-income elderly individuals, for which it receives about $23,000 annually in rent subsidies. Since 1966, the plaintiff has also received 100 special public pledges. The majority opinion dismisses the federal subsidies as non-public donations due to their contractual nature, a view deemed unconvincing. Despite procedural issues, the intent behind these subsidies aligns with that of individual donations aimed at supporting elderly housing. The majority's criticism of the contributions being small and potentially fraudulent is seen as arbitrary, as the statute does not set a minimum requirement for public donations relative to operating costs. The trial court found that all income and profits of the organization are dedicated to its operational purposes, supported by testimonies confirming no profit is made and all income is reinvested into facility maintenance and loan repayments. Both the majority and dissenting opinions agree on this aspect.
The trial court ruled that the Sun Tower facility qualifies for a property tax exemption under RCW 84.36.040, which requires that property be "built and used exclusively" for the institution's purposes. The trial court found that all areas of the facility, including apartment units and communal spaces, are dedicated to providing programs and housing for the elderly and infirm. This conclusion is supported by substantial evidence in the trial record, including testimonies and documents. The court affirmed the tax exemption based on the trial court's findings, with Judges Hunter and Utter concurring.
Additionally, the amicus curiae, Pierce County, argued that all residents of such facilities must be both elderly and infirm to qualify for tax exemption. However, the court clarified that if the legislature intended this strict requirement, it would have explicitly stated it, and a more flexible interpretation is warranted. In the case of Sun Tower, while all residents are elderly, only a third are infirm.
A potential legal issue regarding the First Amendment's establishment of religion clause was noted, concerning the facility's ownership and operation by a sectarian organization. However, this issue was not raised on appeal and is not part of the court's consideration. The dissent does not address the application of RCW 84.36.030 regarding property owned by nonsectarian religious organizations due to potential constitutional implications.
