Texas Voa Elderly Housing, Inc. v. Montgomery County Appraisal District

Citations: 990 S.W.2d 938; 1999 Tex. App. LEXIS 3275; 1999 WL 253210Docket: No. 09-98-304 CV

Court: Court of Appeals of Texas; April 29, 1999; Texas; State Appellate Court

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An ad valorem tax case involves Texas VOA Elderly Housing, Inc. (Texas VOA) challenging the denial of its charitable exemption applications for the tax years 1993, 1995, and 1996 under specific provisions of the Texas Tax Code. Texas VOA sought a summary judgment to obtain the exemption, while the Montgomery County Appraisal District (MCAD) filed a counter motion asserting that Texas VOA did not qualify as a charitable organization. The trial court ruled in favor of MCAD, stating Texas VOA failed to provide necessary health, social, and educational services to elderly taxpayers and did not admit elderly citizens without consideration of their ability to pay.

Texas VOA raised three main issues on appeal: whether there are genuine factual disputes regarding essential elements of the case, whether it meets statutory requirements for exemption, and whether the evidence supports the denial of the exemption as a matter of law. The property in question, Harvestwood Apartments, is owned by Texas VOA, a subsidiary of Volunteers of America National Housing, both recognized as charitable organizations under Section 501(c)(3) of the Internal Revenue Code. 

MCAD's summary judgment evidence included an affidavit from its deputy chief appraiser, indicating no social or health services were provided on-site, although Texas VOA coordinated with external entities for tenant needs at tenants' expense. Additionally, it noted that Harvestwood's tenant selection criteria were inadequate for exemption justification. Conversely, Texas VOA provided an affidavit from its vice-president, claiming access to necessary services for tenants and asserting that no tenant had been denied housing due to inability to pay rent. 

The ruling primarily addresses the second issue raised by Texas VOA, interpreting the relevant Tax Code provision that mandates a charitable organization must ensure its assets are transferred to another qualified charitable organization upon dissolution.

Exemptions under Texas law are to be interpreted narrowly, with any uncertainties resolved against granting such exemptions. The case Willacy County Appraisal Dist. v. North Alamo Water Supply Corp. emphasizes this principle. For tax exemption eligibility, a charitable organization's dissolution provisions must ensure that assets are directly transferred to approved entities upon dissolution. Texas VOA’s by-laws allow asset distribution to for-profit organizations if fair market value is received, which does not comply with statutory requirements. The relevant tax code mandates that distributions only occur to the State of Texas or qualifying educational, religious, or charitable organizations under Section 501(c)(3) of the Internal Revenue Code. Texas VOA failed to restrict asset distribution appropriately in its articles of incorporation, thus not meeting the requirements for tax exemption. The trial court's denial of this exemption was justified, and the judgment was affirmed, rendering further arguments unnecessary. The applicable Tax Code stipulates that upon dissolution, assets must be transferred to specified non-profit entities, a condition Texas VOA did not satisfy. The comparison with Mission Palms Retirement Housing highlights similar deficiencies in asset distribution provisions.