A Hearing Officer for the State Tax Commission of Missouri has once again held that a not-for-profit organization must own the real estate for which it is seeking tax exemption in order to pass threshold requirements for exemption.
In Colony Plaza Associates LP v. Cathy Rinehart, Assessor Clay County, No. 17-32083 (Mo. State Tax Comm. Sept. 18, 2018), the property at issue was an 11-story apartment building built in 1980 in Excelsior Springs, Missouri. All 111 units were one-bedroom apartments. The property also included an office, a meeting room, a laundry area, a vending area, a library, and an entry area. Clay County Assessor Cathy Rinehart assessed the property as subject to approximately $39,000.00 in property taxes for the year 2017.
Who owned the property? Colony Plaza Associates, LP (“Colony Plaza”), a limited partnership company. Colony Plaza was owned 50% by a 501(c)(3) non-profit organization and 50% by a for-profit limited liability company. The limited liability company, in turn, was owned 100% by the non-profit.
On appeal from the Clay County Board of Equalization, Colony Plaza argued it was exempt from paying property taxes.
The Missouri Constitution and Section 137.100(5) of the Missouri Revised Statutes recognizes tax exemptions for all real property used exclusively for purposes purely charitable. In determining whether property is exempt from taxation, the Missouri Supreme Court looks at whether the property is owned and operated on a not-for-profit basis, whether the property is actually and regularly used exclusively for charitable activity, and whether the property is used for the benefit of an indefinite number of people and benefits society generally.
According to Senior Hearing Officer John Treu, Colony Plaza failed to prove the first threshold requirement—that the property was owned on a not-for-profit basis—because Colony Plaza was a for-profit entity.
He explained that Colony Plaza “cannot be characterized as a not-for-profit organization simply because one of its equal partners is a not-for-profit organization.” He found guidance from prior Missouri Supreme Court cases which stand for the proposition that a tax exemption will not be given to property which houses a for-profit business, even if the profit is turned over to a parent organization to be used for a charitable purpose.
Mr. Treu also found worrisome the Limited Partnership Agreement, which evidenced that Colony Plaza’s purposes were not purely charitable but rather included for-profit endeavors.
RAH Writing 