                      The Attorney              General            of Texas
                                        December 29, 1980
MARK WHITE
Attorney General
                   Honorable William R. Moore                    Opinion No. w-288
                   Tom Green County Attorney
                   Courthoua                                     Ret ConsUtuUonality       of the
                   San Arrgelo, Texas 76901                      &a&able tax exemption statute
                                                                 kecth   Ltl8 of the Property Tax
                                                                 Code) end related questions
                   Dear Mr. Moore:

                          You lmvi raised question concern*    the applicability of section 1118
                   of the Property Tax Code to facilities of a non-profit corporation, Baptist
                   Memorials Geriatric Center, include      a geriatric hospital, a retirement
                   village, and a hotel,
                          8ectlon ll.18 of the Property Tax Code, which became effective
                   Jsnuary l, 1380, establishes new criteria for determining whether.pmperty
                   owners are eligible for charitable tax exemptions. Acts 1979, 68th Leg., ch.,
                   844 at 2217. Includedkre criteria.based a% (l) organizational purposes; (2)
                   mcde of operation; and (3) dedication of assets. Prop. Tax Code s11l8 (c)(l),
                   (c)(2), (c)(3). Property owned by an organixatlon can qualify for an
                   exemption only if the. organixatlon meets these criteria. Prop. Tax Code
                   SlLl8@.
                                                                              :
                          Specifklly, you ask

                                  (l) la section lL18 ~conatltuttonal?
                                                                               .A’.
                                 (2) CM the retirement village be eparated from
                              the rest of the facilities for purposes of determining
                              ad valorem tax status?
                                  (3) What part, if any, of the center Is exempt
                               from ad valorem taxes?

                         We first’ address the constitutional issue. Article VIU, section 2(a)   of
                    the Constitution of Texas provides, in pertinent part:
                               . . .ITl he legislature MY, bp general laws, exempt
                               from taxation. . .. all buildings used exclusively and
                               owned by. . . institutions of purely public charity; and
                               all laws exempting property from taxation other than




                                                        n.   c
Honorable William R. Moore - Page TWO w-288)



              the property mentioned    in this Section   shall be null and void.
            - (Emphasis addedX

       The legislature may not allow charitable tax exemptioN for property not owned
by institutions of “purely public charity. n Dick&n v. Woodmen of the World Life 7~.
            260 S.W. 2d 315 (Tex. Civ. App. - San Antonio 1955, writ rePd.1. However,
            section lL16 does not employ the familiar phrase “institutions of purely public
charit?     to describe organizations whose property is eligible for tax exemption, its
failure to do so is not fatal. The “ourelv oublic charity” constItutiona       limitation is a
part of section 111%by implication;        t&-express  St&tory     requirements constitute
additional limitetiohs.     See City of Amarillo v. Amarillo Lodge No. 731, A.P. & A.M.,
488 S.W.        26 69 (Tez972).       where the suoreme court. in NsumiN that this
constitutional    limitation was by implication a Nrt of the statute there involved, fo&d
the statute unconstitutional as applied rather than unconstitutional     on its face.

       The law is well-settled that the CoNUtution of Texas allows the legislature to
exempt property of charitable institutions from taxation in Cezcases,        but does not
compel it. See Tex. Con% art VIII, S2(a). In our opinion, the definition of “charitable
functions” fiction       um)a) clearly serves not to enlarge the meaning of “purely
public charity,” but to deny tax exemptions to property owned by institutions of purely
public charity that are not ~organized to perform the charitable functions defined.
Where section lL18 has the effect of denvim? tax exemotions to omani~tio~            that
might otherwise have been properly allowed-tiem, it wib be enforced See Hilltop
Village, Inc. v. Kerrville lnd School District, 426 S.W. 2d 943 (Tex. 1968). Where it 1s
used to bestow tax exemptioN on property that does not meet the “purely public
charity” test, it will be held unconstitutional as applied. City of Amarillo v. Amarillo
Lodge, supra We thus conclude that section lL16 is constitutional   on its face.

     In Hilltop Village, the court noted that the activity of providing facilities to
meet special residential requirements of the aged might qualily an institution for tax
exemption as one of purely public charity, but only where it also qualified under the
statutory     definition of such institutions   for tax exemption purpose           Because the
controlling statute then (former article 7150, section 7, V.T.C.S.) restricted exemptions
to property of JnstitutioN dispeNir@ aid “without regard to the poverty or riches of
the recipient,” e requirement the claimant failed to meet, the exemption was denied.
426 S.W. 2d at 948. See also City of Waco v. Texas Retired Teacher Residence
t;rtion.        464 S.W. mex,          l97l). Accordingly, if the property of the center G
         accorded a charitable exemption, it must first be exempt under section 1118.
Because we conclude that this corporation            does not qualify as e “charitable
organization”    under section ll.18, we need not further consider whether it is an
institution of wpurely public charity” under the constitution.

       “Charitable otgtt~-~izatio~~ must be “organized exclusively to perform. . . one or
 more of the Distedl charitable      functiow.”    Prop. Tax Code s1L16(c)O). (Emphasis
 added).    Although the additional requirement      that they be engaged exclusively in
 perfdrming such functiorm is qualified to the extent that the incidental performance of
 non-chantable    functions will not result in loss of the exemption, there is no similar
,
    Honorable   WIlliem R. Moore - Page Three       (MC 288)




    exception to the requirement that a charitable organization     be “organized exclusively
    to perform [such functions] .” (Emphasis edded).

           The statutory requiement    of exclusivity cannot be ignored. In Setterlee v. Gulf
    Coast Waste Disposal Authority, 576 S.W. 2d 773 (Tex. 1978), the supreme court
    considered a statutory tax exemption of all property “belonging exclusively” to the
    state or a political subdivision.    In denying an exemption because property was not
    exclusively (though substantially) owned by a public entity, the court equated the word
    “exclusively” with the terms “only” and “to the exclusion of all others” The statutory
    condition of exclusivity was strictly contrued against the claimant.      5’76 SW. 2d et
    177.

           Based on the facts supplied us, the Baptist Memorials Geriatric Center is clearly
    not a charitable organization within the restricted meaning of section lL18. According
    to its corporate charter (article 2), which is not significantly modified or supplemented
    by bylaw provisions, the objectives and purposes of the Center are:

                 . . . to engage in religious, missionary, benevolent, eleemosy-
                 nary and scientific undertakings which may be authorized by the
                 Baptist General Convention of Texas, or the Executive Board
                 thereof.

    It is readily apparent that the declared corporate purposes of the Center are much
    broader than the statutorily      defined charitable    functions that eligible charitable
    institutions must be organized exclusively to perform. Section lI.l8(c) does not include
    religious functions or scientific functions in its statutory list of “charitable functions.”
     Although the corporate charter may be amended to cure the problem in subsequent
    years, the tax status of the corporation for this year is determined by its qualifications
    on January 1, 1980. Prop. Tax Code fIlL42. Accordingly, no part of the property owned
     by the corporation  is tax-exempt under section lL18, nor under any other provision that
     we have found.

            We have not overlooked City of McAllen v. Evangelical Lutheran Good Samaritan
               530 SW. 2d 806 (Tex. 1975), wherein the supreme court, in considering a claim
     For e tax exemption under former article 7150, section 7, stated that although
     charitable institutions are entitled to an exemption of only that property which is used
     by the institution exclusively for purely public charity, it does not follow:

                  that every use of the property must be gratuitous. . . . Nor does
                  it follow that all religious or other benevolent activities must
                  be excluded in the operation of the hospital or home. It is no
                  fatal defect to join charitable      and religious purposes; the
                  exemption will not be withdrawn so long as the charitable
                  requirements ere met. (Emphasis added).

      530 S.W. 2d at 810-1L The key is the emphasized language “so long as the charitable
      requirements are met.” Former article ‘7150, section 7, V.T.C.S., did not require that




                                                p. 920
Honorable William R. Moore - Page Four        (?4V-288)
                                                                                                    ,




the institution claiming sn exemption be organized        exduSiVdy    for   certain   charitable
purposes and no other. The present statute &es.

       Fora    charitable exemption to apply, both the constitutional     and statutory
requirements    must be met.      Under section ll.18 of the Property Tax Code, the
charitable   requirements  are not met by an institution organized to perform any
functions other then those charitable functions the statute sets out. In view of our
conclusions, separate consideration of the retirement village property is unnecessary.

                                      SUMMARY

                   Section   Il.18 of the Property      Tax Code governing
            charitable tax exemptions is constitutionat       To be eligible for
            the exemption, property must be owned by an institution of
            purely public charity that is organized exclusively to perform
            certain charitable functions defined by the statute. The Baptist
            Memorials       Geriatric  Center &es not satisfy this test;
            accordingly, its property is not eligible for a tax exemption.

                                           22%

                                               Attorney      General of Texas

JOHN W. FAINTER, JR.
First Assistant Attorney General

 RICHARD E. GRAY III
 Executive Assistant Attorney   General

 Prepared by Jon Bible and Bruce Youngblood
 Assistant Attorneys General

 APPROVED:
 OPINION COMMITTEE

 Susan L. Garrison, Acting Chairman
 Jon Bible
 Rick Gilpin
 C. Robert Heath
 Myra McDaniel
 Bruce Youngblood




                                            p, 921
