                             NEY          GENERAL
                      0F    TEXAS



                     September 9, 1966

Honorable Harold Vlttitoe           Opinion No. C-75%
County Attorney
Brooks County Courthouse            Re:    Exemption from
Falfurrias, Texas                          ad valorem taxes
                                           of properties
                                           belonging to The
Dear Mr. Vlttitoe:                         Ed Rachal Foundation
       We have been furnished with several letters and briefs
in connection with your request on the above captioned matter.
We quote the following excerpt from one of these briefs.
              "The properties of the Foundation
         passed under the Last Will and Testament
         of Ed Rachal, Deceased, which has been
         duly probated In the County Court of
         Brooks County, Texas. The Foundation
         was chartered under the Won-Profit Corp-
         oration Act for the State of Texas on
         July 29, 1965. There have been no past
         charitable activities of th F    a ti0n
         %I view of Its newness, howkeytte
          lsnned future activities of the Founda-
         public library area of public charity,
         and although present plans of the Founda-
         tion are indefinite, they will be within
         The limits of its purposes as set forth
         In its Articles of Incorporation. A
         copy of its Articles of Incorporation is
         enclosed for your use,     As indicated    in
         the letter to the various taxing author-
         ities The Ed Rachal Foundation has been
         held to be exempt from Federal Income
         Taxes under the provisions of Section
         501 a as a corporation described in Section
         501 11
              c (3) of the Internal Revenue Code
         inasmuch as the corporation     is organized
         and operated exclusively for charitable
         purposes. For the same reason the Office
         of the Comptroller of Public Accounts for
         the State of Texas has ruled The Ed Rachal
         Foundation exempt from Franchise Taxes as
         a p'urelypublic charity." (Emphasis Supplied.)
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Honorable Harold Vittltoe, Page 2 (c-758),



       At the outset, the fact that The Foundation has been
held to be exempt from federal income taxes and has been ac-
corded an exemption from franchise taxes by the Comptroller,
is not determinative of exemption from ad valorem taxes.
Section 2 of Article VIII of the Constitution of the State of
Texas empowers the Legislature to exempt;from taxation certain
enumerated properties, among which are    e .institutions of
purely public charity." Section 7 of Article 7150, Vernon's
Civil Staututes, which was enacted in pursuance to the fore-
going Constitutional authorization, reads as follows:
              "Public charities. - All buildings be-
         longing to institutions of purely public
         charity, together with the lands belonging
         to and occupied by such institutions not
         leased or otherwise used with a view to
         profit, unless such rents and profits and all
         moneys and credits are appropriated by such
         institutions solely to sustain such institu-
         tions and for the benefit of the sick and
         disabled members and their families and the
         burial of the s&me, or for the maintenance
         of persons when unable to provide for them-
         selves, whether such persons are members of
         such institutions or not. An institution of
         purely public charity under this article is
         one which dispenses Its aid to its members
         and others in sickness or distress, or at
         death, without regard to poverty or riches
         of the recipient, also when the funds, prop-
         erty and assets of such institutions are
         placed and bound by its laws to relieve, aid
         and administer in any way to the relief of
         its members when in want, sickness and dis-
         tress, and provide homes for its helpless
         and dependent members and to educate and
         maintain the orphans of its deceased members
         or other persons."
       We have been furnished with considerable information
about properties, both real and personal, located in Brooks,
Cameron, and Webb Counties, Texas, as well as with certain
arguments that the use to which said properties are presently
being put justifies the allowance of charitable exemptions.
Since we do not agree, we do not deem it necessary to take
up the uses of said properties at this time, since, as stated
in the above quoted portion from one of the briefs, there
have been no charitable activities by the Foundation in view
of its newness and, at the moment, there are only planned
                          -3646-
.




    Honorable Harold Vittitoe, Page 3 (c-758)


    future charitable activities, the precise nature of which
    have not been determined.
           Numerous decisions of our courts clearly establish
    the rule that in order to gain the exemption granted by Sec-
    tion 7 the charitable institution must not only own the pro-
    perty for which exemption is sought, but must, in addition,
    make an actual, direct and exclusive use of said property
    for charitable purposes. Santa Rosa Infirmary v. City of
    San Antonio, 259 S.W. 926 (T                24). enevolent
    and Protec&ve Order of Elksec: CT?y oPfPiiouston:
                                         oPfPiouston:84 S.W. 26
        (T    CL   A    1931 error ref )* City of Longview v.
    Markh~~cRe~'Me%ial     &pital,   137 Gex. 178 152 S W 26
    1112 (1941)' Markham Hospital v. City of LongGiew,~l$l'S.W.
    26 695 (Tex: mv. App. 1945, error ref.}
           The case of Hedgecroft v. City of Houston, 150 Tex.
    654, 244 S.W.  26 632 (1952) demonstrates what facts are suf-
    ficient to constitute 'actual use.' The court was there con-
    cerned with the following facts. The Hedgecroft Corporation
    had acquired title to the propert in question through gift
    and conveyance on December 30, 19$ 8. Before that time the
    corporation had agreed with a construction company to make
    the necessary alterations and repairs of the property to
    fit it for the operation of a hospital, clinic and training
    school; and beginning with the week ending July 7, 1948, and
    continuing until December 29, 1948, the construction company
    had been pre aring plans for repairs and alterations. From
    August 1, 19ft8, through December 27, 1948, a blue print company
    had furnished numerous blue prints concerning the ccntemplated
    repairs. Prior to the corporation's acquisition of the prop-
    erty in question and immediately thereafter including January
    1, 1949, the corporation was engaged in planning and making the
    necessary repairs. The remodeling was completed on May 13,
    1949, to an extent which allowed the clinic to move on to the
    premises; and the clinic had since been continuously in op-
    eration there. The City of Houston and the Houston Indepen-
    dent School District instituted a suit for taxes for the yerr
    1949.
           In holding that the property in question was exempt,
    the court reviewed decisions in other States in which exemp-
    tion had bean accorded on the basis that if the subsequent use
    of the premises created a tax exempt situation then a use
    which was confined to readying them for such purpose esta-
    blished a right to exemption.
           At page 636 the court said:
                              -3647-
Honorable Harold Vittltoe, Page 4 (C-758)


         I,      The work proceeded until it was com-
         pieied on May 13, 1949, and since that time
         the hospital and clinic have been operated
         as a public charity. The facts alleged
         show, In our opinion, an actual and direct
         use of the property on and prior to January 1,
         1949
          . __9 for the charitable purpose."  (Emphasis
         suppliZE)-
       The most recent case involving the exemption of prop-
erties belonging to a charitable foundation is David Graham
Hall Foundation v. Highland Park, et al. 371 S.W. 2d '(62
(T    Ci   A    1963          f         I   The court was'
co~~erne~'wi~~'the f~lE~:~~g'~a~~s",~'~;,Ced at page 765 of
the opinion:
              "The David Graham Hall Foundation was
         established in 1940. Its corporate charter
         recites that it was created for the 'support
         of any benevolent, charitable, educational
         or missionary undertaking.' Over the years
         it has engaged In many laudable activities,
         among them the study, prevention and cure
         of communicable diseases, the establishment
         of blood banks, etc.
              "The Foundation is sole owner of the
         property in question, Lot 16 of Block 87,
         Highland Park 4th Installment. The dimen-
         sions of the lot are 250' by 250'. On it
         four buildings are located: a main build-
         ing and three residences.
              "The main building houses the Founda-
         tion's administrative offices and labora-
         tories. This building also houses the ad-
         ministrative offices of the David Graham
         Hall Trust, a related but separate organi-
         zation. The Trust owns many properties
         the revenue from which is devoted to the
         support of the Foundation.
               . . .
              "Of the three residences on the property,
         two of.them are rent houses, the revenues from
         which are devoted to the Foundation's acti-
         irities. The third residence Is known as the
         caretaker's house. This house has also been
         rented form indet,ermina+eperiod for the
         sum of $50.00 per month. During World War
                         -3648-
Honorable Harold Vittltoe,    Page 5 (C-758)


           II these houses were occupied ~j.npart at
           least at a nominal rental by war refugees
           who performed services  for the Foundation.”
        The court held that the property of the charitable
organization  was not exempt from the payment of ad valorem
taxae since the particular   property in question had not
been used exclmeively   for charitable purpoeee.  At page  764,
the court stated:     -
                 “As was pointed out by our Supreme
           Court recently   it will not suffice  for
           one to show that he cornea within the
           statutory  proviaiona   for tax exemption
           if the facts do not bring his caea with-
           in the requirements for tax exemption
           aa laid down in Art, VIII, Sac. 2 of
           our State Constitution.     River Oak8
           Garden Club v. City of Houston, Tex.
           370 S.U. 26 851. . . .
                 . . .
                 n      The aonrtitutional     requirement
           is two-f&r     the property must be owned
           by the organization   alaiming the examp-
           tion; and it muat be exclurmively used
           by the organization,    ae distinguished
           from a partial   uaa by it and a partial
           use by others whether the others pay
           rent or not.      A th itiee, omitted -7
            . . .   (J&ha6is”th%e)
        It is our opinion that under the decisions   above cited
none of the properties   belonging to the Foundation are now
exempt from ad valorem taxes, because said properties    are
not presently being devoted to the actual,    direct and ex-
clusive  charitable  use requisite to exemption.
                             SUMMARY
           The properties belonging to The
           Ed Rachal Foundation are not now
           exempt from ad valorem taxes be-
           cause said properties  are not
           presently being devoted to the

                              -3649-
Honorable Harold Vittitoe, Page 6 (C-758)


           actual, direct and exclusive
           charitable use requisite to ex-
           emption.
                               Yours very turly,
                               WAGGONRRCARR
                               Attorney General of Texas




MMcGP:lr
APmOVED:
OPINION COMMITTEE
W. V. Geppert, Chairman
Arthur Sandlin
Jack Goodman
John Pettit
Pat Bailey
APPROVED FOR THE ATTORNEX GENERAL
BY: T. B. Wright




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