Opinion
No. 32773
Decided July 16, 1952.
Taxation — Exemptions — Section 5353, General Code — Real property not used exclusively for charitable purposes, when — Operated by corporation organized to promote welfare of young workmen — Profits realized from room rents and dining room — Operation not incidental to overall program of corporation — Split listing on percentage basis not authorized — Section 5560, General Code.
APPEAL from the Board of Tax Appeals.
This case is in this court on an appeal from a decision of the Board of Tax Appeals determining that a certain portion of real property located in Hamilton county and owned and operated by the appellant and cross-appellee, The L.B. Harrison, is subject to taxation.
The L.B. Harrison, an Ohio corporation, was organized in 1914 by the sons and daughters of L.B. Harrison "to promote the welfare of the young workingmen of Cincinnati by establishing and maintaining a place in which they may live at reasonable cost * * *." The trustees of the Harrison estate purchased the original site and constructed a building thereon at a cost of $160,000. In 1930, the present building was erected at the southeast corner of Victory Parkway and McMillan street, which was financed by the sale of the original land and building, a further donation by the Harrison family, and a mortgage loan.
The building is a seven-story brick structure. On the four upper floors are 234 bedrooms, with shower rooms and toilets. On the first floor are a lobby, library, recreation room, manager's office and lounge. In the basement are a kitchen, cafeteria, gymnasium and storerooms. In the subbasement there are a boiler room, swimming pool and locker rooms.
Membership in the club is accepted on the basis of need. Members must be over 18 and under 30 years of age, unmarried and of good character. There are no restrictions as to race, color or creed. A member pays a weekly fee of $14 and in return has his room, two meals a day and all the facilities which the institution offers, including towels, linen and maid service. The average earnings of a member is $35 per week. No profit or benefit is sought and none accrues to any person other than the institution itself. Excess of income over expenses existing prior to 1950 was applied on the 1930 mortgage loan. Since the mortgage was paid off in 1949, any excess of income has been used to fund an account for depreciation on the building.
The record discloses that, for the year 1950, the excess income from room rents and the dining room, after deducting depreciation, was $23,122.63; that the excess income over expenditures, after deductions for all services and expenditures, was $21,761.46; and that the club had income of $262.84 from interest on bonds purchased from excess of income over expenditures.
Upon the refusal of the auditor of Hamilton county to place the real estate in question on the tax duplicate at the demand of Jerome Goldman, appellee and cross-appellant, the latter filed a complaint with the Board of Tax Appeals pursuant to Section 5616, General Code.
Mr. Robert A. Goldman, for appellee.
Messrs. Graydon, Head Ritchey and Mr. Robert L. Black, Jr., for appellant. Mr. C. Watson Hover, prosecuting attorney, and Mr. Francis Schwegmann, for appellee George Guckenberger, auditor.
The ultimate question raised on this appeal is whether the real property of The L.B. Harrison is used exclusively for charitable purposes under the provisions of Section 5353, General Code, and is, therefore, exempt from taxation.
The appellant claims that its property, as a whole, including its rooms and cafeteria as well as other portions of its property, is used exclusively for charitable purposes in the promotion of the welfare of young workingmen in Cincinnati. In support of its position it cites, among other cases, Hubbard Press v. Glander, Tax Commr., 156 Ohio St. 170, 101 N.E.2d 382 (property devoted to printing, without profit, contribution envelopes for use of churches in their support and benevolences); Aultman Hospital Assn. v. Evatt, Tax Commr., 140 Ohio St. 114, 42 N.E.2d 646 (property owned by hospital and maintained by it as a home for its student nurses); In re Bond Hill-Roselawn Hebrew School, 151 Ohio St. 70, 84 N.E.2d 270 (caretaker, wife and child permitted to live in rooms in house of public worship).
The Board of Tax Appeals found that that part of appellant's property used for dormitories, dining rooms and kitchen is not used exclusively for charitable purposes; that such part comprehends 45 per cent of the value of the property; and that such part is subject to taxation whereas the remainder of the property is used for charitable purposes and is exempt from taxation. This finding was made pursuant to Section 5560, General Code, providing that if a part of a property, if a separate entity, is exempt from taxation, the listing of such property shall be split and that part used exclusively for exempt purposes listed as exempt from taxation.
This court, in view of the record, is of the opinion that the rental of rooms and the operation of a cafeteria in the property of the appellant are not incidental to any overall program of charitable purpose of the club, and that the Board of Tax Appeals was justified in finding that such portions of the property are not used exclusively for charitable purposes and are therefore not entitled to exemption from taxation. However, the majority of the court is of the opinion that the division made by the Board of Tax Appeals of the property involved herein is not a division of separate entities thereof; that the provisions of Section 5560, General Code, do not authorize the division on a percentage basis of the property involved herein into that held to be for charitable purposes and that held to be for noncharitable purposes; and that, therefore, the entire property involved herein must be held nonexempt from taxation. Welfare Federation of Cleveland v. Glander, Tax Commr., 146 Ohio St. 146, 64 N.E.2d 813; Cleveland Branch of Guild of St. Barnabas for Nurses v. Board of Tax Appeals, 150 Ohio St. 484, 83 N.E.2d 229; Beerman Foundation, Inc., v. Board of Tax Appeals, 152 Ohio St. 179, 87 N.E.2d 474.
The decision of the Board of Tax Appeals is reversed and the cause is remanded to the Board of Tax Appeals for further proceedings in accordance with this opinion.
Decision reversed.
WEYGANDT, C.J., ZIMMERMAN, MIDDLETON, MATTHIAS and HART, JJ., concur.
I concur for the reasons stated for my dissent in cases Nos. 32774 to 32780, inclusive, this day decided.
STEWART, J., dissents on authority of Goldman, a Taxpayer, v. Friars Club, Inc., post.