{ "id": 11917030, "name": "SOUTHMINSTER, INC., Plaintiff v. BETSY Y. JUSTUS, Secretary, State of North Carolina Department of Revenue, Defendant; DAVIDSON RETIREMENT COMMUNITY, INC., Plaintiff v. BETSY Y. JUSTUS, Secretary, State of North Carolina Department of Revenue, Defendant", "name_abbreviation": "Southminster, Inc. v. Justus", "decision_date": "1995-08-01", "docket_number": "No. COA94-763", "first_page": "669", "last_page": "676", "citations": [ { "type": "official", "cite": "119 N.C. App. 669" } ], "court": { "name_abbreviation": "N.C. Ct. App.", "id": 14983, "name": "North Carolina Court of Appeals" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "114 S.E.2d 655", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1960, "opinion_index": 0 }, { "cite": "252 N.C. 743", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8625645 ], "year": 1960, "opinion_index": 0, "case_paths": [ "/nc/252/0743-01" ] }, { "cite": "1 C.B. 157", "category": "reporters:specialty", "reporter": "C.B.", "opinion_index": 0 }, { "cite": "1 C.B. 194", "category": "reporters:specialty", "reporter": "C.B.", "opinion_index": 0 }, { "cite": "1 C.B. 145", "category": "reporters:specialty", "reporter": "C.B.", "opinion_index": 0 }, { "cite": "171 S.E.2d 747", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1969, "opinion_index": 0 }, { "cite": "120 Ga. App. 627", "category": "reporters:state", "reporter": "Ga. App.", "case_ids": [ 720467 ], "year": 1969, "opinion_index": 0, "case_paths": [ "/ga-app/120/0627-01" ] }, { "cite": "267 S.E.2d 684", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1980, "opinion_index": 0 }, { "cite": "300 N.C. 374", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8561700, 8561638, 8561752, 8561723, 8561662 ], "year": 1980, "opinion_index": 0, "case_paths": [ "/nc/300/0374-03", "/nc/300/0374-01", "/nc/300/0374-05", "/nc/300/0374-04", "/nc/300/0374-02" ] }, { "cite": "263 S.E.2d 838", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1980, "pin_cites": [ { "page": "842" } ], "opinion_index": 0 }, { "cite": "45 N.C. App. 632", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8550562 ], "year": 1980, "pin_cites": [ { "page": "638" } ], "opinion_index": 0, "case_paths": [ "/nc-app/45/0632-01" ] }, { "cite": "273 S.E.2d 445", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1980, "opinion_index": 0 }, { "cite": "301 N.C. 400", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8566689, 8566575, 8566543, 8566611, 8566643 ], "year": 1980, "opinion_index": 0, "case_paths": [ "/nc/301/0400-05", "/nc/301/0400-02", "/nc/301/0400-01", "/nc/301/0400-03", "/nc/301/0400-04" ] }, { "cite": "268 S.E.2d 554", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1980, "pin_cites": [ { "page": "556" } ], "opinion_index": 0 }, { "cite": "48 N.C. App. 20", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8548824 ], "year": 1980, "pin_cites": [ { "page": "24" } ], "opinion_index": 0, "case_paths": [ "/nc-app/48/0020-01" ] }, { "cite": "160 S.E.2d 62", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1968, "pin_cites": [ { "page": "65" } ], "opinion_index": 0 }, { "cite": "273 N.C. 343", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8575269 ], "year": 1968, "pin_cites": [ { "page": "347" } ], "opinion_index": 0, "case_paths": [ "/nc/273/0343-01" ] }, { "cite": "127 S.E.2d 262", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1962, "opinion_index": 0 }, { "cite": "257 N.C. 666", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8570023 ], "year": 1962, "opinion_index": 0, "case_paths": [ "/nc/257/0666-01" ] }, { "cite": "210 S.E.2d 199", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 1974, "opinion_index": 0 }, { "cite": "286 N.C. 215", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8564966 ], "year": 1974, "opinion_index": 0, "case_paths": [ "/nc/286/0215-01" ] }, { "cite": "302 S.E.2d 249", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1983, "opinion_index": 0 }, { "cite": "308 N.C. 386", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 4704706, 4708165, 4710056, 4707534, 4709296 ], "year": 1983, "opinion_index": 0, "case_paths": [ "/nc/308/0386-01", "/nc/308/0386-02", "/nc/308/0386-04", "/nc/308/0386-03", "/nc/308/0386-05" ] }, { "cite": "299 S.E.2d 782", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1983, "opinion_index": 0 }, { "cite": "60 N.C. App. 294", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8520666 ], "year": 1983, "opinion_index": 0, "case_paths": [ "/nc-app/60/0294-01" ] }, { "cite": "323 S.E.2d 921", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1984, "opinion_index": 0 }, { "cite": "312 N.C. 622", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 4755493, 4755336, 4753483, 4753324, 4752111 ], "year": 1984, "opinion_index": 0, "case_paths": [ "/nc/312/0622-01", "/nc/312/0622-05", "/nc/312/0622-03", "/nc/312/0622-04", "/nc/312/0622-02" ] }, { "cite": "319 S.E.2d 657", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1984, "opinion_index": 0 }, { "cite": "70 N.C. App. 236", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8521426 ], "year": 1984, "opinion_index": 0, "case_paths": [ "/nc-app/70/0236-01" ] } ], "analysis": { "cardinality": 821, "char_count": 16620, "ocr_confidence": 0.724, "pagerank": { "raw": 2.1020103323559526e-07, "percentile": 0.7619368928458763 }, "sha256": "09e6226b656e89958c2773e5140fb8b0a16bdea12a1de8b0c79ff127b20a2068", "simhash": "1:db68ca2a7f309148", "word_count": 2571 }, "last_updated": "2023-07-14T17:09:59.579385+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Judges EAGLES and WALKER concur." ], "parties": [ "SOUTHMINSTER, INC., Plaintiff v. BETSY Y. JUSTUS, Secretary, State of North Carolina Department of Revenue, Defendant DAVIDSON RETIREMENT COMMUNITY, INC., Plaintiff v. BETSY Y. JUSTUS, Secretary, State of North Carolina Department of Revenue, Defendant" ], "opinions": [ { "text": "MARTIN, John C., Judge.\nPlaintiffs are religiously affiliated, non-profit corporations operating continuing care facilities for the elderly. Plaintiffs commenced these actions to obtain refunds, pursuant to the provisions of G.S. \u00a7 105-164.14(b), of sales and use taxes paid by them. Defendant denied plaintiffs\u2019 entitlement to the exemption on the grounds plaintiffs are not charitable or religious institutions within the meaning of the statute. The cases were consolidated and heard by the trial court in a bench trial.\nThe evidence at trial, most of which was stipulated by the parties, tended to show the following: Plaintiff Davidson Retirement Community, Inc., (\u201cThe Pines\u201d), was incorporated in 1983 for the purpose of funding and operating a nonprofit home providing health care and assistance in living to the elderly and infirm. The Pines was founded by and is affiliated with the Davidson College Presbyterian Church in Davidson. Plaintiff Southminster, Inc., (\u201cSouthminster\u201d), was organized as a nonprofit corporation in 1984 for the express purpose of providing \u201ca residential environment in which older people may live as independently and as actively as their faculties and strength permit, secure in the knowledge that support is available when and as it may be needed.\u201d Southminster was created by the joint effort of Myers Park Baptist Church and Christ Episcopal Church in Charlotte, and Southminster has maintained its affiliation with these churches to the present.\nThe Internal Revenue Service (\u201cIRS\u201d) and the North Carolina Department of Revenue have determined that both plaintiffs are nonprofit, charitable organizations exempt from federal and state corporate income taxes and state franchise taxes. Plaintiffs are also both exempt from local property taxes as qualifying homes for the aged. G.S. \u00a7 105-164.14(b) provides that sales and use taxes must be refunded to \u201cchurches, orphanages and other charitable or religious institutions and organizations not operated for profit . . . .\u201d In 1984, the Sales and Use Tax Division of the North Carolina Department of Revenue changed its interpretation of \u201ccharitable institutions\u201d under G.S. \u00a7 105-164.14(b) to exclude institutions similar to plaintiffs from exemption. The change in policy came as a result of two decisions of this Court upholding determinations by the Property Tax Commission that non-profit homes for the elderly operated similarly to plaintiffs\u2019 did not qualify for the charitable purpose exemption from ad valorem taxes. See In re Appeal of Barham, 70 N.C. App. 236, 319 S.E.2d 657, disc. review denied, 312 N.C. 622, 323 S.E.2d 921 (1984); In re Chapel Hill Residential Retirement Center, 60 N.C. App. 294, 299 S.E.2d 782, disc. review denied, 308 N.C. 386, 302 S.E.2d 249 (1983). The Pines was denied refunds for its sales and use taxes beginning in 1985, while Southminster was denied refunds beginning in 1987.\nBoth plaintiffs\u2019 facilities consist of independent living units, common living units, and health care centers. The Pines opened in 1988, and currently maintains 204 independent and common units with 60 beds in its health care facility. Southminster opened in 1987, and has 196 independent and common living units with 80 beds maintained in its health care center. Plaintiffs received their initial funding for construction from charitable donations and public revenue bonds issued by the North Carolina Medical Care Commission, and plaintiffs continue to receive charitable donations.\nPlaintiffs also charge entrance fees and monthly service fees to their residents, with the amount of the fees determined by a resident\u2019s choice of living accommodations. The entrance fees at The Pines range from $35,800 for a small efficiency apartment to $115,500 for a large cottage, while the monthly service fees for such accommodations range from $976 to $1,524. This monthly fee is increased by approximately fifty percent if two individuals occupy a unit. Southminster has entrance fees ranging from $30,900 to $162,500 for accommodations similar to those at The Pines, with monthly service fees from $1,000 to $1,350 plus an additional $715 for an additional occupant. These fees collected by The Pines and Southminster cover, respectively, ninety-six percent and eighty-six percent of plaintiffs\u2019 operating expenses.\nThe average annual income of the residents who had reserved accommodations at The Pines as of 29 August 1988 was $43,000 while their average net worth was approximately $444,000. As of 13 November 1985, over eighty-eight percent of residents reserving a living unit at Southminster reported net worths over $200,000, while sixty-three percent had net worths over $350,000. Over fifty percent of those reserving accommodations at Southminster reported annual incomes over $40,000. Plaintiffs\u2019 residents who do not have high net worths and/or annual incomes are generally able to meet the entrance fee and monthly service fees by selling their homes upon entering The Pines or Southminster.\nPlaintiffs\u2019 contracts with their residents authorize the removal of residents who are unable to meet their financial obligations to plaintiffs; however, it is not the policy of either plaintiff to terminate any resident\u2019s occupancy based on an inability to pay. To that end, Southminster created a nonprofit corporation, Southminster Endowment, Inc., and The Pines created a separate deposit account, the Resident Support Fund. These funds receive charitable donations and are plaintiffs\u2019 top fundraising priorities. If circumstances require special consideration of a prospective or current resident\u2019s ability to pay the entrance or monthly fees, these funds may be used to subsidize part or all of the fees in question. To date, Southminster Endowment, Inc., has financially assisted three residents in meeting the costs of the entrance fee, and nine residents in making their monthly service payments. There has yet to be any assistance provided to a prospective or current resident from The Pines\u2019 Resident Support Fund.\nThere was also evidence that since 1984, defendant had denied refunds for sales and use taxes to six similar institutions, while at the same time granting refunds to five similar institutions. Defendant\u2019s enforcement policy is to thoroughly examine refund requests from new institutions, including an examination of fee schedules. However, existing institutions previously exempted from sales and use taxes were not asked for similar information and continued to receive refunds. The evidence indicated defendant lacked the resources necessary to continuously monitor the eligibility of organizations receiving refunds without some indication of an irregularity. Other evidence indicated defendant\u2019s refund policy was not being enforced uniformly.\nThe trial court made extensive findings of fact and concluded, citing In re Chapel Hill Residential Retirement Center, supra, that plaintiffs were not charitable organizations exempt from sales and use taxes under G.S. \u00a7 105-164.14(b) and, in addition, were not exempt as religious organizations. The trial court concluded, however, that defendant\u2019s \u201carbitrary, inconsistent and inequitable application of the \u2018charitable and religious\u2019 test to allow exemptions for some but not all institutions of like kind\u201d was discriminatory and unconstitutionally vague, thus violating plaintiffs\u2019 equal protection and due process rights. The trial court entered judgment in favor of plaintiffs, ordering defendant to refund each plaintiff all sales and use taxes paid for the claimed periods. Plaintiffs appeal from that portion of the judgment holding they are neither charitable nor religious organizations exempt from sales and use taxes; defendant appeals from that portion of the judgment holding that defendant had violated plaintiffs\u2019 constitutional rights and awarding them refunds.\nPlaintiffs assert that the trial court erred by concluding that they are neither charitable organizations nor religious organizations within the meaning of G.S. \u00a7 105-164.14(b) so as to qualify for refunds of sales and use taxes. G.S. \u00a7 105-164.14(b) provides, in pertinent part:\nThe Secretary of Revenue shall make refunds semiannually to . . . churches, orphanages and other charitable or religious institutions and organizations not operated for profit of sales and use taxes paid under this Article,. . ., by such institutions and organizations on direct purchases of tangible personal property for use in carrying on the work of such institutions and organizations.\nWe first consider plaintiffs\u2019 assertion that they are charitable organizations within the meaning of the statute. The terms \u201ccharitable institution\u201d and \u201ccharitable organization\u201d are not defined in the North Carolina Sales and Use Tax Act, G.S. \u00a7 105-164.1 et seq.) indeed, no definition for the terms is contained in the entire Revenue Act, G.S. \u00a7 105-1 et seq.\nIt is a basic rule of statutory construction that where a statute contains no definition of words used therein, the words of the statute are to be given their natural and ordinary meaning. In re ClaytonMarcus Co., 286 N.C. 215, 210 S.E.2d 199 (1974). With respect to taxation statutes, provisions for exemptions are strictly construed and ambiguities are resolved in favor of taxation. Id. A taxpayer who seeks the benefit of an exemption has the burden of showing that he comes within the exclusion upon which he relies. Chemical Corp. v. Johnson, Comr. of Revenue, 257 N.C. 666, 127 S.E.2d 262 (1962). The rule of strict construction does not, however, require that the statute be \u201cstintingly or even narrowly construed\u201d or that relevant language in the statute be given other than its plain and obvious meaning. Wake County v. Ingle, 273 N.C. 343, 347, 160 S.E.2d 62, 65 (1968).\nCiting the entrance fees and monthly service fees charged by plaintiffs, as well as the financial resources of the residents, defendant argues that plaintiffs \u201ccater only to the affluent and provide no benefits to legitimate objects of charity.\u201d The trial court agreed, concluding the \u201cfinancial and health limitations required for admission prevent plaintiffs from benefitting a significant segment of humanity and an indefinite class of persons who are legitimate subjects of charity.\u201d\nWe do not believe the General Assembly intended, when it enacted G.S. \u00a7 105-164.14(b), that such a narrow construction be accorded the word \u201ccharitable,\u201d nor do we agree that the residents served by plaintiffs are not \u201clegitimate subjects of charity.\u201d \u201cGenerally defined, a charitable institution is an organization or other entity engaged in the relief or aid to a certain class of persons, a corporate body established for public use, or a private institution created and maintained for the purpose of dispensing some public good or benevolence to those who require it.\u201d Darsie v. Duke University, 48 N.C. App. 20, 24, 268 S.E.2d 554, 556, disc. review denied, 301 N.C. 400, 273 S.E.2d 445 (1980).\nThe natural and ordinary meaning of \u201ccharitable\u201d is sufficiently broad to include aid and assistance provided for the elderly or infirm without regard to individual poverty. \u201cThe concept of charity is not confined to the relief of the needy and destitute, for \u2018aged people require care and attention apart from financial assistance, and the supply of this care and attention is as much a charitable and benevolent purpose as the relief of their financial wants.\u2019 \u201d In re Taxable Status of Property, 45 N.C. App. 632, 638, 263 S.E.2d 838, 842, disc. review denied, 300 N.C. 374, 267 S.E.2d 684 (1980), quoting Central Board on Care of Jewish Aged, Inc. v. Henson, 120 Ga. App. 627, 171 S.E.2d 747 (1969). We note also that the IRS has recognized that \u201ccharitable\u201d in its generally accepted legal sense includes \u201c[providing for the special needs of the aged . . . where the requisite elements of relief of distress and community benefit have been found to be present.\u201d Rev. Rul. 72-124, 1972-1 C.B. 145.\nRevenue Ruling [72-124] makes clear that a home for the aged will be deemed \u201ccharitable\u201d if it meets the special needs of the elderly such as the need for health care, financial security, and residential facilities designed to meet specific physical, social, and recreational requirements of the elderly. Such a home need not provide direct financial assistance to the elderly in order to be \u201ccharitable,\u201d since poverty is only one form of distress to which the elderly as a class are particularly susceptible.\nRev. Rul. 79-18, 1979-1 C.B. 194. See also Rev. Rul. 75-198, 1975-1 C.B. 157. Indeed, the North Carolina Department of Revenue has itself recognized plaintiffs as \u201cbona fide nonprofit, charitable organizations\u201d for the purposes of exemption from State corporate income and franchise taxes under other applicable sections of the Revenue Act.\nOur decisions in In re Chapel Hill Residential Retirement Center, supra, and In re Appeal of Barham, supra, do not control the resolution of this case. In those cases, the issue was whether the property owned by the two non-profit corporations and used as residential care facilities for the elderly, under arrangements similar to those operated by the present plaintiffs, qualified for the ad valorem tax exemption provided by G.S. \u00a7\u00a7 105-278.6 and 105-278.7 of the Machinery Act, G.S. 105-271 et seq. and Article V, \u00a7 2(3) of the North Carolina Constitution. We determined that the property did not qualify for the exemption because it was not being held for charitable purposes. The General Assembly responded to our decisions by enacting G.S. \u00a7 105-275(32) which specifically excludes from ad valorem taxation property owned by \u201ca home for the aged, sick, or infirm . . . and used in the operation of that home.\u201d In any event, our Supreme Court has recognized that the rules for determining whether property is exempt from ad valorem taxes are distinct from those determining whether a corporation is exempt from the taxes imposed by the Revenue Act. In re Vanderbilt University, 252 N.C. 743, 114 S.E.2d 655 (1960).\nWe hold that even construed strictly, the term \u201ccharitable organization\u201d easily accommodates the nature of plaintiff corporations. Plaintiffs are clearly engaged in an humane and philanthropic endeavor to aid and assist the rapidly growing class of elderly citizens of this State, and their activities certainly benefit the larger community which only recently has come to realize the problems associated with an aging population. Therefore, the trial court erred in concluding that plaintiffs are not charitable organizations.\nBecause we have determined that plaintiffs are charitable organizations, they are entitled, pursuant to the provisions of G.S. \u00a7 105-164.14(b), to refunds of the sales and use taxes paid by them. We need not determine whether they are also religious organizations, nor is it necessary that we determine whether defendant\u2019s enforcement of the statute violated plaintiffs\u2019 constitutional rights. The judgment ordering defendant to pay such refunds is affirmed, although for reasons different from those stated by the trial court.\nModified and affirmed.\nJudges EAGLES and WALKER concur.", "type": "majority", "author": "MARTIN, John C., Judge." } ], "attorneys": [ "Robinson, Bradshaw & Hinson, P.A., by Russell M. Robinson, II, Louis A. Bledsoe, III, and J. Stephen Dockery, III, for plaintiffs.", "Attorney General Michael F. Easley, by Senior Deputy Attorney General Reginald L. Watkins and Special Deputy Attorney General George W. Boylan, for defendant." ], "corrections": "", "head_matter": "SOUTHMINSTER, INC., Plaintiff v. BETSY Y. JUSTUS, Secretary, State of North Carolina Department of Revenue, Defendant DAVIDSON RETIREMENT COMMUNITY, INC., Plaintiff v. BETSY Y. JUSTUS, Secretary, State of North Carolina Department of Revenue, Defendant\nNo. COA94-763\n(Filed 1 August 1995)\nTaxation \u00a7 30 (NCX4th)\u2014 homes for elderly \u2014 catering to affluent population \u2014 homes as charitable institutions\nThe trial court erred in concluding that plaintiffs were not charitable organizations within the meaning of N.C.G.S. \u00a7 105-164.14(b) so as to qualify for refunds of sales and use taxes where plaintiffs operated homes for the elderly which required entrance fees and monthly service fees, since the natural and ordinary meaning of \u201ccharitable\u201d is sufficiently broad to include aid and assistance provided for the elderly or infirm without regard to individual poverty, and the concept of charity is not confined to the relief of the needy and destitute.\nAm Jur 2d, State and Local Taxation \u00a7 387.\nAppeal by plaintiffs and defendant from judgment entered 29 March 1994 by Judge Shirley L. Fulton in Mecklenburg County Superior Court. Heard in the Court of Appeals 4 April 1995.\nRobinson, Bradshaw & Hinson, P.A., by Russell M. Robinson, II, Louis A. Bledsoe, III, and J. Stephen Dockery, III, for plaintiffs.\nAttorney General Michael F. Easley, by Senior Deputy Attorney General Reginald L. Watkins and Special Deputy Attorney General George W. Boylan, for defendant." }, "file_name": "0669-01", "first_page_order": 703, "last_page_order": 710 }