ATTORNEY FOR PETITIONER: ATTORNEYS FOR
MARK A. SCHERER JEFFREY A. MODISETT
Indianapolis, Indiana Attorney General of Indiana
TED J. HOLADAY
Deputy Attorney General
State Board held a hearing on September 4, 1991, and on May 5, 1995, the State
Board issued a final determination sustaining the BOR's decision. On June 22, 1995,
Alte Salem filed this original tax appeal. The parties tried this cause on April 16, 1996.
Oral argument followed on November 11, 1996.
listed exempt purposes are to be construed broadly and in accordance with their
constitutional meaning. See LeSea Broad. Corp. v. State Bd. of Tax Comm'rs, 525
N.E.2d 637, 639 (Ind. Tax Ct. 1988); Indianapolis Elks Bldg. Corp. v. State Bd. of Tax
Comm'rs, 145 Ind. App. 522, 251 N.E.2d 673, 670 (1969); State Bd. of Tax Comm'rs v.
Methodist Home for the Aged, 241 N.E.2d 84, 87 (Ind. App. 1968) (en banc); Ind.
Const. art. X, § 1(a).
In its final determination, the State Board stated, "Alte Salems Kirche, Inc. does not function as a church or religious society and has offered no substantive evidence to qualify for exemption as religious . . . ." (Ex. C at 10). Under this Court's limited standard of review, this Court gives great deference to the factual findings of the State Board. See Sangralea Boys Fund, 686 N.E.2d at 959. This Court may not reverse a final determination of the State Board simply because it disagrees with how the State Board found the facts, and it is improper for this Court to substitute its judgment for that of the State Board.
At trial, Alte Salem presented the testimony of one of its directors, Ms. Burgdorf. Ms. Burgdorf testified at length concerning the history and the activities conducted at Alte Salem. Mr. Dennis Neuhoff, the State Board hearing officer, admitted that Ms. Burgdorf's testimony was consistent with the evidence she presented at the State Board hearing.See footnote 2 (Trial Tr. at 65). Accordingly, this Court may consider that evidence.
See Ind. Code Ann. § 33-3-5-14 (West 1996); State Bd. of Tax Comm'rs v. Gatling Gun
Club, Inc., 420 N.E.2d 1324, 1328 (Ind. Ct. App. 1981).
Ms. Burgdorf recounted the story of a small, non-denominational church. Originally, the church building served as a church for a local congregation of which Ms. Burgdorf was a member. When the congregation wished to build a new church, Ms. Burgdorf and others purchased the church building, which was built in the 1800s, and moved it to its present location.See footnote 3 Ms. Burgdorf and others incorporated Alte Salem shortly after the move.
According to Ms. Burgdorf, the purpose of Alte Salem was to provide a place where people could attend to their spiritual needs. Alte Salem was never supposed to be a "regular" church with a congregation and a minister. Rather, it was supposed to be a place where anyone, regardless of their adherence to the beliefs of any particular denomination, could come to pray and worship. To that end, the church building remained unlocked, and many individual worshipers have used the church building. (Trial Tr. at 22-23).
Although one of the main purposes of Alte Salem was that individuals could use the church to attend to their own spiritual needs, the church building was often used by
other churches for meetings and worship services. (Trial Tr. at 25-26). Other church
organizations used the church building for Bible studies. No particular church ever
used Alte Salem regularly for worship services. This was in keeping with the non-
denominational nature of Alte Salem's mission. Other organizations, such as
environmental groups, used Alte Salem for meetings. The Girl Scouts also had
meetings there and were allowed to use the property so that individual girl scouts could
achieve their outdoor merit badges. Ms. Burgdorf testified that all these activities
happened in 1990 or prior to that year and that the usage of the church remained the
same throughout its existence. (Trial Tr. at 29).
The evidence presented paints a picture of a small country church operating on a shoestring budget struggling to survive. However, in its final determination, the State Board concluded that the property was only used "approximately four times a year" for parties, picnics and reunions, and that there was no substantive evidence presented to support the exemption claim. This ignores Ms. Burgdorf's testimony about the individual worshippers using the church building, other churches and groups using the church building, as well as her own use of the church building.
Perhaps realizing the tenuousness of its position, the State Board argues that this Court must limit its consideration of the evidence to only those events that took place in 1990.See footnote 4 According to the State Board, much of Ms. Burgdorf's testimony was
not relevant to the determination of Alte Salem's exempt status because it was not
specifically tied to the 1990 tax year. Therefore, the State Board hearing officer had
very little probative evidence from which to make his findings. The evidence that
related specifically to the 1990 tax year only demonstrated that the property was used
three or four times and that at least two of those events were recreational. As a result,
Alte Salem could not establish that the predominant use of the property was for exempt
purposes. See Ind. Code Ann. § 6-1.1-10-36.3 (West 1989). It is readily apparent that
the State Board's position that Alte Salem produced no substantive evidence to support
its exemption claim hinges on acceptance of the State Board's contention that only
events taking place during 1990 were relevant.
The State Board's position is contrary to law. Evidence of events occurring in other tax years should be considered if relevant to a fact existing during the tax year. See Governours Square Apartments v. State Bd. of Tax Comm'rs, 528 N.E.2d 864, 866 (Ind. Tax Ct. 1988) (citing Youngstown Sheet & Tube Co. v. Mahoming County Bd. of Revision, 66 Ohio St. 2d 398, 422 N.E.2d 846 (1981)). This is particularly true in cases where property is claimed to be exempt under section 6-1.1-10-16. In these cases, the central question is the purpose for which the property is being used. Events occurring outside of the tax year at issue may shed a great deal of light on the purpose for which the property is used during that tax year. Ms. Burgdorf's testimony was relevant to the 1990 tax year, and it constituted substantive evidence in support of Alte Salem's exemption claim.
The State Board also argues that the fact that the church building is left
unlocked and held open to anyone with little or no supervision means that it is
impossible to determine that the property is being used for exempt purposes. This
argument is unpersuasive. Ms. Burgdorf's uncontradicted testimony indicated that Alte
Salem's purpose was to provide a place for anyone to attend to their spiritual needs as
they saw fit. That some people may have used the church building for other purposes
does not invalidate the purposes of Alte Salem. Additionally, the fact that some non-
exempt recreational activities may have taken place on the property does not
necessarily lead to the conclusion that Alte Salem does not further exempt purposes.
As has been shown, these non-exempt activities (i.e., the picnic and reunion) were
viewed in isolation because the State Board failed to consider all the relevant evidence.
When viewed in light of the evidence that was not considered, it appears that the non-
exempt activities may have been mere innocent collateral activities. See LeSea Broad.
Corp., 525 N.E.2d at 638-39 (quoting Buffalo Turn Verein v. Reuling, 155 Misc. 797,
281 N.Y.S. 545, 546 (Sup. Ct. 1935)).
The State Board also points to the fact that Alte Salem does not conduct regular religious services and that Alte Salem does not have clergy or a congregation. At oral argument, counsel for the State Board argued that this meant that the State Board was required to closely scrutinize the application for an exemption. In Sangralea Boys Fund, 686 N.E.2d at 959, this Court noted its confidence that the State Board, aided by local taxation officials, would be able to ferret out abuse of the exemption provisions. Accordingly, the State Board acts properly when it takes a hard look at the use of certain property, especially where, as here, the property's use does not have the
normal hallmarks of religious activity.
In this case, however, there is no evidence that Ms. Burgdorf is attempting to abuse the system. At oral agument, the State Board conceded that Ms. Burgdorf "has a worthy motive here." (Tr. at 17). The only issue, therefore, is whether Alte Salem uses the property for exempt purposes. The State Board failed to consider all the evidence germane to that issue and consequently abused its discretion.
The parties also dispute the exempt status of the barn and the mobile home. In its final determination, the State Board did not consider the exempt status of the barn and mobile home apart from its consideration of the exempt status of the church building. Apparently, the State Board felt that if the church building did not qualify for an exemption, then the barn and the mobile home did not qualify either. The State Board now attempts to support its conclusion that the barn and mobile home are not exempt by arguing that they are not reasonably necessary for the furtherance of an exempt purpose. With respect to the mobile home, the State Board argues that it cannot be exempt because no one who lives there performs pastoral duties.See footnote 5
In Indiana, property that is "'incidental and necessary' for the effective welfare of
[an] exempt religious institution" is exempt from property taxation. LeSea Broad., 525
N.E.2d at 639 (quoting State Board of Tax Comm'rs v. Wright, 139 Ind. App. 370, 215
N.E.2d 57, 62 (1966)). This "incidental and necessary" standard has been construed to
mean "reasonably necessary." See id. (quoting House of Rest of the Presbyterian
Church v. Los Angeles County, 151 Cal. App. 2d 523, 312 P.2d 392, 398 (1957)). Ms.
Burgdorf's testimony indicated that the barn was necessary for the storage of
equipment and picnic tables and that the mobile home played a large role in reducing
vandalism of the property because it maintained a human presence on the property.
This could support a findingSee footnote
that the barn and mobile home are reasonably necessary
to further an exempt purpose (assuming of course that Alte Salem is found to further an
The State Board's argument that the mobile home cannot be exempt from property taxation because no one who lives there performs pastoral duties also contravenes precedent. In Seventh Day Adventists, 512 N.E.2d at 940, this Court found that property used for housing may qualify for an exemption despite the fact that
the property was not used to house ministers. This Court declines the State Board's
implied invitation to overrule Seventh Day Adventists.
their effect on this Court's ability to recreate the record of what was presented at the administrative level. The State Board did not object to the bulk of Ms. Burgdorf's testimony, and at oral argument, the State Board admitted that all of the evidence presented at trial was presented at the administrative hearing. (Oral Arg. at 19-20). The Court also notes that the proper way for the State Board to prevent evidence that was not presented at the administrative level from being considered by this Court is to lodge an objection. See Indiana Ass'n of Seventh Day Adventists v. State Board of Tax Comm'rs, 512 N.E.2d 936, 940 (Ind. Tax Ct. 1988) ("The court assumes that the same evidence was presented at the administrative hearing since there was no objection to the testimony at trial.").
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