Grace Cathedral, Inc. v. Testa

O’Donnell, J. ¶ 1 Grace Cathedral, Inc., filed claims for tax exemption, one, pursuant to R.C. 5709.07(A)(2) — houses of public worship, and the other, pursuant to R.C. 5709.12(B) — property used for charitable purposes, in connection with a recently constructed building located on a parcel of land that had been exempted as necessary for the proper occupancy, use, and enjoyment of the preexisting church building on the same parcel. Although originally intended to form part of an onsite Bible college, the building was repurposed when the church decided to conduct the Bible college as an on-line operation. The record reflects that use of the building has been limited to providing transient lodging to congregants who visit the Akron area and desire to attend services at Grace Cathedral itself; additional religious activity associated with the worship in the church occurs in the building, such as fellowship and religious conversation, meditation, and learning. ¶ 2 The tax commissioner denied Grace Cathedral’s claimed exemptions and the Board of Tax Appeals (“BTA”) upheld that determination. In its decision, regarding the claim of exemption under former R.C. 5709.07(A)(2) for houses devoted exclusively to public worship, the BTA applied the test we articulated in Faith Fellowship Ministries, Inc. v. Limbach, 32 Ohio St.3d 432, 437, 513 N.E.2d 1340 (1987), and held that the building faded to qualify as being “ ‘used in a principal, primary, and essential way to facilitate public worship.’ ” BTA No. 213 2012-2168, 2014 Ohio Tax LEXIS 963, *5 (Feb. 12, 2014). On appeal to this court, the church argues that the .building’s use in facilitating attendance at religious services qualifies for exemption under Faith Fellowship Ministries, given the circumstances of this case. We agree and therefore reverse the decision of the BTA. Because we allow the exemption for tax year 2010 under R.C. 5709.07(A)(2), the public worship exception, we do not reach the claim of exemption based on exclusive charitable use under R.C. 5709.12(B). Factual Background ¶ 3 On September 30, 2010, Grace Cathedral filed its exemption application for the tax year 2010 pertaining to additional buildings added to an exempt church parcel “in order to increase Ministerial Training,” and it identified “[t]he first building” as a “Dormitory which will be used to house those who are in the Ministerial Training Program.” The other building was a “Study Hall for the Students.” ¶ 4 Responding to an inquiry from the tax department, Grace Cathedral Media Director and Finance Manager Catherine D. Shupe submitted a site plan with a letter dated April 20, 2011, stating that Grace Cathedral had “revised its plans for use for the buildings, and the buildings will not be used as part of a Ministerial Training Program.” Specifically, the “Study Hall” would be repur-posed as a location for religious education seminars and as a meeting area for members in conjunction with special worship services such as wedding and funeral services. Regarding the building at issue here, the letter stated, “The Dorm is made available to visitors in need of temporary housing, free of charge, while they visit the church to participate in worship services.” ¶ 5 These two new buildings, Shupe confirmed, are in addition to the building identified as the “existing” building on the site plan, which has been and is used as a church “in which weekly religious services are held.” The site map shows that the dormitory building was constructed behind the study hall and the church building on a largely rectangular parcel, on which the larger church edifice is the main building that fronts on the street. ¶ 6 On May 11, 2012, the tax commissioner issued a final determination. The commissioner found that the study hall was “used for religious educational seminars and a meeting area for church members,” with the result that its “use qualifies for exemption pursuant to R.C. 5709.07.” By contrast, “the building designated as a ‘dormitory’ is used as temporary housing for visitors who attend services of the church,” and pursuant to “[t]he general rule in Ohio * * * that residential property is not exempt from taxation,” the commissioner denied exemption. The commissioner also reviewed the application under the claim of exemption for charitable use and found that the case law prohibited the grant of exemption based on residential use of the property. 214 ¶ 7 Grace Cathedral appealed to the BTA, which held a hearing on September 16, 2013. It presented testimony from Paul Machamer and Catherine Shupe, which established that there are two Grace Cathedral church locations in Summit County: the property at issue and another located in Cuyahoga Falls. Regular services are held at both locations. Special events include “camp meeting” weekends and a baptismal service once a year. Attendance on site at the church services was estimated at over 1,000 weekly. ¶ 8 Because the congregation’s leader, the Reverend Ernest Angley, travels and conducts a television ministry, Grace Cathedral has members and supporters throughout the country and elsewhere in the world, some of whom come to Akron to attend live services. The dormitory building provides lodging for a weekend or for a full week encompassing two weekends. This use occurs on about 40 to 50 percent of the weekends during a year. When not so used, the building is used for religious services and related study classes, apparently on an ad hoc basis. ¶ 9 In its decision issued February 12, 2014, the BTA acknowledged Grace Cathedral’s argument that the dormitory is not a “residence” but rather “ ‘directly and primarily provides for the proper occupancy, use, and enjoyment of the church for public worship’ ” by analogy with the church’s parking lot. BTA No. 2012-2168, 2014 Ohio Tax LEXIS 963, *3-4 (Feb. 12, 2014). But the BTA concluded that the use of the dormitory did not satisfy the standard set forth in the case law that the property must be used “ ‘in a principal, primary, and essential way to facilitate * * * public worship.’ ” Id., *5, quoting Faith Fellowship Ministries, 32 Ohio St.3d at 437, 513 N.E.2d 1340. ¶ 10 The BTA ruled that uses of property that are “ ‘merely supportive’ ” of worship do not qualify for the house-of-public-worship exemption. Id., quoting Faith Fellowship Ministries at 436. Two circumstances led the BTA to conclude that the dormitory’s use was “merely supportive.” First, the dormitory was used primarily on weekends to house out-of-town visitors who came to participate in regular church services or special weekend worship events, which take place about six times a year. Second, the property was vacant approximately 50 to 60 percent of the time. Because of these circumstances, the BTA concluded that the dormitory use was “merely supportive” of the public worship at Grace Cathedral itself and it therefore did not qualify the building for exemption under R.C. 5709.07(A)(2). ¶ 11 The BTA further addressed the claim of exclusive charitable use under R.C. 5709.12(B) and found that although “the record contains evidence that appellant does charitable work throughout the world,” there was “insufficient evidence that the subject property is used in furtherance of its charitable purposes.” It also relied on the court’s decision in Church of God in N. Ohio, Inc. v. Levin, 124 Ohio St.3d 36, 2009-Ohio-5939, 918 N.E.2d 981, for the principle 215 that a use of property ancillary to and supportive of public worship does not typically qualify as a charitable use. Id., *6-8. The BTA therefore affirmed the commissioner’s denial of exemption for the dormitory building. ¶ 12 Grace Cathedral has appealed the decision of the BTA to this court. Arguments of the Parties ¶ 13 Grace Cathedral presents two propositions of law: one claiming entitlement to the house-of-public-worship exemption under R.C. 5709.07(A) and one asserting a right to the exemption for property used exclusively for charitable purposes under R.C. 5709.12(B). Because the public worship exemption applies and is dispositive of this appeal, we shall address it initially and deem it unnecessary to consider the other exemption claim advanced by Grace Cathedral. ¶ 14 In support of its public-worship exemption claim pursuant to R.C. 5709.07(A)(2), which provides exemption for “[h]ouses used exclusively for public worship * * * and the ground attached to them * * * that is necessary for their proper occupancy, use, and enjoyment,” Grace Cathedral maintains that the building provides “an extension of the worship experience and is utilized in continuing fellowship, religious discussion and religious learning.” Moreover, Grace Cathedral argues that “keeping out-of-town visitors on the Grace Cathedral campus during their stay promotes fellowship among the church members and clergy and maximizes the opportunity for visitors to attend all church services and events during their visit.” ¶ 15 In opposition, the tax commissioner urges that the case law declines to extend the public worship exemption to residential use of property, including cases that view the provision of overnight lodging as a “functional equivalent” of residential use for purposes of denying exemption. See Gerke v. Purcell, 25 Ohio St. 229 (1874); Faith Fellowship Ministries, 32 Ohio St.3d 432, 513 N.E.2d 1340; Moraine Hts. Baptist Church v. Kinney, 12 Ohio St.3d 134, 465 N.E.2d 1281 (1984). Standard of Review ¶ 16 Our review of BTA decisions is to determine whether they are reasonable and lawful. See R.C. 5717.04. The standard for conducting that review ranges from abuse of discretion, which applies when we are asked to reverse the BTA’s determination regarding credibility of witnesses, to de novo review of legal issues. Compare EOP-BP Tower, L.L.C. v. Cuyahoga Cty. Bd. of Revision, 106 Ohio St.3d 1, 2005-Ohio-3096, 829 N.E.2d 686, ¶ 14, with Akron Centre Plaza, L.L.C. v. Summit Cty. Bd. of Revision, 128 Ohio St.3d 145, 2010-Ohio-5035, 942 N.E.2d 1054, ¶ 10. This appeal presents primarily a question of law for our plenary review, see Equity Dublin Assocs. v. Testa, 142 Ohio St.3d 152, 2014-Ohio-5243, 28 N.E.3d 1206, ¶ 22, and we recognize that this court defers to the 216 BTA with respect to factual findings, Satullo v. Wilkins, 111 Ohio St.3d 399, 2006-Ohio-5856, 856 N.E.2d 954, ¶ 14, citing Columbus City School Dist. Bd. of Edn. v. Zaino, 90 Ohio St.3d 496, 497, 739 N.E.2d 783 (2001). Public Worship Exemption ¶ 17 R.C. 5709.07(A)(2) exempts “[hjouses used exclusively for public worship, the books and furniture in them, and the ground attached to them that is not leased or otherwise used with a view to profit and that is necessary for their proper occupancy, use, and enjoyment.” Incidental Use ¶ 18 Our case law provides a dispositive resolution of the exemption claim presented in this appeal: the test we formulated in In re Bond Hill-Roselawn Hebrew School, 151 Ohio St. 70, 84 N.E.2d 270 (1949), approved in Bishop v. Kinney, 2 Ohio St.3d 52, 442 N.E.2d 764 (1982), which focuses on the primary use of the premises, holds that incidental uses of church property will not defeat a public worship exemption when the primary use of the property is public worship. ¶ 19 In Bond Hill for example, the building at issue was a 1% story structure with the 120-seat church on the first floor and three rooms upstairs. The upstairs rooms were used as a residence by the caretaker and his family. We observed: Some care of a building is necessary in order that it may be used. Provision for such care may require that the caretaker reside on the premises. The fact that he does, that his wife also helps in the work, and that their child lives with them should clearly not detract from the fact that the building is used exclusively for public worship. Such a use is not only definitely incidental to the primary use of the building for public worship but also is merely an element in making that use possible. Bond Hill at 74-75. ¶ 20 In Bishop v. Kinney, a multipurpose building had a church, an administrative office, and the housekeeper’s residence on the first floor. On the second floor was the priest’s residence. In the basement were three classrooms, a furnace room, and a parish hall. Exemption had been granted for the church and the administrative office on the first floor and the classrooms in the basement. ¶ 21 The issue on appeal there related to the parish hall, where activities included regular religion classes, religion-related training and curriculum workshops, retreats, a summer Bible school, regular fellowship activities, and weekly bingo games. Relying on Bond Hill, we held the parish hall tax exempt. 217 Significantly, following Bond Hill, the legislature enacted R.C. 5713.04, allowing a single parcel — or a single building on a parcel — to be “split listed” between taxable and exempt uses. In Bishop v. Kinney, we held that the rationale of Bond Hill was “equally applicable whether the focus of inquiry is the whole building, as in Bond Hill, or a portion thereof as now authorized by the split-listing statute. Moreover, decisions rendered since the enactment of R.C. 5713.04 have not abandoned the primary-use test * * *.” 2 Ohio St.3d at 53, 442 N.E.2d 764. ¶ 22 Applying Bishop v. Kinney to this case, the separate dormitory building on the church’s parcel in this case would be exempt if its primary use is for public worship or incidental to the primary use of the property for public worship and is an element in making that use possible. We have, however, clarified this test in later cases by allowing an exemption when the ancillary use was found to facilitate public worship in a “principal, primary, and essential way,” rather than being “merely supportive” of but “incidental to” it. Faith Fellowship Ministries, 32 Ohio St.3d at 437, 513 N.E.2d 1340. Inapposite Case Authority ¶ 23 The tax commissioner relies on well-settled, but inapposite, authority to the effect that residential use of property defeats a claim of exemption under the public-worship provision. Thus, in Gerke, 25 Ohio St. 229, we held that the parsonages located on ground adjacent to the churches themselves could not qualify for the exemption because “[t]he ground in such case is appropriated to a new and different use” from that of worship, namely, a “place of private residence” for the day-to-day use by the clergy. Id. at paragraph ten of the syllabus. Accord Watterson v. Halliday, 77 Ohio St. 150, 82 N.E. 962 (1907) (“parish houses” that are residences of the priests also do not qualify for exemption as institutions of purely public charity); Full Gospel Apostolic Church v. Limbach, 46 Ohio St.3d 195, 546 N.E.2d 403 (1989) (affirming denial of exemption for parsonage and vacant land in the context of approving exemption for other portions of the property). The property here is not a parsonage, as it is not a residence for clergy. ¶ 24 The BTA here acknowledged that “the property was not used as a ‘permanent’ residence by the individuals attending appellant’s services,” but held that the use was “merely supportive of public worship” and did not, as a consequence, qualify the building for exemption. BTA No. 2012-2168, 2014 Ohio Tax LEXIS 963, *5. In defending its holding, the tax commissioner relies on four cases: Moraine Hts., 12 Ohio St.3d 134, 136, 465 N.E.2d 1281 (overnight facilities for boys and girls at church camp not exempt); Faith Fellowship Ministries, 32 Ohio St.3d at 437 (affirming denial of exemption for 12 sleeping rooms that, along with associated building space, were used for church retreats); 218 Christian Church of Ohio v. Limbach, 53 Ohio St.3d 270, 560 N.E.2d 199 (1990) (denominational administrative building not exempt); and Church of God in N. Ohio, 124 Ohio St.3d 36, 2009-Ohio-5939, 918 N.E.2d 981 (same). ¶ 25 Those cases do not provide controlling precedent to resolve the instant matter. The first two involve sleeping quarters, as does the dormitory building in the present case. But each of them differs from the present case in this respect: the overnight accommodation in those cases facilitated attendance at a church camp (Moraine Hts.) or at a church retreat (.Faith Fellowship Ministries), rather than facilitating attendance at the public worship service of the church itself.1 In addition, this dormitory provides a location and atmosphere to facilitate the worship through continued discussion and fellowship. ¶ 26 The other two cases are more remote from the circumstances presented here. Both Christian Church and Church of God in N. Ohio involve office buildings separate from church facilities that were used to coordinate activities of a number of congregations from an administrative standpoint. The administrative use of property in those cases was “merely supportive” of public worship; by contrast, the overnight lodging for congregants on the church’s own property facilitates public worship in the “principal, primary, and essential way” that qualifies the property for exemption. ¶ 27 The BTA relied in part on the fact that the building apparently is unused 50 to 60 percent of the time during the year as part of its justification to deny the claimed exemption. BTA No. 2012-2168, 2014 Ohio Tax LEXIS 963, *5-6. The criterion for establishing the taxable or exempt status of the building is its use, not the percentage of all time during the year that it is in use. Here, the status of the building must be determined in light of its use, and exemption should not be denied merely because it is not used more often during the year. The record here also suggests that providing lodging for visiting congregants occurs primarily on and over the weekend, coordinated with the worship services, and actually does facilitate public worship in a principal, primary, and essential way that qualifies for the exemption. ¶ 28 Like on-site church parking lots, which facilitate public worship and are used only at times of worship and which routinely qualify for exemption pursuant to R.C. 5709.07(A)(2), the on-site dormitory here facilitates public worship by affording congregants proximity to attend church services and an opportunity for fellowship following services. See Greater Life Assembly, Inc. v. Zaino, BTA No. 219 2002-A-878, 2003 WL 123666, *2 (Jan. 10, 2003) (tax commissioner determined a church building and seven acre part of the church’s property used for a driveway, parking lots, and grounds qualified for exemption pursuant to R.C. 5709.07(A)(2)); Columbus City School Dist. Bd. of Edn. v. Tracy, BTA No. 97-J-285, 1998 WL 741918, *3 (Oct. 16, 1998). However, the dissent denies that the dormitory facilities public worship by congregants who may otherwise be unable to take advantage of the services and that fellowship, which is part of the religious experience, occurs in the dormitory itself and further facilitates public worship. ¶ 29 It also vigorously denies the distinction between the use of a building as temporary lodging so that out of town visitors can attend church services and the use of a building as a private, permanent residence for a religious leader. It simply ignores the fact that the cases in which we denied exemption to temporary sleeping quarters dealt with church camps and retreats. See Faith Fellowship Ministries, 32 Ohio St.3d at 433, 513 N.E.2d 1340; Moraine Hts., 12 Ohio St.3d at 134, 465 N.E.2d 1281. By contrast, this case involves temporary lodging on the ground attached to a house of public worship that is necessary for the proper use of the church to facilitate attendance at the church. ¶ 30 The dissent further focuses on the BTA’s factual finding that “very little public worship occurs” in the dormitory itself and on the number of Grace Cathedral’s congregants who use the dormitory. BTA No. 2012-2168, 2014 Ohio Tax LEXIS 963, *6. This position is not well taken, because pursuant to R.C. 5709.07(A)(2), it is not necessary that a specified number of services of public worship occur in the dormitory, nor does the statute specify that a specific number of congregants require use' of the property to attend services. Rather, the dormitory need only facilitate public worship in a “principal, primary, and essential way” or provide a use incidental to the primary use, and it does just that. Charitable Purpose Exemption ¶ 31 Grace Cathedral also asserts a second position that the dormitory is exempt under R.C. 5709.12(B), which removes from taxation “[r]eal and tangible personal property belonging to institutions that is used exclusively for charitable purposes.” Our disposition of the claim of exemption under the public worship exemption obviates the need for us to address this claim. Conclusion ¶ 32 The Grace Cathedral claim that the dormitory building qualifies for exemption as being used in a principal, primary, and essential way to facilitate public worship is well taken. The decision of the BTA is reversed, and the 220 exemption is allowed for tax year 2010 in accordance with the application filed in this case. Decision reversed. Pfeifer, Kennedy, and French, JJ., concur. O’Connor, C.J., and Lanzinger and O’Neill, JJ., dissent. Footnotes [1] As the tax commissioner points out, the General Assembly responded to Moraine Hts. and Faith Fellowship Ministries by enacting a tax exemption for church camps and church retreats, now codified at R.C. 5709.07(A)(3). Am.S.B. No. 71,142 Ohio Laws, Part I, 147-150 (1988).