Attorney General Opinions

The Honorable William J. Howell

Member, House of Delegates

Young Life purchased property in Rockbridge County in 1992 to operate a youth camp. Like the national camp properties, the camp in Rockbridge provides an opportunity for youth to hear and experience the Christian gospel. In 2000, the camp in Rockbridge served approximately 4,978 campers, 560 adult volunteer leaders, 365 volunteer work crewmembers, and 169 adult guests. By 2005, Young Life expects the camp to serve more than 7,000 campers. Young Life’s camps are open to all young people on a nondiscriminatory basis.

Section 58.1-3617 provides that "[a]ny church, religious association or religious denomination operated exclusively on a nonprofit basis for charitable, religious or educational purposes is hereby classified as a religious and charitable organization." (Emphasis added.) § 58.1-3609(A) provides for a tax exemption by classification for the property owned by the organizations described in § 58.1-3617, if the property is "used in accordance with the purpose for which the organization is classified."

Section 58.1-3606(A) also provides a "religious association" tax exemption based on classification:

• • • • Pursuant to the authority granted in Article X, § 6 (a) (6) of the Constitution of Virginia to exempt property from taxation by classification, the following classes of real and personal property shall be exempt from taxation:

        ….

        5. Property belonging to and actually and exclusively occupied and used by the Young Men’s Christian Associations and similar religious associations, including religious mission boards and associations, orphan or other asylums, reformatories, hospitals and nunneries, conducted not for profit but exclusively as charities …. [Emphasis added.]

Although Young Life is a "religious association," as that term is used in §§ 58.1-3617 and 58.1-3606(A)(5), that determination alone does not entitle Young Life to a property tax exemption.¹⁴ Whether the property owned by Young Life qualifies for an exemption under § 58.1-3617 or § 58.1-3606(A)(5) is a factual determination to be made by the commissioner of the revenue or other appropriate local tax official.¹⁵

Pursuant to § 58.1-3617, property is exempt if it is used by the qualifying entity "exclusively … for charitable, religious or educational purposes."¹⁶ In addition, property classified as a tax-exempt "religious association" pursuant to § 58.1-3617 must also be "used in accordance with the purpose for which the organization is classified."¹⁷ To qualify for the exemption provided by § 58.1-3606(A)(5), Young Life has the burden of showing that the property belongs to it and is "‘actually and exclusively occupied and used by’ [Young Life]."¹⁸ Additionally, the property must meet the "dominant purpose test" of "whether the property in question promotes the purpose of the institution seeking the tax exemption."¹⁹ The property is entitled to a tax exemption "if the property has ‘direct reference to the purposes for which [Young Life was created] and tends immediately and directly to promote those purposes.’"²⁰

In determining whether the property owned by Young Life is tax exempt, Article X, § 6(f) requires the commissioner of the revenue, or other taxing official, to strictly construe any exemption.²¹ The commissioner of the revenue, or other local tax official, must determine from the facts whether an exemption applies to the property in question. Specifically, if the camp in Rockbridge County is operated exclusively on a nonprofit basis for charitable, religious or educational purposes, and the camp property is used in accordance with the purpose for which Young Life is organized, as required by §§ 58.1-3617 and 58.1-3609, the property is exempt from taxation. Also, if the property is actually and exclusively occupied and used by Young Life and operated exclusively as a charity, as required in § 58.1-3606(A)(5), it is tax exempt. Again, the determination whether Young Life uses the property for "charitable, religious or educational purposes" under § 58.1-3617, or whether it uses the property "in accordance with the purpose for which the organization is classified" pursuant to § 58.1-3606(A)(5), rests within the judgment of the commissioner of the revenue, after careful consideration of all the attendant facts.

¹The Internal Revenue Code provides an exemption for "[c]orporations … organized and operated exclusively for religious, charitable … purposes." I.R.C. § 501(c)(3) (West. 2002).

²See Va. Code Ann. §§ 58.1-3606, 58.1-3609 (Michie Repl. Vol. 2000).

³See § 58.1-3607 (Michie Repl. Vol. 2000).

⁴See tit. 58.1, ch. 36, art. 3, §§ 58.1-3606 to 58.1-3622 (Michie Repl. Vol. 2000); § 58.1-3606 (Michie Repl. Vol. 2000).

⁵See tit. 58.1, ch. 36, art. 4, § 58.1-3650 (Michie Repl. Vol. 2000), §§ 58.1-3650.1 to 58.1-3650.840 (not set out in Code); §§ 58.1-3607, 58.1-3608 (Michie Repl. Vol. 2000).

⁶Va. Const. art. X § 6(a)(6); see, e.g., §§ 58.1-3609(A), 58.1-3650(A) (restricting tax exemptions to real and personal property of organizations that, in first statue, are classified in §§ 58.1-3610 to 58.1-3621 or, in second statute, are specifically designated in §§ 58.1-3650.1 to 58.1-3650.904 (not set out in Code)).

⁷July 1, 1971, is the effective date of the 1971 Constitution. See 1970 Va. Acts ch. 763, at 1595, 1623-24; id. H.J. Res. 786, at 1698, 1727 (citing art. XII, Schedule, § 1).

⁸See Westminster-Canterbury v. City of Virginia Beach, 238 Va. 493, 502, 385 S.E.2d 561, 566 (1989) (finding that Westminster–Canterbury is not entitled to exemption under classification statutes, because it is not conducted exclusively for charity).

⁹1991 Op. Va. Att’y Gen. 303, 304-05.

¹⁰Id. at 304.

¹¹The mission of the Young Men’s Christian Association is "[t]o put Christian principles into practice through programs that build healthy spirit, mind and body for all." See YMCA Mission, at http://www.ymca.net/index.jsp.

¹²Op. no. 99-117 to Larry W. Davis, Albemarle Co. Att’y (Jan. 4, 2002) (concluding that religious corporation may be considered religious association for purposes of §§ 58.1-3606(A)(5), 58.1-3617 and overruling previous opinions that deny property tax exemptions because of an organization’s corporate status), available at http://www.vaag.com/media%20center/Opinions/99-117.htm.

¹³J. Rodney Johnson, Virginia Tax Laws Affecting Churches, 18 U. Rich. L. Rev. 301, 320 (1984) (construing § 58-12.24, predecessor to § 58.1-3617).

¹⁴Id.

¹⁵See Op. Va. Att’y Gen.: 1989 at 338, 339; 1984-1985 at 372, 373.

¹⁶See also op. no. 99-117, supra note 12.

¹⁷Section 58.1-3609(A).

¹⁸Smyth County Comm. Hospital v. Town of Marion, 259 Va. 328, 333, 527 S.E.2d 401, 403 (2000) (quoting Hospital Association v. Wise County, 203 Va. 303, 307, 124 S.E.2d 216, 219 (1962)).

¹⁹Id. at 334, 527 S.E.2d 404.

²⁰Id. at 334-35, 527 S.E.2d at 404 (quoting Com’th v. Lynchburg Y. M. C. A., 115 Va. 745, 752, 80 S.E. 589, 591 (1914)).

²¹Id. at 335, 527 S.E.2d at 404. The strict construction rule applies to post-1971 exemptions; the rule of liberal construction exists only where the property in question was actually owned on July 1, 1971. Johnson, supra note 13, at 319.