Tax Type
Property Tax
Description
Application of Local Real Estate Tax to Charitable Organization
Topic
Exemptions
Local Power to Tax
Local Taxes Discussion
Property Subject to Tax
Date Issued
02-14-1992
[Opinion - Virginia Attorney General: 1992 at 194]
REQUEST BY: The Honorable Ronald H. Williams Treasurer for the City of Suffolk P.O. Box 1583 Suffolk, Virginia 23434
OPINION BY: Mary Sue Terry, Attorney General
OPINION:
You ask whether the clubhouse of Woodmen of the World Lodge No. 2 is exempt from real property taxation pursuant to Chapter 36 of Title 58.1,§§ 58.1-3600 through 58.1-3663, of the Code of Virginia.
I. Facts
Woodmen of the World Lodge No. 2 ("Woodmen"), which owns a meeting hall in the City of Suffolk, is a local affiliate of Woodmen of the World Life Insurance Society (the "Society"). Woodmen and the Society are exempt from federal income taxation pursuant to Internal Revenue Code § 501(c)(8) (West Supp. 1991). Membership in Woodmen is not required to be eligible for various insurance benefits provided by the Society; nor is a member of Woodmen required, as a condition of membership, to enroll in the insurance benefit program.
The clubhouse has been owned by Woodmen since 1955 and exempt from local real property taxation since then. You state that Woodmen engages in numerous charitable and benevolent community activities.
II. Applicable Constitutional and Statutory Provisions
Article X, § 6 of the Constitution of Virginia (1971) governs the exemption of property from taxation. Article X, § 6(a) provides, in pertinent part:
Except as otherwise provided in this Constitution, the following property and no other shall be exempt from taxation . . . :
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(6) Property used by its owner for . . . charitable [or] benevolent . . . purposes, as may be provided by classification or designation by a three-fourths vote of . . . each house of the General Assembly and subject to such restrictions and conditions as may be prescribed.
Article X, § 6(f) provides: Exemptions of property from taxation as established or authorized hereby shall be strictly construed; provided, however, that all property exempt from taxation on the effective date of this section shall continue to be exempt until otherwise provided by the General Assembly as herein set forth.
Section 58.1-3602 provides: Nothing contained in this chapter shall be construed to exempt from taxation the property of any person, firm, association or corporation who shall, expressly or impliedly, directly or indirectly, contract or promise to pay a sum of money or other benefit, on account of death, sickness or accident, to any of its members or other person.
Section 58.1-3606 provides: A. 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:
* * *
7. Buildings with the land they actually occupy, and the furniture and furnishings therein belonging to any benevolent or charitable organization and used by it exclusively for lodge purposes or meeting rooms, together with such additional adjacent land as may be necessary for the convenient use of the buildings for such purposes.1
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B. Property, belonging in one of the classes listed in subsection A of this section, which was exempt from taxation on July 1, 1971, shall continue to be exempt from taxation under the rules of statutory construction applicable to exempt property prior to such date.
This quoted statutory language exempts the property belonging to the classes listed from property taxation. The effect of subsection B is that property in existence and eligible for exemption on July 1, 1971, because of its membership in one of the classes listed in subsection A, continues its exempt status under the rules of liberal construction applicable under the 1902 Constitution.2
III. Rule of Liberal Construction for Exemption from Property Taxation to Be Applied
You indicate that Woodmen was in existence and owned its present clubhouse, which was exempt from property taxation, on July 1, 1971. As a result, its current tax status must be determined by applying to the exemption provisions the liberal rules of construction that were in effect before 1971 under the 1902 Constitution. See 1986-1987 Att'y Gen. Ann. Rep. 332, 333.
IV. Woodmen Clubhouse Exempt from Property Taxation
The threshold question presented by your inquiry is whether Woodmen's association with the Society and the availability to members of Woodmen of certain insurance benefits from the Society disqualify Woodmen from the property tax exemption in § 58.1-3606(A)(7).
Woodmen engages in various charitable and benevolent activities and its property was exempt from taxation on July 1, 1971. The property, therefore, should continue to be exempt from taxation unless Woodmen "expressly or impliedly, directly or indirectly, contracts or promises to pay a sum of money or other benefit, on account of death, sickness or accident, to any of its members or other person." § 58.1-3602. Although not present in the 1971 Constitution, language nearly identical to § 58.1-3602 first was adopted as part of Article XIII, § 183(g) of the 1902 Constitution and later was included in § 457 of the Code of 1887 by Chapter 417, Acts of Assembly of 1902-3-4 at 643, 644-45. See 1985-1986 Att'y Gen. Ann. Rep. 277.3 "[T]he purpose [of § 58.1-3602] is to deny exemption to the property of 'pretended benevolent associations' and 'fake insurance companies' who confer sick benefits and death insurance benefits on their members." Id. at 278.
While it may be argued that Woodmen, through its association with the Society, does directly or indirectly agree to pay death, sickness or accident benefits to its members or other persons, the facts indicate that Woodmen is not a "pretended benevolent association" or "fake insurance company". In fact, Woodmen does engage in charitable and benevolent activities. Further insurance benefits are not an automatic incident of membership in Woodmen, nor is membership in Woodmen required to contract for the payment of death, sickness or accident benefits with the Society.
Based on the above, and the liberal interpretation of exempt status required by § 58.1-3606(B) for property exempt from taxation on July 1, 1971, it is my opinion that the clubhouse owned by Woodmen and used for its meetings and the conduct of its charitable activities is exempt from property taxation.
1 With the exception of the reference to the 1971 Constitution of Virginia, the operative language in § 58.1-3606(A)(7) appeared in § 58-12(2), its predecessor. Before the adoption of the 1971 Constitution, § 58-12 simply mirrored the 1902 constitutional exemptions, with several additions not relevant to your inquiry. See Va. Const. Art. XIII, § 183(e)(1902).
2 Section 58.1-3606(B) codifies Article X, § 6(f) of the 1971 Constitution. See 1983-1984 Att'y Gen. Ann. Rep. 353.
3 The language was recodified in the 1919 Code as part of the last two paragraphs of § 2272, in the 1928 Tax Code as part of § 435(g), in the 1950 Code as § 58-13, and in the revision of Title 58 as present § 58.1-3602.
Attorney General's Opinion