Section 8 Basic Definition

• Library: Tax Law 2009

The seminal case in this area is Franciscan Tertiary Province of Missouri, Inc. v. State Tax Commission of Missouri, 566 S.W.2d 213 (Mo. banc 1978), discussed in §15.9 below. In Franciscan, the Supreme Court delineated a three-prong test to be used when determining whether property is used for “charitable” purposes and is exempt from taxation. Under the Franciscan test, the following three requirements must be met to qualify property for exemption:

1. The property must be owned and operated on a not-for-profit basis

2. The property must be unconditionally dedicated to charitable use, and no private profit may result

3. The dominant use of the property must benefit an indefinite number of people or society generally

Id. at 224.

Franciscan has been followed in a series of cases, including Affiliated Medical Transportation, Inc. v. State Tax Commission of Missouri, 755 S.W.2d 646 (Mo. App. E.D. 1988), in which the Eastern District held that property used by a not-for-profit corporation to provide emergency medical services was exempt, even though the corporation sometimes operated in the black
and may have refused to provide services to some indigent patients. Affiliated was an affiliate of Saint Louis University. The university purchased the assets of a privately owned, for-profit ambulance service, including ambulances and a combination office and ambulance garage. To insulate its other assets from the potential liability arising from the high-risk activities associated with providing ambulance services, the university formed Affiliated as a not-for-profit corporation with the university as the sole member of it. The university contributed the purchased assets to Affiliated, together with several hundred thousand dollars of capital. Affiliated provided its mobile emergency services (ground and air ambulance services) to the entire community, and it also operated the university’s emergency room facilities. Before...