Section 9 Homes for the Aged

• Library: Tax Law 2009

Until 1969, there were no Missouri cases addressing the exempt status of homes for the aged. From 1969 to 1987, the Supreme Court of Missouri entertained seven cases on the question, which are discussed below. The Court’s initial position appeared to be that, for the home to be exempt, the residents of the home had to be virtually indigent. The fifth case made it clear that relief of the aged is a charitable activity in its own right, and the beneficiaries of such an activity clearly do not have to be indigent for the facility to be exempt. The sixth case qualified this somewhat, holding that an exempt home for the aged must accommodate inability to pay. The seven cases are as follows:

1. Defenders’ Townhouse, Inc. v. Kansas City,441 S.W.2d 365 (Mo. 1969), was the first Missouri case involving the real property tax exemption of a residence or facility for the aged. The facility was owned by a not-for-profit corporation and used for housing persons 62 years of age or older. The residents were not required to pay an entrance fee. Rents ranged from $75 to $145 per month, and approximately 15% of the residents were accepted on a rent-reduced basis. The Court held that the facility was not exempt from property taxes as a charity

2. In Paraclete Manor of Kansas City v. State Tax Commission of Missouri, 447 S.W.2d 311 (Mo. 1969), the Court held that a not-for-profit corporation that constructed and operated rental facilities for elderly persons with low income was not entitled to exemption from property taxes as a charity when

• no one was permitted to occupy the rooms without payment of the established rent

• the rent was the same for all rooms

• rents were fixed at an amount necessary to pay the interest, amortize the principal, and pay all expenses of supporting and maintaining the property and to provide a surplus equal to an annual mortgage payment; and

• the operation was intended to be completely
  self-supporting and self-liquidating without any intention that gifts or charity be involved.

Only persons 62 years of age or older were eligible for
the housing, which was limited to single persons with
an annual income not exceeding $3,950 and to two persons living as a family unit with an annual income
not exceeding $4,800. Rental rates ranged from $65 to $85
per month. Some occupants received welfare assistance, and the organization administered a rent-supplement program sponsored by the federal government.

3. In the third consecutive case denying exemption to a facility for the aged, Westminster Gerontology Found., Inc. v. StateTax Comm’n, 522 S.W.2d 754 (Mo. 1975), the Court held that the not-for-profit operation of a facility (John Calvin Manor) providing housing and physical care for older persons did not qualify for exemption as a charity because, through their rents, the residents paid both the capital outlay and the operating expenses of the facility.

4. In MissouriUnited Methodist Retirement Homes v. State Tax Commission of Missouri, 522 S.W.2d 745 (Mo. 1975), the organization was successful in maintaining that it was entitled to exemption from real property taxes as a charity. Although residents were charged for the services they received, a substantial portion of the cost of the operation was received from church donations and gifts. The facility had operated at a loss for the past ten years. In its opinion, the Court stated that the case was distinguishable from, and not controlled by, Defenders’ Townhouse, Paraclete Manor, and Westminster Gerontology Foundation because a substantial portion of the total
   cost of operation was received from the two Missouri Conferences of the Methodist Church and from other gifts and bequests. The Court also stated: “In recent years the concept of care for the aged has changed, and it has become the accepted philosophy that in caring for the aged they should be provided facilities so...