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Mid-State Baptist Hospital, Inc. v. City of Nashville, 15 McCanless 599, 211 Tenn. 599, 366 S.W.2d 769

Facts

The hospital had owned the property for many years, during which it was tax exempt due to its charitable status. In late 1958, the hospital began construction on a new structure that would include a ward and staff occupancy, with a portion designated for commercial use. As of January 10, 1959, the building was incomplete, with only the concrete frame poured and no usable floors. The hospital argued that since the building was not completed and in use, it should not be liable for taxes for the year 1959.

The Hospital began construction of a structure in the latter part of 1958. The Hospital had owned this property for many years and it had been tax exempt all that time because the Hospital was a charitable institution under our statutes.

Issue

Does property that has been tax exempt for many years continue to be tax exempt during the construction of a building intended for both charitable and commercial use until the building is completed and put into actual use?

The question in this case is, as stated by the appellee: ‘Where property is and has been tax exempt for many years, and the tax exempt institution owning same, commences construction of a structure on said property, to be used as a ward of a hospital and for occupancy by members of the hospital staff, with a portion of the completed building to be used commercially, does the property continue to be tax exempt until the building is completed and put into actual use?

Rule

The taxable status of property is determined as of a specific date each year, and if the property is exempt on that date, it remains exempt for that fiscal year, even if it later changes ownership or use.

The taxable status of property relates to a certain day in each year. There must be some day of the year as of which the power to tax property at all is determined.

Analysis

The court analyzed the facts surrounding the construction and the tax exemption status of the property. It noted that the property had been tax exempt for many years and that the construction was not completed or in use as of the tax assessment date. The court emphasized that the use of the property, rather than the intentions of the owner, determines tax exemption status. Since the property was not being used for non-charitable purposes before the assessment date, it remained exempt.

Clearly, under all the authorities the use of the property is the basis of tax exemption under the statute passed pursuant to our constitutional provisions heretofore referred to, and when real estate is acquired for such charitable corporations and held for that purpose before it can be changed to taxable property it must appear that it is as of January 10th of the taxable year being used for non-charitable purposes.

Conclusion

The court affirmed the Chancellor's decree, concluding that the hospital was not liable for taxes for the year 1959 as the property had not been put to use for non-charitable purposes by the assessment date.

Thus to us it seems reasonable to say and conclude that since this property had long been immune from taxation and since the statute, above referred to, more or less means that, when property thus immune has been put back into competition with other properties by someone receiving rents, etc., from the property, the logic of the situation is that until this property is thus in a position to be used in competition with other properties it should hold its immunity from taxation until this happens.

Who won?

The hospital prevailed in the case because the court found that the property remained tax exempt until it was completed and put into actual use.

The Chancellor held, ‘The property having been exempt for years, its exemption would not change until the property was put to use as commercial, or some other use contrary to the Charter of the Hospital.’

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