Appeal from the 269th District Court Harris County, Texas
Trial Court Case No. 2014-35858
consists of Justices Higley, Bland, and Massengale.
CARTER HIGLEY, JUSTICE
Church Residences of Alief, TX ("NCR") and the
Harris County Appraisal District ("HCAD") each
moved for rehearing of our August 9, 2016 opinion. We granted
rehearing and withdrew our August 9, 2016 opinion and
judgment. We now issue this opinion and a new judgment in
owns an apartment complex providing federally-subsidized
housing to low-income elderly persons. For tax years 2012 and
2013, NCR requested that it be exempt, as a charitable
organization under Texas Tax Code section 11.18(d)(13), from
paying ad valorem taxes. See Tex. Tax Code Ann.
§ 11.18(d)(13) (West 2015). NCR asserted that it was
entitled to the exemption because it provided permanent
housing and related support services to the elderly residents
of its property without regard to the residents' ability
to pay for the housing.
denied the requested exemption on the basis that NCR was not
providing housing without regard to the residents'
ability to pay. NCR filed suit, seeking judicial review of
the denial. After the parties filed cross-motions for summary
judgment, the trial court granted HCAD's motion and
denied that of NCR. On appeal, NCR raises one issue,
asserting that the trial court erred in ruling on the motions
for summary judgment. NCR maintains that it was entitled to a
property tax exemption under Tax Code section 11.18(d)(13)
for tax years 2012 and 2013. Because we agree that NCR met
its summary-judgment burden to show that it was entitled to a
property-tax exemption for 2012 and 2013, we reverse and
render judgment, granting NCR's motion.
an Ohio nonprofit corporation, organized exclusively for
charitable and educational purposes; it is exempt from
federal income taxation pursuant to Section 501(c)(3) of the
Internal Revenue Code. NCR's articles of incorporation
provide that it "shall have the power to provide elderly
persons and handicapped persons with housing facilities and
services specially designed to meet their physical, social,
and psychological needs, and to promote their health,
security, happiness, and usefulness in longer living" on
a nonprofit basis.
1995, NCR has owned a 62-unit apartment complex in Houston,
known as the Evening Star Villa ("the Property").
That same year, NCR obtained financing from the Department of
Housing and Urban Development ("HUD") to develop
the Property into low-income rental housing for the elderly.
In conjunction with the financing, NCR entered into a Project
Rental Assistance Contract with HUD. The contract indicated
that NCR agreed to provide housing for low-income elderly
persons at the Property, and HUD agreed to provide monthly
subsidies to NCR "[to] cover the difference between
[NCR's] Operating Expenses and tenant payments as
determined in accordance with the HUD-established schedules
and criteria." In other words, pursuant to the
agreement, a tenant would pay a portion of the monthly rent,
calculated under HUD's formulas depending on the
tenant's income, and HUD would pay the remaining portion
of the rent to NCR as a subsidy.
return for receiving HUD's financial assistance, NCR was
obliged to comply with various federal statutory and
regulatory requirements regarding the management of the
Property. HUD regulations also governed the application
process for renting an apartment, establishing who was
eligible to be a tenant at the Property. NCR summarized many
of the eligibility requirements in its published "Tenant
stated in the Tenant Selection Plan, to be eligible for
tenancy, a person must be at least 62 years old with an
annual income that does not exceed certain income limits.
Specifically, to be eligible for housing, a tenant must be in
either the "very low" or "extremely low"
income range as defined by HUD. To be in the "very
low" income category, yearly income must not exceed $23,
200 for one person or $26, 500 for two people. To be in the
"extremely low" income category, yearly income must
not exceed $13, 900 for one person or $15, 900 for two
people. There is no minimum income requirement to qualify.
prospective tenant must "[a]gree to pay the rent
required by the program . . . ." A tenant is further
required to pay at move-in "the full security deposit,
" equal to the tenant's portion of the monthly rent
or $50, whichever is greater. A tenant must pay the security
deposit from his "own resources and any other public or
also had a published eviction policy, providing that, if a
tenant fails to pay his non-subsidized portion of the rent by
the third day of the month, the tenant will receive a 10-day
notice. If the rent balance is still owed after the
thirteenth day of the month, a three-day notice to vacate
"will be issued to evict."
addition to housing, residents of the Property have health,
social, and educational services available to them. Some, but
not all, of the services are provided through a
federally-funded service coordination program and are staffed
by a federally-funded service coordinator.
in 1997, NCR received an exemption from paying ad valorem
taxes on the Property. NCR received tax exemptions from HCAD
for the next 15 years. Then, on October 29, 2012, HCAD sent a
letter to NCR, requesting it "to file a new application
to confirm current qualification for the exemption." NCR
filed an "Application for Charitable Organization
Property Tax Exemption." With regard to its function,
NCR checked the box on the form that stated, "Provides
permanent housing and related social, health care and
educational facilities for persons 62 years of age or older
without regard to ability to pay." When asked to
describe the use of the Property, NCR responded, "This
property is used to provide housing for low income elderly
without regard to ability to pay."
denied NCR's property-tax-exemption request for tax years
2012 and 2013. HCAD took the position that NCR was not
providing its residents with housing or other services
without regard to the residents' ability to pay. For that
reason, HCAD asserted that NCR was not entitled to a property
tax exemption under Tax Code section 11.18(d), as implied by
NCR's s application.
filed suit in district court, seeking judicial review of
HCAD's denial of its request for a property-tax
exemption. NCR claimed that it was entitled to an exemption
under the Texas Tax Code. HCAD filed a motion for summary
judgment regarding NCR's claim, asserting that NCR did
not provide housing to its elderly residents without regard
to their ability to pay, as required to receive the tax
support of its motion, HCAD offered NCR's Tenant
Selection Plan, which indicated that tenants must pay a
security deposit at move-in, and tenants must agree to pay
the rent required by the program under which they are
receiving assistance. HCAD also pointed to NCR's eviction
policy, which provided the procedure by which a tenant would
be evicted for non-payment of rent.
addition to filing a response to HCAD's motion, NCR filed
a cross-motion for summary judgment. NCR claimed that it was
entitled to a property-tax exemption under section
11.18(d)(13) for tax years 2012 and 2013 because it
"provid[ed] permanent housing and related social, health
care, and educational facilities for persons who are 62 years
of age or older without regard to the residents' ability
to pay." Id. § 11.18(d)(13).
in NCR's summary-judgment evidence were the affidavits of
its president and vice president, certain of its business and
financial records, and documents detailing HUD regulations
and requirements relevant to the Property's management
and occupancy, such as the HUD Policy Handbook. NCR
acknowledged that prospective tenants must agree to pay the
rent required by the program providing assistance, and
tenants must pay a security deposit before moving into to
NCR's property. NCR asserted, however, that these
requirements did not show that it provided housing and
services to its elderly residents based on the residents'
ability to pay.
asserted that it treated all rental applicants the same,
regardless of their ability to pay. NCR offered evidence
showing that, although the market value of each apartment is
$389, no resident pays the full $389 out of his or her own
funds. Instead, the amount that each resident pays is
determined by a HUD formula. Pursuant to the formula, the
amount of rent each tenant must pay is the highest of (1) 30%
of the person's adjustment monthly income; (2) 10% of the
person's monthly income; or (3) the portion of welfare
payments specifically designated for housing costs. NCR's
president, Steve Bodkin, explained in his affidavit as
[W]hile the market rate for all units at the Evening Star
property was $389.00 per month in 2012, no tenants actually
paid the market rate to rent a unit. Subsidies from the
federal government are paid to NCR to cover the difference
between the market rent and rent charged to each tenant.
also offered a list indicating, as of October 12, 2012, what
each resident had paid in monthly rent and what HUD had paid
each month for each apartment. The list indicated that most
of the tenants paid between $100 and $200 per month in rent
with HUD paying the remainder of the $389. A few of the
residents were responsible for payments as low as $13 per
month in rent. In those cases, the remaining $376 was paid to
NCR by HUD.
further offered evidence showing that it had a corporate
policy "to maintain in residence any senior citizen
resident who becomes unable to pay the regular charges if,
after investigation, the Board of Trustees determines that
said resident is without financial ability to pay."
Relatedly, NCR's vice president, Steven A. Van Camp,
testified in his affidavit as follows:
If a resident cannot pay his or her rent in a timely manner,
NCR staff (including a federally funded service coordinator)
will assist the resident in obtaining additional assistance.
The assistance can be obtained through governmental agencies
or non-profit organizations such as churches. If assistance
cannot be obtained, NCR staff will work with the resident to
formulate a reasonable payment plan. NCR does not and did not
in 2012 or in 2013 charge any residents late fees if rent
payments were late. Likewise, NCR did not evict any residents
in 2012 or in 2013 for non-payment of rent.
affidavit, Bodkin also stated,
NCR also provides its tenants with an allowance to assist in
meeting their electric utility obligations. If, in any given
month, the allowance is more than the amount charged to a
tenant for rent and electricity actually used, which
occasionally happens, NCR tenders payment to the tenant for
the difference that month. In other words, during some
months, some NCR residents are actually paid to live in an
air conditioned unit and take advantage of the free services
that NCR has to offer to its residents.
the trial court granted HCAD's motion for summary
judgment, and denied that of NCR. This appeal followed. In
one issue, NCR challenges the trial court's
summary-judgment rulings, contending that it is entitled to a
property-tax exemption under Tax Code section 11.18(d)(13)
for tax years 2012 and 2013.
Standard of Review & Rules of
moving for traditional summary judgment has the burden to
prove that there is no genuine issue of material fact and
that it is entitled to judgment as a matter of law.
Tex.R.Civ.P. 166a(c); SeaBright Ins. Co. v. Lopez,
465 S.W.3d 637, 641 (Tex. 2015). When a plaintiff moves for
summary judgment on its claim, it must establish its right to
summary judgment by conclusively proving all the elements of
its cause of action as a matter of law. Rhone Poulenc,
Inc. v. Steel, 997 S.W.2d 217, 223 (Tex. 1999);
Anglo-Dutch Petroleum Int'l, Inc. v. Haskell,
193 S.W.3d 87, 95 (Tex. App.-Houston [1st Dist.] 2006, pet.
denied). A matter is conclusively established if reasonable
people could not differ as to the conclusion to be drawn from
the evidence. See City of Keller v. Wilson, 168
S.W.3d 802, 823 (Tex. 2005). Conversely, a defendant is
entitled to summary judgment if it disproves at least one
element of the plaintiff's cause of action as a matter of
law. Doe v. Boys Clubs of Greater Dall., Inc., 907
S.W.2d 472, 476-77 (Tex. 1995).
summary-judgment movant meets its burden, the burden then
shifts to the nonmovant to raise a genuine issue of material
fact precluding summary judgment. See Centeq Realty,
Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex. 1995);
Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d
754, 755 (Tex. 2007) (stating that summary-judgment evidence
raises fact issue if reasonable and fair-minded jurors could
differ in their conclusions in light of all evidence
presented). We review summary-judgment evidence in the light
most favorable to the party against whom the summary judgment
was rendered, crediting evidence favorable to that party if
reasonable jurors could, and disregarding contrary evidence
unless reasonable jurors could not. SeaBright Ins.
Co., 465 S.W.3d at 641.
as here, both sides move for summary judgment, and the trial
court grants one motion and denies the other, we review the
summary-judgment evidence presented by both sides, determine
all questions presented, and render the judgment the trial
court should have rendered. Id. at 641-42. We may
consider evidence presented by both parties in determining
whether to grant either motion. Expro Ams. LLC v.
Sanguine Gas Exploration, LLC, 351 S.W.3d 915, 919 (Tex.
App.-Houston [14th Dist.] 2011, pet. denied) (citing
Knighton v. Int'l Bus. Machs. Corp., 856 S.W.2d
206, 208-09 (Tex. App.-Houston [1st Dist.] 1993, writ
denied); River Oaks Shopping Ctr. v. Pagan, 712
S.W.2d 190, 193 (Tex. App.-Houston [14th Dist.] 1986, writ
both parties move for summary judgment, each party must carry
its own burden, and neither can prevail because of the
failure of the other to discharge its burden." BP
Auto., L.P. v. RML Waxahachie Dodge, L.L.C., 448 S.W.3d
562, 569 (Tex. App.-Houston [1st Dist.] 2014, no pet.)
(citing Guynes v. Galveston Cty., 861 S.W.2d 861,
862 (Tex. 1993)).
issue in the summary-judgment proceedings was whether NCR was
entitled to a property-tax exemption under Tax Code section
11.18(d). Issues involving statutory construction are
questions of law, which we review de novo. See R.R.
Comm'n v. Tex. Citizens for a Safe Future & Clean
Water, 336 S.W.3d 619, 624 (Tex. 2011). When construing
a statute, "our primary objective is to give effect to
the Legislature's intent as expressed in the
statute's language." Galbraith Eng'g
Consultants, Inc. v. Pochucha, 290 S.W.3d 863, 867 (Tex.
2009). Words that are not defined are given their ordinary
meaning unless a different meaning "is apparent from the
context" or unless the ordinary meaning "leads to
absurd results." Marks v. St. Luke's Episcopal
Hosp., 319 S.W.3d 658, 663 (Tex. 2010); see also
Galbraith, 290 S.W.3d at 867 (stating that if "the
words of a statute are clear and unambiguous, we apply them
according to their plain and common meaning"). Courts
"generally avoid construing individual provisions of a
statute in isolation from the statute as a whole."
Tex. Citizens, 336 S.W.3d at 628.
statutes are construed strictly against the taxing authority
and liberally for the taxpayer." Morris v. Hous.
Indep. Sch. Dist., 388 S.W.3d 310, 313 (Tex. 2012). In
contrast, tax exemptions are strictly construed against the
claimant. See Bullock v. Nat'l Bancshares Corp.,
584 S.W.2d 268, 271-72 (Tex. 1979). The claimant seeking an
exemption "bears the burden of 'clearly showing'
that it falls within the statutory exemption." Tex.
Student Hous. Auth. v. Brazos Cty. Appraisal Dist., 460
S.W.3d 137, 140-41 (Tex. 2015) (quoting N. Alamo Water
Supply Corp. v. Willacy Cty. Appraisal Dist., 804 S.W.2d
894, 899 (Tex. 1991)).
Texas Constitution Article VIII, Section
claims it is exempt from paying ad valorem taxes for tax
years 2012 and 2013 under Texas Tax Code section
11.18(d)(13). See Tex. Tax Code Ann. §
11.18(d)(13). However, before it can be considered for tax
exempt status under Tax Code section 11.18, an organization
must first meet the applicable state constitutional
requirements entitling it to seek the exemption. N. Alamo
Water Supply Corp., 804 S.W.2d at 899. Here, the
applicable state constitutional provision is Article 8,
section 2(a), which provides that the legislature "may,
by general laws, exempt from taxation . . . institutions
engaged primarily in public charitable functions, which may
conduct auxiliary activities to support those charitable
functions. . . ." Tex. Const. art. VIII, § 2(a).
Thus, before considering whether NCR meets the statutory
provisions of Tax Code section 11.18(d), we must
determine whether NCR demonstrated that it qualifies as an
institution "engaged primarily in public charitable
functions." See N. Alamo Water Supply Corp.,
804 S.W.2d at 899; see also Tex. Const. art. VIII,
1999, section 2(a) provided that "the legislature may,
by general laws, exempt from taxation . . . institutions of
purely public charity[.]" N. Alamo Water Supply
Corp., 804 S.W.2d at 895 (citing former Tex. Const. art.
VIII, § 2(a)). In 1999, section 2(a) was amended, and
the phrase an institution "engaged primarily in public
charitable functions" replaced the phrase institutions
"of purely public charity." See Brazos Cty.
Appraisal Dist. v. Bryan-College Station Reg'l Ass'n
of Realtors, Inc., 419 S.W.3d 462, 464 (Tex. App.-Waco
2013, pet. denied).
1999 analysis provided by the Texas Legislative Council
indicated that section 2(a) needed to be amended because the
Supreme Court of Texas had construed the legislature's
authority under the purely-public-charity language to grant
exemptions from ad valorem taxation very narrowly.
See Tex. Leg. Council, Analysis of Proposed
Constitutional Amendments, November 2, 1999, Election,
109-110 (September 1999). The council noted that the supreme
court had held "that the legislature may grant an
exemption to a charitable organization only if the
organization is organized and operated exclusively
for charitable purposes and the property in question is used
exclusively for those purposes." Id.
The council explained that the amendment to section 2(a)
"substantially broadens the authority of the legislature
to exempt from ad valorem taxation the property of charitable
institutions." Id. at 110. "Under the
proposed amendment, the legislature could exempt
organizations that engage 'primarily, ' rather than
exclusively, in public charitable functions, even if those
organizations conduct non-charitable auxiliary activities to
support their charitable functions." Id.
1999 amendment did not change the essence of what constitutes
a public charity or a public charitable function but instead
provided the legislature with the ability to grant a tax
exemption to a charity engaged in non-charitable auxiliary
activities to support its public charitable function. Thus,
to determine whether NCR's activity of providing housing
to the elderly poor constitutes a public charitable function,
we utilize the standard developed under former section 2(a).
This standard requires an organization to meet a three part
test: (1) the organization must make no gain or profit; (2)
it must be "organized to accomplish ends wholly
benevolent by engaging in humanitarian services maintained to
care for the physical or mental well-being of its
recipients"; and (3) "[t]he total operation of the
charity must affect all the people of a community or state by
assuming, to a material extent, services which otherwise
might devolve to and become the obligations of the community
or state." N. Alamo Water Supply Corp., 804
S.W.2d at 899 (citing City of McAllen v. Evangelical
Lutheran Good Samaritan Soc'y, 530 S.W.2d 806, 810
(Tex. 1975); San Antonio Conservation Soc'y, Inc. v.
City of San Antonio, 455 S.W.2d 743, 746 (Tex. 1970);
City of Houston v. Scottish Rite Benevolent
Ass'n, 230 S.W. 978, 981 (Tex. 1921)).
the first factor, "[t]he law is well settled that the
proscription against an institution's realization of
'gain or profit' refers to gain or profit by private
individuals or the accrual of distributable profits."
City of McAllen, 530 S.W.2d at 809. Here, the
evidence showed that NCR is a section 501(c)(3)
not-for-profit corporation. NCR's financial records,
offered in support of summary judgment, indicate that NCR
used its revenue to maintain and support the operation of the
Property. See id. ("[T]he fact that the net
result of the Society's endeavors was the acquisition of
profit, would not subject the organization to taxation
because the profits were used for the permissible purposes of