STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6385

September 12, 1986

TAXATION:

Exemption of housing project consisting of ten separate buildings, each with residential unit

Eligibility for tax exemption of nonprofit corporation incorporated in another state

WORDS AND PHRASES:

"Housing"

A housing project comprised of ten separate buildings, with one residential unit only in each building, is not "housing" eligible for tax exemption under MCL 211.7d; MSA 7.7(4a).

The tax exemption afforded housing for the elderly and handicapped under MCL 211.7d; MSA 7.7(4a), is available to an eligible nonprofit corporation incorporated in another state.

Mr. Robert H. Naftaly, Director

Department of Management and Budget

Lewis Cass Building

Lansing, Michigan

You have requested my opinion on the following question:

In your letter of request you advise that the housing project in question is comprised of ten separate structures, each containing a two-bedroom unit.

In the event the housing facility in question is exempt from ad valorem property taxes, upon certification of the local treasurer, the state is obligated to pay the tax revenue lost by virtue of such exemption as provided in MCL 211.7d; MSA 7.7(4a).

The General Property Tax Act, MCL 211.7d; MSA 7.7(4a), states, in pertinent part:

Const 1963, art 9, Sec. 3, states, in pertinent part:

The Michigan Constitution sets forth the general limitations upon the Legislature's authority over property tax exemptions for nonprofit organizations. Const 1963, art 9, Sec. 4, states:

The construction of tax exemptions was analyzed at length in 2 Cooley, Law of Taxation (4th ed), Sec. 672, p 1403-1408, which states:

Detroit v Detroit Commercial College, 322 Mich 142, 148-149; 33 NW2d 737, 739-740 (1948); Evanston YMCA Camp v State Tax Commission, 369 Mich 1, 8; 118 NW2d 818, 821 (1962).

Since exemption is the antithesis of tax equality, exemption statutes are to be strictly construed in favor of the taxing unit. Retirement Homes of the Detroit Annual Conference of the United Methodist Church, Inc v Sylvan Twp, 416 Mich 340, 348; 330 NW2d 682, 685 (1982); Michigan Baptist Homes & Development Co v City of Ann Arbor, 396 Mich 660, 670; 242 NW2d 749, 753 (1976). See also, Ladies Literacy Club v. City of Grand Rapids, 409 Mich 748, 753; 298 NW2d 422, 425 (1980); St. Joseph's Church v. Detroit, 189 Mich 408, 414; 155 NW 588, 590 (1915), reh den (1916).

Conversely, tax exemption statutes are to be strictly construed against the property owner. Christian Reformed Church in North America v City of Grand Rapids, 104 Mich App 10, 22; 303 NW2d 913, 919 (1981), lv den, 413 Mich 934 (1982); American Legion Memorial Home Association of Grand Rapids v City of Grand Rapids, 118 Mich App 700, 707; 325 NW2d 543, 546-547 (1982). A court, however, is not relieved of its duty to ascertain and give effect to the legislative intent. Association of Little Friends, Inc v City of Escanaba, 138 Mich App 302, 307; 360 NW2d 602, 604 (1984), lv den, 422 Mich 979 (1985).

General property tax exemption claims are evaluated under a four part test discussed in Engineering Society of Detroit v Detroit, 308 Mich 539, 550; 14 NW2d 79, 83 (1944). All four prongs of this test must be satisfied to qualify the property for tax exempt status:

Gull Lake Bible Conference Association v Twp of Ross, 351 Mich 269, 273; 88 NW2d 264, 266 (1958)--a tax exemption granted under this test to a conference center containing living facilities for religious study gatherings; Retirement Homes of the Detroit Annual Conference of the United Methodist Church, Inc v Sylvan Twp, 416 Mich 340, 348; 330 NW2d 682, 685 (1982)--tax exemption status denied under this test to a home for the elderly.

It is noted that the third part of the analysis is no longer viable under scrutiny of the Equal Protection Clauses of Const 1963, art 1, Sec. 2 and US Const, Am XIV. In American Youth Foundation v Benona Twp, 37 Mich App 722; 195 NW2d 304, lv den, 387 Mich 782 (1972), the court held the third prong to be unconstitutional in that a nonprofit foreign corporation could not be denied tax-exempt status of its youth camp property used for religious and educational purposes from ad valorem taxation solely because of corporate residency. American Youth Foundation v Twp of Genona, 8 Mich App at 524-527. The United States Supreme Court reached the same conclusion under US Const, Am XIV in WHYY, Inc v Borough of Glassboro (per curiam), 393 US 117; 89 S Ct 286; 21 L Ed 2d 242 (1968). See also, Wheeling Steel Corp v Glander, Tax Commissioner of Ohio, 337 US 562; 69 S Ct 1291; 93 L Ed 2d 1544 (1948); Southern R Co v Samuel E Greene, 216 US 400; 30 S Ct 387; 54 L Ed 536 (1910). There is no discernible difference between the Equal Protection Clauses of the Federal and Michigan Constitutions. Armco Steel Corp v Department of Treasury, 419 Mich 582, 591; 358 NW2d 839, 842 (1984); Fox v Employment Security Commission, 379 Mich 579, 588; 153 NW2d 644, 647 (1967).

A reading of MCL 211.7d; MSA 7.7(4a), in light of the aforesaid authorities, fails to provide a ready answer to your question because the statutory tax exemption afforded otherwise qualified housing for senior citizens and handicapped persons is not entirely clear with respect to "structures consisting of 8 or more residential units" as set forth in subsection (4).

Ambiguous statutory language is construed according to the common and approved usage of the language, including a resort to dictionary definitions. State, ex rel Wayne County Prosecuting Attorney v Levenburg, 406 Mich 455, 465; 280 NW2d 810, 812 (1979)--remand on issues raised but not considered in Court of Appeals, 407 Mich 1147, 1148 (1979); Harper Safety Center, Inc v Department of State, 134 Mich App 404, 407; 350 NW2d 888, 889 (1984); K Mart Corp v Department of State, 127 Mich App 390, 395; 339 NW2d 32, 34 (1983), lv den, 418 Mich 933 (1984); Fenton Area Public Schools v Sorensen-Gross Construction Co, 124 Mich App 631, 639; 335 NW2d 221, 224 (1983), lv den, 419 Mich 856 (1984).

Webster's Third New International Dictionary defines the term "structure" as "something constructed or built." The term "structure" in its ordinary meaning is an edifice or building of any kind. State v Roadhs, 71 Wash 2d 705, 707-708; 430 P2d 586, 588 (1967); Skinner v Henderson, 556 SW2d 730, 733 (Mo App, 1977); Black's Law Dictionary, 5th ed.

Had the Legislature employed the term "structure" in the singular, its intent would be manifest based upon a plain reading that the structure must consist of at least eight units. Since the Legislature used the term in the plural, focus must shift to the meaning of the phrase "consisting of" when used conjunctively with the term "structures."

The term "consisting of" is defined by Webster's Third New International Dictionary as "composed or made up--used with of." The term "consist" when used with "of" means "composed or made up of." Hoskins Mfg Co v General Electric Co, 212 F 422 (ND Ill, 1914); In Re Wright's Estate, 2 NYS2d 25, 28; 166 Misc 52, 54 (1938).

The term "includes" has been employed by the Legislature in subsection (3), but only with respect to contiguous land and related facilities. The term "structures" does contain a definition employing the term "consisting of" residential units, but does not reference the term "including." The terms "consisting of" and "including" are not synonymous. The former is a more specific, narrowing term. Baker v Soltau, 94 NJ Eq 544, 546; 118 A 682, 683 (1923). The latter, when used in connection with a number of specified objects, always implies that there may be others which are not mentioned. Farish v Cook, 6 Mo App 328, 331 (1878).

The term "unit" is defined in Webster's New Third International Dictionary as "a single thing or person or group that is constituent and isolable member of some more inclusive whole."

Applying the aforementioned rules of construction, MCL 211.7d; MSA 7.7(4a), makes a housing facility or project, the essential contiguous land and related facilities, including personal property used in connection with the facility or project, eligible for tax exemption provided that the "structures" for housing of the elderly and handicapped consist of "8 or more residential units." Since a senior rental housing facility or project may be comprised of more than one building, the Legislature stated the term "structures" in the plural to meet such a contingency. No one could seriously contend that a housing facility or project of one building with 40 residential apartments would be ineligible for tax exemption if the owner or owners thereof were otherwise qualified. The 40 units "unite to compose" the structure. Farish v Cook, 6 Mo App 328, 332 (1878). As one structure, such a building would consist of more than 8 residential units for occupancy by elderly and handicapped persons and would be eligible for tax exemption.

In the event a housing facility or project were to be comprised of two or more buildings, each would be required to consist of 8 or more residential units in order to qualify as "housing" under MCL 211.7d(4); MSA 7.7(4a)(4). Otherwise, the tax exemption would be subject to a construction which would permit it to be available to a housing facility made up of 8 separate buildings, each composed of one residential unit. This construction is impermissible because the terms "structures" and "units" do not have the same meaning. Both terms must be given effect and one part of the statute may not be construed in a manner to make another part nugatory. Melia v Employment Security Commission, 346 Mich 544, 562; 78 NW2d 273, 275 (1956).

Moreover, such a reading would broaden the exemption in favor of the taxpayer. American Legion Memorial Home Association of Grand Rapids v City of Grand Rapids, supra. Had the Legislature intended to provide a tax exemption for a housing facility or project of 8 separate buildings consisting of one residential unit in each building, it could have easily done so by providing a definition of "housing," such as residential real property consisting of 8 or more units. Cf, Rushton v O'Malley, 89 Ill App 3d 103, 105; 411 NE2d 528, 530 (1980), where an Illinois statute required a lessor of residential real property containing more than 25 units to pay interest on tenants' security deposits. The lessor owned four apartment buildings comprising a single apartment complex and all four together contained more than 25 units, although no single building contained more than 25 units. The court, interpreting the statute in its plain and ordinary meaning, held that more than 25 units were contained within the lessor's "residential real property."

Undoubtedly, in providing the tax exemption, the Legislature was encouraging the construction or reconstruction of housing for the elderly and the handicapped on the basis that the state would make whole the local taxing unit for the total amount of revenue lost as a result of the housing exemption. In order to protect the state treasury, it is reasonable to assume the Legislature intended that the expense of construction or reconstruction of such housing facilities and the resultant assessment for tax reimbursement purposes, be cost-effective by requiring a minimum of eight residential units in a housing structure.

It is my opinion, therefore, that a housing project comprised of ten separate buildings, with one residential unit only in each building, is not "housing" eligible for tax exemption under MCL 211.7d; MSA 7.7(4a).

Your question also asks whether the tax exemption set forth in MCL 211.7d; MSA 7.7(4a), may be limited to nonprofit corporations or associations incorporated under the laws of this state. In light of the decision in American Youth Foundation v Benona Twp, supra, 37 Mich App 722, discussed above, the tax exemption is available to eligible nonprofit corporations incorporated in another state.

Frank J. Kelley

Attorney General