“Upscale” Facility Qualifies For Iowa Property Tax Exemption


Ballard Creek Community, an assisted living facility in Huxley, Iowa, is operated by a religious organization called Madrid Home for the Aging. Ballard Creek is a new development, and its current residents are mostly financially secure. Can such a facility qualify for a property tax exemption as a charitable use?

According to the Story County Board of Adjustment, Ballard Creek should not be accorded the preferential tax status because of the way it actually operates its business. The Board of Adjustment points out that Ballard Creek residents tend to be wealthy, the accommodations are plush, and the services provided are minimal. Even though the owner of Ballard Creek is unquestionably a charitable organization, reasoned the Board of Adjustment, it should not be exempt from property tax on this particular project.

Iowa law, like that of Arizona and most other states, exempts the property of both religious and charitable organizations from having to pay property tax. In Iowa, the owner of property must prove three things in order to qualify for the exemption:

1. The property must be used by a charitable, religious or educational organization,

2. The property may not be used for pecuniary gain, and

3. The use of the property must be solely related to the religious or charitable purpose of the organization.

While the Board of Adjustment conceded the first two points, it argued that Ballard Creek was essentially an upscale and profitable retirement home. Madrid Homes pointed to its bylaws, which require that its facilities be operated to “provide Christian care, including housing and medical services, to the elderly.” It also pointed out that every resident was required to contribute to a special fund, designed to help pay for those residents who become unable to afford the rent in the future.

Assisted living facilities are often confused with more traditional nursing homes and similar institutions. The very purpose of Ballard Creek, as its owners pointed out, is to provide support for elders in an apartment-like setting, encouraging independence and family involvement. When such facilities work, they help aging seniors stay out of nursing homes longer, and may even prevent institutionalization altogether.

Iowa’s Court of Appeals agreed with Madrid Home. Because plans had been made to provide financial assistance for residents as they became unable to pay their own way, and because volunteers and donations help to reduce the cost of care and extend residents’ ability to stay out of institutions, Ballard Creek is a charitable use of the land and the property tax exemption is appropriate. Madrid Home for the Aging v. Story County, November 10, 1999.

©2021 Fleming & Curti, PLC