Roanoke County, Virginia v. Friendship RL, LLC

COURT OF APPEALS OF VIRGINIA Record No. 0163-26-3 ROANOKE COUNTY, VIRGINIA v. FRIENDSHIP RL, LLC, ET AL. Present: Judges Beales, Lorish and Duffan Argued by videoconference Opinion Issued November 10, 2026 FROM THE CIRCUIT COURT OF ROANOKE COUNTY Charles N. Dorsey, Judge Scott A. Stephenson (Kathleen L. Wright; Peter S. Lubeck; Douglas P. Barber, Jr.; Gentry Locke; Roanoke County Attorney’s Office, on briefs), for appellant. Christopher W. Stevens (W. Thomas Chappell; Woods Rogers Vandeventer Black PLC, on briefs), for appellees. Amicus Curiae: Commonwealth of Virginia (Jay Jones, Attorney General; Tillman J. Breckenridge, Solicitor General; R. Trent Taylor, Deputy Solicitor General; Mikaela A. Phillips, Assistant Solicitor General, on brief), for appellant. PUBLISHED OPINION BY JUDGE LISA M. LORISH Friendship RL, LLC and Friendship Foundation (collectively, “Friendship”) purchased real estate (the “Property”) in Roanoke County from Richfield Retirement Community. Friendship argues that it should benefit from the exemption from local taxation that the General Assembly granted to “The Richfield Retirement Community” for this “Property located in Roanoke County owned by the Richfield Retirement Community and used by it . . .” in Code § 58.1-3650.248. Under a separate statute, Code § 58.1-3601, “[a]ny property exempt from taxation pursuant to this chapter which is subsequently sold to a person not having tax-exempt status shall immediately become subject to taxation and be assessed therefor.” According to Friendship, because it is a 26 U.S.C. § 501(c)(3) tax-exempt organization, the exemption made to Richfield passes to it under Code § 58.1-3601. The trial court agreed, overruling Roanoke County’s demurrer. We granted this interlocutory appeal and now reverse. On its face, Code § 58.1-3650.248 does not apply to Friendship. And, strictly construed, Code § 58.1-3601 does not create a new tax-exemption for Friendship or any other organization solely because it is exempt from federal income tax. The trial court therefore erred in finding that Friendship could benefit from the prior exemption by designation for the Richfield Retirement Community. BACKGROUND This litigation arises from Friendship’s acquisition of the Property, which hosts facilities to assist the elderly and disabled. For decades, the Property was owned by Richfield Living, a § 501(c)(3) organization whose predecessor merged with Richfield Retirement Community. The General Assembly designated the Property as exempt from local taxation in 1987, providing that: A. The Richfield Retirement Community, a nonprofit organization, is hereby designated as a charitable and benevolent organization within the context of Section 6 (a) (6) of Article X of the Constitution of Virginia. B. Property located in Roanoke County owned by the Richfield Retirement Community and used by it exclusively for charitable and benevolent purposes, on a nonprofit basis, as set forth in subsection A of this section, is hereby determined to be exempt from local taxation. 1987 Va. Acts ch. 267; Code § 58.1-3650.253. In 2023, Friendship Foundation purchased the Property from Richfield Retirement Community and conveyed the Property to Friendship RL in 2024. Both Friendship Foundation and Friendship RL are § 501(c)(3) organizations that provide “healthcare and housing for seniors in the Roanoke Valley.”1 Friendship specifically uses the Property to “operate[] assisted living 1 Friendship Foundation is the sole member of Friendship RL and another § 501(c)(3) entity, Friendship Apartment Village Corporation (“FAVC”), formerly known as Friendship Manor Apartment Village Corporation. The General Assembly previously designated as tax -2- and skilled nursing facilities, memory care facilities and independent living apartments/cottages that provide affordable housing opportunities and health services for the elderly and/or disabled.” Although the County first treated the Property as tax exempt immediately after the sale, the County ultimately increased the Property’s assessed value and informed Friendship that it no longer considered the Property exempt from local taxation. Friendship sued for a declaratory judgment that the Property is tax exempt. Friendship specifically alleged that the Property was exempt before the sale, that it was sold to “an entity that was and is tax-exempt,” and thus “[p]ursuant to Va. Code § 58.1-3601, the Property maintains its tax-exempt status.” The County demurred. It argued, among other things, that Friendship failed to allege sufficient grounds for tax exemption and challenged Friendship’s interpretation of Code § 58.1-3601.2 In full, that provision states: Any property exempt from taxation pursuant to this chapter which is subsequently sold to a person not having tax-exempt status shall immediately become subject to taxation and be assessed therefor. The tax levied for the current year shall be prorated for the remainder of the tax year. Code § 58.1-3601. The trial court overruled the County’s demurrer, holding that “tax-exempt status,” as used in Code § 58.1-3601, “means organizations designated as tax-exempt by the Internal Revenue Service—501(c)(3) organizations included.” The court then referenced Code § 58.1-1, which provides in part: “Tax exempt organization” or “an organization exempt from taxation under § 501(c) of the Internal Revenue Code” means any corporation, partnership, organization or trust which has received written notice of its exempt status from the Internal Revenue exempt certain property held by FAVC. See 1987 Va. Acts chs. 267, 303; Code § 58.1-3650.252. 2 The parties also disputed whether FAVC’s exemption could apply to the Property. The trial court did not reach this issue, however. -3-  Service, if such notice is required by the Internal Revenue Service to obtain exempt status. The court found “persuasive” the fact that the “Virginia tax code uses ‘tax exempt organization’ and 501(c) status interchangeably.” Therefore, “[t]he only conclusion to be drawn is that a tax- exempt organization is one that has a tax-exempt status.” The trial court also observed that “Chapter 36 of Title 58.1 does not exempt any entity from taxes,” but rather it exclusively exempts property. Code § 58.1-3601’s reference to “this chapter” thus does not refer to entities. The court concluded that Friendship “properly alleged that [it is an organization] to which qualifying property would pass without becoming subject to immediate taxation under the statute.” The County filed a motion to reconsider, arguing that the trial court erroneously relied on Code § 58.1-1 in its interpretation of Code § 58.1-3601. The trial court reaffirmed its interpretation of the statute and entered an order denying the County’s motion on September 30, 2025. Then, on January 7, 2026, the trial court granted the County’s motion to certify the court’s ruling for an interlocutory appeal.3 This Court granted the interlocutory appeal on February 19, 2026, and invited the Attorney General to file an amicus brief expressing the view of the Commonwealth on the proper interpretation of the statutes in question. The Attorney General filed an amicus brief supporting the County’s position. ANALYSIS The issue before us is whether any exemption from local taxation applies to the Property under Code §§ 58.1-3650.248 and/or 58.1-3601. We consider this question of statutory interpretation de novo. Ayers v. Brooke Rd., LLC, 300 Va. 315, 321 (2021). 3 A separate claim challenging the amount of the County’s tax assessment was not resolved on demurrer. -4-  “In interpreting [a] statute, ‘courts apply the plain meaning . . . unless the terms are ambiguous or applying the plain language would lead to an absurd result.’” Miller & Rhoads Bldg., LLC v. City of Richmond, 292 Va. 537, 541 (2016) (alterations in original) (quoting Baker v. Commonwealth, 284 Va. 572, 576 (2012)). “We assume ‘the legislature chose, with care, the words it used when it enacted the relevant statute, and we are bound by those words as we interpret the statute.’” Belaal Khan v. McAlister, 87 Va. App. 458, 466 (2026) (quoting Jennings v. Commonwealth, 82 Va. App. 692, 697 (2024) (en banc)). And in any “textual interpretation, context is everything.” Scott v. McDougle, ___ Va. ___, ___ (May 8, 2026) (quoting Antonin Scalia, A Matter of Interpretation 37 (1997)). So we look to the text as well as the context. Here, the context is constitutional. The Constitution of Virginia states that “[a]ll property, except as hereinafter provided, shall be taxed.” Va. Const. art. X, § 1. Certain tax exemptions are then enumerated in the Constitution, including those “provided by classification or designation.” Va. Const. art. X, § 6(a)(6). “Exemption by classification requires the taxpayer to qualify for the exemption by fitting within the class of entities exempted,” whereas “[e]xemption by designation specifies the entities to be exempted.” Emmanuel Worship Ctr. v. City of Petersburg, 80 Va. App. 100, 109 (2024). This “classification-designation dichotomy” was “deliberately created” by the General Assembly, allowing it to “reserve[] unto itself the authority to grant exemptions [by designation] where entitlement under the stricter terms of the classification statutes might be doubtful.” Westminster-Canterbury of Hampton Rds., Inc. v. City of Virginia Beach, 238 Va. 493, 501-02 (1989). “The General Assembly implemented [this] constitutional provision[] in Title 58.1, Chapter 36, of the Code.” Mariner’s Museum v. City of Newport News, 255 Va. 40, 44 (1998). Chapter 36 includes provisions relating to exemptions generally, including Code § 58.1-3601. -5- See Code §§ 58.1-3600 to -3605. It also designates as exempt the property owned by more than 1000 identified organizations—declaring those organizations to be exempt from taxation for properties owned in specified cities or counties—so long as the property continued to be used for one of the charitable purposes set out in Article X, § 6(a)(6). See Code §§ 58.1-3650.1- 3650.1001. An amendment to the Constitution, effective January 1, 2003, transferred the classification-designation authority to local governing bodies. Va. Const. art. X, § 6. After this amendment, the General Assembly enacted Code § 58.1-3651 to set requirements for how a local body must set out an ordinance making such a classification or designation. All of these exemptions come with an important constitutional caveat—they must be “strictly construed against the taxpayer.” Mariner’s Museum, 255 Va. at 44 (citing Va. Const. art. X, § 6(f)). This instruction is repeated in Code § 58.1-3650(B), the statute that lists property exempt from taxation by designation. Virginia courts have long adhered to the “general rule . . . that provisions exempting property of individuals or private corporations from taxation must be strictly construed, taxation of such property being the rule and exemption from taxation the exception.” City of Richmond v. Va. United Methodist Homes, 257 Va. 146, 154 (1999) (quoting Commonwealth v. Lynchburg Y.M.C.A., 115 Va. 745, 747-48 (1914)). Strict construction “means that entitlement to exemptions must ‘appear clearly from the statutory provisions’ relied upon. If there is any doubt concerning the exemption, the doubt must be resolved against the party claiming the exemption.” Va. Baptist Homes, Inc. v. Botetourt County, 276 Va. 656, 668 (2008) (quoting Smyth Cnty. Cmty. Hosp. v. Town of Marion, 259 Va. 328, 333 (2000)). The rule is motivated by a desire that “all such persons should bear their fair share of the burdens of -6- taxation” and a concern “that lessening the burden of one increases the burdens of others.”4 Va. United Methodist, 257 Va. at 154 (quoting Lynchburg Y.M.C.A., 115 Va. at 748). Applying these principles, Friendship cannot claim an exemption under Code § 58.1-3650.248 or Code § 58.1-3601. I. Code §§ 58.1-3601 and 58.1-3650.248 do not create a tax exemption for Friendship. We start with the original designation for Richfield Retirement Community. Friendship does not contend that Code § 58.1-3650.248, on its own, makes the property exempt from local taxation now that it is under Friendship’s ownership. Indeed, the General Assembly designated only “The Richfield Retirement Community” as “a charitable and benevolent organization” and the designation extends only to “Property located in Roanoke County owned by the Richfield Retirement Community and used by it exclusively for charitable and benevolent purposes, on a nonprofit basis.” (Emphasis added). There is no mention of Friendship, or any property owned by Friendship. The plain language of Code § 58.1-3650.248, then, does not provide a basis for Friendship, or any entity other than Richfield Retirement Community, to enjoy exemption through this designation. Friendship instead relies on Code § 58.1-3601 and argues that the statute “implies that a property that is tax-exempt that is sold to a tax-exempt entity does not lose its tax-exempt status due to a change in ownership.” (Emphasis added). It claims that the “tax-exempt” Property retains its exempt designation even after sale to Friendship. But the text of the statute says only that “[a]ny property exempt from taxation pursuant to this chapter which is subsequently sold to a person not having tax-exempt status shall immediately become subject to taxation and be assessed therefor.” We must “strictly construe[]” any exemption from taxation, Va. Const. art. 4 The new constitution pivoted from the previous constitution’s rule of liberal construction. See Va. United Methodist, 257 Va. at 154 (discussing the change from liberal to strict constitution in the 1971 Constitution of Virginia). -7- X, § 6(f), and “if there is any doubt concerning the exemption, the doubt must be resolved against the party claiming the exemption,” Va. Baptist Homes, Inc., 276 Va. at 668 (quoting Cmty. Hosp., 259 Va.at 333). This basic principle resolves this appeal. We cannot find exemptions by implication, and Code § 58.1-3601 does not create any express tax exemption. In fact, to the contrary, our Supreme Court has cited to Code § 58.1-3601 to support the opposite premise—that “tax exemptions do not run with property.” Va. United Methodist Homes, 257 Va. at 157. Friendship next argues that interpreting the statute in this way makes no sense. According to Friendship, there would be no reason for the General Assembly to single out that exempt properties “subsequently sold to a person not having tax-exempt status” are subject to taxation, if in fact all properties lost their exemption upon sale. But this ignores the statute’s focus on timing and instructions regarding proration of taxes. When the full text of the statute is considered, the General Assembly was concerned with giving clear instructions to localities on how to proceed in the event of a sale. If the purchaser lacks “tax-exempt status,” the property is subject to immediate taxation on a prorated basis for the rest of the tax year. See Report of the Virginia Code Commission on the Revision of Title 58 of the Code of Virginia to the Governor and the General Assembly of Virginia, H. Doc. No. 16 at 389 (1984) (noting that the drafters’ intent in enacting Code § 58.1-3601 was to “[m]ake[] certain that any tax exempt properties are immediately added to the tax rolls upon their sale”). With that said, the statute recognizes that property designated for an exemption could be sold to a new entity that is otherwise entitled to a tax exemption under Chapter 36. Friendship claims that it has qualifying “tax-exempt status” because it is exempt from paying federal income tax as a § 501(c)(3) organization. But this argument also fails. -8-  II. “Tax-exempt status” means an organization with a tax exemption under Chapter 36, not an organization with a federal § 501(c)(3) tax exemption. While Code § 58.1-3601 does not create any new exemptions, the statute recognizes the possibility that a property subject to an existing exemption could be sold to an organization with existing “tax-exempt status,” which covers the property. The question is what “tax-exempt status” means. The circuit court agreed with Friendship, interpreting “tax-exempt status” to mean an organization that has received an exemption from federal taxation under § 501(c)(3) of the Internal Revenue Code. Thus, if a property previously designated as exempt by the General Assembly is later sold to any organization with an exemption from federal income taxation under 28 U.S.C. § 501(c)(3), the statute would exempt that organization from local property tax as well. But this reading effectively creates new tax exemptions through the sale of property, which is inconsistent with the strict construction rules that apply to interpreting any tax exemption statute discussed above and does not consider the context of the phrase “tax-exempt status” as used in Chapter 36. As used in Code § 58.1-3601, “tax-exempt status” refers to a person or organization otherwise designated or classified as eligible for a tax-exemption under Chapter 36. It does not refer to an organization’s federal income tax status. After the 2002 amendment to Article X of the Constitution of Virginia shifted the power to grant exemptions by classification or designation from the General Assembly to the local governing body, the General Assembly set out requirements in another statute, Code § 58.1-3651, for how a local body could create an ordinance making such a classification or designation. In addition to requiring a public hearing where citizens could be heard about a potential ordinance, and notice requirements for that hearing, that statute sets out eight questions the governing body must consider before passing an “ordinance exempting property by designation”: -9-  1. Whether the organization is exempt from taxation pursuant to § 501(c) of the Internal Revenue Code of 1954; 2. Whether a current annual alcoholic beverage license for serving alcoholic beverages has been issued by the Board of Directors of the Virginia Alcoholic Beverage Control Authority to such organization, for use on such property; 3. Whether any director, officer, or employee of the organization is paid compensation in excess of a reasonable allowance for salaries or other compensation for personal services which such director, officer, or employee actually renders; 4. Whether any part of the net earnings of such organization inures to the benefit of any individual, and whether any significant portion of the service provided by such organization is generated by funds received from donations, contributions, or local, state or federal grants. As used in this subsection, donations shall include the providing of personal services or the contribution of in-kind or other material services; 5. Whether the organization provides services for the common good of the public; 6. Whether a substantial part of the activities of the organization involves carrying on propaganda, or otherwise attempting to influence legislation and whether the organization participates in, or intervenes in, any political campaign on behalf of any candidate for public office; 7. The revenue impact to the locality and its taxpayers of exempting the property; and 8. Any other criteria, facts and circumstances that the governing body deems pertinent to the adoption of such ordinance. Code § 58.1-3651(B)(1)-(8). As Code § 58.1-3651 makes clear, the fact that an organization is exempt from paying federal income tax is just one of the criteria that is relevant to whether a local governing body should exempt that organization from paying local property taxes. If we were to now interpret Code § 58.1-3601’s reference to “tax-exempt status” to mean an organization exempt from paying federal income tax, it would improperly make this factor the only criteria for exemption. This could dramatically expand exemption grants. - 10 -  Concluding that a federal income tax exemption creates a local property tax exemption would also conflict with existing caselaw and the opinions of two Attorneys General. In Manassas Lodge v. County of Prince William, 218 Va. 220, 224-25 (1977), the Supreme Court evaluated whether Manassas Lodge was entitled to a property tax exemption and noted that the Lodge was exempt from both federal and Virginia income tax. The Court determined, however, that neither status was dispositive when it came to whether the property was exempt from local real estate tax. Rather, the Court assessed whether the Lodge was a charitable or benevolent organization and whether its property was exclusively used for those purposes. Id. at 225-27. See also Va. United Methodist, 257 Va. at 150, 159 (rejecting a “non-profit corporation[’s]” claim to tax exemption); Westminster, 238 Va. at 495, 502 (same). Relying upon Manassas Lodge, two Attorneys General have since opined that a property owner’s federal 501(c) status does not control whether the property is exempt from local real estate tax. 1989 Op. Va. Att’y. Gen. 342, 345 (Nov. 7, 1989) (“The exemption of an organization from federal income taxation pursuant to Internal Revenue Code § 501(c)(3) has no bearing on whether the property of the organization is exempt from local property taxation. Property owned by an organization exempt from federal income taxation is subject to local real property taxation, unless a Virginia constitutional or statutory exemption applies.”); 1981–82 Op. Va. Att’y. Gen. 373, 374 (Feb. 23, 1982) (“Property owned by an organization exempt from federal income taxation is still subject to local real estate taxation, unless a specific State exemption applies.”). What is more, in other parts of Chapter 36, the General Assembly explicitly referenced an organization’s federal income tax status when it was otherwise relevant to a local tax exemption. See, e.g., Code § 58.1-609.11(D)(1) (explaining that “[t]o qualify for the [previously described] exemption” a nonprofit must be “exempt from federal income taxation (i) under § 501(c)(3) of the Internal Revenue Code; (ii) under § 501(c)(4) of the Internal Revenue Code and is organized - 11 - for a charitable purpose; or (iii) under § 501(c)(19) of the Internal Revenue Code”); Code § 58.1-3603(C) (explaining that “rent from the lease of the property applied to reduce indebtedness against the property . . . shall not constitute revenue or profit, provided that the property is leased to a lessee who is exempt from taxation pursuant to § 501(c)(3) of the Internal Revenue Code and is used by such lessee exclusively for charitable purposes”). “[W]hen the General Assembly has used specific language in one instance, but omits that language or uses different language when addressing a similar subject elsewhere in the Code, we must presume that the difference in the choice of language was intentional.” City of Richmond v. Va. Elec. & Power Co., 292 Va. 70, 75 (2016) (alteration in original) (quoting Zinone v. Lee’s Crossing Homeowner Ass’n, 282 Va. 330, 337 (2011)). Rather than considering the context of Chapter 36 and the overall structure governing local tax exemptions, the trial court focused on Code § 58.1-1, which sets out definitions for the entire Virginia tax code. This provision states that “‘[t]ax exempt organization’ or ‘an organization exempt from taxation under § 501(c) of the Internal Revenue Code’ means any corporation, partnership, organization or trust which has received written notice of its exempt status from the Internal Revenue Service, if such notice is required by the Internal Revenue Service to obtain exempt status.” Code § 58.1-1. This provision notably does not define “tax- exempt status,” the actual language used in Code § 58.1-3601. The trial court erred by applying a definition of “tax exempt organization” from Code § 58.1-1 to “tax-exempt status” as used in Code § 58.1-3601. The context of the definition provided in Code § 58.1-1 shows that the General Assembly was answering a different question related to federal income tax. The legislature was addressing whether, when the Virginia tax code made federal income tax status relevant, an organization had to show that it theoretically qualified for an exemption under the Internal Revenue Code, or whether it had actually received - 12 - an exemption. Code § 58.1-1 answers that question by requiring the organization to have actually received written notice of the exemption, so long as the Internal Revenue Service would require the same. When this statute was amended in 1997 to define “tax exempt organization,” it partially codified the requirements that had already been set in place by regulation, which required a church seeking an exemption from sales and use taxes to receive an actual determination that it was exempt under § 501(c)(3) or under Code § 58.1-3606.5 This statute, thus, does not change the meaning of “tax-exempt status” as used in Code § 58.1-3601. Instead, Code § 58.1-3601 recognizes only the possibility that a continuing tax exemption may apply if a property subject to an existing exemption is sold to an organization that was otherwise designated or classified as eligible for a tax exemption under Chapter 36. If property is sold to such an organization, Code § 58.1-3601 preserves the tax exemption until the locality can decide whether it wants to allow the property’s tax-exempt status to continue permanently. This case demonstrates how a locality may need time to evaluate whether a property remains exempt from taxation. After Friendship initially purchased the Property in October 2023, Roanoke County initially treated the Property as tax-exempt through the 2023 tax year. It was only later, in April 2024, that Roanoke County concluded that the existing exemption did not apply to Friendship. In conclusion, the General Assembly designated Richfield Retirement Community, not Friendship, for a tax exemption for the Property in Code § 58.1-3650.248. And Code 5 A February 27, 1997 ruling from the Tax Commission explains that then Virginia Regulation 630-10-22.1 was codified by statute. Virginia Department of Taxation, Public Document Ruling No. 97-107, https://www.tax.virginia.gov/laws-rules-decisions/rulings-tax- commissioner/97-107. The current regulation, 23VAC10-210-310, continues to define “church” as a nonprofit religious organization that “has been specifically recognized by the Internal Revenue Service as being exempt from taxation under § 501(c)(3) of the Internal Revenue Code” or “whose real property is exempt from local real property taxation under § 58.1-3606.” - 13 - § 58.1-3601 does not create any tax exemptions. Because the trial court concluded otherwise, we reverse and remand. CONCLUSION For these reasons, we reverse the judgment of the circuit court and remand for further proceedings consistent with this opinion. Reversed and remanded. - 14 -