The Michigan Court of Appeals recently held in United Methodist Retirement Communities that the petitioner was not entitled to an exemption from ad valorem taxation under the charitable purpose exemption, the hospital or public health exemption, or the home for the aged exemption. United Methodist Retirement Communities, Inc. v City of Chelsea, Docket No. 337998, Michigan Court of Appeals (May 2018).
http://publicdocs.courts.mi.gov/OPINIONS/FINAL/COA/20180522_C337998_28_337998.OPN.PDF
Petitioner is a Michigan nonprofit corporation with tax-exempt status under § 501(c)(3) of the Internal Revenue Code, 26 USC §501(c)(3). Petitioner owns and operates the Chelsea Retirement Community (CRC) in Chelsea, Michigan. The CRC is made up of “Glazier Commons” and “Towsley Village.” The CRC provides its residents with several senior living options along a continuum of care. Petitioner began construction of Glazier Commons in 2013, and completed it in 2014. In 2015, respondent- City of Chelsea, assessed petitioner property tax on the Glazier Commons portion of the property. Petitioner challenged, arguing that Glazier Valley was merely an extension of Towsley Village, which was a tax-exempt facility.
The Michigan Supreme Court has held that in order to qualify for tax-exempt status under MCL 211.7o(1) [the charitable purpose exemption], a petitioner must establish three elements: (1) the real estate must be owned and operated by the exemption claimant; (2) the exemption claimant must be a nonprofit charitable institution; and (3) the exemption exists only when the buildings and other property thereon are occupied by the claimant solely for the purposes for which it was incorporated. Wexford Med Group v Cadillac, 474 Mich 192, 203; 713 NW2d 734 (2006). The Tribunal’s ruled that petitioner met the first two elements, but did satisfy the third element because it did not occupy the property at issue solely for the purposes for which petitioner was incorporated. The Appeals Court held that the Tribunal’s ruling was supported by competent, substantial, and material evidence.
The Appeals Court held that in order to meet the third element and be eligible for the tax exemption status, the petitioner must occupy the property “for what would traditionally be called charitable or benevolent objectives,” which is essentially what Petitioner’s incorporation documents stated. The Appeals Court determined that petitioner did not satisfy this requirement because the facility “did not serve the elderly generally, but rather provides an attractive retirement environment for those among the elderly who have the health to enjoy it and who can afford to pay for it.”
This article was written by Ryan Hansen, Law Clerk
