The Michigan Court of Appeals in Dearborn Heights Montesorri Center, Inc. v City of Livonia, No. 341920 (February 2019) held that providing an educational environment does not, by itself, constitute charity or a gift when tuition is charged.
Plaintiff appealed the Michigan Tax Tribunal’s (MTT) holding that the school does not qualify as a nonprofit charitable institution for purposes of an exemption from ad valorem property taxes under MCL 211.7o relative to its Livonia campus. The Michigan Court of Appeals affirmed the MTT’s ruling.
To claim an exemption from property taxes under MCL 211.7o, a claimant must show that 1) the real estate is owned and occupied by the claimant; 2) the claimant is a nonprofit charitable institution; and 3) the property is occupied by the claimant solely for the purpose for which it was incorporated. The Court relied on Wexford Med Group v City of Cadillac, 474 Mich 192, 202; 713 NW2d 734 (2006) in determining the meaning of “charitable institution.” Wexford held that the institution’s activities as a whole must be charitable. Also, there can be no restrictions on those who are afforded the benefit of the charitable deeds, provided they are in the particular group the charity is designed to serve.
The school argued that it is a charitable organization and qualifies for the exemption because it offers partial tuition reductions for families who need it. Specifically, the school argued that the MTT improperly required a threshold of charitable giving in order to be considered organized chiefly, if not solely, for charity. The Court disagreed and held that “providing an educational environment . . . does not, in and of itself, constitute charity or a gift when tuition is being charged. And an occasional tuition assistance discount and some reduced daycare costs did not convert the school into a charitable organization.”
A link to the opinion can be found here: https://law.justia.com/cases/michigan/court-of-appeals-unpublished/2019/341920.html
This article was written by Ryan Hansen, Law Clerk
