Big Springs Medical Assoc., Inc. v. Meyers (Carter)

August 28th, 2012

 

Clean
Clean
false

6 pt
6 pt
0
3

false
false
false
false

EN-US
X-NONE
X-NONE

MicrosoftInternetExplorer4


<w:LatentStyles DefLockedState="false" DefUnhideWhenUsed="false"
DefSemiHidden=”false” DefQFormat=”false” LatentStyleCount=”267″>

<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
QFormat=”true” Name=”heading 2″/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
QFormat=”true” Name=”heading 3″/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
QFormat=”true” Name=”heading 4″/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
QFormat=”true” Name=”heading 5″/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
QFormat=”true” Name=”heading 6″/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
QFormat=”true” Name=”heading 7″/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
QFormat=”true” Name=”heading 8″/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
QFormat=”true” Name=”heading 9″/>
<w:LsdException Locked="false" SemiHidden="true" UnhideWhenUsed="true"
QFormat=”true” Name=”caption”/>

<w:LsdException Locked="false" Priority="99" SemiHidden="true"
Name=”Placeholder Text”/>

<w:LsdException Locked="false" Priority="34" QFormat="true"
Name=”List Paragraph”/>

<w:LsdException Locked="false" Priority="30" QFormat="true"
Name=”Intense Quote”/>

<w:LsdException Locked="false" Priority="19" QFormat="true"
Name=”Subtle Emphasis”/>
<w:LsdException Locked="false" Priority="21" QFormat="true"
Name=”Intense Emphasis”/>
<w:LsdException Locked="false" Priority="31" QFormat="true"
Name=”Subtle Reference”/>
<w:LsdException Locked="false" Priority="32" QFormat="true"
Name=”Intense Reference”/>

<w:LsdException Locked="false" Priority="37" SemiHidden="true"
UnhideWhenUsed=”true” Name=”Bibliography”/>
<w:LsdException Locked="false" Priority="39" SemiHidden="true"
UnhideWhenUsed=”true” QFormat=”true” Name=”TOC Heading”/>

/* Style Definitions */
table.MsoNormalTable
{mso-style-name:”Table Normal”;
mso-tstyle-rowband-size:0;
mso-tstyle-colband-size:0;
mso-style-noshow:yes;
mso-style-unhide:no;
mso-style-parent:””;
mso-padding-alt:0in 5.4pt 0in 5.4pt;
mso-para-margin:0in;
mso-para-margin-bottom:.0001pt;
mso-pagination:widow-orphan;
font-size:10.0pt;
font-family:”Times New Roman”,”serif”;}

State Tax Commission of Missouri

 

BIG SPRINGS MEDICAL ASSOC. INC.,)

)

Complainant,)

)

v.                                                                            ) Appeal No.11-48501

)

GEORGE MEYERS, ASSESSOR,)

CARTER COUNTY, MISSOURI,)

)

Respondent.)

 

 

DECISION AND ORDER

 

HOLDING

 

Assessment by Assessor that subject property was not tax exempt was sustained by County Board of Equalization.Complainant presented substantial and persuasive evidence establishing the subject property to be exempt under Section 137.100(5) and applicable case law.

Hearing Officer finds subject property to be exempt under Section 137.100(5), assessment SET ASIDE.

Complainant appeared by Counsel, Jennifer Hackworth Thompson and L. Dwayne Hackworth, The Hackworth Law Office, Piedmont, Missouri.

Respondent appeared in person and by Counsel, Rocky Kingree, Prosecuting Attorney.

Appeal heard and decided by Senior Hearing Officer, W. B. Tichenor.

ISSUE

Complainant appeals, on the ground of exemption under Section 137.110(5), the decision of the Carter County Board of Equalization sustaining the Assessor’s assessment of the subject property as commercial property.The Commission takes this appeal to determine whether the subject property is exempt from taxation under Section 137.100(5), RSMo for the tax year 2011.

The Hearing Officer, having considered all of the competent evidence upon the whole record and the Brief filed by Complainant, enters the following Decision and Order.

FINDINGS OF FACTS

1.                  Jurisdiction.Jurisdiction over this appeal is proper.Complainant timely appealed to the State Tax Commission from the decision of the Carter County Board of Equalization.

2.                  Evidentiary Hearing & Briefs.A hearing was conducted on April 26, 2012, Carter County Courthouse, Van Buren, Missouri.Transcript was filed with the Commission on June 6, 2012.Complainant filed its Brief on July 6, 2012.Respondent was given until and including August 6, 2012, to file his Brief.[1]No Respondent’s Brief was filed.

3.                  Assessment.The Assessor appraised the subject property at $446,500, a commercial assessed value of $142,880.The Board sustained the assessment.[2]

4.                  Subject Property.The subject property is identified by map parcel number 5-6-24-31-1601.00.The property is located at 405 Main Street, Van Buren, Missouri.The property is owned by Complainant, doing business as Missouri Highlands Healthcare.The property operates as a medical care clinic.[3]

5.Complainant’s Evidence.Complainant filed and exchanged the following exhibits, which were received into evidence without objection.[4]

EXHIBIT

DESCRIPTION

A

2009 Carter County Real Estate Tax Statement

B

2010 Carter County Real Estate Tax Statement

C

Check 037092 to Carter County Collector – 2010 Real Estate Taxes, 2/28/10

D

Paid 2010 Carter County Real Estate Tax Receipt

E

Application for Real Property Tax Exemption, 12/7/09

F

Notice of Change in Assessed Value, 5/14/10

G

Big Springs Medical Assoc. v. Parker, STC Appeal 01-82500, 8/5/02

H

Carter County Board of Equalization Decision, 8/8/11

I

Complainant’s 2011 Complaint for Review of Assessment

J

Form 990 – Return of Organization Exempt from Income Tax – 2007

K

Form 990 – Return of Organization Exempt from Income Tax – 2008

L

Form 990 – Return of Organization Exempt from Income Tax – 2009

M

Contract – Complainant & MO Coalition for Primary Health Care Inc, 7/1/07

N

IRS – 501 (c) (3) Determination Letter, 8/31/07

O

Missouri – Limited Sales & Use Tax Exemption Letter, 3/30/07 – 3/30/10

P

Complainant’s Certificate of Incorporation as Not For Profit Corp, 2/6/1975

Q

Charitable Activities and Donations, 2009 & 2010

R

Complainant’s By-Laws, 10/19/10

S

Complainant’s Board Resolution, 12/28/09

T

Section 330 – Public Health Service Act – 42 USCS § 254b

U

2009 Health & Human Services Poverty Guidelines

V

Complainant’s Policy: Sliding Fee Scale Income Eligibility

W

Complainant’s Sliding Fee Schedule effective, 3/1/11

X

Complainant’s Accountants; Reports and Financial Statements, 5/31/10 & 5/31/11

Y

Form 990 – Return of Organization Exempt from Income Tax – 2010

Z

Missouri – Limited Sales & Use Tax Exemption Letter, 12/23/09 – 12/23/12

AA

Complainant’s Donations, 2011

BB

Written Direct Testimony – Sherilyn Clark[5] & Karen Lawman[6]

 

6.Respondent’s Evidence.Respondent did not file any exhibits or written direct testimony.

7.Official Notice.[7]By Order dated 8/14/12, the Hearing Officer took official notice of:

A.                The Articles of Amendment to the Articles of Incorporation Filed with the Secretary of State of Missouri on May 26, 1976, a copy of which is attached hereto and incorporated by reference into this Order as if set out fully herein; and

 


B.                 The Articles of Amendment to the articles of Incorporation filed with the Secretary of State of Missouri on September 1, 1978, a copy of which is attached hereto and incorporated by reference into this Order as if set out fully herein.

 

Parties were given until and including August 21, 2012, to filed objection and show cause why official notice of the two documents should not be taken.The 5/26/1976 Amendment was labeled Exhibit CC.The 9/1/1978 Amendment was labeled Exhibit DD.No objection to the taking of official notice was filed.

8.Not-for-Profit Corporation.The Complainant is a not-for-profit corporation under the laws of the State of Missouri.[8]The corporation is organized for charitable purposes.[9]

9.Corporate Purpose.The purpose of Complainant is to provide comprehensive primary care and preventive services to a medically-underserved population in southern Missouri.The service area includes, but may not be expressly limited to the Missouri counties of Butler, Carter, Iron, Reynolds, Ripley, Shannon and Wayne.The Corporation focuses not only on improving the health of individual patients, but the improvement of health status within the entire area.[10]

10.Prohibition on Inurement of Income.No part of the net earnings of Complainant may inure to the benefit of, or be distributable to, its members, trustees, officers, or other private persons, except that reasonable compensation may be paid for services rendered.[11]

11.Distribution of Assets Upon Dissolution.Upon dissolution of Complainant all assets remaining after payment of all liabilities must be disposed of exclusively for the purposes of the corporation in such a manner or to such organization or organizations organized and operated exclusively for charitable, educational, religious or scientific purposes as shall at the time qualify as an exempt organization or organizations under Section 501(c) (3) of the Internal Revenue Code of 1954 (or the corresponding provisions of any future United States Internal Revenue Law).[12]

12.Federal Tax Exemption.The Complainant is exempt from Federal Income Tax under section 501(c)(3) of the Internal Revenue Code.[13]Federal tax exemption does not establish that the use of a particular property is a charitable use.It does establish that the purpose and operation of the corporation is on a not-for-profit charitable basis under the Internal Revenue Code.

13.Missouri Sales and Use Tax Exemption.The Complainant is exempt from Missouri Sales and Use Tax on purchases.[14]State exemption for sales and use taxes does not establish that the use of a particular property is a charitable use.It does establish that the purpose and operation of the corporation is on a not-for-profit charitable basis under applicable Missouri revenue statutes.

14.Use of Subject Property.The subject property is used for a medical care clinic. The following services are provided by the subject clinic:primary and preventive health services, lab services, x-rays, immunizations, behavioral health counseling by a Licensed Clinical Social Worker, nutrition counseling by a Registered Dietician, Certified Diabetic Education, dental education, drug abuse education, emergency preparedness education, nutrition and danger of obesity education, back to school dental health and emergency preparedness.Complainant’s services are provided to all persons, irrespective of whether they reside in the service area.No one is turned away.[15]

15.Financial Information.The following information is a summary of the overall operation of Complainant relative to carrying out its corporation purpose:

a.Patient Fees:Patient charges are on a sliding fee scale based on Federal Poverty Guidelines published by the U. S. Department of Health and Human Services.The current fee payment scale is based on the percent of the poverty level for the patient household: $20 per visit 100% and below; $35 per visit 100% – 133%; $50 per visit 133% – 166%, and $65 per visit 166% – 199.9%.No sliding fee discount is available to patients at or above 200%.[16]

b.Form 990 – Income or Loss:The Form 990 returns reported the following for the respective years.2007 – loss $490,437; 2008 – income $3,165,021 ($7 million federal grant); 2009 – income $68,019 ($3,365,000 federal grant money); 2010 – income $738,557 ($3,163,454 federal grant money); 2011 – loss $10,066.[17]

c.Sources of Income:The sources of income for Complainant’s operations and carrying out its charitable purposes through its medical clinics, including the subject clinic during 2007 through 2011 were: (i) Grants from the U. S. Department of Health and Human Services – Health Resources and Services Administration (HRSA); (ii) Grants from the Missouri Department of Health and Senior Services, Missouri Foundation for Health, Missouri Primary Care Association and other charitable foundations (iii) patient services; and (iv) miscellaneous incomes such as interest revenue.[18]

d.Government Grants Percentage:The following percentages of total revenue to Complainant for its operations and carrying out of its charitable purposes through its medical clinics, including the subject clinic, during 2008 through 2011 came from government contributions and grants:2007 – 45%; 2008 – 64%; 2009 – 41%; 2010 – 42%.[19]

e.Use of Income over Expenses:Complainant does not operate with an intent to make a profit.If any profits (income in excess of expenses) are realized, they are placed back into the organization in order to expand health care services to meet the needs of the citizens in and around the service area and to maintain capital reserves as required by HRSA to continue to be eligible for grants.[20]

f.Cost of Services:Services provided to self-pay sliding fee patients are charged at a cost well-below the cost to provide the services.[21]

g.Payment of Physicians:Doctors on staff do not receive any benefit from the net earnings, if any, of Complainant.Doctors are paid according to their employment contracts.Salaries are compared with other Federally Qualified Health Care Center wages in the State of Missouri.[22]

16.Exemption of Complainant’s Other Properties.Complainant’s properties on which medical clinics are operated in Butler, Iron, Shannon, Reynolds, Ripley and Wayne counties are exempt from ad valorem real estate taxes for charitable purposes.[23]The personal property (machinery and equipment used in the operations of a medical clinic) of the clinic in Reynolds county was found to be exempt from ad valorem personal property taxes in 2001.[24]

CONCLUSIONS OF LAW

Jurisdiction

The Commission has jurisdiction to hear this appeal and correct any assessment shown to be unlawful, unfair, arbitrary or capricious.[25]Assessment of a property that is shown to be exempt from taxation under Section 137.100(5), RSMo and the case law applicable thereto constitutes an unlawful and unfair assessment.

Exemption from Ad Valorem Taxation

The Constitution of Missouri provides in relevant part, as follows: “All property, real and personal, . . . , not held for private or corporate profit and used exclusively . . . , for purposes purely charitable, . . . may be exempted from taxation by general law.”[26]

The legislature enacted section 137.100, which provides, in relevant part, the following:

“The following subjects are exempt from taxation for state, county or local purposes:

. . .

(5) All property, real and personal, actually and regularly used exclusively for … purposes purely charitable and not held for private or corporate profit, . . .;

 

Burden of Proof

Complainant seeks exemption of its property from taxation pursuant to Section 137.100(5).Complainant has the burden to present substantial evidence to rebut the presumption of correct assessment by the Board of Equalization.[27]In order to meet this burden in an appeal seeking exemption from taxation, the Complainant must meet the substantial burden to establish that the property falls within an exempted class under the provisions of Section 137.100.[28] It is well established that taxation is the rule and exemption from taxation is the exception. Exemption is not favored in the law.[29]

As will be addressed below, Complainant’s substantial burden of proof has been met in the present case.

Franciscan Tertiary Test

In meeting its burden of proof that the subject property is used “exclusively for … purposes purely charitable, and not held for private or corporate profit….”Complainant must meet the three prong test set forth by the Missouri Supreme Court in Franciscan Tertiary Province v. STC.[30]The court said:

The first prerequisite for property to be exempt as charitable under §137.100 is that it be owned and operated on a not-for-profit basis.It must be dedicated un-conditionally to the charitable activity in such a way that there will be no profit, presently or prospectively, to individuals or corporations.Any gain achieved in use of the building must be devoted to attainment of the charitable objectives of the project…. [A]n exemption will not be granted covering property which houses a business operated for the purpose of gaining a profit, even though it is turned over to a parent organization to be used for what are admittedly independently…charitable purposes.

 

The requirement that the property must be operated as a not-for-profit activity does not mean that it is impermissible for the project at times or even fairly regularly to operated in the black rather than on a deficit basis, provided, of course, that any such excess of income over expenses, is achieved incidentally to accomplishment of the dominantly charitable objective and is not a primary goal of the project, and provided further that all of such gain is devoted to the charitable objectives of the project.

 

Another prerequisite for charitable exemption is that the dominant use of the property must be for the benefit of an indefinite number of people, for thepurpose, as expressed in Salvation Army, of “relieving their bodies of disease, suffering, or constraint…or by erecting or maintaining pubic buildings…lessening the burdens of government.” 188 S.W.2d at 830…. Thus it is required that there be the element of direct or indirect benefit to society in addition to and as a result of the benefit conferred on the persons directly served by the humanitarian activity.[31]

 

The three tests to be met under Franciscan are:

1.Property must be owned and operated on a not-for-profit basis;

 

2.Property must be actually and regularly used exclusively for a charitable purpose; and

 

3.Property must be used for the benefit of an indefinite number of persons and for society in general, directly or indirectly.

 

Complainant’s Property Qualifies Under Franciscan Test

First Test – Owned and Operated – Not-For-Profit Basis

The subject property is owned by a not-for-profit corporation.Complainant operates the property on a not-for-profit basis.The fact that Complainant may realize a net income in excess of expenses, due to receiving government grants, does not operate to defeat the Complainant’s use of the subject property from meeting the first Franciscan test. Over the period from 2007 through 2010, on average 48% of Complainant’s overall income to operate its medical clinics, including the subject, came from government grants, as opposed to fees charged to patients for services.It is not necessary that the property always operate in the red.It may operate in the black and still satisfy the criteria to be operated on a not-for profit basis.[32]There is no statutory mandate that a claimant for tax exemption not charge market rates in order to obtain tax-exempt status.[33]In the present case, however, 46% of the patients served paid on a sliding scale at below the cost of providing services or below market rates.[34]

Second Test – Actual, Regular & Exclusive Use

The actual, regular and exclusive use of Complainant’s property is as a not-for-profit medical clinic.The subject property has been put to no other use than to provide services consistent with its charitable purpose.Providing of the medical and health services made available through the subject clinic qualifies as activities which relieve individuals from disease and suffering.The providing of medical services has been recognized as a humanitarian activity that qualifies as charitable.[35]The providing of medical and health services as conducted by Complainant at the subject clinic is a charitable use.

Third Test – Benefit to Indefinite Number of People and Society

The charitable use of the property under appeal extends its benefits to an indefinite number of individuals.Those who are limited in their ability to pay, as well as, persons who have adequate insurance and other means to pay for services may receive health care services at Complainant’s clinic.The potential class of persons that can be served at the clinic is not restricted to the approximately 4,000 persons served annually.[36]The services of the clinic are literally open to anyone who wishes to utilize the services.Each patient at the clinic is benefited by receiving medical and health care services, irrespective of the amount that each given patient is charged for services rendered.Society in general receives a benefit from having medical and health care services provided to non-insured and underinsured individuals.

Summary and Conclusion

The Hearing Officer finds the requested exemption must be granted, because Complainant has met each of the Franciscan tests.Complainant’s property is owned and operated on a not-for-profit basis.The property is used actually, regularly and exclusively to provide medical and health care services to the community.The use of the property benefits both an indefinite number of people and society in general.

ORDER

The assessment of the subject property made by the Assessor and sustained by the Board of Equalization for Carter County for the subject tax day is SET ASIDE.

The assessor and county clerk are ordered to enter the subject property on the list of exempt property into the supplemental tax book for the county for the tax years 2011 and 2012.


A party may file with the Commission an application for review of this decision within thirty days of the mailing date set forth in the Certificate of Service.The application shall contain specific facts or law as grounds upon which it is claimed the decision is erroneous.Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.

Failure to state specific facts or law upon which the appeal is based will result in summary denial. [37]

The Collector of Carter County, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an Application for Review, unless said taxes have been disbursed pursuant to a court order under the provisions of Section 139.031.8, RSMo.

Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed.Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.

SO ORDERED August 28, 2012.

STATE TAX COMMISSION OF MISSOURI

_________________________________

W. B. Tichenor

Senior Hearing Officer

 

 

 


Certificate of Service

 

I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 28th day of August, 2012, to: L. Dwayne Hackworth, 1401 N. Main, Piedmont, MO 63957, Attorney for Complainant; Rocky Kingree, Prosecuting Attorney, 504 Main Street, P.O. Box 456, Van Buren, MO 63965, Attorney for Respondent; George Meyers, Assessor, 105 Main Street, P.O. Box 429, Van Buren, MO 63965; Rebecca Gibbs, Clerk, 105 Main Street, P.O. Box 517, Van Buren, MO 63965; Jennifer Clark-Williams, Collector, 105 Main Street, P.O. Box 445, Van Buren, MO 63965.

___________________________

Barbara Heller

Legal Coordinator

 

Contact Information for State Tax Commission:

Missouri State Tax Commission

301 W. High Street, Room 840

P.O. Box 146

Jefferson City, MO 65102-0146

573-751-2414

573-751-1341 Fax

 

 


[1] Order dated 6/5/12

 

[2] Complaint for Review of Assessment; Board of Equalization Decision Letter, dated 8/8/11; TR 2:14 – 15

 

[3] Complaint for Review of Assessment; Exhibit BB: Clark – Q & A 6 & 8, p. 2

 

[4] TR 2: 19 – 25

 

[5] Pages 1 – 7

 

[6] Pages 7 – 14

 

[7] Section 536.070(6). Agencies shall take official notice of all matters of which the courts take judicial notice. They may also take official notice of technical or scientific facts, not judicially cognizable, within their competence, if they notify the parties, either during a hearing or in writing before a hearing, or before findings are made after hearing, of the facts of which they propose to take such notice and give the parties reasonable opportunity to contest such facts or otherwise show that it would not be proper for the agency to take such notice of them;

 

[8] Exhibits J, K, L, P, R, Y, CC & DD;Exhibit BB: Clark – Q & A 9, 10, & 11, p. 3

 

[9] Exhibits CC & DD

 

[10] Exhibit R – Article I, Section I; Exhibit BB – Clark – Q & A 10, p. 3

 

[11] Exhibit CC – Article 6. A

 

[12] Exhibit CC – Article 7

 

[13] Exhibit N; Exhibit BB: Clark – Q & A 18, p. 6

 

[14] Exhibits O & Z

 

[15] Exhibit BB – Clark – Q & A 6, p. 2, 14 – 17, pp. 5 – 6

 

[16] Exhibit BB – Layman – Q & A 4, p. 8

 

[17] Exhibit BB – Layman – Q & A 5, p. 9

 

[18] Exhibit BB – Layman – Q & A 6 & 8, pp. 9 – 11

 

[19] Exhibits J, K, L, Y & BB – Layman – Q & A 10, p. 12

 

[20] Exhibit BB – Layman – Q & A 11, p. 12

 

[21] Exhibit BB – Layman – Q & A 12, pp. 12 – 13

 

[22] Exhibit BB – Layman – Q & A 13, p. 13

 

[23] Exhibit BB – Clark – Q & A 12 – 13, p. 4

 

[24] Exhibit G

 

[25] Article X, Section 14, Missouri Constitution of 1945; Sections 138.430, 138.460(2), RSMo.

[26] Mo. Constitution, Article X, Section 6. 1

 

[27] Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 895 (Mo. banc 1978).

 

[28] State ex rel. Council Apartments v. Leachman, 603 S.W.2d 930, 931 (Mo. 1980).

 

[29]See, Missouri Church of Scientology v. STC, 560 S.W.2d 837, 844 (Mo. banc 1977); CSCEA v. Nelson, 898 S.W.2d 547, 548 (Mo. banc 1995), citing Scientology).

 

[30] 566 S.W.2d 213, 223-224 (Mo. banc 1978).

 

[31] Id. At 224.

[32] Affiliated Medical Transport, Inc., v. STC, 755 S.W.2d 646, 650 (citing to Franciscan at 224) (Mo. App. E.D. 1988)

 

[33] Id. 654

 

[34] TR 7:12 – 17

 

[35] Community Memorial Hosp. v. City of Moberly, 422 S.W.2d 290, 295 (Mo. 1967); Jackson County v. STC, 521 S.W.2d 378, 383 (Mo. banc 1975)

 

[36]TR 6:22 – 7:6

 

[37] Section 138.432, RSMo.