CITIZENS MEMORIAL HEALTH CARE )
v. ) Appeal Number 03-49502
PAUL E. JOHNSON, ASSESSOR, )
CEDAR COUNTY, MISSOURI, )
DECISION AND ORDER
Complainant presented evidence to establish that the subject facility is primarily and inherently used for charitable purposes, is owned and operated on a not-for-profit basis, and that its use is beneficial to society in addition to those directly served by the facility. Accordingly, this Hearing Officer finds that the subject property should be exempt from property taxes for 2003 and 2004.
The primary issue in this appeal is whether Complainant=s operations of Community Springs Healthcare Facility constitutes a charitable operation and use.
Complainant appeals the taxation of the Community Springs Healthcare Facility in El Dorado Springs, Missouri for the 2003 tax year and alleges entitlement to an exemption.
The parties waived hearing and the appeal was submitted for a decision on the basis of the prefiled exhibits and testimony.
Complainant submitted the following documents and written direct testimony as evidence in this appeal:
Complainant=s Exhibit A, Certificate of Incorporation of Citizens Memorial Hospital District Foundation;
Complainant=s Exhibit B – Articles of Incorporation of Citizens Memorial Hospital District Foundation;
Complainant=s Exhibit C – Certificate of Merger and Not for Profit Merger Plan;
Complainant=s Exhibit D – Certificate of Amendment;
Complainant=s Exhibit E– 1991 Amendment to Articles of Incorporation;
Complainant=s Exhibit F – 1992 Amended By-Laws;
Complainant=s Exhibit G – Certificate of Good Standing, 2001;
Complainant=s Exhibit H – Certificate of Good Standing, 2002;
Complainant=s Exhibit I – Certificate of Good Standing, 2004;
Complainant=s Exhibit J – 2001 Annual Registration Report;
Complainant=s Exhibit K – 2002 Annual Registration Report;
Complainant=s Exhibit L – 2003 Annual Registration Report;
Complainant=s Exhibit M – Letter of Sales Tax Exemption;
Complainant=s Exhibit N – 501(c)(3) Letter, February 26, 2003;
Complainant=s Exhibit O – 501(c)(3) Letter, November 7, 1990;
Complainant=s Exhibit P – 501(c)(3) Letter, November 21, 1989;
Complainant=s Exhibit Q – 501(c)(3) Letter, July 16, 1987;
Complainant=s Exhibit R – Form 990, Year Ending May 31, 2000;
Complainant=s Exhibit S – Form 990, Year Ending May 31, 2001;
Complainant=s Exhibit T – Form 990, Year Ending May 31, 2002;
Complainant=s Exhibit U – Form 990, Year Ending May 31, 2003;
Complainant=s Exhibit V – Admission Agreement for Community Springs Healthcare Facility;
Complainant=s Exhibit W – Financial and Statistical Report for Nursing Facilities for Period of January 1, 2002 through May 31, 2002;
Complainant=s Exhibit X – Financial and Statistical Report for Nursing Facilities for Period of June 1, 2002 through May 31, 2003;
Complainant=s Exhibit Y – Citizens Memorial Health Care Foundation Policy: Mission Statement;
Complainant=s Exhibit Z– Citizens Memorial Health Care Foundation Policy: Hardship Consideration;
Complainant=s Exhibit AA– Schedule of Revenues;
Complainant=s Exhibit BB – Community Springs Healthcare Facility Advertising Materials;
Complainant=s Exhibit CC – 2002 Property Tax Statement;
Complainant=s Exhibit DD – April 3, 2002 Letter to Cedar County Assessor=s Office without Enclosures;
Complainant=s Exhibit EE – December 24, 2002 Letter to Cedar County Assessor=s Office with Enclosures;
Complainant=s Exhibit FF – January 14, 2003 Letter to Cedar County Collector;
Complainant=s Exhibit GG – Written Direct Testimony of Donald J. Babb.
Respondent did not submit evidence on the issues.
FINDINGS OF FACT
1 The subject property consists of a lot improved with a 120-bed skilled nursing facility which operates under the name of Community Springs Healthcare Facility (hereafter ACommunity Springs@). The facility provides A…housing, food and medical care to persons who are unable to care for themselves due to advanced age, disease or disability.@ Complainant=s Exhibit GG, at 2.
2. Community Springs is owned and operated by Citizens Memorial Health Care Foundation (hereafter AComplainant@). Complainant is organized as a not-for-profit corporation with the Missouri Secretary of State. Complainant=s Exhibit A, B, C, and GG, at 1. Complainant purchased the Community Springs on January 1, 2002. Complainant=s Exhibit GG, at 2.
3. Complainant is organized for A…charitable purposes … by way of the establishment, funding, and operation of facilities, programs, operations and enterprises including but not in limitation thereof, real estate developments, clinics, nursing homes, residential care facilities, fitness centers, child care centers…and to support and assist Citizens Memorial Hospital District….@ Complainant=s Exhibit E, at 1 – 2.
4. Complainant is exempt from federal income taxes. Complainant=s Exhibits N and O.
5. Complainant submitted a Schedule of Revenues and Expenses for its operation at Community Springs. Complainant=s Exhibit AA. For fiscal year ending May 31, 2003, the Schedule reflects net revenues of $3,240,431 and expenses of $3,440,120 which indicate a deficit of $199,689 for the year. Id. See also, Complainant=s Exhibits W, at 4 – 7 and X, at 5 – 8.
6. From January 1, 2002 to May 31, 2002, Community Springs had 61.5% of the licensed beds occupied. Complainant=s Exhibit W, at 1. From June 1, 2002 to May 31, 2003, Community Springs had 65.69% of the licensed beds occupied. Complainant=s Exhibit X , at 1.
7. Of Community Springs= residents approximately 33% are private pay residents, 57% are Medicaid residents, and 10% are Medicare residents. Complainant=s Exhibit AA, at 2. The private pay rates are $94 dollars per day for a semi-private room and $104 per day for a private room. The Medicaid rate is $85.00 per day. The Medicare rate is approximately $124.00 per day. Complainant=s Exhibit GG, at 2.
8. For fiscal year ended May 31, 2003, the private pay residents paid $932,053, incurred $1,141,329 in expenses for a deficit of $209,276 for the year. The Medicaid patients paid $1,382,185 plus Community Springs received an intergovernmental transfer of $10,928. They incurred expenses of $1,935,059 for a deficit of $541,946 for the year. The Medicaid patients paid $361,416 and incurred expenses of $346,647 for a surplus of $14,769 for the year.
9. The services of Community Springs are available to those with means to pay for their care and those without means to pay for their care. Community Springs charges those that have the ability to pay so that they can continue providing health care to the community. Complainant=s Exhibit GG, at 2. Since Complainant has owned Community Springs, no one has been forced to leave for failure to pay. Additionally no one has been refused admittance due to inability to pay. Id., at 3. If presented with a resident that does not have the ability to pay, the social worker will counsel concerning Medicaid options and help the family apply for Medicaid through the local DFS Office. If Medicaid will not pay, the family can apply to Complainant and Community Springs for hardship consideration. AIf Community Springs determines that the resident cannot privately pay, Community Springs will write-off the resident=s charges.@ Id. See also, Complainant=s Exhibit Z.
10. Complainant advertises Community Springs as a Medicare/Medicaid certified facility. Complainant=s Exhibit BB.
11. No part of Complainant=s net earnings may inure to the benefit of any individual or corporation. Complainant=s Exhibit B at 6.
CONCLUSIONS OF LAW
Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the Cedar County Board of Equalization.
Burden of Proof
Although a taxing statute is construed strictly against the state, an exemption statute is strictly construed against the one claiming the exemption. State ex rel. Union Electric Co. v. Goldberg, 578 S.W.2d 921, 923 (Mo. banc 1979). AThe law disfavors claims for exemption from taxation. The substantial burden of establishing the property falls within the exempted class is on the person claiming exemptions under the referenced constitutional and statutory provisions. To prevent the curtailing of the purpose and intended scope of a tax exemption, the tax exemption statute is to be strictly but reasonably construed.@ Twitty v. State Tax Commission of Missouri, 896 S.W.2d 680, 684 (Mo. App. S.D. 1995) (citations omitted). Accordingly, in order to prevail, Complainant must demonstrate by substantial and persuasive evidence, that it is entitled to an exemption.
Substantial evidence is that evidence which, if true, has probative force upon the issues, i.e., evidence favoring facts which are such that reasonable men may differ as to whether it established them, and from which the Commission can reasonably decide an appeal on the factual issues. Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).
Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact. The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief. Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).
Properties which can be exempted from taxation are set out within our Constitution and the statutes enacted to enforce that Constitution, to wit:
A . . .all property, real and personal, not held for private or corporate profit and used exclusively for religious worship, for schools and colleges, for purposes purely charitable, . . .may be exempt from taxation by general law but any such law may provide for approximate restitution to the respective political subdivisions of revenues lost by reason of the exemption. All laws exempting from taxation property other than the property enumerated in this article, shall be void.
Article X, Section 6, Mo. Const. of 1945.
In support of this Constitutional provision, the Legislature has enacted Section 137.110, RSMo 1994, which provides in relevant part:
The following property shall be exempt from taxation:
(5) All property, real and personal, actually and regularly used exclusively for religious worship, for schools and colleges, or for purposes purely charitable and not held for private or corporate profit, except that the exemption herein granted does not include real property not actually used or occupied for the purpose of the organization but held or used as investment even though the income or rentals received therefrom is used wholly for religious, education or charitable purposes;
Section 137.110, RSMo.
Case Law on Charitable Use
1. In order for a property to be exempt from taxation for state, county or local purposes, the following tests must be met:
A. The property must be actually and regularly used exclusively for a charitable purpose, as charity is defined by Salvation Army v. Hoehn, 188 S.W.2d 826 (Mo. banc 1945). ACharity@ is therein defined as A. . .a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing their hearts under the influence of education or religion, by relieving their bodies of disease, suffering or constraint, by assisting them to establish themselves for life, or by erecting or maintaining the public buildings or works or otherwise lessening the burdens of government.@ Salvation Army at 830.
B. The property must be owned and operated on a not-for-profit basis. The property Amust be dedicated unconditionally 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 achievement of the charitable objectives of the project.@
C. The dominant use of the property must be for the benefit of an indefinite number of persons and must directly or indirectly benefit society generally. AIt 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@.
Franciscan Tertiary Province v. State Tax Commission, 566 S.W.2d 213, at 224 (Mo. banc 1978). See also, Barnes Hospital v. Leggett, 589 S.W.2d 241 (Mo. banc 1979).
2. AExclusive use@ has been construed by our courts to mean the Aprimary and inherent use@ of the property rather than Aa mere secondary and incidental use.@ Central States Christian Endeavors Association v. Nelson, 898 S.W.2d 547, 549 (Mo. banc 1995).
3. Salvation Army, supra, indicates that the provision of products or services to the public at cost or less constitutes a gift. Id., at 830. Provision of services Aat cost or less@ does not mean that it is impermissible for the operator A…at times or even fairly regularly to operate in the black rather than on a deficit basis, provided of course, that any excess of income over expense is achieved incidentally to the accomplishment of the dominantly charitable objective and is not a primary goal of the project….@ Tri-State Osteopathic Hospital Association v. Blakeley, 898 S.W.2d 693 (Mo. App. S.D. 1995).
Community Springs Operations
1. The provision of long-term skilled nursing care at a residential facility to the public at cost or less constitutes a gift.
2. Long-term skilled nursing care at a residential facility directly benefits people by relieving their bodies of disease, suffering, or constraint.
3. The brief performance history of the Community Springs= operations evidences an intent to provide such services on a non-profit basis.
4. The availability of such services at the Community Springs facility accessible to rich and poor alike is beneficial to the Cedar County community.
Exemption law requires that the primary and inherent use of the property be for a charitable objective. Charity is defined as A. . .a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing their hearts under the influence of education or religion, by relieving their bodies of disease, suffering or constraint, by assisting them to establish themselves for life, or by erecting or maintaining the public buildings or works or otherwise lessening the burdens of government.@ Salvation Army, at 830.
Is the use made of the Community Springs facility a qualified use? Community Springs is a 120-bed skilled nursing facility that provides A…housing, food and medical care to persons who are unable to care for themselves due to advanced age, disease or disability.@ Complainant=s Exhibit GG, at 2. The provision of long-term skilled nursing services clearly qualifies as an appropriate use under the Salvation Army definition in that the services directly benefit people by relieving their bodies of disease, suffering, or constraint as well as providing two of the most basic human needs — food and shelter.
Does Complainant=s operation of Community Springs constitute a public gift? In order for Community Springs= long-term skilled nursing services to constitute a gift, they must be provided at cost or less. The average per day cost of Community Springs= services for private pay and Medicaid residents are below the average per day expenses incurred for these residents creating deficits of $209,276 and $541,946, respectively. The private pay and Medicaid residents constitute 90% of Community Springs= occupancy. Complainant=s Exhibit AA, at 2. Of the remaining residents, their costs covered expenses and created a surplus of only $14,769. Id. It is clear that on the whole, the daily room rates for Community Springs have been below the cost incurred to provide such services. Community Springs= brief performance history under Complainant=s ownership evidences an intent to provide long-term skilled nursing services at cost or less.
Exemption law requires ownership and operation on a non-profit basis. The key element of this prong is that the property Amust be dedicated unconditionally 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 achievement of the charitable objectives of the project.@ Franciscan, at 224.
Complainant is organized as a Missouri not-for-profit corporation. Complainant=s Exhibits A, B, at 1, and C, at 2. Complainant=s Articles of Incorporation declare that A[n]o part of the property or net earnings of the corporation shall be distributed to, used for or inure to the benefit of any private member, director, individual, firm or corporation….@ Complainant=s Exhibit B, at 6. Complainant purchased Community Springs on January 1, 2002. Complainant=s Exhibit GG, at 2. Complainant has operated Community Springs since January of 2002 and, thus far, those operations have been at a loss. As discussed above, 90% of the residents pay room rates that do not fully reimburse Community Springs for the cost of the services provided to those residents. Complainant=s Exhibit AA, at 2. Complainant=s evidence is persuasive to establish that its brief performance history with Community Springs shows an intent to provide long-term skilled nursing services on a non-profit basis.
Exemption law further requires A…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.@ Franciscan, at 224. Under this analysis, the court requires us to go
further and consider whether the rendering of the charitable activity inherently confers a benefit to society in general.
The Missouri Supreme Court upheld the determination that the provision of housing at cost or less to elderly low income people renders a benefit to society generally in addition to those directly served by the activity. Id., 224 – 226. The Court also provided the example of a hospital operation whose services are available to both rich and poor as being an activity considered to benefit society generally. Id. It follows then that the operations of a long-term skilled nursing facility whose services are available to both rich and poor would qualify as an activity that benefits society generally.
The evidence on the record establishes that the long-term skilled nursing care services provided by Community Springs are provided to many on a subsidized basis and that prospective residents are not denied service based upon an inability to pay. Complainant=s Exhibit GG, at 3. The fact that Cedar County has long-term skilled nursing care services at the subject facility available to rich and poor alike is beneficial to the Cedar County community.
The evidence persuasively supports a conclusion that the Community Springs is primarily and inherently used for charitable purposes, is owned and operated on a not-for-profit basis, and that its use is beneficial to society in addition to those directly served by the facility. Accordingly, Complainant is entitled to an exemption on the real property that houses Community Springs Healthcare Facility, parcel number 90-3-8-28-4-14-1.
The Assessor=s determination to tax the subject parcel and the Board=s approval thereof are set aside. The Clerk is ordered to show the subject parcel as exempt for the 2003 and 2004 tax years.
A party may file with the Commission an application for review of this decision within thirty (30) days of the mailing of such decision. The application shall contain specific grounds upon which it is claimed the decision is erroneous. Failure to state specific facts or law upon which the appeal is based will result in summary denial. Section 138.432, RSMo 1994.
If an application for review of this decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission. If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of Cedar County, as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal. If any or all protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.
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 November 5, 2004.
STATE TAX COMMISSION OF MISSOURI