Tax Court affirms Evansville rehab center falls under 3% tax cap

An Evansville temporary inpatient rehab center is not considered to be either a long-term care property or a residential property, the Indiana Tax Court affirmed Tuesday. As such, the property owner’s tax liability was required to be computed using the 3% property tax cap.

Between 2011 and 2015, Universal Health Realty owned property in Evansville that was used as an 85-bed inpatient rehabilitative hospital. Universal’s property tax liability on the hospital for each of the years at issue was computed using the 3% property tax cap applicable to nonresidential property, prompting Universal to appeal those computations to the Indiana Board of Tax Review.

Universal argued that Indiana Code § 6-1.1-20.6-7.5 required its property tax liability to be computed using a 2% property tax cap because its property was either a hospital, a long-term care property, or a residential property.

But the Indiana Board, after conducting a final hearing, rejected all three of Universal’s arguments and issued a final determination, prompting Universal to appeal in Universal Health Realty v. William J. Fluty, Jr., in his official capacity as Vanderburgh County Assessor, 19T-TA-12.

On appeal, Universal argued that the Indiana Board’s final determination must be reversed because it was contrary to law and constituted an abuse of discretion. The Indiana Tax Court, however, found otherwise. First, it found as misplaced Universal’s reliance on two memoranda issued by the Department of Local Government Finance to local assessing officials in 2008.

“First, the memoranda explicitly indicate that they are offering non-binding guidance to local assessing officials,” Judge Martha Wentworth wrote for the tax court. “In fact, they provide the specific disclaimer that ‘depending on the circumstances some propert[ies ] may have more than one possible [property tax] cap. The ultimate decision on the most appropriate property class code and [property tax cap] rests with the local assessing official.’

“Second, and more importantly, the DLGF is authorized to adopt rules, regulations, and advisory memoranda, like those at issue here, that enable it to accomplish the purposes of Indiana’s property assessment statutes, but it is not authorized to make any rules, regulations, or issue memoranda that are inconsistent with the statutes it administers or that add to or detract from the law as enacted,” the tax court continued.

It next concluded that the Indiana Board did not create or apply an arbitrary distinction when it determined that Universal’s property did not qualify as a long-term care property because it was not a health facility licensed under Indiana Code § 16-28.

“Instead, the Indiana Board applied the plain language of Indiana Code § 6-1.1-20.6-2.3 exactly as it was written, giving meaning to the words intentionally chosen by the Legislature. As a result, the Court will not reverse the Indiana Board’s final determination on this basis either,” Wentworth wrote.

Lastly, the tax court noted that patients who stayed at Universal’s property during the years at issue did so temporarily, therefore the 85-bed hospital did not constitute 85 individual dwelling units. Thus, because the property was not comprised of multiple dwelling units, it did not qualify as a “residential property” for purposes of the 2% property tax cap under Indiana Code § 6-1.1-20.6-7.5(a), the tax court wrote.

“Universal Health has not demonstrated that the Indiana Board’s final determination is contrary to law or constitutes an abuse of discretion,” it therefore affirmed.