Tax Court denies charitable tax exemptions for medical center

The Indiana Tax Court has affirmed the denial of a Catholic nonprofit organization’s request for charitable tax exemption on a medical center it owns, finding none of its provided evidence supported its request.

For the years 2014 and 2015, Saint Mary’s Building Corporation sought a charitable tax exemption for a medical building it owns in Newburgh, Indiana, that houses a breast imaging and therapy center, a primary care physician’s practice, and an urgent care and imaging and laboratory center.

The Warrick County Property Tax Assessment Board of Appeals denied the building corporation’s request, as did the Indiana Tax Board of Board of Appeals. The latter concluded that Epworth Crossing did not qualify for an exemption under Indiana Code § 6-1.1-10-16(h) because the building corporation failed to show how the medical building’s operations support an Evansville hospital’s inpatient facility. It also noted no evidence proved the provision of charity care and community benefits was Epworth Crossing’s predominant use.

The Tax Board additionally found that the Epworth Crossing did not “independently” qualify for an exemption under Indiana Code § 6-1.1-10-16(a) because it “operate[d] on a fee-for-service basis, with an indeterminate impact on the poor, uninsured, or underinsured.”

The Indiana Tax Court similarly rejected the building corporation’s charitable purposes exemption request in St. Mary’s Building Corporation v. Sarah E. Redman, Warrick County Assessor, 18T-TA-13, ultimately concluding that the building corporation’s appeal directed it to generalizations, conclusory statements, and inaccurate citations to the administrative record.

First, the Tax Court acknowledged that the Tax Board acted contrary to law when it concluded both the Building Corporation and the hospital were essentially “one in the same” for the purposes of property taxation.

“Despite that error, the Indiana Board’s ultimate legal conclusion — that Epworth Crossing did not qualify for an exemption under Indiana Code § 6-1.1-10-16(h) — is not contrary to law and is supported by evidence in the certified administrative record. As a result, the Court will not reverse that holding,” Judge Martha Blood Wentworth wrote.

Additionally, the Tax Court found that Epworth Crossing’s entitlement to the charitable purposes exemption was not demonstrated through the 501(c)(3) statuses of its owner and/or its tenants. Neither did the building corporation’s cited evidence demonstrate exactly how it and its tenants used the medical building to relieve human want through charitable acts different from the everyday purposes and activities of man in general, and confer a public benefit sufficient to justify the loss of tax revenue.

Finally, the Tax Court concluded that the building corporation’s data did not show that the leased space at issue was used more than 50% of the time to provide “charity health care.”

“The Building Corporation has acknowledged repeatedly that every patient that walks in Epworth Crossing’s doors is treated, some pay and some do not,” Wentworth wrote in affirming the Tax Board’s final determination. “Nonetheless, the Building Corporation’s Data suggests only that Epworth Crossing may have been used to provide some charitable health care services, not what amount of those services are charity care. Based on this evidence, the Indiana Board did not err in denying Epworth Crossing the charitable purposes exemption.”