Charitable institution entitled to ad valorem tax exemption.

The Supreme Court of Michigan ruled that, if the overall nature of an institution is charitable, it is a charitable institution for purposes of property tax exemption, regardless of how much money it devotes to charitable activities in a particular year.

Wexford Medical Group (Wexford) is a nonprofit 501 (c)(3) corporation that provides health care in an area federally designated as a health professional shortage area. Wexford has a charity-care policy and an open-access policy for Medicare and Medicaid patients. The charity-care policy provides free and discounted health care to anyone whose income is up to twice the federal poverty level. The open-access policy provides that patients are treated on a first-come, first-served basis. Wexford places no limit on the number of Medicare and Medicaid patients it will treat.

Wexford reported that in the years 2000-2001, its annual budget was $10 million, 13 patients used the charity-care program, and the total value of care rendered to charity-care patients was $2400. During that same time period, Wexford handled approximately 40,000-44,000 patient visits each year and 50% of its patients used Medicare or Medicaid. Between 1999 and 2000, under its policy of accepting patients who could not pay their Medicare and Medicaid co-payments, Wexford reported that it provided below-cost medical care totaling nearly $2 million more than its receipts.

The City of Cadillac assessed and taxed Wexford's property in 2000 and 2001. Wexford appealed but the Tax Tribunal and Court of Appeals affirmed the assessments finding Wexford did not qualify for a charitable institution tax exemption. Wexford appealed.

The Supreme Court of Michigan concluded that Wexford was a charitable institution because it exists for, and carries out, the purpose of giving a gift for the benefit of an indefinite number of persons by providing free and below-cost medical care to anyone who needs it without qualification, and it realizes no pecuniary gain from its activities. As such, the court said, it was entitled to an ad valorem tax exemption. The lower courts' decisions were reversed.

Wexford Medical Group v. City of Cadillac

Supreme Court of Michigan

May 3, 2006

(AJ/07/W.07-$10)