Baruch Sls Inc v. Township of Tittabawassee
152047
Mich.Jun 28, 2017Background
- Baruch SLS, a 501(c)(3) nonprofit, operates Stone Crest Assisted Living (adult foster care/specialized care unit) serving elderly and disabled residents.
- Stone Crest has an Income Based Program that reduces monthly rates for qualifying residents; written eligibility includes 24 months residency with 24 full payments, Medicaid eligibility, income disclosure, and a cap of 25% of rooms for the program.
- Baruch claims it has often admitted residents into the income program without strict adherence to the written 24-payment rule and sometimes exceeded the 25% cap.
- Baruch sought property and personal property tax exemptions under MCL 211.7o and MCL 211.9 for tax years 2010–2012; the Tax Tribunal denied exemptions relying on Wexford factors 3, 5, and 6.
- The Court of Appeals affirmed as to Wexford factor 3 (discriminatory provision of charity) but reversed as to factors 5 and 6; Baruch appealed to the Michigan Supreme Court.
Issues
| Issue | Plaintiff's Argument (Baruch) | Defendant's Argument (Tittabawassee Twp) | Held |
|---|---|---|---|
| Whether Wexford factor 3 (no discrimination within served group) bars charities that charge or select beneficiaries | Baruch: Fees and selection do not automatically make charity discriminatory; its residency/payment conditions are reasonably related to charitable goals | Township: Income program conditions discriminate within the served class by excluding those who haven’t met payment/residency thresholds | Court: Factor 3 excludes only restrictions that bear no reasonable relationship to a permissible charitable goal; fees/selection analyzed under factor 5, not per se disqualifying under factor 3 |
| Proper allocation of fee/selection analysis among Wexford factors | Baruch: Fee analysis belongs to factor 5; factor 3 should target purposeless restrictions | Township: Restrictions and selection indicate discrimination under factor 3 as previously applied by lower courts | Court: Agrees with Baruch — fee/ability-to-pay issues belong to factor 5; factor 3 focuses on whether conditions reasonably relate to charitable goals |
| Whether Baruch’s 24-payment and residency prerequisites violate factor 3 | Baruch: Conditions further permissible charitable goals and can be reasonable in light of operations and financial sustainability | Township: Conditions arbitrarily exclude needy persons and therefore discriminate | Court: Remanded — tribunal and COA used an incorrect standard; conditions must be assessed for reasonable relationship to permissible charitable goals under factor 4 |
| Standard of review for restrictions on beneficiaries | Baruch: Broad, deferential test to allow charities to tailor services to need and sustainability | Township: Narrower test to ensure open access within the served class | Court: Adopts a broadly deferential “reasonable relationship” test; restrictions allowed if reasonably tied to goals that qualify under factor 4 |
Key Cases Cited
- Wexford Med. Grp. v. City of Cadillac, 474 Mich. 192 (definition and six-factor test for charitable institution)
- Retirement Homes of the Detroit Annual Conference v. Sylvan Twp., 416 Mich. 340 (definition of charity as a gift benefiting an indefinite number of persons)
- Michigan Sanitarium & Benevolent Ass’n v. Battle Creek, 138 Mich. 676 (fees do not preclude charitable status)
- North Star Research Institute v. Hennepin County, 306 Minn. 1 (beneficiary restrictions must reasonably relate to charitable objectives)