Background

• Trinity Health (nonprofit) formed Trinity Health-Warde Lab, LLC (the Lab), a for-profit wholly owned subsidiary, to acquire, own, and operate a 57,000 sq ft medical laboratory building used solely as a medical lab.
• Trinity appoints the Lab’s board and exercises control over the Lab’s management and operations; Trinity and other nonprofit hospitals use the Lab under a co-tenancy agreement.
• The Lab petitioned the Michigan Tax Tribunal for a property tax exemption under MCL 211.7o (charitable institution) and MCL 211.7r; the Township denied exemption because the Lab is a for-profit entity.
• The Lab moved for summary disposition; the Tribunal granted the exemption, reasoning Trinity’s domination made the Lab essentially the same entity as Trinity.
• The Township appealed, arguing statutory language requires the exempt property be owned or operated by a nonprofit and a for-profit subsidiary cannot claim the parent’s exemption.
• The Court of Appeals reversed the Tribunal: the exemption statutes require the property be owned/occupied by a nonprofit charitable institution and case law does not allow a for-profit subsidiary to use a nonprofit parent’s tax-exempt status.

Issues

Key Cases Cited

• Ann Arbor v. The Univ. Cellar, 401 Mich 279 (1977) (parental control relevant; Court declined to decide broadly whether an exempt parent may extend exemption to separate corporation)
• Wexford Med Group v. City of Cadillac, 474 Mich 192 (2006) (charitable institution must be nonprofit)
• Mich Props, LLC v. Meridian Twp., 491 Mich 518 (2012) (standard of appellate review of Tax Tribunal; interpret tax statutes de novo)
• Nat’l Music Camp v. Green Lake Twp., 76 Mich App 608 (1977) (related exempt entities treated as one for tax exemption where all were tax-exempt)