*1
CITY OF ANN ARBOR Argued 6, Docket No. 56407. November 1975. Resubmitted December 19, (Calendar 12) 3, 1976. No. June . Decided Michigan Baptist Development Plaintiff Company Homes and Terrace, operates owns and Hillside a licensed home for the aged City in Ann Arbor. The Ann Arbor Assessor denied the exemption home an from ad valorem taxes as a charitable pays institution in 1971-72. A resident of the home monthly charge life-lease fee and a service based upon apartment, facility the size of his and the is intended to self-supporting self-liquidating operation. Ability in determining applicant the fees is a factor whether an will Terrace; applicants be admitted subject to Hillside are also requirements ability health and must demonstrate to maintain apartments. themselves in their The Ann Arbor Board of Review, the Appeals, State Tax Commission and the Court of Danhof, J., Carland, JJ., P. and T. M. Burns and affirmed the (Docket 17211). city action of the appeals. assessor No. Plaintiff Held: Basically, may charity 1. be said that or benevolence general public benefit the without restriction. Hillside Terrace occupied objectives was not during for charitable or benevolent years question. elderly It generally does not serve the provides but a retirement environment for those who have pay. provided their health and can afford to The residents have by purchasing for themselves a life-care contract at cost through plaintiff. Legislature exempt 2. The has not shown an intent all housing elderly general property for the from the tax taxpayers allowance certain limited tax relief for over the age of 65 who rent or own homes. 3. The court declines to address the issue of the constitution- [1, [2-6, 9, 11, [10] 71 Am Jur 8] 71 Am Jur 12] 71 Am Jur 2d, References State and Local 2d, State and 2d, for Points in Headnotes State Local Taxation 307§ Taxation §§ and Local Taxation 387. etseq. §§ 362-391. Ann Arbor v ality certain low income senior an citizen housing financing qualified for Federal under National Housing Act. equal protection 4. Plaintiff has not been denied of the laws granting elderly *2 the to another home for in Ann Arbor exemptions plaintiff of the the seeks where other home is contributions, pay endowed the residents charitable do not care, depends upon the actual costs of their admission applicant’s supervision, inability priority live without to is given applicants cannot obtain care elsewhere. who
Affirmed. following grounds: Justice Coleman dissented on the For designation benevolent, of an as charitable or institution it nonprofit society. should be a institution of beneficial interest to charging equal necessarily prevent of fees to costs does not nonprofit. controlling classification of an institution as charged consideration is whether the fees do not exceed what is required to maintain the institution at a reasonable standard of operation. designation A charitable is not limited to relief of poverty; sufficiently widespread if the benefit conferred has a value, purpose Aged people require social a charitable exists. apart care and attention from financial assistance and the supply of this care is as much a charitable and benevolent purpose as the of their relief financial wants. Hillside Terrace exemption property is entitled to an from taxes under the facts undertaking providing of this case as a charitable for the mental, physical, aged. and emotional needs of (1974) 725; App
55 Mich NW2d affirmed. op the Court Property Exemptions. 1. Taxation —Real Taxes — Exemption unequal from taxation effects the removal of the placed generally burden on all landowners to in share support government; exemption of local since is the antithesis equality, exemption strictly of tax statutes are to be construed taxing in unit. favor Property 2. Taxation —Real Taxes —Charitable Institutions —Ex- emptions. exemption taxation, property library, To obtain an of real from a benevolent, charitable, educational, or scientific institution incorporated must have been under the laws of this state and occupy property solely purposes own and for the for which (MCL 7.7). incorporated 211.7; it was MSA 396 Property 3. Taxation —Real Taxes —Charitable Institutions —Ex- emptions. charges approximating costs are made for The fact that services claiming exempt to be and benefits from offered a landowner property institution does not real taxes as a charitable alone claim; however, exempt requires exemption defeat status provided showing more that services are than a mere 7.7). (MCL nonprofit 211.7; corporation MSA Exemptions. 4. Taxation —Charitable Institutions — Basically, may charity or he said that benevolence benefit the general restriction, public determining without whether real property occupied or benevolent for charitable so as 7.7). (MCL211.7; exempt MSA from taxes Property 5. Taxes —Charitable Taxation —Real Institutions —Ex- emptions. nonprofit corporate operates A landowner residence for elderly is not entitled to an from real taxes as a charitable institution where the residence does not generally provides elderly serve the but a retirement environ- requirements ment for those who meet certain health and who ability corporation have the for a life-care contract *3 (MCL 7.7). 211.7; at cost MSA Property 6. Taxation —Real Taxes —Charitable Institutions —Ex- emptions Equal Protection. — nonprofit corporate operates A landowner which a residence for elderly equal protection the was not denied of the laws because exemption property it was denied an from real taxes while elderly granted exemption another home for the was an where nonexempt the residents of the home are admitted on the basis requirements ability pay of certain health and the for the exempt of their cost care while the residents of the home do the full of their cost care and are selected on the basis inability supervision of their to live without and to obtain (MCL 7.7). comparable 211.7; care elsewhere MSA
Dissenting Opinion
Coleman, Property Exemptions. 7. Taxation —Real Taxes — exemptions property The rule of strict construction of of real requires property exempt from taxation claimed as must clearly exemption interpreted by be within the statute as the v Ann Arbor courts; interpretation reasonably be the nature of that must at related issue. to the societal need Property Exemptions. 8. Taxation —Real Taxes — judicial exemption always a tax construction of should reasonable; meaning giving possible the narrowest words exemption, objects descriptive the of the such as "benevo- lent”, "charitable”, "educational”, "scientiSc”, frustrates statutory provisions. the true intent of the constitutional and Property Exemptions—Charitable 9. Taxation —Real Taxes — In- stitutions. nonproñt corpo- A charitable benevolent institution must be a qualify exemption property taxes; ration to for an from real however, charging prevent does not of fees classiñcation of long charged an institution so as charitable the fees do not required exceed the amount to maintain the institution at a (MCL 7.7). 211.7; operation reasonable standard of MSA Aged. 10. Taxation —Charitable Institutions —Homes for concept of a charitable institution is not conñned to the relief destitute; needy aged require people care and apart assistance, supply attention from financial and the of this purpose care and attention is as much charitable as the relief of their financial wants. Property Exemptions—Charitable 11. Taxation —Real Taxes — In- stitutions. purpose nonproñt corporation claiming exempt A of a tax status accomplishment is charitable if its is of such social interest to community justify property being as to devoted to the purpose perpetuity; there is no fixed standard to determine what community, are of such social interest community vary because interests of the with time and (MCL 7.7). place 211.7; MSA Property Exemptions—Charitable 12. Taxation —Real Taxes — In- stitutions. nonproñt corporate operates A landowner which a residence for elderly is entitled to an from real taxes *4 as a charitable institution where the residents must be over 65 old, years religious group need not be affüiated with the which residence, plan financed the to remain in home for life or indefinitely, pay fees for the services of residence based upon operation, they of costs and are not cannot evicted if (MCL 7.7). 211.7; for the services rendered MSA op the Court C, Collins, P. plaintiff. for Foster, & Swift Laidlaw, City Attorney, Assistant R. Bruce Chief Arbor. Ann City for defendant of Amici Curiae: Kantor) D. (by Allyn
DeVine & DeVine Ann Arbor. City Public Schools Londerholm, & Austin Hackler, Speer, Vader (by Ruddick) for the Peter V T Hackler Eugene Association and the Michigan Non-Profit Aging. for the of Homes American Association appeal on is principal issue J. The Fitzgerald, Terrace, Hillside aged, a home for whether entitled to a plaintiff, operated by owned ,of ad valo payment from the statutory exemption 1971-72 as years for the tax taxes property rem or occupied a benevolent by property owned purposes for the solely institution charitable incorporated.1 Plaintiff institution was which said 7.7, 7, 211.7; being Paragraph MCLA MSA "Fourth” of § part Property relevant Act read at times here Tax General follows: "Fourth, occupied be owned and Such real estate as shall charitable, benevolent, library, educational or scientific institutions incorporated war veterans under memorial homes of world and laws of this state occupied property buildings thereon while with the and other incorpo- they solely purposes of fraternal or secret societies.” for which were them for the As homes rated. Also charitable 358, 1, portion April of 7§ PA eff § amended now reads: "Fourth, personal property owned as shall be Such real estate benevolent, charitable, theater, library, by nonprofit occupied and educational, memorial homes of world institutions and or scientific incorporated this state with the under the laws of veterans war buildings solely occupied by them thereon while and other incorporated. they Also charitable for which were for the nonprofit corporations or secret societies and homes of fraternal whose stock is wholly by religious owned or fraternal societies ill, chronically aged in which operate facilities for the own and no inures corporations operation part from of such the net income any person(s) residents.” than the to the benefit other *5 Mich v Ann Arbor Opinion of Court the state is
also maintains that constitutionally required to extend to it the bénefits of the separate exemption of contained 7d the General Prop § erty Tax asserts Finally, Act.2 that is a equal protection grant denial of an exemption Home, to the Anna Botsford Bach which is owned occupied the Old Ladies Home by Association Arbor, Ann of deny plaintiff and to the same exemption under 7 and 9 of the Prop General §§ erty Tax Act.
The
by plaintiff
claimed
was denied
the Ann
by
City
Arbor
Assessor. This action was
affirmed
the Ann
Review,
Board of
Arbor
Commission,
the State Tax
and by the Court of
Appeals
App 725;
at 55 Mich
which own and facilities for the nevertheless the language added refers back to the words "charitable homes”. Likewise, relevant, paragraph 9, being at times here "First” of § 211.9; 7.9, Property MCLA follows: MSA of the General Tax Act read as "First, personal benevolent, property charitable, educational institutions, incorporated and scientific under the laws of this state: Provided, societies, exemptions apply That such shall not to secret or fraternal personal property but the of all charitable homes of such exempt.” 83, 1, societies shall be As amended 1974 PA § portion of 9 now § reads: "(a) personal charitable, educational, and scientific institutions, incorporated exemp- under the laws of this state. The apply societies, personal tions shall not property to secret or fraternal but the non-profit of all charitable homes of such societies and corporations cally operate aged which own and facilities for the and chroni- ill, part operation in which no of the net income from the corporations any person(s) such residents shall be inures to the benefit of other than the exempt.” Although less clear than with the amended it would § seem that language personal added in 9§ refers back to the words "the property issue appear, therefore, of all charitable It homes.” would that the Court, being essentially statutory which confronts this one of construction, would not be less difficult under the statute as amended. 7.7(4a). 211.7d; MCLA MSA op the Court
Facts corporation nonprofit Michigan is a Plaintiff article II of its forth in set as whose follows: incorporation articles conduct, equip, erect, acquire "To *6 principles of service Christian on maintain to homes for the disabled, the broadest homes, and nursing convalescent and humanity, for the care of other institutions aged, or physically sick, handicapped, mentally and persons. aged or destitute corporation of this organization purpose of the "The profit any and and not for general welfare for the is income derived paid out on shall not therefrom corporation, but shall be any person dividends to used general welfare benevolent, and for charitable institutions purposes of such only for the purposes, and organized hereunder. organization receipts of this Any purchase or erection and expenses of of the in excess maintenance of said for tients institutions.” provided or institutions institution charity pa- to the care of applied herein shall be enlargement of said equipment and and to the facility, plain- Terrace its Hillside In addition to retire- three other operates and tiff has established Rapids, Whit- Manor in Grand Olds ment centers: Detroit, in St. Tower in and Whitcomb tier Towers proceedings before of the date Joseph. As Commission, Rapids the Grand the State Tax per- exempted real had Detroit Assessors with the Olds used connection sonal The Whit- Towers facilities. and Whittier Manor for yet opened been facility had comb Tower operation. con- at issue was facility Terrace
The Hillside 1969 at a June 1968 and October between structed $2,742,953.30. It has been licensed cost of Ann Arbor Homes v Opinion of the Court a home of Health Department State consists of one- facility The residence aged. of which there are apartments five two-bedroom from the most modest at designs, ranging basic square largest square at 504 feet. feet apartment equipped air-conditioning, Each with features, safety and has carpeting, wall-to-wall features private a bath attached. Other room, dining complex residential include a central solariums, and areas for recre- library, chapel, is also a 23-bed ational activities. There health nursing which licensed as a home. center has been Although are contributions deducti- income, gift pur- ble for Federal estate and tax there poses, is no indication contributions by plaintiff have ever been solicited or received use in connection with Hillside Terrace. Construc- start-up tion and initial costs were financed by mortgage bank loans and the sale of deben- tures. The mainly through debentures sold Michigan Baptist churches affiliated with the Con- vention, guaranteed also the mortgage *7 series, notes. The debentures are of several with ranging maturities from 90 to 15 days years, and bear interest from to 5% 8%. mortgage obligations
Plaintiffs and debenture are charged met the fees to its residents. The fees of Hillside Terrace were structured with the facility aim that would be self-supporting and self-liquidating. Each resident of Hillside Terrace admission, which, pays, upon a life-lease in fee $8,000 ranged $20,000. between The amount of the life-lease fee is based on the size of apartment rented. The average life-lease fee paid through $11,000. 1970 was approximately The residency provides that, contract in the event of death after all occupancy, life-lease fee and paid other sums to plaintiff shall be forfeited to op the Court are not forfeited treated thus plaintiff. Amounts death, but year in the are plaintiff as income expect- actuarial life amortized over the deceased’s ancy. fee, each
In addition to the life-lease resident meals, charge daily service pays monthly cleaning maid and service. Dry bed-linen laundry personal apparel specifically included charge. monthly this service charge upon is the number likewise based square During feet in rented. apartment per this fee month. ranged between $240 $440 average charge service was monthly $283. Each of free care in provided days resident This nursing year. may center each benefit 30 days. Physicians’ accumulated to a maximum of fees, drugs, optical dental care are extra.
Plaintiff offered to the effect testimony that during monthly charge 1970 the service to 4 of its 72 Hillside Terrace residents was reduced because special given consideration to the financial sta- tus of these residents. The extent of the reduction proved was not made clear. Plaintiff also that during there two instances 1970 where were life- lease fees were waived. noted, exceptions ability
With but few above determining all fees is a factor whether an applicant will be admitted to Hillside Terrace. Although plaintiff’s policy it is not to evict anyone reverses, that person’s plain- because of financial rules state there is a corresponding tiff’s on all responsibility properly residents care financial resources. To determine whether these with, begin appli- are sufficient each resources to make a complete cant is asked rather disclosure and income. of assets *8 the appli-
Based on information disclosed on Baptist Homes v Ann Arbor op the Court forms, attempted to cation establish be- and net fore the income worth commission aver- residents as of ages Hillside Terrace December 31, However, 1970. the data on which these aver- great ages were based contained number exceptions Many residents and omissions. failed to assets, disclose all and others disclosed only the fact that assets exceeded a certain amount. Even estimates, plaintiff’s average low yearly income $6,811 $74,274. average was net worth was resident assets of One did disclose over one-half dollars, million others listed while seven assets of one-quarter over million.
During plaintiff’s ending fiscal years September 1970 and years the initial of Hillside operations, $148,460 Terrace’s the facility lost $191,332 respectively. The losses may accounted nonoperational such expenses deprecia- tion, amortization and interest. plaintiff’s One of continued, officers if plain- stated that such losses tiff would raise resident fees to eliminate noted, deficit. previously As the fee structure had been designed so that the facility would be self- supporting self-liquidating.
In addition to the financial upon restrictions admission, there requirements. strict health admission, Prior applicant each must submit physical examination. Applicants must be at age, least 65 years must be in reasonably good health, and must be free of all contagious objectionable Applicants diseases. must demon- strate ability maintain themselves in apart- ments and take meals in the dining with- facility nursing out the aid of personnel.
I. Exemption from taxation unequal effects the *9 660 670 396 Mich op Court the placed on generally all removal of the burden govern of local support the landowners to share in is the antithesis of tax ment. exemption Since are equality, strictly statutes exemption taxing unit.3 In of the examin construed in favor ing upon necessarily the which each case will facts turn, four-part has evolved for claims based test "Fourth” of 7 of the General paragraph Prop on § Tax erty Act: "(1) occupied by The real estate must be owned and exemption claimant;
the "(2) exemption library, The must be a claimant be- nevolent, charitable, educational scientific institu- tion; "(3) incorporated been claimant must have under State; the laws of this
"(4) exemption only buildings exists when the occupied by and other thereon are the claim solely purposes incorpor for which it ant ated.”4 the was met, four-part charges If the test the fact that approximating are cost made services and ben exemption efits offered the claimant does not claim.5 alone defeat On the other hand, exempt requires status more than a mere showing that provided by nonprofit services are corporation. plaintiff parts
That
has satisfied
one and three
of the test above set forth is not
in controversy.
four,
two and
it
Regarding parts
while
is clear that
as set forth in its articles
3
(1915).
Detroit,
Joseph’s
408;
St.
Church v
189 Mich
it and
can
to
who
afford
it. Plaintiff’s
health and financial limitations on admission can
elderly
general
not be said to benefit
as a
proposition. By purchasing a life-care contract at
through plaintiff,
cost
the residents of Hillside
provided
Terrace have
for themselves. Further
presume
Legislature
more, we cannot
that
grant
exemptions
intended to
the claimed
to these
relatively favored individuals while at the same
granting only
time
limited
tax relief to
elderly
the less affluent
who rent or own modest
years
taxpayers
issue,
homes. In the
here at
those
age
residency
65 or over who met certain
and
only
partial
income limitations could obtain
exemption
equalized
$2,500
of
in state
valuation if
$10,000
their homestead did not exceed
in SEV.7
statute,
Under this
no revenue was lost to the
taxing
partial exemption
local
subsidized
unit since the
was
present,
the state. At
the limited
just
senior citizen tax relief
described has been
replaced by
special
against
an allowance of
credits
liability
expenditures
state income tax
for rent
Legislature
and taxes.8 We are convinced that the
6
Hospital Assn,
v R B
Auditor General
Smith Memorial
Mich
293
(1940).
36, 38;
By § 9 1746, Aging Act, on 72 Stat the White House Conference See 1958). 2, (Sept Public Law 85-908 10 Prop- Aged Exempt generally from Anno: Homes for See Taxation, erty 37 ALR3d 565-604. Assessors, Corp Storage v States Cold Detroit Board of United (1957). 4, See, also, 1963, 9, 81, 91; 84 Const art § Mich NW2d exempts "[pjroperty occupied by nonprofit religious owned and exclusively religious organizations or or and used educational * * * ”, purposes, by as defined law educational v Arbor Ann Court of the 7.7(4a), Legislature did intend to subsidize an exemption low-income senior for certain citizen housing design of material: modest "(1) operated by Housing nonprofit a owned and state, corporation any political or association or instrumentality, occupancy subdivision thereof or or by elderly persons exempt general use shall from all state, village property city, county, taxation or any public body agency. or or "(4) 'Nonprofit corporation or any association’ means corporation incorporated or association under the laws exempt general of this state not otherwise from ad personal valorem housing facility operating real and taxes project qualified, built or financed housing under section 202 the national act of ” (Emphasis supplied.) as amended. important It is to note that this does taxing not result in loss of to the local revenue provides unit, since subsection 5 for reimburse- directly ment from the to the local state unit. exemption must, Plaintiff contends that this necessity, constitutional be made available to it. argues by making Plaintiff that subsection exemption depend upon financing pursu Federal Housing § 1959,12 ant to 202 of the National is an unconstitutional Act of delegation legislative au Housing thority Secretary and Urban Development. Legislature enacting intent of the MCLA possible, It
211.7d is manifest. would not be with- doing facility intent, out violence to allow qualify such as Hillside Terrace to under by striking giving statute down subsection while remaining portions exemption. effect to the 1701q. 12 12 use *12 660 Mich Opinion of the Court that reso- determination
Therefore, of our in view plain- on no effect have issue could lution of the decline address liability, we tax tiffs of MCLA 211.7d. constitutionality the issue of III. it has de- that been contends
Finally, plaintiff guaranteed of the laws protection the equal nied Const, Am 1, 2, US XIV and Const art by § exemptions denied has been because Home, Bach Anna Botsford it seeks while the operated owned and and housing elderly women Arbor, Ann Association the Old Ladies Home by 9 of the Gen- exempted under has been §§ the Court of agree with Tax Act. We Property eral the Bach between that the differences Appeals readily apparent, Terrace Home and Hillside must be plaintiffs that the contention the Bach Home like classified record. The on the support without exemption is partially and is endowed Bach Home was Annual through charitable contributions. financed prin- withdrawals are met operating deficits fund, endowment interest from its cipal and of the Bach drives. None annual contribution care, her the actual cost of pays residents Home in effect were plans there payment the various overrid- goal in mind. The designed with that is to the Bach Home admissibility ing criteria supervi- inability to live without applicant’s rigid Hillside Terrace’s contrasted with sion. To be the Bach requirements and financial health applicants those giving priority policy Home care else- comparable are unable obtain who where. costs, a is affirmed. No Appeals Court of involved. being
public question Baptist Homes Ann v Arbor *13 Coleman, Dissenting Opinion J. J., J., C. Kavanagh, Levin, concurred with J. Fitzgerald, JJ., took no Ryan,
Williams, Lindemer, part in the decision of this case. Although (dissenting). agreed it J. is Coleman, strictly exemption
that tax statutes are construed taxing generally accepted unit, in favor of the this exemption rule of law should not work to statute from its intended an divert purpose meeting toward society. certain needs of The case facts of the are well stated in Justice opinion, particular Fitzgerald’s are of but few relevance to dissent: this may 1. Those who be to the nonprofit admitted Terrace, elderly, church-affiliated home Hillcrest must be years They Baptists. over 65 old. need be 2. average The have an annual residents income of $6,811 approximately plan to remain in the home little, for any, indefinitely. Although life or some have if affluent, income and others are more the home primarily serves elderly. middle strata financial of the
3. they Residents are not evicted if cannot for the services rendered.
4. Some purportedly have been and will be admitted payment without of the "life lease”. 5. care nursing Limited free is available in the center any needing it. resident Michigan Baptist 6. guaranteed Convention has mortgage notes. operating 7. The been home had at sizable loss at suit, although
the time of this intended to be self- sustaining. self-sustaining, If the residents’ fees must adjusted If higher. tax-exempt, home is not an $55,000 annually estimated the suit.) will taxes be added to (There costs of residents. at were the time of Mich Dissenting Opinion Coleman, (1971-1972), For in issue the tax MCLA years 211.7; property MSA from exempted 7.7 taxation: occupied "Such owned and real estate as shall be * * * charitable, benevolent, educational or scientific * * * ,”1 institutions 211.9; And MCLA 7.9 exempted: MSA personal charitable, "The educational and * * * ”2 scientific institutions parts relevant statutes are *14 phrased in general terms of "charitable” or Exemption "benevolent” institutions.3 statutues However, are strictly construed. it does not follow "benevolent”, that the construction of "charita ble”, "educational”, general "scientific” or other exemptions should be in granite. carved This adjustments would restrict consistent with the changing perceptions of society.
The rule of strict construction is best viewed as following provision: 1 A1974 amendment added the * * * nonprofit corporations "Also charitable homes of whose stock wholly by religious is operate owned or fraternal societies which own and aged ill, chronically part facilities for the in which no of operation corporations the net income from the of such inures to the any person(s) 358, 1, benefit of other than the residents.” 1974 PA § 1, April eff 1975. following provision: A 1974 amendment added the * * * personal property non-profit "The of all charitable homes of corporations cally such operate aged which own and facilities for the and chroni- ill, part operation in which no of the net income from the corporations any person(s) inures to the benefit of other than the exempt.” residents shall be 1974 PA 1.§ Legislature employs separate designations of "benevolent” may separate and "charitable” institutions from which we infer meanings. ent. than meaning opinion. subject, There is little case law on the is inconsist- Although may liberally interpreted "benevolent” well be more "charitable”, this dissent is directed toward the more narrow "charitable”, proposed term prevailing of the as v Arbor Ann Dissenting Coleman, as requiring claimed exempt that clearly must be within the exemption statute interpreted courts. The nature that interpretation be related reasonably should It societal need at issue. need be severe or approve For I example, harsh. would view of Supreme the North regarding Dakota Court strict Evangelical construction of exemption statutes. In Society Lutheran v Good Samaritan Board Commissioners, County County, Ramsey 1974), (ND, NW2d that Court stated: " theory requiring 'The that exemption the rule strict construc- tion narrowest descriptive a tax statute demands that possible meaning given should be to words objects of it would too severe establish a standard. A liberal and not harsh or strained given "educational,” construction tois to the terms "religious,” and "charitable” in order the true intent of statutory provisions the constitutional may judicial interpretation be realized. The of such ” always statute should be reasonable.’ question ultimate which must be answered is: What factors should exist for designation of an institution as charitable benevolent? Michigan
I believe that should follow the lead of (1) other states examine two nonprofit criteria: (2) status; and beneficial society. interest *15 A charitable or benevolent institution must abe nonprofit However, operation. the charging of fees equal to does a negate nonprofit costs not status.
In Fredericks Home for Aged Diego the v San County, 789, 35 Cal 2d 793; 221 P2d 70-71 (1950), the Supreme California Court stated: charge the "So of fees such an institution as aged home for prevent will not its necessarily classification as charitable if 'go pay such sums 396 Coleman, Dissenting Opinion profit expenses operation of of shareholders,’ persons may for all or founders 'under objects charity.’ proper conditions be certain controlling determining consideration ”[T]he whether an institution such as should be classi- fed as a charitable one is not whether few all of recipients may make of its beneñts reasonable defraying beneñts, of such contributions the cost toward as are made but whether such contributions do not required exceed what for the maintenance institution at a standard and are reasonable devoted to founded, for which the institution was purposes, required which in the absence of the contribu- tions, (Em- would clearly be deemed be charitable.” added.) phasis Although the elderly here concerned have vary ing degrees wealth, Fifield Manor v Los Angeles County, 20; App Rptr Cal 2d 10 Cal (1961)4 is applicable. The California Court Ap peals stated: light "In the of these authorities it seems clear that a aged
home for the
wealthy persons
caters to
furnishes them those services and
old and
care needed
infirm,
poor,
rich or
does not cease to be a
long
charges
charitable institution so
yield
as its
do not
operation;
more than actual cost of
that it does cease to
occupants
have that status
when the
more than the
home,
resulting
cost to the
profit
thus
in a
and convert-
ing it into a noncharitable institution.”
I can say without
reservation that plaintiff
is a
nonprofit organization.
also,
See
State Board of Tax Commissioners v Methodist Home for
Aged,
419;
App
(1968);
143 Ind
(1968). *16 Mich v Ann Arbor Dissenting Opinion by Coleman, J. might
Discussion the second criterion best be not impor- is by looking understood first at what designation. tant the charitable and benevolent First, charity and benevolence limited to relief poverty: "The concept charity is not confined to the relief of destitute, needy 'aged people require care apart assistance, from and attention financial and the supply of this and attention as much care a charita- purpose relief of
ble benevolent as the their finan- ” cial wants.’ Frederieka, supra, quoting Estate of Hen- at derson, 853, 857; 17 Cal 2d 112 P2d (1941).
" poverty 'Relief of is not a condition of charitable assistance. If benefit conferred has a sufficiently widespread value, social a charitable purpose exists ***.”’
Fifield, supra, Henderson, 11-12, supra, quoting at 857. at "To qualify charity require does not that it have * * * relationship
an exclusive poor to the Bozeman, supra, at 148.
Second, high quality of facilities care should not affect charitable and benevolent status: may appellants
"It care, be that feel the standard of accommodations, the excellence of and the mode of life facility, accorded this all reflected the size of the occupancy fees, and maintenance physical plant and facilities available are inconsistent with the concept charity. 'charity’ usual But law has Coleman, Dissenting Opinion that accorded in com- meaning than much broader mon 8).” (15 Id 2d, 149. p speech Am Jur *17 the Further, that institution agreed it is any elderly to indiscriminately open must its doors or financial condi- of health applicant regardless or "benevo- in as "charitable” qualify tion order to encouraged not fact, be to might lent”. In it well provided. may be do so service because better Here, purport nursing to be plaintiff does not to care for the chroni- equipped and home staffed ill, free beds and although provide it does cally Although illness. non- nursing care for short-term self-sustaining. it to be profit, propose does criterion, beneficial interest proposed The second Court Supreme idea. society, to is not a novel current social needs: "The recognized of Montana the standards under which scope of charity past, the administered are not frozen but is times and the new conditions keep pace with the Bozeman, supra, at 149. society.” and wants of Trusts, 2d, recognizes Restatement § following purposes: the as charitable "(a) poverty; the relief of "(b) education; of the advancement "(c) religion; the advancement "(d) health; promotion "(e) municipal purposes; governmental or "(f) accomplishment is other of which community.” to the
beneficial In the comments under the Restatement § notes: purposes element of all charitable "The common designed accomplish objects are they to community. to the
beneficial v Ann Arbor Coleman, Dissenting Opinion purpose if accomplishment "A its is charitable is of community such social interest permitting perpetuity. to justify purpose be devoted to to no to pur "There is fixed standard determine what poses are such to community; social interest time vary place.5 interests of with community
Thus, in the instant question appeal the basic plaintiff becomes: of sufficient beneficial Is interest as to society qualify as charitable benevo lent institution?6
The answer be should affirmative. Problems brought on old age are rendered more acute by longer ever life expectancies cause institutions such as beneficial interest *18 society. Supreme The of Pennsylvania Court has well expressed the reasons for such interest: "Moreover, governmental the social of need and char caring aged, itable and for the importance well as the necessity for public policy, such a benevolent have widely recognized accepted, become and as medical science in expectancy needy aged. pletely incapacitated and from lengthens the United States constantly life resulting its with increase in the number of elderly,
The even those who are not com loneliness, physically, suffer from physical mental and which infirmities tend to they grow increase as family die. older and their children leave the contemporaries and home their away move or passing year, they usually With each become less cope and less day-to-day problems able with the Supreme Pennsylvania recognized 5 The Court of also the view of the Restatement: "' purpose "Whether is charitable must be ascertained from a surrounding design all consideration of objects purposes. circumstances. A to achieve community beneficial is common to all charitable * * ’ ” * concept charity continually broadening.” The Homes, Presbyterian supra, at 150. nonprofit plaintiff presents problem. status no Coleman, Opinion by Dissenting homes, life, management including of their their even, times, support, at proper and and maintenance nourishment; they adequate and often live in fear their physical disability and dread of illness or of some inability possible poverty, just plain adequately or of certainly public take care of It is themselves. public homes and other interest and welfare that facili to relieve ties be established and maintained these anxieties, sufferings, fears and worries and these aged inability adequately this of the care well-known Furthermore, for it is a matter of themselves. common benefits, knowledge pension plans, retirement Government-supported programs support for the aid, simply elderly greatly care but do not solve problems aged.” underlying all of the (Emphasis human added.) Homes, Presbyterian supra, at 151.7 legislative I fail to find intent to exempt plaintiff partial in the tax relief accorded senior 206.522; citizens homes. MCLA owning their own 7.557(1522). majority opinion MSA concludes that a full exemption plaintiff is inconsistent However, with such tax relief. partial concerns and institutions of its kind are differ- recognize special The California courts also needs of the elderly: long recognized charity “The courts have and declared that is not alms, giving poor, may limited to extend to is not confined to relief of the they rich in areas where are not able to care for themselves, objectives promote and extends to those social the in the general government welfare and would be served philanthropic enterprises aged. absence of such as homes for the Historically, well-nigh unanimously, the courts have found homes aged for the to be charitable institutions where conducted at cost or man, old, They recognized especially *19 less. live have also that does not alone; though that bread he be able to for all material may dependent upon wants he nevertheless be his fellow man or the government protect haunting him to from the fear of of all loss his poverty, physical resultant with fear of illness or other disability overtaking help, him with no one near to fear of the arising contacts, any from absence of loneliness social fear of of the help.” tragedies age standing by of old where there no is one added.) (Emphasis Fifield, supra, at 11. 1976] Arbor v Ann Dissenting Opinion Coleman, supra. 206.522, MCLA in from those concerns ent special are citizens such that of senior needs plaintiff should be encour- as institution such an aged through property as a tax charita- Many critical institution. needs or benevolent ble only institution. met such an can Finally, the Internal that Revenue it is notable exempted plaintiff from income tax as a Service corporation organized charitable un- 501(c)(3). 1954, § Rev Rul 72- Int Rev Code der plaintiff: applies to aged, recognized apart that generally is now "[I]t alone, also, distress are from considerations of financial class, susceptible forms of to other distress highly aas special needs because of they have in sense example, recognized For years. their advanced objectives, Older Amer- Congressional declaration 89-73, Congress, Law 89th icans Act of Public housing, include suitable that such needs USC care, civic, cultural, health physical and mental activities, and an overall environment con- recreational independence, specially de- dignity all ducive aged. signed the needs of the Satisfaction to meet prevention special these needs contributes unique the causes of the forms 'dis- elimination of class, suscepti- aged, highly tress’ to which the proper constitute charitable may in the context ble though functions even direct financial as- purposes or poverty may in the of relief of not be sistance sense involved. "Thus, qualified chari- organization, an otherwise 501(c)(3) Code, which under section
table status operation of a home for the devotes its resources aged purposes of qualify for charitable status for will designed to operates if it in a manner Federal satisfy tax law aged persons. These primary the three needs of care, and housing, the need for health are the need for security. for financial the need *20 396 Mich Dissenting Coleman, i.e., "The security, aged need for per- financial protection against son’s need for the financial risks life, associated satisfied if two years generally with' later will First, organization conditions exist. must be policy, committed to an established whether practice, written or in maintaining actual in resi- dence any persons who become to pay unable their regular charges.” 1 Internal Revenue Bulletin pp 145, 146-147. The reasoning of Rev Rui 72-124 particular is in application to the instant case. short,
In that, I would find under the facts as well stated the majority opinion, plaintiff entitled to an exemption as a "charitable” or "benevolent” institution. The special problems of our increasing population of older Americans re- quire that statute be interpreted meet the needs of society they exist.
At this writing, the young do not generally take into their homes older family members as past was custom. Although some may enough have money alone, to exist we now see life as embracing more than a roof over the head and food for the body. Not only indigent and those physically mentally individual, disabled need our legislative, or judicial compassion, but those who may be lonely, afraid or emotionally starved. There are those who cannot cope with the everyday chores of a house or apartment an and who suffer other physical and mental deprivations while alone. The persons who, or groups at profit themselves, no provide for such needs under the circumstances engaged this case are in a "charitable” or "benevo- lent” undertaking which particular is of benefit the community.
I would find that comes within the definition of the provided legislatively exemption, and, therefore, would reverse.