Rural Health Collaborative of S. Ohio, Inc. v. Testa (Slip Opinion)

the BTA’s did we decline address LMES particular, appeal. at issue. respect with to the Because as a “manufacturer” personal-property-tax it no obli- no taxable incurred property, LMES owned gations.

III. CONCLUSION reasons, BTA. we affirm the decision of the foregoing For the Decision affirmed. JJ., O’Donnell, O’Neill, O’Connor, C.J., French, and and concur. J., only. in judgment concurs

Lanzinger, and J., appeal. dissents would dismiss the Pfeifer, Shoemaker; Junk, Prosecuting Attorney; Kevin L. Keat- County Robert Pike P.L.L., A. Posey; and William Law Office of Klekamp, and Sean ing, Muething & McCarter, A. for and appellee cross-appellant. McCarter and Sean DeWine, General, Fausey and Daniel W. Melissa W. Attorney Michael General, Baldwin, com- appellee cross-appellee for Attorneys Assistant missioner. Pease, L.L.P., Houston, Sater, Tait, & E.

Vorys, Seymour Hilary Robert J. Smiseck, appellant L. and cross-appellee. Steven Ohio, Inc., Health Collaborative of Southern

Rural Appellant. Appellee, Testa, Commr., v. Tax Ohio, Inc. Health Collaborative S. [Cite as Testa, v. 430, 2016-Ohio-508.] (No. 2016.) February 2014-0963 Submitted November 2015 Decided

Per Curiam. an appeal This is from a of by the commissioner decision the Board of

{¶ 1} (“BTA”), Tax Appeals which a granted charitable-use a in exemption facility Adams County provides dialysis services. The property owned (“Rural appellee, Ohio, Rural Health Health”), Collaborative of Southern Inc. and operated Clinic, by Dialysis under lease Inc. Rural applied Health for the exemption, denied, which the tax commissioner on relying primarily this court’s in holding Dialysis v. Inc. reversed,

N.E.2d 329. The BTA concluding qualified that the property under 5709.121(A)(2) qualified because Rural Health itself aas charitable institu tion. On the tax both appeal, argues that Rural Health does not

qualify as a charitable and institution that the precludes Clinic decision set under standards forth in 5709.121. We conclude that the BTA’s Rural Health is a institution is both reasonable and lawful, and we therefore affirm the But we finding. grant hold that the BTA’s exemption under R.C. 5709.121 was premature, because the BTA did not fully analyze the claim under R.C. We therefore vacate the BTA’s grant of exemption, and we remand for further proceedings consistent with this opinion. Background

Factual at property issue acres, improved issue is two one-story with a brick building, Valley located Ohio Local School District in Seaman Adams donated, County. The land was was building with funds that constructed Rural Health received through grant. a federal Ohio,

The owner: Rural Health Collaborative Southern Inc. At time it was formed Rural Health had four directors. The Brown, Adams, members three for nonprofit county hospitals were and Highland counties—Brown later it a for-profit withdrew when became a hospital plus— nonprofit organization provides physicians throughout underserved areas Ohio. Rural Health’s focus on purposes promoting health-care initiatives in staff; has no directors and the staff of the its southern Ohio. activities. carry members out Rural Health’s region discuss medical needs Rural Health’s directors

5}{¶ grants supply institutions services member perspective in- that Rural Health has conducted programs Grant-funded charge. without program a women-and-children-uninsured program, clude tobacco-cessation care, managed-care program, a diabetic-education focusing pregnancy Blood are managed providers. care on drives impact used to assess the grant As BTA hearing, Rural Health. of the time of the activity organized by another implemented. still programs being was grant-supported none early the board of directors was for more One need identified 6}{¶ provide. than able to dialysis services the member institutions were convenient patients times feel increas- reducing important travel particular, treatments, they undergo which must two way dialysis every ill on their to ingly Also, treatments, hours, patients last three to four leave days. to three the which exhausted. feeling clinic; need, dialysis to a To address this Rural Health resolved establish

7}{¶ land, a grant building, it the donation of obtained to construct the received (“DCI”), of dialysis Inc. as the services to provider identified clinic. operate the

The agreement lease into a Rural Health and DCI entered contract entitled “commercial lease 8}{¶ August agreement assigned 2005. The maintenance and agreement” landlord, required utility to Rural Health as that be made repair payments duties tenant, liability-insurance obligation. DCI as and created a mutual The 1, 2005; years July five original beginning lease term ran for addendum five-year running for a new term from 2010 to 2015. The rent was provided $53,556 installments. years annually, three at initially payable monthly set for $71,412, In the fourth annual to with year, subsequent the rent increased three-year increases at intervals based on the Price Index. In Consumer however, the to rent parties adjusted postpone the lease escalations after DCI incurred at the operating losses site.

The the nature DCI and use regarding evidence the it According indigency dialysis provides to the treatments policy, DCI’s 9}{¶ “not or charity patients. rights are a to DCI retains all to refuse to admit gift treat no But the patient ability pay.” testimony presented a who has provision. this hearing larger understanding establishes context for federal patients, counsel testified that for Medicare general DCI’s 10}

{¶ 20 percent to demand and seek to collect the regulations generally required DCI added that federal statutes responsibility. is the He portion patient’s the co-insurance. specifically prohibit waiving DCI indigency policy DCI’s was light regulations, of the strict Medicare through process. to avoid the collection designed putting patient clinic testified that Medicare would “allow us to administrator of the Seaman if the clinic off’ under one of two circumstances: [unpaid amounts] write those if, alternatively, collection or the clinic through process,” reasonable “[went] patient pay. made “a fair determination” that the was unable anticharity indigency policy, of the language When asked about point language convey counsel that the was to general explained DCI’s with “in traditional provide patients charity DCI could Medicare th[e] i.e., payment copays. it could not Medicare and waive simply accept sense” — financial Reserving right “part stewardship,” to refuse treatment is of [DCI’s] may analysis in that must “make it clear that we have to have some for each DCI facility as a means which the patient.” policy thereby part serves cooperation certifying his or her need. procure patient’s able general indigency policy DCI’s counsel also testified reached many “there’s in Medicare that beyond patients concepts the Medicare so * * * talk sources decided that payor about nondiscrimination between [that] it fair” to “to that has a only policy any patient patient responsibili- encourages and that need assistance.” uninsured ty might patients balance DCI Medicaid; at least for certain of time. they typically qualify, periods to for fully services to for which patients [it is] When asked whether “DCI limit[s] services,” for the counsel answered: “No.” compensated general those a Similarly, any when asked whether he was aware of instance when {¶ 14} treatment, inability pay had refused service for the to for DCI’s patient been clinic, administrator, “At clinic answered: “No.” He later reiterated: neither Portsmouth, away at nor never turned a due to patient neither Seaman we’ve that that of DCI’s inability pay.” part to The administrator elaborated was years mission and culture: “I’ve worked in health care for over 25 corporate * * * organizations, I’ve worked with and other health care and I’ve hospitals never a that walks the talk as far as services for all company providing seen as DCI has.” patients in Testimony year and documentation show that each fiscal

{¶ 15} a loss hearing, operations experienced until the BTA at the Seaman clinic dialysis treatments. expenses generated exceeded the revenues the History Procedural 13, 2006, on the exemption application Rural Health filed its October 20, final on 2012. on Relying tax commissioner issued a determination June 215, 2010-Ohio-5071, Clinic, Inc. v. 938 N.E.2d Dialysis 329, on the reservation of the right the commissioner denied the based inability indigency policy. for to set forth DCI’s pay to refuse treatment BTA, 6, February a on 4 and March appealed hearing to the which held 2014, testimony at Rural Health the of six witnesses and presented which numerous exhibits. 8, BTA 2014. It conducted its May analysis issued its decision 5709.121(A)(2), to used property exclusively

under R.C. which deems be if it a institution and made purposes charitable is owned charitable available institution’s direction and control furtherance of or incidental to the under the a purposes, profit. discussing institution’s charitable and not with view to After case, case, BTA that in to the Clinic the found contrast the earlier “the institution, focus in this matter is whether is [Rural Health] 2014). 2809179, 2012-3421, BTA (May DCI.” BTA No. 2014 WL *3 qualified therefore found that Rural Health charitable institution. Id. subject The BTA then turned to the whether the question property * * * “made available under the direction or control of such institution for use in * * * purposes furtherance of or incidental to its charitable and not with the view Testa, profit.” Community to From Cincinnati Kollel v. the BTA extracted the “ principle inquiry relationship that ‘the focus of the should be on the between the ” actual property purpose use and the the institution.’ 2014 WL *3, at quoting Community (concerning ques- Cincinnati Kollel institution property tion “whether educational uses its furtherance of or 5709.121(A)(2)). purposes” meaning incidental its educational within the of R.C. case, BTA Applying principle to this concluded the Seaman clinic operated purposes. separate analysis furtherance of charitable No was as whether Rural Health or performed exercised direction control over the use property. Finally, determined was not used with view to profit granted exemption pursuant therefore 5709.121(A)(2). Id. at *4-5. op Propositions

The Tax Commissioner’s Law decision, In tax appeal presents his from the BTA’s the the of law: following propositions three is not entitled to property Clinic v. real Dialysis

1. Under it is used a non-charitable institution such exemption charitable where Clinic, care to dialysis pursuant Inc. to non-charitable Dialysis provide pay. those who cannot against that discriminates indigence policy exemption institution and is 2. A owner is not property activity only longstanding 5709.121where the owner’s defeated under R.C. care and the owner does not itself provider to health leasing property care services. provide health to exemption pursuant for charitable R.C. property

3. To leased 5709.121, to and from a “charitable institu- property the must be leased (A)(1) 5709.121, mutually with division of R.C. tion” accordance (A)(2). Further, qualifies leased for charitable property exclusive division if it a strict standard for “exclusive charitable exemption only satisfies use.” sic.)

(Emphasis

Analysis * * * * * * 5709.12(B) property belonging states that “[r]eal from purposes exempt for charitable shall be exclusively institutions is used Traditionally, exemption required for the charitable-use qualifying taxation.” no designated purposes i.e., for the property using property owner be — be, appeared destroy the use otherwise a lease would matter how charitable the user of the under obtaining exemption, property possibility Milford, Inc. v. Baptist lease would not be the owner. See First Church 2006-Ohio-4966, 494, 12, Wilkins, Lincoln citing (1968). Warren, 109, 110, 235 N.E.2d 129 Hosp., Mem. Inc. v. 13 Ohio St.2d 5709.121 background, Assembly the General enacted R.C. Against Laws, III, 133 Ohio Part 2646-2647. his in 1969. Am.Sub.H.B. No. Bd. Tax 38 Ohio Hosp. Appeals, Cross Assn. v. concurring opinion White .of 199, 203, (1974), oft-cited view pronounced N.E.2d 862 Justice Stern his St.2d ownership 5709.121 is to declare that the that “the overall purpose That this property exempt.” not coincide for that to be property use of need to a accordingly, path is not dispute; involves leased appeal (if one) It is also a through there is lies R.C. 5709.121. exemption charitable-use 215, 2010-Ohio-5071, Dialysis point distinction tax commissioner relies: there was no lease N.E.2d on which the See id. at 4. Clinic. possible two avenues to a charitable-use R.C. 5709.121 allows for 22}

{¶ in this case: 436 * * * * * * (A) Real to a belonging charitable institution * * * * * * exclusively shall be as used for purposes considered charitable * * *

by such institution if it meets one of following requirements: * * * (1) It is used such institution or one or more other such * * * lease, sublease, arrange- institutions under or other contractual ment: * * *

(a) * * * * * *

(b) For purposes. charitable (2) It is made under the direction or available control of such institution * * * * * * for use in furtherance of or incidental to its charitable and not with the purposes profit. view BTA did not abuse its discretion in determining that qualifies as a charitable institution law, of his support proposition second of the tax commissioner

challenges qualifies the BTA’s that Rural Health as a charitable institu tion. The determination a property qualifies whether owner as a charitable requires institution under R.C. 5709.121 examination of the activity” “core institution determining activity whether as qualifies charitable for 215, property-tax purposes. Dialysis 2010-Ohio-5071, 329, (rejecting N.E.2d at 28-30 the contention that tax-exempt status of the 501(c)(3) applicant under 26 U.S.C. of the Internal automatically Revenue Code established its character as a charitable institution property-tax purposes); Ctr., see Computer Library also OCLC Online Inc. v. Kinney, (1984). 201, 464 N.E.2d 572 pertinent Also this context is the standard of review that we BTA. Although stated, determinations we have not so explicitly

have in past applicant decisions treated whether an qualifies as fact, institution as an primarily issue of the determination of which within lies province of the taxing authorities and thus merits our deference. See ¶at (affirming Clinic 31-35 BTA’s determination of charitable status on its based lawful”); being “reasonable and Psych. Northeast Ohio Inst. v. 121 Ohio ¶20 (same); (same). St.3d 903 N.E.2d OCLC We the BTA’s approach determination issue here the same spirit deference. Tower, Revision, See EOP-BP v. Cuyahoga Cty. L.L.C. Bd. 106 Ohio St.3d 2005-Ohio-3096, (BTA’s 686, 9, weighing evidence and determi standard). nation of credibility of witnesses reviewed under abuse-of-discretion serving is an organization that Rural Health Here the record shows noted region. institutions instrumentality nonprofit of three obtaining grants formation and its work of Rural Health’s the circumstances education, prevention care and diabetes funding, pregnancy for tobacco-cessation initiatives education, community-care with planning, along and managed-care 2809179, BTA 2012-3421, at *3. The BTA No. 2014 WL as blood drives. such that within the context of dialysis clinic leasing the construction and viewed regard in this activities, that its determination and we conclude larger body reasonable and lawful. both asserts as the tax commissioner finding, reversal of the BTA’s Seeking Ohio, BTA’s denial in which we affirmed the our decision Northeast

controlling Insti- Psychiatric that Northeast Ohio based on its determination exemption services, tute, could provider psychiatric of a to a charitable building the lessor case, that demonstrated a institution. In that the record qualify as charitable lessees and and charitable for-profit Northeast Ohio was landlord both Psych. Northeast Inst. v. services to the lessees as well. Ohio provided staffing 2007). (Dec. 4463267, 14, Wilkins, 2005-M-1683, *4 Based on BTA No. 2007 WL a it, Northeast Ohio was although the BTA found that the entire record before commercial, income-produc- “activities are more akin to nonprofit corporation, its it that rejected argument Northeast Ohio’s ing appeal, activities.” Id. On insisted provider. a institution as to its lease with the We qualified was “based for the qualification that the standard for Northeast Ohio’s ” of its lessees single than those of a one of its own activities rather range sic.) Northeast (Emphasis a sought split-listed exemption. for whose it premises ¶ OCLC, 14, Ohio, 2009-Ohio-583, 1188, 292, citing N.E.2d at 121 Ohio St.3d 201, 572. 11 Ohio St.3d at 464 N.E.2d discussion, does not Northeast Ohio foregoing As is evident from the in this case. as a charitable institution against qualifying

militate Rural Health’s case, the BTA did from those here. this facts of Northeast Ohio differ that the own activities” and concluded “range consider the of [Rural Health’s] as a charitable institution. entity did grounds other factual tax commissioner attacks on several meaning a charitable institution within finding

BTA’s that Rural Health is fact- that the BTA abused its But the commissioner fails to show R.C. 5709.121. finding Specifically: discretion.

(cid:127) Rural by facilitated Health range BTA looked at a of activities Whereas the charge,” at without community large available to the

that were “made 2012-3421, 2809179, *3, commissioner asserts No. 2014 WL see no reason to disturb activity.” Rural Health’s “core We leasing to DCI is core activities. of Rural Health’s the BTA’s determination (cid:127) The emphasizes that the DCI is a lease market-rate lease. But Ohio,

unlike the owner in Northeast which engaged leasing and ¶ staffing revenue, services that generated see id. at Rural Health was engage range found to of charitable activities. The fact that the DCI generates lease by revenue Rural Health does not destroy itself Heath’s status as a charitable institution. See Girl Trail Scouts-Great Levin, 493, 17; Council v. 113 Ohio St.3d 862 N.E.2d Community Professionals, Inc. v. 2007- Ohio-2336, 23.

(cid:127) The commissioner out that points Rural Health has no employees of its own

and that it uses employees of its member institutions. We are not however, persuaded, aas matter of law this factor undermines the Rural Health qualifies as charitable institution. (cid:127) The commissioner notes that various activities coordinated Rural Health

at meetings or in actually communications are conducted the member hospitals. But determining whether the coordination itself constitutes an activity is a factual determination province within the of the BTA.

Rural Health does not exercise “direction and control” 5709.121(A)(2)

within the meaning of law, In of support his third of proposition the tax commissioner argues {¶ 29} 5709.121(A)(1) 5709.121(A)(2). that R.C. applies to the exclusion of R.C. commissioner offers First, two forms of this argument. the commissioner (A)(1) only contends that division applies in this case because it expressly refers to those situations in which alternative, there is an actual In lease. the the that contends the existence of DCI’s lease and other circumstances preclude the finding Rural Health exercises “direction and control” over the (A)(2) use of the property, which is an element that division explicitly requires. Our review of the case law reject leads us to the first form of the tax {¶ 30} commissioner’s argument. out, As Rural points Health acknowledged have that lease-like contractual arrangements can way constitute one is (A)(2). “made available” Wilkins, under division See Case W. Res. Univ. v. 105 (memorandum 30 of under standing university between and fraternity by which the latter had “exclusive use” of a house to supply fraternity residence to members satisfied the “made (A)(2)); available” element of division Community at 19- Professionals (tax commissioner conceded that property leased one nonprofit affiliated to lessor). the other affiliates was made available “under direction or control” of the While he to points why reasons these definitively cases do not point, establish the the tax commissioner cannot avoid his longstanding acceptance of leasing situa tions as satisfying the “made available” standard. See also Humane Soc. Found. (Oct. 98-J-884, Tax LEXIS Ohio Cty. Tracy, v. BTA No. Hancock

of 1999) (charitable entity concededly entity kennel to other charitable leasing requirement division “made available under direction control” satisfied the (A)(2)). the BTA hand, of the record and decision the other our review On

{¶ 31} support raised in of the tax argument that the form of the persuade us alternative Ordinarily, by granting third of law is correct. proposition commissioner’s lessee, a claim the will defeat rights to the lease possessory exclusive premises, activities on the exercising is and control” over “direction lessor/owner 5709.121(A)(2) record, this there is no apply. condition for R.C. On explicit dialysis the any authority provision that Rural Health over indication exercises services; premises. on the operation that business and conducts that DCI 5709.121(A)(2), skipped BTA the the over purporting ahead to completely, consider requirement plunging “direction and control” “in furtherance of or incidental to” Rural dialysis whether the provision any that could support Given absence of evidence purposes. Health’s Health, BTA granting erred of direction control 5709.121(A)(2). the authority under of R.C. exemption 5709.121(A)(1) remand, analysis BTA complete On under R.C. should 5709.121(A)(2)does not Reversing grant exemption based on R.C. however, should mean, that we must that the claim be denied. conclude premature fully That consider the claim ruling would be did under R.C. (A)(1), closely two related remaining division there are Under can as a qualify considered remand: whether DCI as lessee

elements be institution, under since to a lease must so division parties both (A)(1), DCI’s of services on as charitable. On provision qualifies and whether site remand, these the standard for using the BTA should consider both of elements Found., 30, 2 206 forth in Vick Mem. Med. exemption set v. Cleveland (1965), is syllabus i.e., “providing 2 whether DCI paragraph N.E.2d two — need, race, creed, ability in color or regard pay.” services to those without sure, support in his first To be tax commissioner contends {¶ 35} Clinic, 215, 2010- Dialysis of law that our in proposition decision 329, Ohio-5071, in favor. We turn finding N.E.2d Rural Health’s now bars to that contention. in is not here controlling precedent decision Clinic

Our when prevail tax contends that Rural Health cannot {¶ 36} 5709.121(A)(1) case, previously this court deter- applied this mined in Dialysis Clinic that DCI qualify does not as a charitable institution. Clinic, The commissioner notes that in Dialysis this court quoted and relied on part language the same indigency policy its decision affirming the ¶ BTA’s denial of the exemption. Id. at 34-35. Under the tax commissioner’s

theory, Dialysis Clinic is controlling precedent, particularly on the question qualifies whether DCI aas charitable institution. We conclude the commis- sioner’s claim of controlling precedent is mistaken. point, As initial tax commissioner explicitly

{¶ disclaims 37} reliance estoppel. collateral It follows that whatever the merits of a claim of collateral here, estoppel that claim has been waived. Instead, commissioner appears to invoke the doctrine of stare

decisis, according to which courts follow “controlling precedent, thus creating stability and predictability in our legal system.” Galatis, Ins. Co. v. Westfield ¶ 100 Ohio 1256, St.3d 1. But stare decisis typically law, applies principles of findings Bethel, of fact. State v. 10th ¶26 07AP-810, 2008-Ohio-2697, Dist. Franklin No. (“Stare 2008 WL (1) decisis has two aspects: the absence of overriding considerations courts will (2) adhere to its own previously law; [sic] principles announced that courts are bound by and must follow decisions of a reviewing court that has issue”); decided Williams, the same Terrell v. 79AP-16, 10th Dist. Franklin No. 1979) (stare WL *2 (May decisis is upon “based following controlling legal principals judgments,” [sic] former and is “not applicable matters”). where the prior case decided factual In Dialysis had determined as a matter of fact

DCI did not institution, constitute a charitable and this court affirmed because that finding reasonable, lawful, (“we and supported by evidence. Id. at 30 must determine whether the BTA acted reasonably and lawfully when it found (“We the DCI did not qualify as a institution”), not persuaded are * * * that [other evidence indicating charitable purpose] required the BTA to find that DCI satisfied the nondiscrimination requirement, given that DCI’s own policy statement explicitly reserved the right to refuse to indigent treat pa- tients”). Because this ruling court’s in Dialysis merely Clinic affirmed the BTA’s fact, the BTA was free to evaluate the evidence in present case and

make a fresh determination whether DCI could as a charitable institution for purposes of Stare decisis did not bind the BTA to conclusion that it case, had drawn in the earlier which it presented with a different record developed by different exemption applicant.

Conclusion reasons, affirm the BTA’s foregoing finding For the 5709.121(A), but we as a charitable institution under R.C. qualified for a charitable-use property qualified reverse the BTA’s 5709.121(A)(2). Additionally, we vacate the BTA’s decision exemption under R.C. property qualifies remaining and remand for consideration whether the under the criteria of R.C.

Judgment accordingly. JJ., O’Connor, C.J., Pfeifer, Lanzinger, French, O’Neill, concur. JJ., dissent. Kennedy, O’Donnell J., dissenting.

O’Donnell, I dissent. Respectfully, view, In Inc. v. 127 Ohio my our decision St.3d controlling precedent argued by commissioner, I Board of and on that basis would reverse the decision of the

Tax Appeals. J., foregoing opinion. concurs

Kennedy, Eckler, L.L.P.,

Bricker & and Mark A. Engel, appellee. DeWine, General, D. and Barton A. Attorney Michael and David Ebersole Hubbard, General, for Attorneys appellant. Assistant et al. re Messer Messer,

[Cite as In re 441, 2016-Ohio-510.] 145 Ohio St.3d

Case Details

Case Name: Rural Health Collaborative of S. Ohio, Inc. v. Testa (Slip Opinion)

Court Name: Ohio Supreme Court

Date Published: Feb 16, 2016

Citation: 50 N.E.3d 486

Docket Number: 2014-0963

Court Abbreviation: Ohio