ST. JOSEPH‘S LIVING CENTER, INC. v. TOWN OF WINDHAM
(SC 17916)
Supreme Court of Connecticut
Argued September 12, 2008—officially released March 24, 2009
290 Conn. 695
Norcott, Katz, Vertefeuille, Zarella and Schaller, Js.
Aaron S. Bayer, with whom were Seth L. Huttner and, on the brief, Bennett J. Bernblum, for the appellant (plaintiff).
Thomas J. Londregan, with whom was Jeffrey T. Londregan, for the appellee (defendant).
Daniel J. Foster filed a brief for the Connecticut Association of Not-for-Profit Providers for the Aging as amicus curiae.
ZARELLA, J. The primary issue raised in this appeal is whether the defendant, the town of Windham (town), properly denied the application of the plaintiff, St. Joseph‘s Living Center, Inc. (Center), a skilled nursing home facility, for a property tax exemption under
Center also claims that the trial court improperly relied on irrelevant and clearly erroneous facts in denying its appeal.4 Finally, the Center asserts that the trial court improperly concluded that the Center‘s chapel was not exempt from property tax pursuant to
that this fact is relevant because it precludes the Center from satisfying the requirements of
The record reveals the following relevant facts and procedural history.7 The Center‘s nursing home facility was constructed in 1987 on approximately ten acres of cemetery land owned by the Roman Catholic Diocese of Norwich (diocese), which eventually was transferred to the Center via a quitclaim deed. The facility was built with the financial assistance of a for-profit partner pursuant to an agreement granting the Center an option to buy out the partner after five years. Despite the financial partnership, the diocese and the Center maintained complete operational control over the facility. In 1994, the Center exercised its option and bought out the partner by obtaining a $13,385,000 loan financed through the Connecticut Health and Educational Facilities Authority (CHEFA), which raised the funds through a tax-exempt bond issuance. Upon assuming sole ownership of the facility, the Center applied to the town for a property tax exemption. The town tax assessor (assessor) denied the application on the ground that the facility did not provide free care to any of its patients and thus was not used exclusively for a charitable purpose. The assessor also determined that the Center‘s
Subsequently, in 2003, the Center reapplied for a property tax exemption for the 2003, 2004 and 2005 tax years, claiming an exemption under
At trial, the Center claimed that its property was exempt from property tax under
We begin our analysis with a brief review of the following additional undisputed facts regarding the
The Center employs approximately 200 individuals in operating the nursing home facility, including an administrator, medical and nursing directors, registered and licensed practical nurses, certified nursing assistants, social workers, physical, speech and occupational therapists, a chaplain, dietary staff, and maintenance and housekeeping personnel. All staff salaries are slightly below market rates. In addition to this paid staff, the Center also maintains an active list of seventy to ninety volunteers who perform various functions including taking the residents to daily mass, running the gift shop, helping with the chapel, accompanying residents on day trips and participating in “vigil teams.”13 More volunteer services are provided by priests from St. Joseph‘s Church, who visit the Center regularly to support the spiritual life at the facility.
The Center derives most of its revenue from the health care services that it provides from Medicaid and Medicare reimbursement and payments from private
The record indicates that the Center received charitable contributions during the period of 2000 to 2005 in the amounts of $41,136, $18,584, $56,563, $33,706, $30,668 and $51,755, respectively. In addition, the Center reported making contributions out of its excess revenue to the diocese and St. Joseph‘s Church during the period of 2001 to 2005 in the amounts of $42,000, $72,000, $84,000, $84,000 and $63,000, respectively.15 In addition to the charitable contributions flowing to the
In accordance with state law, the Center‘s admission policy does not discriminate between potential patients on the basis of their ability to pay.19 The record also indicates that the Center has never forced a patient to leave the facility for a failure or inability to pay. Furthermore, the Center does not give any admissions preference to those individuals who are covered by
The Center pays approximately $950,000 to $1 million annually to service the principal and interest of its mortgage. In addition, the terms of its agreement with CHEFA require the Center to maintain a surplus of revenue over its total expenses that is 25 percent greater than its required mortgage payment (debt service coverage ratio). Pursuant to the CHEFA financing arrangement, this money must be set aside in various trust accounts and cannot be used for operational expenses, except that certain of the funds, such as the working capital fund and the reserve and replacement fund, may be accessed under extraordinary circumstances or for specific expenditures. The record includes the Center‘s audited financial statements for the years 2000 through 2005. During each of those years, the Center reported an excess of revenue and support over expenses, and complied with CHEFA‘s required debt service coverage ratio of at least 1.25:1.20 A failure to meet the debt service
In an effort to gain more fiscal security and control, and to ensure that it was meeting its debt service coverage ratio obligation, the Center attempted to expand its patient base. In addition to increasing its principal, long-term chronic care services, the Center sought to increase its population of short-term rehabilitative care patients in hopes of eventually utilizing twenty-five to forty beds for these services, or up to one third of its capacity. Although the record is somewhat unclear, it appears that the Center may reserve a bed for a rehabilitation patient if it knows that such an individual will be coming from a hospital for postsurgical rehabilitation, but admissions otherwise are on a first-come, first-served basis without regard to whether an individual requires short-term or long-term care.21 The record indicates that short-term rehabilitative care is generally more cost effective for the facility because it is covered under Medicare or by private health insurance and therefore is fully reimbursed.
Before turning to the substantive aspects of the case, we address the appropriate standard of review. “It is well settled that [w]e review the trial court‘s conclusion in a tax appeal pursuant to the well established clearly erroneous standard of review. Under this deferential standard, [w]e do not examine the record to determine
Our analysis also is informed by our settled approach to the construction of tax exemption statutes. “It is . . . well established that in taxation cases . . . provisions granting a tax exemption are to be construed strictly against the party claiming the exemption, who bears the burden of proving entitlement to it. . . . Fanny J. Crosby Memorial, Inc. v. Bridgeport, supra, 262 Conn. 220. Exemptions, no matter how meritorious, are of grace. . . . [Therefore] [t]hey embrace only what is strictly within their terms. . . . We strictly construe such statutory exemptions because [e]xemption from taxation is the equivalent of an appropriation of public funds, because the burden of the tax is lifted from the back of the potential taxpayer who is exempted and shifted to the backs of others. . . . Id. [I]t is also true, however, that such strict construction neither requires nor permits the contravention of the true intent and purpose of the statute as expressed in the language used. . . . Hartford Hospital v. Hartford, 160 Conn. 370, 375, 279 A.2d 561 (1971).” (Internal quotation marks
Because the Center‘s claim for exemption is based primarily on
At the outset, we note that the fourth and fifth prongs of the Isaiah 61:1 test are clearly inapplicable in this case. There has been no claim that the Center‘s facility is “housing,” as that term is ordinarily understood, nor does the record support such a characterization. In addition, the third prong is applicable only when the taxpayer is allowing another entity to use its property and is claiming that such a use is in furtherance of its own charitable purpose.23 See id., 85. Because that prong is not applicable in the present case, our analysis of the Center‘s claims under
Before proceeding further, we also take this opportunity to address the town‘s claim that the trial court incorrectly determined that the Center is a
The trial court expressly found that the Center was “organized in 1987 as a nonstock, nonprofit corporation exempt from federal income tax under . . .
We also note that the Center satisfies that part of
We note that this area of law is particularly complicated, and, therefore, in the interest of clarity, we divide the following analysis into three parts. The first two parts of our analysis will discuss the first two statutory requirements set forth in Isaiah 61:1, Inc. In each part, we will set out the legal framework for each factor and then proceed to apply that law to the facts of this case, addressing the parties’ related arguments as well as the applicable trial court findings. Finally, in the third part, we will address the Center‘s claim for a tax exemption with respect to its chapel.
I
CHARITABLE PURPOSE26
The first statutory requirement in Isaiah 61:1, Inc., for tax-exempt status under
A
Organized Exclusively for Charitable Purposes
The first element—whether a corporation is organized exclusively for charitable purposes—can be broken into two parts. First, we must determine for what purposes a particular corporation has been “organized.” We then must decide whether that purpose is, in fact, “charitable.” The trial court found that, “[a]lthough the [Center] is organized and operated as a nonprofit corpo-
In determining the purposes for which a corporation has been formed, we begin by examining the entity‘s foundational documents. “The purposes for which a corporation is organized are to be found in its charter . . . .” Waterbury First Church Housing, Inc. v. Brown, 170 Conn. 556, 561, 367 A.2d 1386 (1976); accord Camp Isabella Freedman of Connecticut, Inc. v. Canaan, supra, 147 Conn. 514; see also Isaiah 61:1, Inc. v. Bridgeport, supra, 270 Conn. 86 (“a corporation‘s charter reveals its purpose“); H-C Health Services, Inc. v. Board of Assessors, 42 Mass. App. 596, 599, 678 N.E.2d 1339 (1997) (“whether a taxpayer is a charitable organization depends upon the language of its charter or articles of association, constitution and by-laws, and upon the objects which it serves and the method of its admin-
The Center‘s purpose, as stated in its certificate of incorporation, is: “a) To operate exclusively for charitable, educational and scientific purposes, all for the public welfare consistent with activities permitted to be performed by a corporation classified under
“b) To develop, operate and maintain a chronic and convalescent care nursing home (i.e., skilled nursing facility) . . . in accordance with applicable state and federal regulations . . . and operate adult day care and other related programs . . . .”
Article I, § 4, of the Center‘s bylaws provides, as one of its stated purposes, “[p]rimarily to fulfill the goals and aspirations of the Roman Catholic Church in its ministry and service to the elderly and to those who are ill located in the [d]iocese . . . regardless of their race, color, creed or religion.” The Center‘s mission statement “is to provide quality health care to [its] residents in a spirit of compassion, love and service, consistent with the Gospel of Jesus Christ.”
Having gleaned the Center‘s corporate purpose from its charter and related documents, we next must determine whether that purpose is charitable. The modern approach to defining a charitable use or purpose is rather broad and liberal. Almost fifty years ago, this court explained that “[t]he definition of charitable uses and purposes has expanded with the advancement of civilization and the daily increasing needs of men. Mitchell v. Reeves, 123 Conn. 549, 554, 196 A. 785 [1938]. It no longer is restricted to mere relief of the destitute or the giving of alms but comprehends activities, not in themselves self-supporting, which are intended to
Camp Isabella Freedman of Connecticut, Inc. v. Canaan, supra, 147 Conn. 514-15; see also Isaiah 61:1, Inc. v. Bridgeport, supra, 270 Conn. 76 (“[i]n construing
We had occasion to comment on the charitable nature of caring for the elderly in Waterbury First Church Housing, Inc. v. Brown, supra, 170 Conn. 556. Although that case did not deal directly with the provision of long-term health care for the elderly, our analysis of
Other jurisdictions that have addressed more directly the charitable nature of providing long-term health care for the elderly have found such a purpose to be charitable. See, e.g., Knox County Property Tax Assessment Board of Appeals v. Grandview Care, Inc., supra, 826 N.E.2d 182 (“Indiana courts have long recognized that providing care and comfort to the aged constitutes a charitable purpose“); H-C Health Services, Inc. v. Board of Assessors, supra, 42 Mass. App. 599 (“[t]he language of the charter of the appellees—dedication to the care of the elderly and the infirm, with no financial benefit permissibly flowing to private investors—is the language of a charitable organization, and the operation of a nursing home for the elderly and the infirm is the work of a charitable corporation“); Wexford Medical Group v. Cadillac, 474 Mich. 192, 215-19, 713 N.W.2d 734 (2006) (nonprofit organization providing, inter alia, health care services to elderly constituted charitable organization); see also Evangelical Lutheran Good Samaritan Society v. Gage, 181 Neb. 831, 836, 151 N.W.2d 446 (1967) (nursing homes not operated for
The trial court determined that the Center‘s “original purpose was not charitable.” We do not agree. Although the Center initially was operated in partnership with a for-profit entity, it is unclear whether its original purpose was noncharitable. The Center‘s original certificate of incorporation is not a part of the record, nor was any testimony elicited regarding whether the stated purpose of the organization was changed in the amendments to the certificate that were filed following the buy out of the for-profit partner. Therefore, to the extent that it is relevant, there is no evidence as to what the Center‘s “original purpose” was. What is certainly relevant is the Center‘s purpose during the tax years for which an exemption was claimed, and that purpose and mission, as stated in the corporate documents to which we previously referred, are most certainly charitable. The provision of long-term health care and spiritual support to the elderly in a nonprofit, nondiscriminatory manner and without regard to individual financial circumstances is a charitable purpose.30
The trial court‘s conclusion that the Center‘s purpose is not charitable is incorrect as a matter of law and is based on a misinterpretation of our prior cases. Relying on, inter alia, United Church of Christ v. West Hartford, 206 Conn. 711, 539 A.2d 573 (1988), the court concluded that our cases do not support the Center‘s contention that “[t]he delivery of health care to the elderly is a charitable purpose.” (Internal quotation marks omitted.) In our view, United Church of Christ does not support such a narrow conception of what constitutes a charitable purpose.
In United Church of Christ, we concluded that the plaintiff corporation‘s property, which was being utilized as an elderly housing complex; id., 714; was not
In this respect, we articulated, consistent with our precedents, a very broad notion of the term “charitable” in United Church of Christ: “This court has recognized that the definition of charitable uses and purposes has expanded with the advancement of civilization and the daily increasing needs of men. . . . It no longer is restricted to mere relief of the destitute or the giving of alms but comprehends activities, not in themselves self-supporting, which are intended to improve the physical, mental and moral condition of the recipients and make it less likely that they will become burdens on society and more likely that they will become useful citizens.” (Citation omitted; internal quotation marks omitted.) Id., 719, quoting Camp Isabella Freedman of Connecticut, Inc. v. Canaan, supra, 147 Conn. 514. We continue to believe that this is the proper approach. In sum, therefore, we conclude that the present case is factually distinct in important ways from United Church of Christ and that, pursuant to the general prin-
B
Self-Supporting Nature of the Institution
The second factor that we have considered is that, in order to serve a charitable purpose, an organization must not be completely self-supporting. E.g., Common Fund v. Fairfield, 228 Conn. 375, 383, 636 A.2d 795 (1994). This factor has been considered to a lesser extent than the primary statutory requirement, and the ad hoc nature of its utilization has led to some confusion. In this context, the town points to the trial court‘s finding that the “Center does not receive, nor is it in need of, outside financial support in the operation of the skilled nursing home facility.” It is on this finding that the town rests its claim that the facility is self-supporting and thus not charitable. We do not agree.
This court has considered the “self-supporting” requirement in three prior cases, and in none of those cases is it particularly well-defined.32 Generally speaking, we have concluded that entirely self-supporting organizations are not charitable in nature. For instance, in Common Fund, we stated that, “[f]or the purpose of determining eligibility for a property tax exemption, a Connecticut property owner is not ‘a corporation organized exclusively for . . . charitable purposes’ . . . if
The connection between the receipt of outside charitable support and the notion of a charitable organization not being self-supporting was made even more explicit in Waterbury First Church Housing, Inc. v. Brown, supra, 170 Conn. 556. In Waterbury First Church Housing, Inc., we evaluated the claim of a nonprofit corporation involved in providing housing for the elderly that it should be exempt from the sales and use tax because it was a charitable organization. Id., 557. We noted that “the requirement that the exempt organization‘s income be based to some measureable extent on sums coming from private sources which are spent for the public weal remains.” (Internal quotation marks omitted.) Id., 563. We concluded that “[i]t [did] not appear from the record that the plaintiff [was] the beneficiary of any gifts from private sources, and the only funds which it ha[d] to distribute consist[ed] of rental income from its tenants and the federal subsidies which it receive[d].” (Emphasis added.) Id., 564. In holding that the plaintiff was not entitled to the tax exemption, we were specifically concerned that we could not find, “on the record before us, that the plaintiff ha[d] shown sufficient private intervention and private effort to earn charitable
Finally, in United Church of Christ v. West Hartford, supra, 206 Conn. 711, we considered a tax exemption claim for property being used for an elderly housing project. See id., 713-14. The cost of constructing and maintaining the project was to be borne almost exclusively by the prospective residents, who each were required to pay an up-front fee of $73,000 for the privilege of occupying a unit. Id., 715. Importantly, each resident was entitled to dwell in the subject housing only as long as he or she was able to live there independently. Id. In addition, each resident was to be charged a monthly fee of $350, which covered all of the required maintenance on the property. Id. In holding that the plaintiff corporation‘s property did not qualify for a charitable exemption under
A common thread in each of these cases is that the organizations in question were designed from the outset to be self-supporting. In every case in which we determined that the institution in question failed to meet the requirement that it not be self-supporting, we noted that there was no reliance on, or expectation of, private charitable support. In other words, to constitute a charitable organization, the entity must be structured in such a way that it is intended to function with the aid of at least some private charitable support and must, in fact, seek out and receive such support. We also agree with
In this case, the trial court‘s finding that the “Center does not receive, nor is it in need of, outside financial support in the operation of the skilled nursing home facility” contradicts uncontested documentary and testimonial evidence presented at trial, and is clearly erroneous. The record plainly indicates that, for each of the years in question, the Center received “outside financial support” in the form of private charitable contributions and testamentary gifts. For the years 2000 through 2005, the Center‘s financial statements reflect individual contributions totaling $41,136, $18,584, $56,563, $33,706, $30,668, and $51,755, respectively. The facility‘s administrator testified that these financial contributions were “extremely helpful . . . for [the Center‘s] bottom line, you know, to make [the Center‘s] debt service [coverage] ratio, definitely.” This evidence alone is sufficient to contradict the trial court‘s finding.33 The record also
We thus examine how the Center uses its excess revenue. The record reflects that the surplus revenue of the Center primarily is used to maintain compliance with the requirements of its CHEFA mortgage. The
The fact that the Center “for several years made payments to the diocese” likewise does not influence our determination of whether the Center is self-supporting or whether its purpose is ultimately charitable. The town‘s reliance on this finding in support of its argument that the Center is self-supporting highlights a flaw inherent in the approach of the trial court and implicitly
We note that both the trial court‘s decision and the town‘s brief rely on language culled from prior cases quoting a passage in
C
Relieving a State Burden
The third factor we have considered in determining whether an entity claiming a charitable tax exemption is organized for a charitable purpose is whether the
The trial court found that “[t]he operation of the . . . Center does not lessen the burden on society or taxpayers since it receives compensation for services rendered.” Closely related to this finding is the court‘s declaration that “[t]here was no financial burden from the operation of the facility either on the . . . Center or on the diocese.” These findings are clearly erroneous. The requirement that a charitable entity relieve a public burden is inextricably tied to the public policy justifying the granting of such exemptions to charitable institutions: “[E]xemptions are made, and can be made lawfully, only in recognition of a public service performed by the beneficiary of the exemption. They are not bestowed, as is too often unthinkingly supposed, as a matter of grace or favor. . . . [T]hey are granted in aid of the accomplishment of a public benefit and for the advancement of the public interest. It is in recognition of their position as an agency in the doing of things which the public, in the performance of its governmental duties, would otherwise be called upon to do at its own expense, or which ought to be done in the public interest and without private intervention would remain undone.” Corbin v. Baldwin, 92 Conn. 99, 107, 101 A. 834 (1917); see also Isaiah 61:1, Inc. v. Bridgeport, supra, 270 Conn. 85 (“when a charitable organization does nothing to make it less likely that [the individuals it services] will become burdens on society and more likely that they will become useful citizens, the subject
This requirement compels an organization seeking charitable status, and the advantage of tax exemption that that status entails, to give something to the state in return for the privilege, either by relieving it of a financial burden or by pursuing a publicly mandated moral obligation. See Corbin v. Baldwin, supra, 92 Conn. 107. The mere fact that the state is not completely relieved of any obligation, and may even partially subsidize the activity, does not necessarily defeat a claim for tax exemption.
Although this court has not directly addressed this requirement with respect to the receipt of state funds by a nursing home, our analysis is informed by the approach taken in other jurisdictions. For instance, in a well reasoned opinion, the Pennsylvania Supreme Court stated that the “test of whether an institution has relieved the government of some of its burden does not require a finding that the institution has fully funded the care of some people who would otherwise be fully funded by the government. The test is whether the institution bears a substantial burden that would otherwise fall to the government. [When a] home pays a substantial portion of the cost for Medicaid patients, who comprise about half of its residents . . . this fulfills the requirement that the home relieve the government of some of its burden.” St. Margaret Seneca Place v. Board of Property Assessment, Appeals & Review, supra, 536 Pa. 487. The Michigan Supreme Court has similarly declared: “[R]elieving [patients] from disease or suffering is lessening the burden of government. In other words, [the purportedly charitable entity] does not have to prove that its actions lessen the burden of government. Rather, it has to prove . . . that it reliev[es] [its patients] from disease, suffering or constraint, which
The Center clearly undertakes a “financial burden” by virtue of the fact—which the trial court expressly recognized—that reimbursement under the Medicaid program “does not fully [compensate] the [Center] for actual patient care costs.”38 This funding gap relieves the state of having to shoulder the entire financial burden of caring for the indigent elderly. Moreover, under state law, as well as its own policy, the Center is prohibited from discriminating on the basis of a patient‘s ability to pay. Thus, because the Center cannot plan its patient mix in advance, it cannot predict with any certainty how large a gap in funding may exist for any
It is important to note that, as long as a corporation is “organized and operated for the public welfare without profit to itself or any individual . . . [t]he mere fact that some patients pay for part or all of their care does not destroy its charitable character.” Boardman v. Burlingame, 123 Conn. 646, 653-54, 197 A. 761 (1938). Indeed, the trial court‘s conclusion that receiving state subsidies for health care services means that no public burden is relieved ignores the realities of the modern health care delivery system in the United States and
The trial court also found that the “Center does not admit indigent patients at the expense of the . . . Center since all patients at the Center are either supported by Medicare, Medicaid or self-supporting.” This finding also ignores the realities of modern health care. First, under the current health care system in this country, accepting those patients who are eligible, or keeping those who thereafter become eligible, for Medicaid is the modern equivalent of caring for the indigent.42 “[T]he absence of indigent residents who receive no government support is not surprising, and is certainly not, standing alone, enough to disqualify a nursing home from an exemption as a purely public charity.” St. Margaret Seneca Place v. Board of Property Assessment, Appeals & Review, supra, 536 Pa. 483.
In order to qualify for Medicaid, an individual must establish that he or she is financially needy by virtue 4142
of the lack of significant income and assets. See
We conclude that the Center‘s receipt of taxpayer funded government assistance alone is irrelevant to the question of whether it relieves a burden that would otherwise be borne by the state. The trial court specifically found that “Medicaid does not fully reimburse the [Center] for actual patient care costs.” This funding shortfall and the accompanying risk that payments from private paying patients and charitable contributions will fail to make up for the funding shortfall are sufficient to satisfy the requirement that the Center relieve a burden on society.43 As the Pennsylvania Supreme Court
D
Private Paying Patients
The trial court found that “[s]ervices provided to private pay[ing] patients . . . are simply not charitable services . . . .” Both the town and the court seem to equate the term “charitable” with “free,” and conclude that the acceptance of private paying patients renders the Center‘s purpose not exclusively charitable. We do not agree. The trial court‘s conclusion that merely charging a fee to those who have the means to pay renders the Center‘s purpose not exclusively charitable is not in keeping with our precedents, and is belied by the realities of the modern health care system.
This court never has held that accepting payment or charging a fee, without more, alters the character of a charitable or otherwise tax-exempt organization. In
The cases from our sister jurisdictions are consistent with this approach. For instance, the Ohio Supreme Court has described the situation plainly: “It is the use of property rather than the fact that revenues are collected and received from property which is controlling. . . . Nor do reasonable charges exacted from beneficiaries of a charitable institution detract from its eleemosynary character.” (Citations omitted.) Bowers v. Akron City Hospital, 16 Ohio St. 2d 94, 96, 243 N.E.2d 95 (1968). Other states that have examined this issue are in accord. See, e.g., State Board of Tax Commissioners v. Methodist Home for the Aged of the Indiana Conference of the Methodist Church, Inc., 143 Ind. App. 419, 425, 241 N.E.2d 84 (1968) (“[t]o qualify as a charity does not require that [the entity] have an exclusive relationship to the poor, and its charitable status is not destroyed by the charging of fees for admission and maintenance” [internal quotation marks omitted]), quoting Bozeman Deaconess Foundation v. Ford, 151 Mont. 143, 148, 439 P.2d 915 (1968); Knox County Property Tax Assessment Board of Appeals v. Grandview Care, Inc., supra, 826 N.E.2d 184 (“With respect to homes or facilities that provide comfort and care to the aged . . . ‘charitable’ is not necessarily the equivalent of ‘free.’ . . . [T]he fact that residents of such facilities are charged for their stays does not necessarily negate the charitable
E
Summary
There are three elements relevant to our analysis of the first Isaiah 61:1 factor. The first element of the
We are convinced, on the basis of the foregoing analysis, that the trial court‘s determinations that the Center “is simply not a charity” and that “its original purpose was not charitable” are clearly erroneous, legally incorrect and unsupported by the evidence in the record. To the contrary, the Center‘s corporate charter, bylaws and mission statement evince a classic charitable purpose of operating a nonprofit “chronic and convalescent care nursing home” in order “to fulfill the goals and aspirations of the Roman Catholic Church in its ministry and service to the elderly and to those who are ill located in the [d]iocese . . . regardless of their race, color, creed or religion.” These purposes fall well within the broad parameters set forth in previous cases and clearly represent purposes befitting an exclusively charitable
II
EXCLUSIVE USE FOR CHARITABLE PURPOSES
We next undertake the second step of our analysis under
We first endeavor to define the statutory term “used exclusively” and apply it to the facts of this case. This is an intensely fact-bound inquiry. “Whether the property for which exemption is claimed is actually and exclusively used for [charitable] purposes must be determined from the facts of the case.” Camp Isabella Freedman of Connecticut, Inc. v. Canaan, supra, 147 Conn. 514; see also Lutheran Home, Inc. v. Board of County Commissioners, 211 Kan. 270, 276-77, 505 P.2d 1118 (1973) (“a case involving a determination of that which is charitable must be decided upon its own particular facts or circumstances“). Although the legislature has not defined the exact meaning of the term “used exclusively,” and the term seems to have heretofore defied precise definition, our analysis is guided by the strict construction that we must apply to statutory provisions bestowing on a taxpayer the privilege of a tax exemption. E.g., Fanny J. Crosby Memorial, Inc. v. Bridgeport, supra, 262 Conn. 220. In order to satisfy this exclusivity requirement, “[a]n institution must be exclusively charitable, not only in the purposes for which it is formed and to which its property is dedicated, but also in the manner and means it adopts for the accomplishment of those purposes.” (Emphasis added; internal quotation marks omitted.) H.O.R.S.E. of Connecticut, Inc. v. Washington, 258 Conn. 553, 563, 783 A.2d 993 (2001). A closer examination of cases that turn on this issue will be helpful in expanding on this “manner and means” approach.
The defendant argued that the plaintiff‘s property was not being used exclusively for a charitable purpose because there was evidence that the plaintiff may have boarded some horses commercially in order to make money to support the charitable portion of its operation.
Moreover, the record is devoid of any evidence to indicate that the Center has satisfied the requirements
We conclude that the approach taken in St. Bridget Convent Corp. is a sound one, and is the approach dictated by
III
EXEMPTION OF THE CENTER‘S CHAPEL
* * *
The Center‘s chapel clearly embodies the characteristics of a house of worship set forth in Masonic Building Assn. of Stamford, Connecticut, Inc.54 The evidence
Our conclusion that the Center qualifies as a religious organization for purposes of
In sum, we conclude that the trial court improperly determined that the Center‘s chapel was not entitled to a tax exemption pursuant to
The judgment is reversed in part and the case is remanded with direction to render judgment sustaining the Center‘s appeal with respect to that portion of the Center‘s property devoted to use as a chapel.
In this opinion NORCOTT, KATZ and VERTEFEUILLE, Js., concurred.
SCHALLER, J., concurring in part and dissenting in part. I agree with the majority‘s conclusion that the plaintiff, St. Joseph‘s Living Center, Inc. (Center), is not entitled to a tax exemption by the defendant, the town of Windham, pursuant to
Although it may be useful to clarify the law with respect to these types of tax appeals, I believe this goal should be accomplished in this case without deciding whether the Center was organized exclusively for a charitable purpose. As the majority recognizes, in Isaiah 61:1, Inc. v. Bridgeport, 270 Conn. 69, 76-77, 851 A.2d 277 (2004), we set forth a five part test to determine whether a subject real property qualifies for a tax exemption under
In reaching the question of whether the Center was organized exclusively for a charitable purpose, the majority determines, contrary to the trial court, that it was so organized.5 I disagree with the majority‘s conclu-
Furthermore, “[t]he trial court‘s findings are binding upon this court unless they are clearly erroneous in light of the evidence and the pleadings in the record as a whole. . . . We cannot retry the facts or pass on the credibility of the witnesses.” (Emphasis added; internal quotation marks omitted.) Tyler‘s Cove Assn., Inc. v. Middlebury, 44 Conn. App. 517, 527-28, 690 A.2d 412 (1997). In short, “[t]he conclusions of the trial court are to be tested by [its] finding[s]. State v. Perkins, 146 Conn. 518, 522, 152 A.2d 627 (1959); Gorman v. American Sumatra Tobacco Corp., 146 Conn. 383, 386, 151 A.2d 341 (1959).” Camp Isabella Freedman of Connecticut, Inc. v. Canaan, 147 Conn. 510, 513, 162 A.2d 700 (1960).
Throughout the majority‘s analysis of whether the Center has been organized exclusively for charitable purposes, however, it disregards the findings of the trial court and essentially assumes the function of the finder of fact. In doing so, the majority ultimately decides that the trial court could have, and therefore should have, reached another conclusion. The majority‘s review is more akin to de novo review than to the deferential review required by the clearly erroneous standard. In making its alternate findings and conclusions, the majority relies heavily on “undisputed” testimony, which it credits, despite the fact that the trial court neither made such findings nor passed on the credibility of the witnesses on whose testimony the majority relies. “Undisputed” facts are not the equivalent of “found” facts. Our law does not require the finder of fact to accept the testimony of a witness even if that testimony is undisputed. Barrila v. Blake, 190 Conn. 631, 639, 461 A.2d 1375 (1983) (“[a] trier of fact is free to reject
With respect to its analysis as to whether the Center is self-supporting, the majority concludes that the trial court‘s finding that the “Center does not receive, nor is it in need of, outside financial support in the operation of the skilled nursing home facility” was clearly erroneous. The majority‘s conclusion is based, in part, on its own “findings of fact,” which include findings that: (1) the Roman Catholic Diocese of Norwich (diocese) saved the Center up to $120,000 per year in health care costs; and (2) the Center received valuable volunteer contributions, presumably without which the Center could not operate. The trial court neither made such findings nor indicated whether it believed or disbelieved such testimony.
The majority‘s “finding” with respect to health care cost savings was based on the testimony of Maureen Kolaczenko, the Center‘s administrator, whose testimony the trial court may or may not have credited. More importantly, this testimony was largely irrelevant to the question before the trial court. The Center appealed the denial of a tax exemption for the tax years
The majority‘s “finding” with respect to the value of the volunteer contributions is similarly flawed. First,
Finally, the majority‘s principal reliance on the Center‘s receipt of outside financial donations to conclude that it is not self-supporting does not warrant a conclusion that the trial court‘s factual findings were clearly erroneous, if that standard is to have any meaning. At the outset, it is significant that the trial court made no findings with respect to these contributions. Even assuming, however, that the Center‘s financial statements are accurate in this respect, those statements would support only a finding that in the relevant tax years the Center received outside financial donations of $33,706 in 2003, $30,668 in 2004, and $51,755 in 2005. In applying the comprehensive approach advocated by the majority, with which I agree, these contributions, when viewed in light of the trial court‘s other findings, more than adequately support the trial court‘s conclusion. The trial court found that “[t]he . . . Center generates an excess of operating income over operating expenses and for several years made payments to the diocese . . . .” These “voluntary” payments totaled $84,000 in 2003, $84,000 in 2004 and $63,000 in 2005. The Center‘s voluntary payments, therefore, exceeded
In short, our law requires a reviewing court to evaluate the trial court‘s conclusions by the trial court‘s findings, and not by the reviewing court‘s “findings” made on the basis of its own evidentiary review, unfettered by the trial court‘s findings. See Camp Isabella Freedman of Connecticut, Inc. v. Canaan, supra, 147 Conn. 513. In reaching an issue that is unnecessary to the resolution of this case, the majority improperly tests the trial court‘s conclusions on the basis of its own findings. The majority‘s resolution of this issue, therefore, is based on an evidentiary review of the record that lacks the authenticity of a trial court‘s fact-finding review. In the process, the majority credits various pieces of undisputed evidence that have not been scrutinized by the trial court. The conclusion—the opposite of the trial court‘s conclusion—lacks the proper evidentiary foundation. Accordingly, I concur in the result and
With respect to the majority‘s conclusion that the chapel qualifies for a tax exemption under
Rather than order a remand, however, the majority engages in what amounts to de novo review of the
In short, the principal issues before the trial court in this case were whether the Center was organized
For the foregoing reasons, I respectfully concur in part and dissent in part.
LIBERTY MUTUAL INSURANCE COMPANY v. LONE STAR INDUSTRIES, INC., ET AL.
(SC 18199)
Norcott, Palmer, Vertefeuille, Sullivan and Sheldon, Js.
Notes
***
“(7) Property used for scientific, educational, literary, historical or charitable purposes. Exception. Subject to the provisions of sections 12-87 and 12-88, the real property of, or held in trust for, a corporation organized exclusively for scientific, educational, literary, historical or charitable purposes or for two or more such purposes and used exclusively for carrying out one or more of such purposes ... provided (A) any officer, member or employee thereof does not receive or at any future time shall not receive any pecuniary profit from the operations thereof, except reasonable compensation for services in effecting one or more of such purposes or as proper beneficiary of its strictly charitable purposes ....”
All references to
***
“(13) Houses of religious worship. Subject to the provisions of section 12-88, houses of religious worship, the land on which they stand, their pews, furniture and equipment owned by, or held in trust for the use of, any religious organization ....” The majority‘s discussion, in footnote 27, regarding the “organized exclusively for a charitable purpose” prong, calls into question the statutory analysis. The majority states that part I A of the majority opinion, which looks to a corporation‘s charter and bylaws to determine whether the entity is organized exclusively for a charitable purpose, is the sine qua non with respect to this first statutory prong. The opinion then states that the other factors, discussed in parts I B, I C and I D of the majority opinion, “should be considered under the totality of the circumstances to determine whether the organization is, in fact, fulfilling its charitable purpose.” It is unclear, however, whether an entity that satisfies part I A, but fails any or all of parts I B, I C and/or I D, passes the “organized exclusively” prong. If part I A truly is the sine qua non, failure to fulfill parts I B, I C or I D should not matter. If that is the case, what is the point of analyzing parts I B, I C or I D? On the other hand, if failure to satisfy parts I B, I C, and/or I D does matter, part I A would not be the sine qua non. Moreover, the practical—or conceptual—difference between fulfilling a charitable purpose and being in furtherance of a charitable purpose is unclear, because the former will now be part of the organized exclusively prong and the latter will be part of the used exclusively prong. Despite the majority‘s admonition that these analyses should not be confused, confusion seems very likely to occur. The result concerning the organized exclusively prong that the majority goes to such lengths to achieve comes at the cost of sacrificing consistency in the statutory analysis that it strives to clarify in the body of the opinion. I suggest that it would be more appropriate to analyze the factors discussed in parts I B and I D of the majority opinion, namely, whether the entity is self-supporting and accepts private paying patients, under the “used exclusively” prong rather than the “organized exclusively” prong, whereas the discussion in part I C of the majority opinion, as to whether the entity relieves the state of a burden, should be subsumed within the analysis concerning charitable purpose in part I A of the majority opinion. The majority opinion appears to concede this point, in part, when its asserts that “the notion of ‘self-supporting’ could just as appropriately be discussed in the exclusive use analysis. . . .”
“An organization described in subsection (c) or (d) ... shall be exempt from taxation under this subtitle . . . .
“(c) List of exempt organizations
“The following organizations are referred to in subsection (a):
***
“(3) Corporations ... organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes . . . .”
***
“(12) Personal property of religious organizations devoted to religious or charitable use. Personal property within the state owned by, or held in trust for, a Connecticut religious organization, whether or not incorporated, if the principal or income is used or appropriated for religious or charitable purposes or both . . . .” I believe this explains the trial court‘s statement that “no claim has been made that the chapel has a separate physical existence from the rest of the real estate, including the land.” Essentially, the trial court appears to be asserting that no claim had been made that the chapel was personal property, as opposed to real property.
“(1) Be prohibited from discriminating against indigent persons who apply for admission to such facility on the basis of source of payment. Except as otherwise provided by law, all applicants for admission to such facility shall be admitted in the order in which the applicants apply for admission . . . .”
“Q. . . . Would [the Center] have any policy with regard to whether or not a bed would be available for [a] particular patient or perhaps someone coming from rehabilitation?
“A. We really take first come first serve[d]. But usually, there‘s the twenty-five beds we try to reserve for short term if we know someone is in the hospital . . . . [S]o we kind of reserve the bed for them knowing that they‘re coming. But if we don‘t have anyone coming . . . we don‘t discriminate . . . .”
“A. Oh, yes. Just like all of our other institutions.
“Q. Are there any shareholders?
“A. No, no. And nobody gets any money, none of the board members. They get a lot of grief, but they don‘t get any money. No, we serve voluntarily, all of us.”
“Q. And wouldn‘t you agree with me then that [the Center] is self-supporting?
“A. Yes.”
To the extent that this statement is relevant, it represents a legal conclusion that the witness was not qualified to make. Furthermore, there is no indication that the trial court relied on this testimony in making its finding.“Q. And so is it fair to say that you try to make it up [the gap in Medicaid funding] on the private rates?
“A. Well, we have to make up our—we do make up our money. The private rates will reflect more of the true cost of the care.”
In any case, we assume that, to remain competitive for private paying patients, the Center‘s rates must be commensurate with those charged by similar nursing homes in the state.* * *
“(16) Hospitals and sanatoriums. Subject to the provisions of section 12-88, all property of, or held in trust for, any Connecticut hospital society or corporation or sanatorium, provided (a) no officer, member or employee thereof receives or, at any future time, shall receive any pecuniary profit from the operations thereof, except reasonable compensation for services in the conduct of its affairs . . . .”
Yale University, Loomis Institute and Arnold College for Hygiene & Physical Education were decided according to the more liberal approach to statutory construction that previously had been applied to educational institutions claiming a property tax exemption and are thus inapposite to the present case in terms of defining the term “exclusive use.” See footnote 22 of this opinion. Furthermore, in First Unitarian Society, this court reasoned that the renting of the church‘s “audience-room” when not in use for religious services allowed the church to provide such services for free, thus promoting the legislative policy of the “encouragement of religion” underlying the tax exemption. Because we were dealing with a different statutory exemption under different circumstances, we find that the reasoning of First Unitarian Society also is unhelpful to our analysis in the present case.
“Q. . . . Are there any—at [the] Center—are the beds designated for particular uses?
“A. No.”