Peacehealth St. Joseph Med. Ctr. v. State

• Decision Date: 06 August 2020
• Docket Number: No. 97557-4,97557-4
• Court: Washington Supreme Court
• Parties: PEACEHEALTH ST. JOSEPH MEDICAL CENTER and PeaceHealth St. John Medical Center, Petitioner, v. State of Washington, DEPARTMENT OF REVENUE, Respondent.

196 Wash.2d 1

468 P.3d 1056

PEACEHEALTH ST. JOSEPH MEDICAL CENTER and PeaceHealth St. John Medical Center, Petitioner,

v.State of Washington, DEPARTMENT OF REVENUE, Respondent.

No. 97557-4

Supreme Court of Washington.

Argued May 26, 2020

Filed August 6, 2020

Dirk Jay Giseburt, Michele G. Radosevich, David Maas, Davis Wright Tremaine LLP, 920 5th Ave. Ste. 3300, Seattle, WA, 98104-1610, for Petitioners.

Rosann Fitzpatrick, Washington Attorney General, Po Box 40123, Olympia, WA, 98504-0123, Dept. of Revenue A.G. Office, Attorney at Law, 7141 Cleanwater Lane Sw, Po Box 40123, Olympia, WA, 98504-0123, Tera Marie Heintz, Office of the Attorney General, 1125 Washington Street Se Box 40100, Olympia, WA, 98504-0001, for Respondent.

Daniel Ryan Baker, Attorney General's Office - UW Division, 4333 Brooklyn Ave. Ne, Seattle, WA, 98195-9475, for Amicus Curiae Harborview Medical Center.

Robert Lee Mahon III, Erin Earl, Perkins Coie LLP, 1201 3rd Ave. Ste. 4900, Seattle, WA, 98101-3095, for Amici Curiae Seattle Children's Hospital, and Seattle Cancer Care Alliance.

Carla Marie Dewberry, Christopher M. Wyant, K&L Gates LLP, 925 4th Ave. Ste. 2900, Seattle, WA, 98104-1158, for Amicus Curiae Washington State Hospital Association.

OWENS, J.

¶ 1 RCW 82.04.4311 provides a business and occupation (B&O) tax deduction to public and nonprofit hospitals on compensation they receive from both Washington State and the federal government for health care services subsidized under certain government-funded programs, such as Medicaid and Children's Health Insurance Programs (CHIP). Petitioners PeaceHealth St. Joseph Medical Center and PeaceHealth St. John Medical Center (PeaceHealth) argue that, under RCW 82.04.4311 ’s plain language, qualifying Washington hospitals are entitled to a B&O tax refund and deduction on compensation they receive from any state's CHIP or Medicaid programs, not just Washington's. PeaceHealth alternatively argues that by excluding compensation that qualifying Washington hospitals receive from other states’ CHIP and Medicaid programs, the department unlawfully penalizes those hospitals that serve out-of-state patients, thus violating the dormant Commerce Clause of the United States Constitution.

¶ 2 In holding that RCW 82.04.4311 ’s deduction excludes compensation that qualifying hospitals receive from other states’ CHIP and Medicaid programs, the Court of Appeals used the series-qualifier rule of statutory construction (in which a postpositive modifier normally applies to all nouns or verbs in a series when there is a straightforward, parallel construction) in lieu of the last antecedent rule (in which qualifying words or phrases modify only the immediately preceding words or phrases). We hold that the Court of Appeals properly applied the series-qualifier rule to delimit the scope of RCW 82.04.4311 ’s deduction, thus we affirm the Court of Appeals’ reasoning on this issue. Additionally, because we find that RCW 82.04.4311 supports a traditional government function without any differential treatment favoring local private entities over similar out-of-state interests, we hold that RCW 82.04.4311 is constitutional under the government function exemption to the dormant Commerce Clause.

FACTS

¶ 3 In 1980, the legislature enacted former RCW 82.04.4297, which created a B&O tax exemption for "amounts received from the United States" or "from the state of Washington ... as compensation for, or to support, health or social welfare services rendered by a health or social welfare organization" (i.e., Medicaid). LAWS OF 1980, ch. 37, § 17. This original deduction was limited to compensation received from Washington State and the federal government and did not cover compensation received from other states’ health care programs.¹ See id .

¶ 4 In subsequent years, the legislature observed that third-party-managed health care organizations had assumed an increasingly greater role in the provision and disbursement of covered benefits, leading to a decrease in direct payments from both the federal government and Washington to qualifying hospitals. See LAWS OF 2002, ch. 314, § 1. The legislature concluded that "the tax status of these amounts should not depend on whether the amounts are received directly from the qualifying program or through a managed health care organization under contract to manage benefits for a qualifying program." Id. Thus, the legislature amended RCW 82.04.4297 and created RCW 82.04.4311. See id . §§ 1-3. That revised statute, under which PeaceHealth brings this current action, now states that

[a] public ... or a nonprofit hospital ... may deduct from the measure of tax amounts received as compensation for health care services covered under the federal medicare program authorized under Title XVIII of the federal social security act; medical assistance, children's health, or other program under chapter 74.09 RCW ; or for the state of Washington basic health plan under chapter 70.47 RCW.

RCW 82.04.4311 (emphasis added).

¶ 5 PeaceHealth applied for a refund from the Department of Revenue for the period of December 1, 2007, through December 31, 2008, seeking a deduction for all taxes paid on out-of-state Medicaid and CHIP revenue during this time period. PeaceHealth relies on the second clause of RCW 82.04.4311, which entitles qualifying hospitals to claim a B&O deduction on compensation received under "medical assistance, children's health, or other program under chapter 74.09 RCW."² The department denied PeaceHealth's request, reasoning that RCW 82.04.4311 ’s deduction for compensation received from CHIP and Medicaid programs authorized "under chapter 74.09 RCW" necessarily excludes compensation received from other states’ CHIP and Medicaid programs. PeaceHealth appealed the department's decision to the Board of Tax Appeals, and the board granted PeaceHealth's motion for summary judgment, holding that PeaceHealth was entitled to the deduction. The department petitioned for judicial review, and the superior court reversed the board's decision. The Court of Appeals affirmed, PeaceHealth St. Joseph Med. Ctr. v. Dep't of Revenue , 9 Wash. App. 2d 775, 785, 449 P.3d 676 (2019), and PeaceHealth petitioned for review, which was granted. PeaceHealth St. Joseph Med. Ctr. v. Dep't of Revenue , 194 Wash.2d 1016, 455 P.3d 134 (2020).

ANALYSIS

1. RCW 82.04.4311 ’s Deduction Does Not Extend to Compensation That Qualifying Hospitals Receive from Other States’ Medicaid and CHIP programs

¶ 6 The party seeking a tax deduction bears the burden of showing that it is entitled to the benefit sought, and any doubt or ambiguity as to the availability of a statutory benefit is "to be construed strictly, though fairly and in keeping with the ordinary meaning of [the statute's] language, against the taxpayer." Group Health Co-op. of Puget Sound, Inc. v. Wash. State Tax Comm'n , 72 Wash.2d 422, 429, 433 P.2d 201 (1967).

¶ 7 We review questions of statutory interpretation de novo and interpret statutes so as to give effect to the legislature's intentions. State v. Bunker , 169 Wash.2d 571, 577-78, 238 P.3d 487 (2010). We derive legislative intent solely from the plain language of the statute, considering the text of the provision, the context of the statute, related provisions, amendments, and the statutory scheme as a whole. First Student, Inc. v. Dep't of Revenue , 194 Wash.2d 707, 710, 451 P.3d 1094 (2019) (citing Cashmere Valley Bank v. Dep't of Revenue , 181 Wash.2d 622, 631, 334 P.3d 1100 (2014) ). We regularly employ traditional rules of grammar when discerning a statute's plain language. Bunker , 169 Wash.2d at 578, 238 P.3d 487. When a statute's plain language is unambiguous, meaning it is subject to only one reasonable interpretation, our inquiry ends, and we will not resort to interpretive tools such as legislative history. Spokane County v. Dep't of Fish & Wildlife , 192 Wash.2d 453, 458, 430 P.3d 655 (2018) (citing State v. Velasquez , 176 Wash.2d 333, 336, 292 P.3d 92 (2013) ).

¶ 8 The contested clause in RCW 82.04.4311 establishes a deduction for "compensation for health care services covered under ... medical assistance, children's health, or other program under chapter 74.09 RCW." PeaceHealth argues that we should apply the last antecedent rule when interpreting this provision. The "last antecedent rule" states that qualifying words or phrases modify only those words or phrases that immediately precede them. BLACK'S LAW DICTIONARY 1598-99 (11th ed. 2019). As applied here, the phrase "under chapter 74.09 RCW" would modify only the immediately preceding phrase "other program" and would not be read to modify "medical assistance" or "children's health." Consequently, under this reading, compensation that qualifying hospitals receive from any state's CHIP or Medicaid programs would theoretically qualify for the statutory deduction.

¶ 9 Conversely, citing "the overall structure of Washington's subsidized health programs within chapter 74.09 RCW," the Court of Appeals applied the series-qualifier rule. PeaceHealth , 9 Wash. App. 2d at 780, 449 P.3d 676. This rule provides that "when there is a straightforward, parallel construction that involves all nouns or verbs in a series, a prepositive or postpositive modifier normally applies to the entire series." BLACK'S LAW DICTIONARY , supra , 1642. Applied here, the contested clause is understood to read "medical assistance [program under chapter 74.09 RCW], children's health [program under chapter 74.09 RCW], or other program under chapter 74.09 RCW." RCW 82.04.4311. Accordingly, under this reading, RCW 82.04.4311 ’s deduction excludes compensation hospitals receive from other states’ CHIP or Medicaid programs.

¶ 10 Analyzing both the context of the contested clause and the broader statutory scheme of RCW 82.04.4311 as a whole, we hold that the Court of Appeals properly applied the series-qualifier rule. See Lockhart v. United States , ––– U.S. ––––, 136 S. Ct. 958, 963, 194 L. Ed. 2d 48 (20...