Starke Cnty. Assessor v. Porter-Starke Servs., Inc., Cause No. 71T10–1701–TA–00002

Citation88 N.E.3d 814
Decision Date08 December 2017
Docket NumberCause No. 71T10–1701–TA–00002
Parties STARKE COUNTY ASSESSOR, Petitioner, v. PORTER–STARKE SERVICES, INC., Respondent.
CourtTax Court of Indiana

ATTORNEY FOR PETITIONER: MARTIN R. LUCAS, ATTORNEY AT LAW, North Judson, IN

ATTORNEYS FOR RESPONDENT: KEVIN G. KERR, TODD A. LEETH, HOEPPNER WAGNER & EVANS LLP, Valparaiso, IN

WENTWORTH, J.

The Starke County Assessor challenges the Indiana Board of Tax Review's final determination that Porter–Starke Services, Inc. was entitled to an 81% charitable purposes exemption for real property it owned during the 2015 tax year. The Court affirms the Indiana Board's final determination.

FACTS AND PROCEDURAL HISTORY

Porter–Starke is an Indiana and federal non-profit corporation that provides, among other things, mental health services. (Cert. Admin. R. at 2, 84.) Its real property at issue is an 8,239 square-foot medical building situated on a 1.147 acre lot located in Starke County, Indiana. (Cert. Admin. R. at 5, 11 – 12.) During 2015, Porter–Starke leased 1,591 square-feet of its building to a third party. (Cert. Admin. R. at 31 ¶ 11, 71, 82.)

During the year at issue, Porter–Starke operated a community mental health center ("CMHC") certified by the Indiana Family and Social Services Administration. (See Cert. Admin. R. at 103–04.) As a CMHC, Porter–Starke administers programs that provide, among other things, medical and psychiatric care, addiction treatment, nursing, counseling, therapy, and training to mentally ill, chronically addicted, and emotionally disturbed individuals. (Cert. Admin. R. at 200–03, 206, 229–30.) It provides these services to long-and short-term patients of all ages. (Cert. Admin. R. at 201–02, 208–09.) These services are overseen by an unpaid board of directors and provided by both volunteers and paid employees, including a licensed psychiatrist and a medical doctor. (Cert. Admin. R. at 205–06, 222–23, 241.) Moreover, as a CMHC, Porter–Starke is subject to oversight by the State Board of Accounts, which requires an annual audit, and the State, which audits its medical records. (Cert. Admin. R. at 233–34.)

Porter–Starke receives subsidies and other financial assistance from various governmental sources, including Starke County, the state of Indiana, and federal grants. (Cert. Admin. R. at 213–14, 220, 226–27, 235–41.) In addition, Porter–Starke charges its patients fees for its services, but it discounts those fees based on the patient's ability to pay and does not refuse service to those unable to pay. (Cert. Admin. R. at 154, 230, 240–41.)

On April 15, 2015, Porter–Starke filed an Application for Property Tax Exemption with the Starke County Property Tax Assessment Board of Appeals (PTABOA) for the 2015 tax year seeking a charitable purposes exemption for 100% of its property, claiming it was used exclusively to operate the CMHC. The PTABOA denied the exemption, and Porter–Starke appealed to the Indiana Board.

The Indiana Board held a hearing on August 10, 2016, and issued its final determination on December 7, 2016. The Indiana Board found that Porter–Starke had established 1) that 81% of its property was used exclusively for charitable purposes, providing mental health services as a certified CMHC, and 2) that it provided a public benefit by fulfilling an essential government obligation that lessened the burden that would otherwise fall on local law enforcement and correctional resources to address mental health issues.1 (Cert. Admin. R. at 37–38 ¶¶ 35–38, 40–41 ¶¶ 44–48.) Accordingly, the Indiana Board granted Porter–Starke a charitable purposes exemption for 81% of its real property.2 (Cert. Admin. R. at 41 ¶ 50.)

On January 10, 2017, the Assessor initiated this original tax appeal. On June 30, 2017, the Court heard the parties' oral arguments. Additional facts will be provided as necessary.

STANDARD OF REVIEW

The Court gives great deference to decisions by the Indiana Board when it acts within its authority. Marineland Gardens Cmty. Ass'n v. Kosciusko Cnty. Assessor, 26 N.E.3d 1087, 1089 (Ind. Tax Ct. 2015). The Court, however, may reverse a final determination by the Indiana Board only if it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; contrary to constitutional right, power, privilege, or immunity; in excess of or short of statutory jurisdiction, authority, or limitations; without observance of procedure required by law; or unsupported by substantial or reliable evidence. IND. CODE § 33–26–6–6(e)(1)(5) (2017). As the party appealing the Indiana Board's final determination, the Assessor bears the burden to prove it is invalid based on the evidence presented to the Indiana Board. See Johnson Cnty. Prop. Tax Assessment Bd. of Appeals v. KC Propco LLC, 28 N.E.3d 370, 374 (Ind. Tax Ct. 2015).

LAW

As a general rule, all tangible property in Indiana is subject to taxation. IND. CODE § 6–1.1–2–1 (2015) ; Hamilton Cnty. Prop. Tax Assessment Bd. of Appeals v. Oaken Bucket Partners, LLC, 938 N.E.2d 654, 656 (Ind. 2010). Nevertheless, the Indiana Constitution allows the Legislature to exempt property from taxation if it is used for municipal, educational, literary, scientific, religious or charitable purposes. IND. CONST. art. 10, § 1 (c)(1). To that end, the Legislature has enacted a property tax exemption for property "owned, occupied, and used" for charitable purposes. IND. CODE § 6–1.1–10–16(a) (2015). The "charitable purposes exemption" includes the land on which an exempt building is situated and the personal property used in pursuit of a charitable purpose. See I.C. § 6–1.1–10–16(c), (e).

The charitable purposes exemption is not susceptible to bright-line tests or other abbreviated inquiries, and each exemption request stands on its own facts. See, e.g., Jamestown Homes of Mishawaka, Inc. v. St. Joseph Cnty. Assessor, 914 N.E.2d 13, 15 (Ind. Tax Ct. 2009), review denied. Thus, property is exempt only if the evidence presented to the Indiana Board shows that it is owned, occupied, and used for a charitable purpose. Trinity Episcopal Church v. State Bd. of Tax Comm'rs, 694 N.E.2d 816, 818–19 (Ind. Tax Ct. 1998).

For purposes of the exemption, the term "charitable purpose" is defined and understood in its broadest constitutional sense. Indianapolis Elks Bldg. Corp. v. State Bd. of Tax Comm'rs, 145 Ind.App. 522, 251 N.E.2d 673, 682 (1969). A charitable purpose is established when a taxpayer provides evidence to the Indiana Board showing 1) "relief of human want ... manifested by obviously charitable acts different from the everyday purposes and activities of man in general[ ]" and 2) that a benefit sufficient to justify the loss of tax revenue inures to the public through these acts. Id. at 683 ; see also Tipton Cnty. Health Care Found., Inc. v. Tipton Cnty. Assessor, 961 N.E.2d 1048, 1051–52 (Ind. Tax Ct. 2012).

ANALYSIS

On appeal, the Assessor claims that the Indiana Board's final determination must be reversed for two reasons. First, the Assessor claims that the final determination is contrary to law because it found the provision of mental health services by an I.R.C. § 501(c)(3) non-profit corporation certified as a CMHC is entitled per se to a charitable purposes exemption. (Appellant's Br. ("Pet'r Br.") at 11–13; Appellant's Reply Br. ("Pet'r Reply Br.") at 2– 4.) Second, the Assessor contends that the final determination is not supported by substantial evidence because Porter–Starke failed to present evidence that showed a sufficient public benefit to justify the exemption.3 (Pet'r Br. at 5–6, 18–19; Oral Arg. Tr. at 17 – 28.)

I. Per Se Exemptions

The Assessor first claims that the Indiana Board erred in granting Porter–Starke a property tax exemption based on finding mental health services provided by an I.R.C. § 501(c)(3) certified as a CMHC is entitled per se to a charitable purposes exemption. (See Pet'r Br. at 11–13.) The Assessor maintains that Knox County Property Tax Assessment Board of Appeals v. Grandview Care, Inc., 826 N.E.2d 177 (Ind. Tax Ct. 2005), suggests "that elder care was essentially per se exempt from property taxation, at least when conducted by a non-profit corporation." (Pet'r Br. at 10 (emphasis added).) The Assessor then explains that "[b]y per se exempt, [it] means that the taxpayer is relieved from the burden of proving that it operates in a financially charitable manner within the ordinary meaning of charity." (Pet'r Br. at 10.)

The Assessor agrees that providing mental health services constitutes good and noble deeds like the elder care services at issue in Grandview. (Cert. Admin. R. at 261; Oral Arg. Tr. at 48.) Nonetheless, the Assessor claims that the Indiana Board relied on Grandview to grant a per se exemption based on good deeds alone, contrary to more recent authority that requires "a more rigorous review of the financial operation of parties pursuing the charitable exemption." (Pet'r Br. at 10–12.) See also Housing P'ships, Inc. v. Owens, 10 N.E.3d 1057, 1060–61 (Ind. Tax Ct. 2014), reh'g granted, 17 N.E.3d 403 (Ind. Tax Ct. 2014) ; Tipton Cnty. Health Care Found., 961 N.E.2d at 1051–52.

Grandview, TiptonCountyHealthCareFoundation, and HousingPartnerships each evaluate whether property is entitled to a charitable purposes exemption by analyzing whether the taxpayer's acts both relieve human want and provide a public benefit sufficient to justify the loss of tax revenue. See Housing P'ships, 10 N.E.3d at 1061, 1064–65 ; Tipton Cnty. Health Care Found., 961 N.E.2d at 1051–52 ; Grandview Care, Inc., 826 N.E.2d at 182. The differences in analyses and outcomes in these cases is not due, however, to an evolving legal standard, as the Assessor urges, but to differences in the evidence presented and the arguments made in each particular case. E.g., Trinity Episcopal Church, 694 N.E.2d at 818–19 (granting an exemption without addressing whether there was a public benefit because the parties did not raise the issue). Accordingly, the Court is not persuaded...

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