Affiliated Medical Transport, Inc. v. State Tax Com'n of Missouri, 54221
| Decision Date | 28 June 1988 |
| Docket Number | No. 54221,54221 |
| Citation | 755 S.W.2d 646 |
| Parties | AFFILIATED MEDICAL TRANSPORT, INC., Plaintiff-Appellant, v. STATE TAX COMMISSION OF MISSOURI, et al., Defendant-Respondent. |
| Court | Missouri Court of Appeals |
James E. Reynolds, St. Louis, for plaintiff-appellant.
Donald Gerard Dylewski, Government Counsel, St. Louis, for defendant-respondent.
Appellant Affiliated Medical Transport, Inc. [hereinafter Affiliated] appeals from the Missouri State Tax Commission's [hereinafter the Commission] denial of an ad valorem tax exemption. The circuit court affirmed the Commission's decision. The prior decision and order by the Commission concluded that the subject property would not be exempt from taxation under the charitable use exemption, because the property was not "actually and regularly used exclusively for purely charitable purposes" as required by the test set forth by the Missouri Supreme Court in Franciscan Tertiary Prov. of Mo., Inc. v. State Tax Comm'n., 566 S.W.2d 213 (Mo.banc 1978). The decision and order of the Missouri State Tax Commission is reversed. This cause is remanded to the Commission with directions to enter an order declaring the subject property exempt from taxation and to return to Affiliated any funds remaining in the subject escrow account and any protested taxes disbursed from this escrow account.
Affiliated was incorporated in November 1983 as a Missouri not-for-profit corporation for the charitable purpose of providing mobile emergency medical care to the community on behalf of the St. Louis University Hospitals [hereinafter the University]. Affiliated's Articles of Incorporation provide in relevant part that:
[Affiliated] is organized exclusively for charitable, scientific and educational purposes within the meaning of section 501(c)(3) of the Internal Revenue Code of 1954 ... including, for such purposes, to provide mobile medical and medical transport services throughout metropolitan St. Louis to members of the community....
No part of the net earnings of the corporation shall inure to the benefit of, or be distributable to; its directors, officers or other private persons, except that the corporation shall be authorized and empowered to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of the purposes set forth in this Article 5.
Affiliated's Articles provide that upon dissolution or liquidation Affiliated's assets shall be distributed to the University. If at the time of Affiliated's dissolution the University is not qualified under § 501(c)(3) of the Internal Revenue Code for a charitable exemption, Affiliated's Articles provide that its assets will not be distributed to the University but will be distributed to some other organization willing to carry on its charitable work.
Shortly after Affiliated's incorporation, St. Louis University purchased certain assets, including a combination office and ambulance garage, ambulances, automobiles, and office equipment, and transferred these assets to Affiliated for no consideration. This property is used by Affiliated when providing mobile emergency medical services to the community. The University itself is a tax-exempt entity and is exempt from federal income taxes as an educational institution and a teaching hospital under the charitable exemption contained in § 501(c)(3) of the Internal Revenue Code. Any gifts contributed to Affiliated are deductible as charitable contributions for the purposes of the Missouri income tax and federal gift and estate taxes. Moreover, Affiliated is exempt from Missouri sales and use taxes. §§ 144.030.2(19), 144.615, RSMo Cum.Supp.1985.
Instead of retaining the subject property and using it to provide mobile emergency services to the community, the University decided to conduct its emergency services through a separate, but controlled, not-for-profit corporation. The University's decision enables the University to insulate its other assets from the potential liability arising from the high-risk activities associated with providing mobile emergency medical services.
Affiliated offers its mobile emergency services to the entire community and also operates the University's medical air rescue services, emergency room facilities, and trauma units. Prior to providing emergency medical transportation services, Affiliated routinely determines whether patients are covered by insurance or whether they have the financial ability to cover the services provided. Affiliated has removed nonpaying patients who were initially transported to its emergency room and stabilized after making this determination. While Affiliated has in the past on isolated occasions denied its services to indigent patients on the basis of their inability to pay the applicable rates for the particular services, Affiliated generally has transported indigent and uninsured patients. Over five percent of Affiliated's revenues fall within its provision for nonpaying allowances and doubtful accounts. Affiliated also provides free ambulance service for events sponsored by other charitable organizations in the community and renders services to medicare and medicaid patients in excess of the reimbursements provided to Affiliated from these programs.
Since much of Affiliated's nonpaying care is reimbursed by the University and reflected in the University's consolidated financial summary, Affiliated's financial statements are not a fair indicator of the amount of services provided by Affiliated to indigent persons. All receipts of Affiliated are transferred into the University's main account, and any withdrawal from this account requires the signature of an officer of the University. Requirements for being a named director of Affiliated include the prior approval of the president of the University and the status of employee or trustee of the University. The daily affairs are managed by high-ranking officers of the University.
As of September 1984, Affiliated's Statement of Revenues and Expenditures indicated that during its first nine months of operations, Affiliated's nonpaying accounts exceeded five percent of its revenue from services, and Affiliated rendered services to medicare and medicaid patients in excess of the reimbursements available to Affiliated from these programs in the amount of $38,839.50 and $848.53 respectively. Using University funds, Affiliated made capital expenditures of approximately $300,000.00 in 1984. During the first six months of operation, Affiliated made 15,916 ambulance trips and 646 medical air rescue flights and was responsible for 13,319 emergency room visits. Affiliated testified that its rates would increase in proportion to the rate of increase in operational costs.
The assessor for the City of St. Louis denied Affiliated an exemption from real and personal property taxes provided by § 137.100(5), RSMo 1986, and placed the subject property on the general assessment roll for the City of St. Louis for 1984. The Board of Equalization of the City of St. Louis as well as the State Tax Commission of Missouri denied Affiliated's appeal requesting a tax exemption on the ground that the property is used for charitable purposes. The Commission denied Affiliated's claim of entitlement to the charitable use exemption from ad valorem taxation by finding Affiliated did not present persuasive evidence demonstrating that the dominant use of the subject property is for the benefit of an indefinite number of people in the community regardless of their ability to pay for the services rendered. The Commission also found the evidence of Affiliated's denial of emergency medical transportation service to some indigents requiring the service fatal to its claim of entitlement to the charitable use exemption from ad valorem taxation. Affiliated paid the 1984 assessed taxes under protest and filed for review of the Commission's decision in the circuit court. The circuit court affirmed the Commission's decision. Affiliated appeals. We reverse and remand.
The Commission in its brief outlines the guiding principles to follow when considering Affiliated's claim. Included are some well-established legal principles such as taxation of property is the rule, and exemption is the exception to this rule. Mo. Church of Scientology v. State Tax Comm'n., 560 S.W.2d 837, 844 (Mo. banc 1978). The law disfavors claims for exemptions from taxation. Id. The substantial burden of establishing the property falls within the exempted class is on the person claiming exemptions under the referenced constitutional and statutory provisions. City of St. Louis v. State Tax Comm'n., 524 S.W.2d 839, 843 (Mo. banc 1975). To prevent the curtailing of the purpose and intended scope of a tax exemption, the exemption statute is to be strictly but reasonably construed. Id. at 843-44.
Affiliated contends on appeal that the Commission erred by not finding the subject property falls within the charitable tax exemption provision of § 137.100(5), RSMo 1986, because the property was exclusively used to provide charitable emergency medical services to the community at large. Preliminarily, we note that this court reviews the findings and decision of the agency and not the judgment of the circuit court when sitting in review of an administrative agency. City of Cabool v. Mo. State Bd. of Mediation, 689 S.W.2d 51, 53 (Mo. banc 1985). This appeal involves questions of application of a revenue law already construed by the Missouri Supreme Court, and therefore, our scope of review is less restricted since Affiliated challenges the Commission's interpretation or application of a law or legal standard. § 536.140.3, RSMo, 1986; Lile v. Hancock Place School Dist., 701 S.W.2d 500, 504 (Mo.App.1985). This court may independently weigh the evidence and resolve...
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