Department of Revenue of State of Mont. v. Gallatin Outpatient Clinic, Inc., Ins. Co.
| Decision Date | 01 November 1988 |
| Docket Number | No. 88-196,88-196 |
| Citation | 763 P.2d 1128,234 Mont. 425 |
| Parties | The DEPARTMENT OF REVENUE OF the STATE OF MONTANA, Petitioner and Respondent, v. GALLATIN OUTPATIENT CLINIC, INC., INSURANCE COMPANY, Respondent and Appellant. |
| Court | Montana Supreme Court |
Dorsey & Whitney, Stephen D. Bell, Billings, for respondent and appellant.
Larry Schuster, Dept. of Revenue, Helena, for petitioner and respondent.
The District Court, Eighteenth Judicial District, Gallatin County, determined that Gallatin Outpatient Clinic, Inc. was not a "hospital," and therefore its personal property was not exempt from state taxation. In so holding the District Court reversed the decision of the State Tax Appeal Board (STAB) which had concluded that Gallatin Outpatient Clinic was a hospital within the personal property exemption statute, and that the personal property of the Gallatin Outpatient Clinic was being used for hospital purposes. The Outpatient Clinic has appealed the decision of the District Court to this Court. We affirm the District Court, holding that Gallatin Outpatient Clinic is not a "hospital" which would be entitled to a personal property tax exemption.
Gallatin Outpatient Clinic also known as Same Day Surgery Center (Clinic) filed an application for a property tax exemption with the property assessment division of the Montana Department of Revenue (Department). The exemption was denied on April 14, 1986. The Clinic appealed the Department's decision to the State Tax Appeal Board.
On May 22, 1986, the Gallatin County Treasurer assessed the Clinic $11,299.54 as taxes on the Clinic's personal property. The Clinic paid the sum to the Gallatin County Treasurer under protest.
In the contested proceedings before STAB, after a hearing and a tour of Gallatin Outpatient Clinic by members of STAB, that agency made findings of fact and conclusions of law. It found that the Clinic was a corporation organized under the laws of the state of Montana and that its primary business was to provide outpatient surgical services and nonsurgical procedures to patients in the Bozeman, Montana area. It was licensed by the Montana Department of Health and Environmental Sciences.
STAB further found that the purpose of the Clinic was to lower medical costs and provide high quality medical services for patients whose surgeries did not require an overnight stay. It found the physical facilities of the Clinic were essentially identical to those found in any outpatient surgery area in any hospital. It also determined that the personal property which was the subject of the appeal before STAB included anesthesia equipment, oxygen and carbon dioxide equipment, a "crash cart" available to resuscitate patients, suction machines, eye surgery laser, gurneys, sterilization equipment for surgical instruments, special surgical lighting, and other property used for surgical and medical procedures. It determined that the same kind of equipment would be found in the outpatient surgical area of any hospital. The Clinic's nonsurgical procedures included chemotherapy, transfusions and dialysis. STAB further found that the Clinic's only source of income was its billings to patients and that if its tax-exemption were denied, the Clinic would have to increase patient charges.
Thereupon, STAB made a conclusion of law that Gallatin Outpatient Clinic was a "hospital" within the meaning of § 15-6-201(1)(c), MCA; that the use of the personal property by the Clinic fell within the purpose of exempting personal property for hospitals; and that therefore the personal property of the Clinic was exempt from taxation under Montana law.
The Department of Revenue appealed the decision of STAB to the District Court. In mixed findings of fact and conclusions of law, the District Court determined:
Section 15-6-201(1)(c), MCA, exempts from taxation property used exclusively for hospitals. The 1987 legislature substituted "non-profit health care facilities for hospitals." The record clearly establishes that respondent does not operate a hospital. While it may perform minor surgeries, it did not have x-ray, laboratory, rehabilitation, major surgery, in-patient, obstetrical, pharmacological, blood banking, full time nursing staff, or emergency room facilities. As the name implies, the facilities in question are for minor "same-day" surgeries.
* * *
Clearly, the Same Day Surgery Center is a profit enterprise, not a hospital. It is closer to a doctor's office than to a full-service hospital. We do not permit doctors to exempt their own equipment, even though it is used in a hospital-like fashion. I do not believe that the legislature intended to apply the exemption for a mutually owned service facility.
Thereupon, the court entered its order reversing the decision of STAB and directed that taxes be levied against the personal property for the years 1986 and 1987.
On appeal to this Court, the Clinic propounds these issues: (1) Does substantial credible evidence support STAB's finding that the Clinic's property was used exclusively for hospital purposes? (2) Did STAB correctly hold that the definition of "hospital" in § 50-5-101(23), MCA, (1985) does not control whether the Clinic is a hospital for the purposes of tax exemption? (3) Did STAB correctly focus on how the personal property was used and the legislative intent with respect to that use? and (4) Does the surgery center have to be a non-profit organization to qualify for the tax exemption?
In response on appeal, the Department of Revenue contends that the District Court properly reversed STAB under the applicable law; that the Clinic is not a hospital and so not entitled to the personal property tax exemption; and that the legislative intent with respect to tax exemptions did not include property used by outpatient clinics.
The District Court correctly divined that the principal issue came down to whether the personal property must be used in a hospital to be exempt, or merely be put to use for hospital-like purposes, as the Clinic urged. We hold that under the applicable statutes, only hospitals are entitled to the property tax-exemption, and that the Clinic is not a hospital.
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