Dept. of Assessments v. N. BALT. CENTER

Decision Date04 January 2000
Docket NumberNo. 5469,5469
CourtCourt of Special Appeals of Maryland

William K. Hammond, Asst. Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen., on the brief), Baltimore, for appellant.

Barry Weiskopf (Hilary J. O'Connor and Tydings & Rosenberg, L.L.P., on the brief), Baltimore, for appellee.

Argued before DAVIS, EYLER and JOHN J. BISHOP (Ret., specially assigned), JJ.

EYLER, Judge.

North Baltimore Center, Inc., appellee, applied to the State Department of Assessments & Taxation, appellant, for a charitable exemption from property tax pursuant to Md.Code, Tax-Prop. § 7-202(b)(1) for the 1996-97 tax year for its building located at 2221-2227 North Charles Street. Appellee used the building to provide mental health care to the indigent. Appellant denied the exemption on the ground that appellee was not supported by significant charitable donations. Appellee appealed the decision to the Property Tax Assessments Appeals Board for Baltimore City (the "Board"), which affirmed appellant's decision. Appellee appealed to the Maryland Tax Court which, after a hearing, reversed the Board and granted the exemption. Appellant petitioned for judicial review in the Circuit Court for Baltimore City, which affirmed the Tax Court. Appellant appealed to this Court and inquires whether the circuit court erred in affirming the Tax Court's grant of a charitable exemption. Finding no error, we shall affirm.

Factual Background

Appellee was incorporated in 1969 and is an organization exempt from Federal income taxes under § 501(c)(3) of the Internal Revenue Code. Appellee operates a mental health center at 2221-2227 North Charles Street. Appellee purchased the building in 1996 with funds obtained through a grant from the Mental Health Administration of the State Department of Health and Mental Hygiene and funds obtained through a tax-free bond issue. Appellee provides mental health services on an outpatient basis, mainly to indigents.1

Appellee is regulated by the Department of Health and Mental Hygiene as a community health program provider. The Mental Health Administration contracts with mental health providers, including appellee, to fulfill its statutory obligation to provide mental health services to the indigent. Appellee is paid from state and federal government funds and receives a relatively small amount of support from charitable donations. Specifically, according to appellee's 1996-97 financial report, it received revenues as follows:

Year 1997 1996 Restated Revenues $3,874,384 $3,697,511 Support from the public $1,825,719 $2,031,366 Grants $ 121,045 $ 90,210 Medical assistance $474,723 $383,972 Supplemental security income ____________ ____________ Total Support From The Public $6,295,871 $6,202,159 Other Revenues State property acquisition grant $1,575,000 Private insurance $ 25,733 $ 29,965 Fees $ 50,762 $ 19,666 Other income $ 55,169 $ 12,585 ___________ ___________ Total Other Revenues $ 131,664 $ 1,637,216 ____________ ____________ Interest Income $ 54,305 $ 11,910 ____________ ____________ Gain From Sale of Assets $ 3,435 ____________ ____________ Total Support and Revenues $ 6,485,275 $ 7,851,285

Appellant's Brief at 3 (footnotes omitted). Private charitable donations were less than 1% of total revenues. Additionally, four volunteers each worked 600-800 hours per year.

At the hearing before the Tax Court, a witness for appellant, Robert E. Young, Associate Director, Taxpayer Services, Maryland State Department of Assessments and Taxation, discussed the test for determining whether an institution is charitable as set forth by the Court of Appeals in Supervisor of Assessments v. Group Health Ass'n, Inc., 308 Md. 151, 517 A.2d 1076 (1986). In that case, the Court stated:

A determination of whether an institution is charitable must include a careful examination of the stated purposes of the organization, the actual work performed, the extent to which the work performed benefits the community and the public welfare in general, and the support provided by donations.

Group Health Ass'n, 308 Md. at 157, 517 A.2d 1076.

Mr. Young, applying that test, testified that (1) appellee's stated purpose of "providing mental health services and a substance abuse facility" was not a charitable purpose; (2) the actual work performed was not charitable because it was paid for out of government funds; (3) it did not benefit the general public because the government was paying a fee for service; and (4) appellee received no significant private donations. As mentioned previously, the Board affirmed.


The charitable exemption statute in question provides, in pertinent part, as follows:

property is not subject to property tax if the property:

(i) is necessary for and actually used exclusively for a charitable or educational purpose to promote the general welfare of the people of the State, including an activity or an athletic program of an educational institution; and

(ii) is owned by:

1. a nonprofit hospital.


2. a nonprofit charitable, fraternal, educational, or literary organization....
3. a corporation or trustee that holds the property for the benefit of an exempt organization.

4. a nonprofit housing corporation.

Md.Code Ann., Tax-Prop. § 7-202(b)(1) (1987 Repl.Vol., 1999 Cum.Supp.).

In Group Health Ass'n, the Court of Appeals had occasion to interpret Art. 81, § 9(e)(1980), the predecessor to Tax-Prop. § 7-202 and specifically, the meaning of "charitable organization." In doing so, the Court identified the four factors quoted above.

Appellant contends that the Tax Court erred in failing to require that all four factors be met and, specifically, the fourth factor, and that this, in turn, lead the court to err in applying the first three factors. Appellant's position is that, as a matter of law, all four factors must be met in order for an organization to qualify for a charitable exemption. With respect to the fourth factor, appellant asserts that it was not met because the evidence showed very modest private donations received by appellee, constituting a very small percentage of its budget. Additionally, relying primarily on Supervisor of Assessments v. Har Sinai W. Corp., 95 Md.App. 631, 622 A.2d 786 (1993), appellant contends that the fourth factor cannot be met because the organization is paid with government funds. Appellant concedes that, if significant charitable contributions were made to appellee, all prongs of the test would be met.

Appellee contends that the Court of Appeals in Group Health Ass'n did not set forth a bright-line rule but merely identified factors to be considered, and that no one factor is determinative. Appellee explains that, based on the evidence before the Tax Court, the first three factors were met, and this is sufficient to sustain the decision of the Tax Court. Additionally, there was evidence that appellee did receive some income from private donations, although admittedly not substantial. Appellee concludes that, taking the evidence as a whole and applying the four factors, there was substantial evidence to support the Tax Court's determination.

Our review of the Tax Court's decision indicates that the court was aware of the applicable law. The Tax Court considered the first three factors and stated that they were clearly met because appellee provided services "to the masses," pointing out that appellee was required to treat all eligible persons. The Court concluded that appellee clearly benefitted the community and public welfare. We will not comment on those factors further because the fourth factor is the focus of this appeal.

With respect to the fourth factor, the Tax Court clearly considered it, but its conclusion is less clear. The Tax Court acknowledged that there was evidence of some private donations to appellee but also recognized the fact that appellee's funding came primarily from State government. The Tax Court implicitly concluded that significant private donations were not necessarily required.

I. Standard Of Review

The Maryland Tax Court is an administrative agency. Md.Code. Ann., Tax-Gen. § 3-102 (1988, Cum.Supp.1999); see Prince George's County v. Brown, 334 Md. 650, 658 n. 1, 640 A.2d 1142 (1994); Abington Ctr. Assocs. Ltd. Partnership v. Baltimore County, 115 Md.App. 580, 589, 694 A.2d 165 (1997). On review, a decision of the Tax Court must be affirmed if it is not erroneous as a matter of law and if it is supported by substantial evidence appearing in the record. CBS, Inc. v. Comptroller of the Treasury, 319 Md. 687, 697-98, 575 A.2d 324 (1990); Ramsay, Scarlett & Co. v. Comptroller of the Treasury, 302 Md. 825, 834, 490 A.2d 1296 (1985); Maisel v. Montgomery County, 94 Md.App. 31, 34, 614 A.2d 1333 (1992). We may not substitute our judgment for that of the agency as to factual findings that are supported by substantial evidence. Ramsay, 302 Md. at 834, 490 A.2d 1296; Rossville Vending Mach. Corp. v. Comptroller of the Treasury, 97 Md.App. 305, 312, 629 A.2d 1283, cert. denied, 333 Md. 201, 634 A.2d 62 (1993).

In contrast to the deferential review accorded to an agency's factual findings, questions of law receive no deference on review. Young v. Board of Physician Quality Assurance, 111 Md.App. 721, 726, 684 A.2d 17 (1996),cert. granted, 344 Md. 568, 688 A.2d 447, and cert. dismissed, 346 Md. 314, 697 A.2d 82 (1997). Consequently, if the Tax Court's decision is based on a question of law, we are not bound by the agency's interpretation. Department of Assessments & Taxation v. Consumer Programs, Inc., 331 Md. 68, 72, 626 A.2d 360 (1993); Ahalt v. Montgomery County, 113 Md.App. 14, 22, 686 A.2d 683 (1996); see, e.g., Roach v. Comptroller of the Treasury, 327 Md. 438, 610 A.2d 754 (1992); Friends School v. Supervisor of Assessments, 314 Md. 194, 550 A.2d 657 (1988). The interpretation of a statute...

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