Good Samaritan Hospital of Dayton v. Porterfield

• Decision Date: 26 January 1972
• Docket Number: No. 71-36,71-36
• Citation: 278 N.E.2d 26,58 O.O.2d 75,29 Ohio St.2d 25
• Parties: , 53 A.L.R.3d 741, 58 O.O.2d 75 GOOD SAMARITAN HOSPITAL OF DAYTON, Ohio, Appellant, v. PORTERFIELD, Tax Commr. of Ohio, Appellee.
• Court: Ohio Supreme Court

Page 25

29 Ohio St.2d 25

278 N.E.2d 26, 53 A.L.R.3d 741, 58 O.O.2d 75

GOOD SAMARITAN HOSPITAL OF DAYTON, Ohio, Appellant, v. PORTERFIELD, Tax Commr. of Ohio, Appellee.

No. 71-36.

Supreme Court of Ohio.

Jan. 26, 1972.

Syllabus by the Court

When a parking garage is an essential and integral part of the proficient operation of a hospital, which is operated exclusively for charitable purposes as defined by R.C. § 5739.02(B)(12), building materials sold to construction contractors for incorporation into that garage, under a construction contract with the hospital, are materials incorporated into a building used exclusively for charitable purposes, and thus are exempt from Ohio sales and use taxes under R.C. § 5739.02(B)(13) and R.C. § 5741.02(C)(2).

This is an appeal from the decision of the Board of Tax Appeals affirming an assessment by the Tax Commissioner against Good Samaritan Hospital of Dayton, Ohio, appellant, the hospital having signed an exemption certificate under the provisions of R.C. § 5739.03(B), and the Tax Commissioner, in effect, having determined that the exemption was not 'properly claimed' and that the hospital was 'deemed to be the consumer' and, thus, liable for the tax. ¹

At the hearing before the Board of Tax Appeals, it was stipulated that the hospital itself is a charitable organization. It provides all types of hospital services. It has 496 beds and during the fiscal year ending on June 30, 1969, it had approximately 70,000 patients come through its doors. It employs 1,142 full-time and 506 part-time employees. Doctors with privileges at Good Samaritan number 447, and there is an additional courtesy staff of 250 doctors.

The area around the hospital is mainly residential, with some small businesses to the north and west. Consequently, the parking is limited. On the hospital grounds there are five parking lots (other than the parking garage) which have a total of 285 parking places. These are restricted to doctors and employees of the hospital, except during the late evening hours.

In the Fall of 1966, a consultant recommended that a parking garage be constructed to alleviate the problem of inadequate parking. A multi-story garage was planned due to the shortage of available land. The construction contract was let and construction commenced in the Fall of 1967. The garage began operation in May of 1968.

The garage accommodates 405 automobiles. Three hundred employees are permitted to park in the garage, approximately 100 at any one time. The employees pay a fee of $5 per month.

Other parkers pay 25 cents for the first hour and 20 cents for each hour thereafter, with a maximum of $1 per day. A $1 pass permits in-and-out parking privileges for the day.

Parking is attempted to be restricted to the use of hospital patrons by appropriate signs, but a recent survey does show that .72% of the parkers do not go to the hospital. The 99.28% who do go to the hospital are shown by the survey to be divided as follows: Visiting patients, 66.15%; employees, 13.3%; volunteer workers, 4.36%; those obtaining medical services, 7.3%; other hospital business, 4.54%; and clergy, 3.63%.

The parking garage cost $906.911, of which $750,000 was borrowed to finance construction. The proceeds from the garage are used to offset its costs. Its operation has thus far resulted in a loss to appellant, considering interest payments and depreciation.

Smith & Schnacke and Howard N. Thiele, Jr., Dayton, for appellant.

William J. Brown, Atty. Gen., and David S. Bloomfield, Columbus, for appellee.

LEACH, Judge.

The single issue in this case is whether the building materials sold to contractors for incorporation into appellant's parking garage, and actually so incorporated, are exempt from the Ohio sales and use tax. We conclude that they are exempt and thus reverse the decision of the Board of Tax Appeals.

R.C. § 5741.02(C)(2) excepts from the Ohio use tax the 'storage, use or consumption in this state' of 'tangible personal property, the acquisition of which, if made in Ohio, would be a sale not subject to the tax imposed' by the Ohio Sales Tax Act.

R.C. § 5739.02 provides in part:

'(B) The tax does not apply to the following:

'* * *

'(13) * * * building and construction materials sold to a construction contractor for incorporation into * * * a building used exclusively for charitable purposes under a construction contract with an organization whose purpose is as described in division (B)(12) of this section * * *.'

R.C. § 5739.02(B)(12), so far as pertinent to the issues herein, excepts from taxation:

'Sales of tangible personal property to churches and to organizations not for profit operated exclusively for charitable purposes in this state, no part of the net income of which inures to the benefit of any private shareholder or individual and no substantial part of the activities of which consists of carrying on propaganda or otherwise attempting to influence legislation.

'Charitable purposes means * * * the improvement of health through the alleviation of illness, disease, or injury * * *.'

It is conceded that appellant is an organization 'not for profit operated exclusively for charitable purposes,' and that it fully qualifies for tax exemption under R.C. § 5739.02(B)(12) to the extent of its operations of the hospital building and the hospital facilities located therein. Appellee and the Board of Tax Appeals, however, take the position that the parking garage cannot be considered 'a building used exclusively for charitable purposes' within the purview of R.C. § 5739.02(B)(13), since the building itself 'is only used to park cars' and not for 'the improvement of health through the alleviation of illness, disease, or injury.' R.C. § 5739.02(B)(12). The board concluded that the 'parking garage is used just like any parking garage'; that 'there are no operating rooms, bed space or anything of that nature' in the garage itself; and that 'parking cars neither alleviates illness, disease, nor injury.'

Where this a case involving exemption of real estate taxes, instead of sales and use taxes, our decision in Bowers v. Akron City Hospital (1968), 16 Ohio St.2d 94, 243 N.E.2d 95, would be dispositive. The syllabus of Bowers reads:

'Real property owned and used by a charitable institution as a vehicle parking facility which is limited to visitors of patients and others having business with the institution, from whom fees are collected in order to exclude those not having a legitimate connection with the institution, may be exempted from taxation under Section 5709.12, Revised Code, as property belonging to an institution 'used exclusively for charitable purposes,' where the proceeds from such fees are used solely to regulate existing and provide for additional such parking facilities.'

Unless the language of the sales and use tax acts would require a different result, it would appear that the reasoning in Bowers would be equally applicable here. We quote from the opinion in Bowers, at page 96, 243 N.E.2d at page 97:

'It is the use of property rather than the fact that revenues are collected and received from property which is controlling. Vick v. Cleveland Memorial Medical Foundation, 2 Ohio St.2d 30, 206 N.E.2d 2. Nor do reasonable charges exacted from beneficiaries of a charitable institution detract from its eleemosynary character. Planned Parenthood Assn. v. Tax Com'r., 5 Ohio St.2d 117, 214 N.E.2d 222; Goldman v. Friars Club, 158 Ohio St. 185, 107 N.E.2d 518. Here the evidence shows that the parking lot is an essential and integral part of the hospital's function and not property used mainly for income purposes. The lot provides visitors and patients a safe and convenient place to park. The fees are not diverted to purposes ultra vires of the institution, but are used to pay expenses of maintaining, regulating and expanding the parking area which is necessary for the hospital complex.'

Here, too, the evidence clearly demonstrates that facilities for parking are an 'essential and integral part of the hospital's function' and that they are 'necessary for the hospital complex.' Applying the rationale of Bowers, we see no distinction between a parking garage and a parking lot. In either case, the question of exemption should be determined by whether such parking facility is merely an adjunct to the hospital itself; and such would be true without regard to physical connection to the main hospital building.

Bowers cited with approval the holding of the Court of Appeals for Cuyahoga County in University Circle Development Foundation v. Perk (1964), 95 Ohio Law Abst. 353, 200 N.E.2d 897 which held that realty, which was owned and used by charitable institutions for parking facilities for students, faculty, staff members, employees and visitors, and for which a small fee was charged to offset a portion of the increased costs incurred in providing and regulating parking facilities, was 'property used exclusively for charitable purposes' so as to be exempt from real property taxation.

See, also, Cleveland v. Carney (1961), 172 Ohio St 189, 174 N.E.2d 254, exempting from real property taxes not only the Cleveland auditorium but also the underground parking area adjacent thereto on the basis (page 196, 174 N.E.2d page 259) that it was an 'incidental part of the overall use.'

It would appear, therefore, that prior holdings of this court would compel the conclusion that the hospital parking garage, here involved, would be considered as being 'used exclusively for charitable purposes' within the meaning of the statute providing for tax exemption of real property, R.C. § 5709.12, and within the scope of Section 2, Article XII of the Ohio Constitution, which specifically permits the adoption of general laws exempting 'institutions used exclusively for charitable purposes' from property taxation.

We, of course, recognize that comparable holdings as to real property tax exemption are not necessarily...