Guthrie Clinic, Ltd. v. Sullivan County Bd. of Assessment Appeals, 042506 PACCA, 1099 CD 2005
|Docket Nº:||1099 CD 2005|
|Party Name:||Guthrie Clinic, Ltd. v. Sullivan County Bd. of Assessment Appeals,|
|Case Date:||April 25, 2006|
|Court:||Court of Appeals of Pennsylvania|
Argued: February 28, 2006
BEFORE: HONORABLE DAN PELLEGRINI, Judge, HONORABLE ROCHELLE S. FRIEDMAN, Judge HONORABLE JOSEPH F. McCLOSKEY, Senior Judge
Guthrie Clinic, Ltd. (Guthrie) appeals from the April 21, 2005, order of the Court of Common Pleas of the 44th Judicial District (Sullivan County Branch) (trial court), which denied Guthries request for an exemption from Pennsylvania real estate taxes for its clinic located in Dushore, Sullivan County (Dushore Clinic).
Guthrie, a medical group that incorporated in 1987 as a professional corporation,1 employs approximately 220 physicians in various clinics that serve approximately forty communities throughout the northern tier of Pennsylvania and the southern tier of central New York. (R.R. 125a, 130a.) Among these, Guthrie operates the Dushore Clinic. Staffed by one physician specializing in internal medicine and a part-time nurse practitioner who specializes in family medicine, (R.R. at 218a), the Dushore Clinic provides primary medical care to residents of Sullivan County.
Guthrie is exempt from federal income taxation under section 501(c)(3) of the Internal Revenue Code, 26 U.S.C. §501(c)(3),2 and is exempt from paying Pennsylvania sales tax under the act known as the Institutions of Purely Public Charity Act, Act of November 26, 1997, P.L 508, 10 P.S. §§371-385 (Act 55). (R.R. at 125a.)
In August 2004, Guthrie applied to the Sullivan County Board of Assessment Appeals (Board) seeking a real estate tax exemption, as a purely public charity, for its Dushore Clinic. By a decision dated November 2, 2004, the Board denied Guthries exemption request, and Guthrie filed a timely appeal to the trial court, which held a de novo hearing on the matter.
At the hearing, James Armstrong, Guthries Chief Financial Officer, and Paul Chacona, Guthries Senior Vice President and Chief Operating Officer, testified regarding physician compensation. Armstrong explained that Guthrie sets physician compensation by first determining the productivity of each physician. Using a national survey, Guthrie then determines how other physicians with the same level of productivity are being compensated and pays its physicians fifteen percent less than that amount. (R.R. at 144a-46a.) On cross-examination, Armstrong admitted that the more a physician produces, the higher the salary and that there is a financial incentive for physicians to be more productive. (R.R. at 193a, 211a.) For example, Armstrong testified that Dr. Deshmukhs salary was based on his productivity and that if Dr. Deshmukh produced an outstanding amount, he would receive a higher salary. (R.R. at 198a.) Armstrong also testified about Guthries Profit Sharing Plan/Pension Plan (Plan).3 (R.R. at 149-51a, 195a-96a.) According to Armstrong, both individual employees and Guthrie make contributions to the Plan, with Guthrie making a set contribution of two percent of the employees salary and a discretionary contribution. (R.R. at 150a, 195a-96a.) Armstrong stated that the Board of Directors determines the discretionary contribution to the Plan annually, and the current contribution was five percent of an employees salary. (R.R. at 150a-51a, 196a.) Finally, Armstrong acknowledged that Guthries prime contract for physicians included a non-competition clause; he also admitted that Guthrie has a bonus program and that part of his compensation is subject to a bonus at the Board of Directors discretion. (R.R. at 150a, 198a-99a, 211a.)
Chacona provided similar testimony regarding Guthries calculation of compensation for the physician at the Dushore Clinic, stating we map [his compensation] out with a fifteen percent deduction based on the revenues generated as compared to the national survey. (R.R. at 223a) (emphasis added). On cross-examination, however, Chacona stated that a physicians compensation is based on that physicians productivity. (R.R. at 230a.)
After considering the testimony, the trial court held that Guthrie had failed to qualify for the exemption as a purely public charity...
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