Retirement Homes of Detroit Annual Conference of United Methodist Church, Inc. v. Sylvan Tp., Washtenaw County, Docket Nos. 64092

• Decision Date: 23 December 1982
• Docket Number: Docket Nos. 64092,No. 9,64093,9
• Parties: RETIREMENT HOMES OF the DETROIT ANNUAL CONFERENCE OF the UNITED METHODIST CHURCH, INC., Plaintiff-Appellee, v. SYLVAN TOWNSHIP, WASHTENAW COUNTY, Defendant-Appellant. Calendar416 Mich. 340, 330 N.W.2d 682
• Court: Michigan Supreme Court

Page 682

330 N.W.2d 682

RETIREMENT HOMES OF the DETROIT ANNUAL CONFERENCE OF the

UNITED METHODIST CHURCH, INC., Plaintiff-Appellee, v. SYLVAN TOWNSHIP, WASHTENAW COUNTY, Defendant-Appellant.

Docket Nos. 64092, 64093.

Calendar No. 9.

416 Mich. 340, 330 N.W.2d 682

Supreme Court of Michigan.

Argued Nov. 13, 1980.

Decided Dec. 23, 1982.

Robert D. Dunwoodie, Ronald S. Holliday, Dykema, Gossett, Spencer, Goodnow & Trigg, Detroit, for plaintiff-appellee.

Keusch & Flintoft by Peter C. Flintoft, Chelsea, for defendant-appellant.

LEVIN, Justice.

Retirement Homes of the Detroit Annual Conference of the United Methodist Church, Inc., claimed a real and personal property tax exemption for the Chelsea Village Apartments. ¹

The Tax Tribunal, relying on Michigan Baptist Homes & Development Co. v. City of Ann Arbor, 396 Mich. 660, 242 N.W.2d 749 (1976), denied exemption. The Court of Appeals reversed, saying that Michigan Baptist Homes was distinguishable. ²

We are of the opinion that Michigan Baptist Homes is controlling and reverse.

I

Retirement Homes is a non-profit, non-stock corporation. The board of trustees is elected by the Detroit Annual Conference of the United Methodist Church. ³

The Chelsea facility is comprised of a licensed nursing home, a licensed home for the aged, and the Chelsea Village Apartments. Thirty-six persons reside in the apartments.

The nursing home and the home for the aged have been tax-exempt since 1905. Retirement Homes acquired land adjacent to these facilities in 1967 and 1968 and completed construction of the apartments in 1972. There are 24 apartments; 18 single-bedroom, 4 double-bedroom, and 2 efficiencies. ⁴

There was evidence that the apartments were constructed to "improve the age mix" by attracting a younger group of retirees, those over the age of 65 but younger than those normally requiring institutional care, and to establish a more orderly progression of elderly persons through the various facilities in Chelsea.

The apartments are designed for independent living. Residents are responsible for their own medical and dental care as well as obtaining their own meals, although meals can be purchased at cost from the Home for the Aged. Residents have available 24-hour emergency medical service, counseling, full access to and involvement in the social and therapeutic activities and programs conducted at the Chelsea facility, 24-hour maintenance service, utilities, trash removal, lawn care, snow removal, painting and repairs, and free transportation. ⁵

Residents are charged a monthly fee which is designed to cover utility and other direct costs and to amortize the cost of construction over a 20-year period. The monthly fee does not include the income which Retirement Homes could have earned by investing the funds that were used in the construction. ⁶

Retirement Homes produced evidence which tended to show that the annual expense of operating the apartments exceeded the fee charged to the residents, but the Tax Tribunal concluded that "[i]t is not clear whether [the apartments] lost money, made money or broke even". ⁷

Applicants are required to supply medical and financial information to assist Retirement Homes in properly placing them within the facilities. Retirement Homes considers that Supplemental Security Income payments are only available to residents of licensed facilities. The apartments are not a licensed facility.

Retirement Homes claimed that no one was ever refused care or evicted because of inability to pay fees. Yet it was acknowledged that residents of the apartments who became unable to pay the monthly fee were asked to transfer to one of the other facilities at Chelsea because they could not obtain government assistance unless they were residents of a licensed facility. ⁸

II

The Court of Appeals, in reversing the Tax Tribunal, ⁹ distinguished Michigan Baptist Homes. The construction of the apartments was financed entirely by gifts, donations and bequests, rather than, as in Michigan Baptist Homes, a mortgage and sale of debentures. Because Retirement Homes incurred no debt in financing construction, the monthly charge was set to recover only direct expenses and fund replacement, not payment of interest. A life-care contract with forfeiture was not required, only a monthly fee. In Michigan Baptist Homes each resident was provided ten days of free care in the nursing center each year, which could be accumulated to a maximum of 30 days. Residents of the apartments were provided with 24-hour emergency medical service without additional charge and could transfer to the nursing care facility if necessary.

The Court regarded Gull Lake Bible Conference Ass'n v. Ross Twp., 351 Mich. 269, 88 N.W.2d 264 (1958), to be more analogous. In Gull Lake, this Court held that the picnic, recreation, and housing facilities operated by the Gull Lake Bible Conference Association qualified for a charitable property tax exemption, although fees for use of the facilities were charged, because the charitable purpose of the Association was to promote Bible study gatherings and the availability of the facilities was necessary to obtain satisfactory attendance. ¹⁰

III

Retirement Homes claims real and personal property tax exemptions under provisions of the general property tax law exempting the personal property of charitable institutions and real property owned and occupied by charitable institutions while occupied solely for the purposes for which the institution is incorporated. ¹¹

A property tax exemption is in derogation of the principle that all property shall bear a proportionate share of the tax burden and, consequently, a tax exemption will be strictly construed. ¹²

In Michigan Baptist Homes, this Court declared that, to qualify for a charitable or benevolent tax exemption, property must be used in such a way that it "benefit the general public without restriction". ¹³ Courts in other jurisdictions have expressed this concept in the following language:

"[C]harity * * * [is] a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing their minds or hearts under the influence of education or religion, by relieving their bodies from disease, suffering or constraint, by assisting them to establish themselves for life, or by erecting or maintaining public buildings or works or otherwise lessening the burdens of government." ¹⁴ (Emphasis supplied.)

The question presented can thus be rephrased: Does Retirement Homes operate the apartments in such a way that there is a "gift" for the benefit of "the general public without restriction" or "for the benefit of an indefinite number of persons"?

We conclude that there is no "gift" for the benefit of an indefinite number of persons or for the benefit of the general public without restriction in the operation of the apartments. The monthly fee is designed to cover all operating costs as well as to recover the construction costs of the apartments. While it does not appear that the apartments are operated for a profit, ¹⁵ neither does it appear that the residents receive any significant benefit that they do not pay for. There is no "gift" to the residents.

The operation of the apartments does not appear to benefit the general public. Its residents are chosen on the basis of their good health, their ability to pay the monthly charge, and, generally, their ability to live independently. ¹⁶

The asserted distinctions between the apartments in Michigan Baptist Homes and the apartments in the instant case do not justify treating these apartments differently under the general property tax law. In both cases residents of the apartments were charged fees designed to cover all costs, including the cost of construction. In the instant case, the monthly fees did not, because no funds were borrowed, include an assessment to cover interest on construction funds. However, it was not shown (see fn 6) that the monthly fee was substantially less or indeed less at all than the market rent.

Retirement Homes stresses that it did not require life leases. The monthly fees were, however, set to arrive at the same result in both cases, an economically self-sustaining residence. The volunteer services provided by residents of the apartments cannot justify tax exemption any more than volunteer services supplied by the active elderly who live in their own homes or apartments. The security, recreational, social, and religious services appear to be incidental to providing a comfortable apartment to those who can afford to pay for it and have not been shown to be of a nature different than those provided by many commercial senior citizen residences.

In Michigan Baptist Homes, supra, 396 Mich. pp. 671-672, 242 N.W.2d 749, this Court concluded that the apartments for which a tax exemption was there sought did "not serve the elderly generally, but rather provide[d] an attractive retirement environment for those among the elderly who [had] the health to enjoy it and who [could] afford to pay for it". The Court reasoned that the Legislature did not intend "to grant the claimed exemptions to these relatively favored individuals while at the same time granting only limited tax relief to the less affluent elderly who rent or own modest homes". The Court continued, "[w]e are convinced that the Legislature has given no clear mandate to exempt elderly housing per se".

In Gull Lake, the auxiliary recreational facilities were used occasionally, and were incidental and not the primary facility. Here the facilities are not auxiliary or incidental. The apartments are the primary facility insofar as the residents are concerned; what is here sought is an exemption for housing devoted to the full-time use of residents. If a non-profit corporation can build housing for the elderly and obtain a tax exemption for the housing because of incidental auxiliary facilities which it subsidizes, other...